EOU Entitled To Claim Deemed Export Drawback On Inputs Which Remained Unutilized With Then-Existing DTA Unit: Delhi High Court

The division bench of Justice Rajiv Shakhdher and Justice Tara Vitasta Ganju has observed that the restriction against the claim of concession in duties and taxes applied only vis-à-vis plants, machinery and equipment that had already been installed. The petitioner was allowed to carry forward the advance authorization to the convertedunit,t i.e., 100% EOU, and thereafter fulfil the outstanding export commitment.

The issue raised was whether the petitioner is entitled to duty drawback, confined to customs duty component, against deemed exports, even where it has claimed cenvat credit.

The petitioner is a manufacturer and exporter of pharmaceutical products. The petitioner claims that it has been in this business for over 15 years and has resultantly gained the status of a two-star export house. The petitioner also averses to an aspect which is not disputed, that it converted its DTA unit into a 100% EOU w.e.f. 28.09.2012.

After the conversion to 100% EOU unit had taken place, the petitioner claimed duty drawback qua custom duty component, on the premise that deemed export had taken place. An application was filed by which the petitioner claimed the duty drawback benefit for the period ending in September 2012.

The Assistant DC rejected the petitioner's claim. The principal reason given by the Assistant DC was that the claim for duty drawback could not be entertained, as the goods against which duty drawback was claimed had been received in the unit prior to it being declared an EOU.

The petitioner contended that since the transfer of goods from the petitioner's DTA unit to its 100% EOU involved deemed exports, it was entitled to duty drawback in respect of the customs duty component, as the suppliers had already claimed cenvat credit, qua central excise duty and service tax. The benefits available under the FTP, vis-à-vis deemed exports, were no different to those that were available to units that made physical exports.

The department contended that FTP, which was framed by the Central Government, was implemented through DGFT, who also had the power to interpret it. The deemed export scheme has been devised to neutralise the duty component, i.e., TED on finished products and excise duty/customs duty on inputs, the inputs being raw materials or components.

The department contended that where cenvat credit was taken, in that case as well, basic customs duty could be claimed, albeit based on the brand rate of duty drawback, which is founded on the evidence concerning payment of actual duty.

The court held that the petitioner is not required to have a brand rate of duty drawback fixed based on actual duty-paid documents for the return of basic customs duty.

Case Title: M/s Combitic Global Caplet Pvt. Ltd. Versus Union Of India

Citation: 2022 LiveLaw (Del) 882

Date: 02.09.2022

Counsel For Petitioner: Advocate Rajneesh K. Verma

Counsel For Respondent: Advocate Shiva Lakshmi

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