M/S AKS APPARELS v. Union of India and Anr

2. The petitioner herein is an exporter and during the period November, 2006 to June, 2007, had exported readymade garments of FOB value of Rs. 82,74,303/- against shipping bills. The export itself is not disputed and there is no quarrel or issue with regard to the quantum of exports. The petitioner had applied for refund of excise duty portion on the imports as drawback and payment of Rs.4,00,801/- was sanctioned and made in 2007 (exact date is not stated). Subsequently, after about 3 years on 13th January, 2010, a show cause notice was issued that the said drawback had been wrongly paid and it was admissible only if the petitioner was a manufacturer exporter or had got the garments manufactured under job work. The claim was not admissible as the petitioner had procured the goods for export from traders in open market. The impugned order records that the petitioner had made false and wrong declaration in the drawback form as he had used the word “supplier” to avail the drawback. There was suppression of facts. Concession granted to merchant/exporters vide CBEC Circular No.16/2009- Cus dated 25-5-2009 on the recommendation of Drawback Committee was not retrospective.

3. It is clear from the impugned order as well as the order passed by the first appellate authority and the adjudicating authority that the petitioner had not used the word “manufacturer” or stated that he had got the goods/garments manufactured on job work. Thus, it can be argued that there was no fraud, suppression of facts or misdeclaration by the petitioner. The word “supplier” used in the form clearly indicates that the goods were purchased from third parties. The show cause notice itself records that the petitioner had not filed details of the job workers or evidence of supporting manufacturer, yet the claim was accepted and payment of drawback was made.

4. However, we need not decide the question of fraud, misdeclaration or suppression of facts, in the form as we find that the issue raised is covered by decision of this Court in Commissioner of Customs (Export) Vs. Kultar Export, 2013 (288) ELT 187 (Del.). It is apparent from the said judgment that Government was concerned with the objections and that the distinction between manufacture/job work and trader purchasers had led to difficulties and denial of claims. Therefore, they had issued Circular No.16/2009 stipulating that duty drawback would be admissible even when merchant exporters purchase goods from the local market for export. The stand of the respondents, however, was that this circular was operative prospectively i.e. with effect from 25th May, 2009 and is not retrospective.

5. In Kultar Export (supra), the High Court examined the question whether the benefit of this Circular No.16/2009 could be given to an exporter from whom drawback paid was being reclaimed. The High Court affirmed the view taken by the Customs, Excise and Service Tax Appellate Tribunal that Rule 3 of the Customs and Excise Drawback Rules, 1995 did not make any distinction between manufacture/job work exporters on the one hand and traders or merchant exporters. This distinction was undone and abolished by Circular No.16/2009 and it was clarified that the drawback would be available to a merchant/trader exporter. In the case of Kultar Export (supra), the respondents herein had initiated recovery proceedings for the period 2003-04 to 2006-07 i.e. for the period prior to Circular No.16/2009 stating that the exporter therein was a merchant/trader exporter and not a manufacturer or the person, who had got the garments stitched under job work and, therefore, was wrongly paid drawback of Rs.1,43,15,400/-. On appeal before the tribunal, the merchant-exporter succeeded. It was observed that the only applicable legal provision was Rule 3 of the Customs and Excise Drawback Rules, 1995, which did not make any such distinction. It was further observed that the respondents themselves had not relied on the said distinction when drawbacks were paid in spite of the circulars that drawback would be available to manufacturer/exporters or the person, who had got the garments manufactured on job work. It was held that the exporter therein was under a bona fide belief that they were eligible for drawback and this belief was also accepted and acted upon by the authorities. After referring and quoting from the order of the tribunal, the Division Bench has held as under:-

6. Reference, thereafter, was made to the earlier circulars issued in 1998 and 2001 and it has been observed:-