News Update

Govt orders mandatory declaration of stock position of wheatCPI gets Rs 11 Cr tax notice for using old PAN numberGST - Penalty demand of Rs.3731 crores - A person who would fall within the purview of sub-section (1-A) of s.122 should necessarily be a taxable person who retains the benefits of transactions: HCGovt issues advisory against calls impersonating DoTFATP hand-wrings over slow regulation of crypto by member-countriesGST - Threatening and pressurising petitioner who is merely an employee - Highly unconscionable and disproportionate on the part of the officer: HCECI's C-Vigil app a big hit with votersGST - Same relief was claimed in earlier petition which was withdrawn unconditionally - Fresh petition seeking same relief is barred by the estoppel principle: HCIncome tax hands over Rs 1700 Cr tax demand to Congress PartyGST - Neither SCN nor the order spell out the reasons for retrospective cancellation of registration, hence cannot be sustained: HCStage-2 of Vikram-1 orbital rocket successfully test-firedGST - Non-application of mind - If reply was unsatisfactory, details could have been sought - Record does not reflect that such exercise was done - Matter remitted: HCHouthis claim UK has not capability to intercept their hypersonic missilesGST - Merely because a taxpayer has not filed returns for some period does not mean that registration is required to be cancelled with retrospective date also covering the period when returns were filed and taxpayer was compliant: HCIsraeli forces kill 200 Palestinians at Gaza medical complex & arrest over 1000GST - Petitioner's reply, although terse, is not taken into account while passing assessment orders - Petitioner put on terms, another opportunity provided: HCUnveil One Nation; One Debt Code; One Compliance Rule for Centre & StatesChina moves WTO against US tax subsidies for EVs & renewable energyMore on non-doms - The UK Spring Budget 2024 (See TII Edit)Training Program for Cambodian civil servants commences at MussoorieCBIC revises tariff value of edible oils, gold & silverCBIC directs all Customs offices to remain open on Saturday & SundayI-T- Once the citizen deposits the tax upon coming to know of his liability, it cannot be said that he has deliberately or willfully evaded the depositing of tax and interest in terms of Section 234A can be waived: HCHouthis attack continues in Red Sea; US military shoots down 4 dronesCus - No Cess is payable when Basic Customs Duty is found to be Nil: CESTAT
 
Pre-deposit Blues - Erroneous drawback is not duty?

JANUARY 27, 2015

By S Murugappan, Advocate

THE Central Board of Excise & Customs has come out with yet another circular containing instructions regarding pre-deposit of duty etc. for filing appeals. The Circular No.993/17/2014-CX dated 05.01.2015 gives a new definition for "drawback" and attempts to enlarge the scope of pre-deposit requirements for filing appeals. In paragraphs 5 and 6 of the above circular the following is stated -

"5. Several representations have been received by the Board stating that some Commissioners (Appeals) have been insisting on pre-deposit in cases of demand of erroneous drawback granted. It has been represented that drawback is not a duty and hence the amended provisions would not apply to such cases.

6. The issue has been examined. Drawback, like rebate in Central Excise, is refund of duty suffered on the export goods. Section 129E stipulates that appellant filing appeal before the Commissioner (Appeals) shall pay 7.5% of the duty demanded where duty and penalty are in dispute. Accordingly, it is clarified that mandatory pre-deposit would be payable in cases of demand of drawback as the new section 129E would apply to such cases."

The instructions as extracted above do not appear to be in conformity with either the Customs Act or the relevant Drawback Rules. Section 2(15) of Customs Act 1962 defines 'duty' as "a duty of customs leviable under this Act". In fact, on earlier occasions there were disputes as to whether the CV Duty or Additional Duty itself can be considered as a Customs Duty.

On the other hand, 'Drawback' is defined in Rule 2(a) of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 as follows:

"drawback" in relation to any goods manufactured in India and exported, means the rebate of duty or tax, as the case may be, chargeable on any imported materials or excisable materials used or taxable services used as input services in the manufacture of such goods;

Similarly, Rule 2(a) of Re-Export of Imported Goods (Drawback of Customs Duties) Rules, 1995 defines drawback payable in terms of Section 74 of Customs Act as follows:

"drawback", in relation to any goods exported out of India, means the refund of duty paid on importation of such goods in terms of section 74 of the Customs Act;

A perusal of the above provisions should clearly indicate that duty as defined in the Customs Act is not the same as drawback payable either under Section 74 or Section 75 of Customs Act, though such drawback is related to duty. But the fact is, it is not duty. In terms of Section 74 it is "refund" of duty and in terms of Section 75 it is an incentive worked out based on Customs Duty, Excise Duty and Service Tax incurred on the inputs and services that go into the cost of manufacture of the goods.

In the case of Liberty India Vs. Commissioner of Income Tax reported in - 2009-TIOL-100-SC-IT the Supreme Court was dealing with a question that arose under the Income Tax Act and whether the benefits under Drawback and DEPB Schemes can be considered as profits derived from industrial undertaking. In paragraph 17 of the above judgment the Apex Court has made the following observations.

"The next question is - what is duty drawback? Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944 empower Government of India to provide for repayment of customs and excise duty paid by an assessee. The refund is of the average amount of duty paid on materials, of any particular class or description of goods used in the manufacture of export goods of specified class. The Rules do not envisage a refund of an amount arithmetically equal to customs duty or central excise duty actually paid by an individual importer-cum-manufacturer. Sub-section (2) of Section 75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. Basically, the source of duty drawback receipt lies in Section 75 of the Customs Act and Section 37 of the Central Excise Act."

The provisions contained in the Drawback Rules referred to above and the observations made by the Apex Court as reproduced above should make it crystal clear that drawback is not the same as duty. Section 129E of Customs Act 1962, as amended, refers to pre-deposit of 'duty' demanded or penalty imposed or both in pursuance of orders passed by Customs authorities.

One of the Golden Rules of Interpretation is that the words and expressions used in an enactment are to be interpreted as they are and nothing is to be added. It is also another principle of interpretation that the expressions and words in the same enactment have to be given the same meaning for achieving a harmonious view.

Therefore, there will not be any scope to include orders passed for recovery of drawback within the scope of Section 129E aforesaid which refers to pre-deposit of 'duty' demanded. Consequently, the instructions on this point as contained in the above circular appear to be misconceived and not in consonance with the provisions of Customs Act.

(DISCLAIMER: The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the sites)

 


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: drawback pre- deposit

Sir,
Learned author made an attempt to conclude that drawback is not duty by citing definition of drawback as provided under Rule 2(a) of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 framed exercising concurrent powers conferred on the government under Section 37 of CE Act,Section 75 of the Customs Act and Section 93A read with 94 of the Finance Act 1994 and also Rule 2(a) of Re-
Export of Imported Goods (Drawback of Customs Duties) Rules, 1995. It is true that drawback in former Rules consists of duty components excise,customs and service tax, while it consists of customs duty component only in the case of latter Rules. Therefore, obviously they cannot be the same. I beg to differ with authors view that drawback is not duty as the said view hits the exporters badly at the time of granting it. It is considered as drawback of duty so as to credit to the applicant exporter instead of being credited to the Fund .It is defined in both Rules that drawback means either rebate of duty or refund of duty. Further Section 27(2)(e) of
the Customs Act ,mandates drawback of duty payable under Section 74 or 75 is to be paid to the applicant exporter instead of crediting the same to the Fund. That means while granting drawback, it takes the form of duty to avoid the sanctioned drawback amount being credited to the Fund. Coming to pre-deposit of drawback as required under Section 129E of the Customs Act,contents of the CBEC circular dt
5.1.2015 are in very much in accordance with the law as the appellate provisions contained Section 128 of the Customs Act are applicable to any decision passed in pursuance of the Customs Act. Further, it may be mentioned that duty drawback under both Rules mentioned above are sanctioned by the Customs Authorities who have to initiate recovery process in case of erroneous drawback sanctioned if any.Thus what is duty when sanctioning needs to be duty while recovery also!.


Posted by rrkothapally rrkothapally
 

AR not Afar by SK Rahman

TIOL Tube Latest

Shri Shailendra Kumar, Trustee, TIOL Trust, giving welcome speech at TIOL Awards 2023




Shri M C Joshi, Former Chairman, CBDT




Address by Shri Buggana Rajendranath, Hon'ble Finance Minister of Andhra Pradesh at TIOL Awards 2023