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M/S Salar International v. Union Of India & Others - WRIT TAX No. 502 of 2004  RD-AH 672 (9 March 2005)
Civil Misc. Writ Petition No.502 of 2004
M/s Salar International v. Union of India and others
Hon'ble R.K.Agrawal, J.
Hon'ble Prakash Krishna, J.
(Delivered by R.K.Agrawal, J.)
By means of the present writ petition filed under Article 226 of the Constitution of India, the petitioner, M/s Salar International through its partner, Mohd. Qasim, seeks the following reliefs :-
"(i) to issue a writ, order or direction in the nature of mandamus directing and commanding the respondents to release the petitioner's pending draw back claim amounting to Rs.18,96,332 alongwith interest till date @ 15% per annum as prescribed under Section 75-A of Draw Back Rules, 1995.
(ii) to issue a writ, order or direction in the nature of mandamus directing and commanding the respondents not to adopt any coercive measures for realisation of the amount mentioned in the notices dated 28.4.2003 (Annexure - XII to the writ petition).
(iii) to issue a writ, order or direction in the nature of certiorari quashing the show cause notice dated 28.4.2003 respectively issued to the petitioner (Annexure - XII to the writ petition) by the Deputy Commissioner of Customs, I.C.D., Moradabad (respondent no.3).
(iv) to issue a writ, order or direction which this Hon'ble Court may deem fit and proper in the facts and circumstances of the case; and
(v) to award the cost of the petition to the petitioner."
Briefly stated, the facts giving rise to the present petition are as follows:-
The petitioner is a registered partnership firm and claims to be a Government recognised export house. It has been allotted Import and Export Code No.B00588074926. It is engaged in the business of manufacture and export of handicrafts made of bras art wares, iron art wares, copper art wares, galvanised art wares and other Indian handicrafts. For the purpose of making export of these goods, the petitioner had imported electrical components (fittings) under the scheme, known as, Duty Exemption Entitlement Certificate (hereinafter referred to as "the DEEC"). The custom authorities exempted the duties on import of electrical components as it is a Government recognised export house. The petitioner had claimed duty draw back on brass scrap and other items. It had exported some consignments of torden table lamps under the scheme of draw back shipping bills containing brass art wares and copper art wares fitted with electrical components during the period 16.3.1996 to 16.12.1996. In the aforesaid consignment of export, the petitioner has used imported electrical fittings which it had imported under Advance Licensing Scheme under the notification no.80/95-Customs dated 31.3.1995. It had claimed draw back on all industry rate of brass art wares with imported electrical fittings and also on copper with iron art wares with imported electrical fittings, exported by it in discharge of its export obligations. According to the petitioner, a show cause notice dated 27.2.1997 was issued for the alleged contravention of the provisions of Sections 50(2), 75, 113(i) and (ii) and 146(2) of the Customs Act, 1962 (hereinafter referred to as "the Act") asking it to show cause as to why pending claims amounting to Rs.4,42,727.00 should not be restricted to Rs.1,12,326.00, i.e., an amount equivalent to central excise allocation and why penalty should not be imposed. The petitioner submitted its reply on 10.3.1997 stating therein that the draw back has been claimed on the exported goods in view of Para 70-A of the Export and Import Policy, as amended till date, and further the brass and copper which it used in the manufacture of exported item, was fully indigenous and procured from the market. The allegations made in the show cause notice was emphatically denied. Another reply was submitted on 28.5.1998 before the Assistant Commissioner (Customs) Draw Back Department, Moradabad, stating therein that it has not claimed draw back of DEEC portion of shipping bills (electrical components) and further at the time of shipment, the Superintendent, ICD, Pakbara, Moradabad has examined the goods and allowed the draw back @ 48/- per Kg. and 23% on brass art wares and Rs.43/- per Kg. on copper items. The Assistant Commissioner of Customs and Central Excise, Moradabad, vide order dated 26.6.1998, did not accept the explanation submitted by the petitioner and restricted the claim of duty draw back to Rs.1,12,326/- and also imposed a sum of Rs.25,000/- as penalty. The Assistant Commissioner of Customs, Moradabad, vide order dated 30.6.1998 also rejected the supplementary claim filed by it. The aforesaid orders dated 26.6.1998 and 30.6.1998 were challenged by the petitioner before the Commissioner (Appeals), Custom and Central Excise, Ghaziabad, under Section 128 of the Act. The Commissioner (Appeals), vide order dated 22.9.1999, has allowed the appeals with the observation that in the case of duty free licence, the draw back shall be available in respect of any duty paid material as provided in Para 70-A of the Export and Import Policy, 1992-97. The order dated 22.9.1999 was challenged by the Department by filing an appeal before the Custom Excise and Gold Control Appellate Tribunal, New Delhi. As the appeal was filed beyond the limitation prescribed under the Act, the application for condonation of delay filed alongwith the memorandum of appeal was taken up by the Tribunal and it being not satisfied with the explanation for the delay, furnished by it, declined to condone the delay and consequently, dismissed the appeal vide order dated 10.8.2000. After the dismissal of the appeal, the Deputy Commissioner, ICD, Moradabad, vide order dated 15.11.2000, asked the petitioner to submit relevant papers for finalisation of pending draw back claim. It is alleged by the petitioner that the Department had filed a revision against the order of the Tribunal, being Revision No.456/457 of 2001, before the Government of India and the Government of India, vide order dated 31.10.2001, had dismissed the said revisions. Thereafter, the petitioner had made a representation before the Deputy Commissioner, Customs, Draw Back Department, Moradabad, on 27.11.2001 for release of the draw back claim with interest. The Commissioner, Customs, NOIDA, at the administrative level, advised the Deputy Commissioner, Customs, ICD, Moradabad, in reply to his letter dated 6.12.2001, to interpret the order of the Commissioner, (Appeals), Customs and Excise and decide the matter accordingly as he is the proper officer in the matter of grant of draw back and refrain from making such reference on the issue in future. It appears that the Department had filed an application for rectification before the Tribunal on the ground that the appeal filed before it was not maintainable and, therefore, the order dated 10.8.2000 be recalled. The said application had been rejected by the Tribunal vide order dated 23.8.2002 with the observation that there is no merit in the application as there is no mistake in the order which requires rectification. The petitioner thereafter made representations on 25.11.2003 and 3.12.2003 before the Assistant Commissioner, Draw Back Department, ICD, Moradabad, requesting him to make payment of pending draw back claim, which was followed by another representation made on 5.12.2003. Instead of making payment of the draw back claim, the Assistant Commissioner, Customs, ICD, Moradabad, had issued two notices, both dated 28.4.2003, calling upon the petitioner to show cause as to why a sum of Rs.1,85,427/- and Rs.6,20,285/- erroneously paid to it as draw back be not recovered under Rule 16 of the Custom and Central Excise Duty Draw Back Rules, 1995 (hereinafter referred to as "the Rules"). The petitioner had submitted its reply on 28.5.2003 denying the liability and further for release of the balance amount of the draw back. The notices dated 28.4.2003 are under challenge in the present writ petition.
We have heard Sri S.K.Mehrotra, learned counsel for the petitioner, and Sri A.K.Rai, learned Standing Counsel appearing for the respondents.
The learned counsel for the petitioner submitted that the draw back has rightly been allowed on all industry rate and thus, there is no question of withdrawing the same. According to him, the goods exported is more of other matters other than electrical fittings as such the petitioner is entitled for draw back on the materials used, which have been procured indigenously. He further submitted that the order of the Commissioner (Appeals), dated 22.9.1999, has become final and, therefore, the respondents are bound to give effect to the said order and make payment of the draw back claim.
The learned Standing Counsel, however, submitted that the amount of draw back is to be computed in terms of the duty paid and if the petitioner has used indigenous materials in the manufacture and export of items, it is not entitled to claim any draw back. He referred to Section 75 of the Act and the Rules to emphasize that the rate of draw back is in respect of which the duty chargeable on the imported raw materials or excisable materials has been paid. According to him, in respect of indigenous raw materials, the petitioner has not furnished any proof of the duty having been paid and, therefore, it is not entitled to draw back.
Having heard the learned counsel for the parties, we find that it is not in dispute that the Commissioner (Appeals), vide order dated 22.9.1999, has held that on materials on which proper duty was paid and which are not covered by the DEEC scheme, it is eligible to draw back of amount of duty paid and limiting draw back to the Central Excise allocation in case of these DEEC material, will not be proper and justified. The said order has become final between the parties. Thus, the petitioner is entitled for the claim of draw back in terms of the aforesaid order.
In the case of Union of India and others v. Kamlakshi Finance Corporation Ltd., AIR 1992 SC 711, the Apex Court has held that it is of utmost importance that in disposing of quasi-judicial issues before them, Revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collector working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collector and the Appellate Collectors who function under the jurisdiction of the Tribunal. The Apex Court has further held that the principle of judicial discipline requires that the order of the higher appellate authority should be followed unreservedly by the subordinate authorities and the mere fact that the order of the appellate authority is not acceptable to the Department, in itself in objectionable phrase, and is a subject matter of appeal, can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to the assessee and chaos in the administration of tax laws.
In the case of Authorised Officer (Land Reforms) v. M.M.Krishnamurthy Chetty, (1998) 9 SCC 138, the Apex Court has held that it is well settled that even orders which may not be strictly legal, become final and are binding between the parties if they are not challenged before the superior Court.
In the case of V.S.Charati v. Hussain Nhanu Jamadar (Dead) by L.Rs., (1999) 1 SCC 273, the Apex Court has held that the order of the Tribunal having not been challenged by the respondent become final and binding on both the parties. A decision simply because it may be wrong, would not thereupon become a nullity. It would continue to bind the parties unless set aside. All the effect of the decision on the parties, therefore, cannot be ignored.
A Division Bench of this Court in the case of M/s P.N.C. Construction Company Ltd. v. State of U.P. and others, 2002 UPTC 262, has held that it is a well settled legal position that the Revenue officers are bound by the decision of the Appellate Authority. The Trade Tax Tribunal being the Appellate Authority, its order is binding upon the Assessing Authority and the Revenue who function under the jurisdiction of the Tribunal.
As laid down by the Apex Court in the decisions referred to above and this Court in the case of M/s P.N.C.Constructions Company Ltd. (supra), the respondents are bound by the decision of the Commissioner (Appeals) and cannot ignore the same. Any order issued contrary to the decision of the Commissioner (Appeals), therefore, cannot be sustained.
We further find that under Section 75(1A) of the Act the Central Government has been empowered to declare any material which is more than the total quantity of like material, that has been used in the goods manufactured, processed or on which any operation has been carried out in India and exported outside India, then the quantity of particular material imported into India be deemed to be imported material for the purpose of sub-section (1). Sub-section (1A) of Section 75 of the Act is reproduced below:-
"(1-A) Where it appears to the Central Government that the quantity of a particular material imported into India is more than the total quantity of like material that has been used in the goods manufactured, processed or on which any operation has been carried out in India and exported outside India, then, the Central Government may, by notification in the Official Gazette, declare that so much of the material as is contained in goods exported shall, for the purpose of sub-section (1), be deemed to be imported material."
Under sub-section (1A) of Section 75 of the Act if a notification has been made notifying any material, then, the use of such material would be deemed to be that of imported material.
The Central Government vide notification no.44/91-customs, dated 30.5.1991, as amended by notifications no.213/92, dated 1.6.1992; 126/93 dated 31.5.1993; 124/94 dated 1.6.1994 and 54/98 dated 1.9.1998, had notified at serial no.7 brass scrap; at serial no.22 copper scrap and at serial no.89 zinc, to be deemed to be imported material for the purpose of sub-section (1) of Section 75 of the Act. Thus, if the petitioner used brass scrap, copper scrap and/or zinc in the manufacture of goods which it has exported to countries outside India, it would be deemed that these materials are imported raw material and the petitioner is entitled for draw back as all industry rate. The refusal and the inaction on the part of the Assistant Commissioner, ICD, Moradabad, to give effect to the decision of the Commissioner (Appeals), dated 22.9.1999, is wholly arbitrary and unjustified. The petitioner is, therefore, entitled for the payment of draw back in terms of the order passed by the Commissioner (Appeals), dated 22.9.1999.
The Assistant Commissioner, Customs, ICD, Moradabad, shall make payment of the draw back, pursuant to the order passed by the Commissioner (Appeals), dated 22.9.1999, within one month from the date a certified copy of this order is filed before him.
So far as the notices dated 28.4.2003 are concerned, we are of the considered opinion that as the petitioner had already submitted its reply, the Assistant Commissioner, Customs, ICD, Moradabad, should pass appropriate orders in accordance with law after giving a reasonable opportunity of hearing to the petitioner within one month from the date a certified copy of this order is filed before him. He shall take into consideration the reply submitted by the petitioner and also keep in mind the observations made above.
In view of the foregoing discussions, the writ petition is partly allowed.
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