M/s.CPS Textiles (P) Ltd. v. Joint Secretary, Government of India

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 3.12.2009CORAMTHE HONOURABLE MR.JUSTICE R.SUDHAKARWrit Petition No.5871 of 2006 M/s.CPS Textiles (P) Ltd.,represented by its Managing Director K.S.Venkatesh,Lakshmi Garden,Kangayam Road,Tirupur-641 604. ... Petitioner vs.1.Joint Secretary, Government of India, Ministry of Finance, (Department of Revenue), 14, Hudco Vishala Buildings, B Wing, 6th Floor, Bhikaji Cama Place, New Delhi-110 066.2.Commissioner of Customs (Appeals), Custom House, No.33, Rajaji Salai, Chennai-600 001.3.Deputy Commissioner of Customs (Drawback), Air Cargo Complex, Meenambakkam, Chennai-600 027.4.Commissioner of Customs, Air Cargo Complex, Meenambakkam, Chennai-600 027. ... Respondents Writ Petition is filed under Article 226 of the Constitutionof India praying to issue a Writ of Certiorarified Mandamus,calling for the records of the first respondent culminating in theorder No.333-334/2005 dated 21.11.2005 and quashing the same anddirect the third respondent to grant drawback to the petitionercompany as claimed. https://hcservices.ecourts.gov.in/hcservices/ For Petitioner : Mr.Suresh Kumar For Respondents : Mr.Peter Gunasekaran, Central Government Standing Counsel -----O R D E RThe Writ Petition is filed praying to issue a Writ ofCertiorarified Mandamus, calling for the records of the firstrespondent culminating in the order No.333-334/2005 dated21.11.2005 and quashing the same and direct the third respondentto grant drawback to the petitioner company as claimed. 2. Writ Petitioner company is engaged in manufacture andexport of Knitted Garments. According to the statement in theaffidavit filed in support of the writ petition, petitionercompany exported Poly Acrylic/Wool/Lycra Blended Knitted Garmentsunder the cover of Shipping Bill No.2499666 dated 31.8.2002.After completion of the exports, petitioner company claimeddrawback on the export of the goods. Third respondent sanctionedand granted the drawback in a sum of Rs.1,19,102/- as claimed.Thereafter, on 19.11.2003, the third respondent issuednotice/letter stating that excess drawback was claimed and paiddue to wrong classification and called upon the petitioner torepay the excess amount of Rs.1,00,142/- within fifteen days fromthe date of receipt of the notice/letter. Petitioner submitted areply on 29.12.2003 to the said notice/letter. Thereafter, theAssistant Commissioner(Drawback)ACC in his proceedingsF.No.TA/Genl./203064/2003-04/DBK-ACC dated 5.1.2004 gave thedetails as to how the excess amount is paid towards the drawbackclaim. According to the petitioner, the goods exported by thepetitioner company are Poly Acrylic, Wool, Lycra KnittedGarments. As per the Drawback Shipping Bill, the export goodswere classified under Serial No.61.09/61.01 of the DrawbackSchedule 2002-2003 at the rate of 12% of the FOB value. 3. According to the Department, the goods exported areblended knitwear containing Poly Acrylic/Wool/Lycra with orwithout natural fibres and would merit classification under SerialNo.60.07 entitled to drawback only at the rate of 12/- per kg.In view of the same, the excess drawback amount was claimed. Anopportunity of personal hearing was granted. In the proceedingsdated 5.1.2004, the details of the working sheet was alsoenclosed. Petitioner submitted a reply dated 19.1.2004 to thethird respondent. The third respondent passed the Order-in- https://hcservices.ecourts.gov.in/hcservices/ Original No.263/2004 in F.No.TA-Genl./203064/2003-04-DBK ACC dated19.5.2004. The third respondent came to the conclusion that thegoods as exported by the petitioner would merit classificationunder Serial No.60.07 and is eligible for the drawback at Rs.12/-per kg only. For the reasons contained in the proceedings dated5.1.2004, the third respondent confirmed the demand ofRs.1,00,142/- and passed the following order:-"In view of this I confirm the demandamount of Rs.1,00,142/- from the date of issueof demand notice. I also order the exporterto pay the applicable interest on the saidamount on expiry of 60 days from the date ofissue of demand notice till the date ofpayment of the said amount." 4. Aggrieved by the said order passed by the thirdrespondent, the Deputy Commissioner (Drawback), petitioner filedan appeal to the second respondent, the Commissioner of Customs(Appeals). The second respondent upheld the finding of the thirdrespondent on merits rejecting the petitioner's plea. Thereasoning of the Commissioner of Customs(Appeals), the secondrespondent, based on the factual details of the drawback claim,will be useful for deciding the present issue and the relevantportion is set out hereunder:-"I have carefully gone through the records of thecase and the submissions of the appellants. The shortquestion before me to decide is whether the goodsexported by the appellants are classifiable underheading 61.09/61.01 or 60.07 of the drawback schedule.The admitted fact of the case is that the appellants hadexported garments described as 77% poly acrylic 19% wool4% lycra Knitted T-Shirts with hood and 77% poly acrylic19% wool 4% lycra knitted sweat shirts vide the ShippingBill No.2499666/31.08.2004 and claimed duty drawbackunder heading 61.01/61.09 which was sanctioned to themas they claimed. It is clear from the description provided by theexporter themselves that these are knitted garments madeup of blended yarns having 77% poly acrylic 19% wool and4% lycra. In other words, the said exported garmentswere only blended knit wears. For appreciation of the classifications anddescription shown under heading No.60.07, 61.01 and61.09 as given in the drawback schedule 2002-03, thesame is reproduced below:- https://hcservices.ecourts.gov.in/hcservices/ SERIAL/SUBSERIALNO.DESCRIPTION OFGOODSRATE OF DRAWBACKALLOCATION CUS.C.Ex.60.07Blended Knitwearscontaining wool/Acrylic/Nylon/Polyester fibre/Viscosefibres/Linen/Cotton with orwithout othernatural fibreslike Mohiar,Angora etc., whenCENVAT facilityhas not beenavailedRs.12.00 (Rupeestwelve only) perkg.All CentralExcise61.01Knitted Shirts/Blouses/T-Shirts/Tops, all sorts,when CENVATfacility has notbeen availed.12% (twelvepercent only) off.o.b. valuesubject to amaximum ofRs.40.00 (Rupeesforty only) perpiece4.55%7.5%61.09All otherknitwears andarticles ofhosiery made ofcotton/polyster/cellulosic yarnor knitted fabricwhen CENVATfacility has notbeen availed.11.5% (elevenpoint five percent only) off.o.b. Valuesubject to amaximum ofRs.35.00 (Rupeesthirty fiveonly) per piece.4%7.5%It is abundantly lucid from the headingdescription depicted supra that the Sl.No.60.07specifically covers blended knitwears. Per Contra, theSl.No.61.01 of the drawback schedule is generic innature and covers knitted garments of all sorts.Similarly, the heading 61.09 encompasses within itselfknitwears and hosiery articles made up of specificmaterials such as cotton, polyester, cellulosic yarnetc. Going by the nature of the subject exported goodsthat these were blended knitted garments, the same are https://hcservices.ecourts.gov.in/hcservices/ rightly classifiable under heading 60.07 of thedrawback schedules. The order of the lower Authorityis thus sustainable to this extent."5. The Commissioner of Customs (Appeals), however, set asidethe claim for interest stating that there was no demand forinterest in the notice. The writ petitioner exporter filed anappeal to the first respondent in terms of Section 129DD of theCustoms Act, 1962 challenging that portion of the order rejectingtheir plea that the claim for drawback was rightly made andgranted. The revenue also filed an appeal challenging thatportion of the order of the Commissioner of Customs (Appeals)rejecting the Department's claim for interest. Both the revisionswere taken up together and disposed off by the first respondent bya detailed common order dismissing the appeal filed by the writpetitioner exporter and allowing the appeal filed by the revenueinsofar as interest is concerned. Aggrieved thereby, the presentwrit petition has been filed by the exporter.6. Thiru Suresh Kumar, learned counsel appearing for thewrit petitioner exporter submitted his arguments as follows:-(i) In the Drawback Shipping Bill, it has been clearly stated thatthe goods are Knitted Sweat Shirts and Knitted T-Shirts withHood. As per Drawback Schedule 2002-2003 Knitted T-Shirts/Blouses/T-Shirts/Tops fall under Serial No.61.01 and theDrawback eligible will be 12% of the F.O.B. value. In viewof the description contained in the Shipping Bill, the specificentry 61.01 alone will apply to the goods exported underDrawback Shipping Bill. He stated that Serial No.60.07relates to all types of blended knitwears containingwool/Acrylic/Nylon/Polyester Fibres/Viscos Fibres/Linen/Cotton. Therefore, it is a generic entry. In the descriptionas per the Drawback Shipping Bill, it is specificallymentioned as "Knitted Sweat Shirts and Knitted T-Shirts withHood" and as per Drawback Schedule 2002-2003, it will fall onlyunder Serial Nos.61.01/61.09.(ii) He submitted that in respect of another exporter, theCommissioner of Customs (Appeals), Coimbatore has taken a viewthat the exported goods, viz., Cotton and Cotton Viscose KnittedT-Shirts will fall under the Heading 61.01 and not under 60.07 asclaimed by the Department and such order has not been challengedby the Department to the knowledge of the petitioner. (iii) Assuming without admitting that the view taken by theDepartment in the present case that the goods will fall underSerial No.60.07 of the Drawback Schedule, in view of thedifferent view taken by the Commissioner of Customs (Appeals),Coimbatore, it is clear that within the Department, there are two https://hcservices.ecourts.gov.in/hcservices/ views insofar as the classification is concerned and therefore,the one which is favourable to the assessee should be preferred.Learned counsel for the petitioner exporter relied upon thedecisions in Sun Export Corporation – vs. - Collector of Customs,Bombay reported in 1997 (93) E.L.T. 641 (S.C.) and also Collectorof Customs, Madras - vs. - Lotus Inks reported in 1996(87) E.L.T.580 (S.C.).(iv) Insofar as interest is concerned, learned counsel forthe petitioner exporter submitted that in the notice, demand forinterest is not claimed in terms of Section 75A(2) of the CustomsAct, 1962, though there is a specific provision for interest. TheDepartment, having not claimed interest in the demand notice, arenot entitled to the same. 7. Counter-affidavit has been filed on behalf of therespondents 3 and 4. Thiru Peter Gunasekaran, learned CentralGovernment Standing Counsel appearing for the Departmentreiterated the stand taken by the Department in the counter-affidavit and submitted his arguments as follows:-(i) The order of the first respondent is a well considered orderon the merits of the case. He pointed out that the descriptionof the goods exported under Drawback Shipping Bill as per theDrawback Schedule, will fall only under the Serial No.60.07,a specific entry, whereas the claim of the petitioner under theSerial No.61.01/61.09 is the generic entry as it applies kindsof goods, like Knitted Sweat Shirts, Knitted T-Shirts, Tops,etc. (ii) He submitted that in terms of Section 75A(2) of the CustomsAct, 1962, on a claim for excess payment of Drawback, theinterest payable is automatic as per the provision of the Actand no separate demand need be issued.8. On the question of classification of goods, two relevantaspects that have to be considered are the Drawback Shipping Billand the Invoice that had been furnished by the writ petitionerexporter to cover the export goods. This will throw light on thenature of the classification which is in dispute. In the DrawbackShipping Bill, it has been clearly stated that the goods areKnitted Sweat Shirts containing 77% Poly Acrylic, 19% Wool and 4%Lycra. Insofar as Knitted T-Shirt with Hood is concerned, itcontains 77% Acrylic, 19% Wool and 4% Lycra. This is the samedescription in the Invoice. The Commissioner of Customs (Appeals)has noticed that the writ petitioner exporter has described thegoods as Knitted Garments made up of blended yarns in theproportion mentioned above. Therefore, the goods are blendedknitwear and falls within the specific description under SerialNo.60.07. https://hcservices.ecourts.gov.in/hcservices/

9. In the present case, the writ petitioner exporter hasclearly stated in the Drawback Shipping Bill as well as theInvoice, the description of the goods and the percentage contentof the blend of the knit wear. Therefore to state that the goodswill fall under Serial No.61.01/61.09 is incorrect. The goodsadmittedly are blended knitwear containing of PolyAcrylic/Wool/Lycra in different proportions and fall correctly asper the description under Serial No.60.07. In view of thedescription given by the writ petitioner in the Invoice and theShipping Bill there can be no doubt that the reasoning of theDepartment that the goods will fall under Serial No.60.07 iscorrect. There can be no manner of doubt insofar as theclassification of the goods as determined by the Department. Thedescription of the goods as per the documents submitted alongwith the Shipping Bill will be a relevant criteria for the purposeof classification, if not otherwise disputed on the basis of anytechnical opinion or test. The petitioner cannot plead that theexported goods should be classified under different headingscontrary to the description given in the Invoice and the ShippingBill which have been assessed and cleared for export. Theconcurrent findings by the Authorities on facts with regard to theclassification of the goods, needs no interference by this Court.10. The reliance placed on the reasoning of theCommissioner of Customs (Appeal), Coimbatore in his order dated12.12.2006 made in Appeal No.20 of 2006 will be of no relevance tothe present case only because the Department has not preferred anappeal against the said decision. The finding of the Commissionerof Customs (Appeal), Coimbatore will not bind this Court, when themerit of the claim is before this Court. However, I find thatthe goods exported in that case under drawback claim are Cottonand Cotton Viscose Knitted T-Shirts which also finds place inSerial No.60.07. Blended Knitwear of cotton fibre will fallunder Serial No.60.07 and not 61.01 as held by the Authority. Iam unable to accept the reasoning in that case. 11. The claim for Drawback under Serial No.61.01 will applyonly in case where the goods do not fall under Serial No.60.07.When the description of the goods in the present case clearlysatisfy the requirement of Serial No.60.07 of the 2002-2003Drawback Schedule as Blended Knitwear containing variouspercentage of Wool, Poly Acrylic, Polyester Fibre, etc., thepetitioner's plea cannot be sustained. 12. The decision of the Apex Court in Sun ExportCorporation case (cited supra) stating that if two views arepossible in classification of goods, the one in favour ofassessee should be taken, will not be applicable to the facts ofthe present case, as there is no ambiguity or another view in the https://hcservices.ecourts.gov.in/hcservices/ classification of the goods which are subject matter of theDrawback claim. All the Authorities have concurrently held thatthe goods fall under Serial No.60.07 of the Drawback Schedule2002-2003. There is no ambiguity in the classification as held bythe Department. In such view of the matter the two decisionsrelied upon by the petitioner will not be applicable to the factsof the present case.Hence the plea on classification ofgoods as upheld by the respondent Authorities stands confirmed andthe writ petitioner's plea stands rejected. 13. Insofar as the interest is concerned Section 75A(2) ofthe Customs Act, 1962 reads as follows:-"(2) Where any drawback has been paid tothe claimant erroneously or it becomesotherwise recoverable under this Act or therules made thereunder, the claimant shall,within a period of two months from the date ofdemand, pay in addition to the said amount ofdrawback, interest at the rate fixed undersection 28-AB and the amount of interest shallbe calculated for the period beginning fromthe date of payment of such drawback to theclaimant till the date of recovery of suchdrawback." On reading of Section 75A(2) of the Customs Act, it is clear thatwhen the claimant is liable to pay the excess amount of drawbackhe is liable to pay interest as well. The section provides forpayment of interest automatically along with excess drawback. Nonotice need be issued separately as the payment of interest becomeautomatic, once it is held that excess drawback has to be repaid.14. For all the above said reasons, I find no merit in thewrit petition. Accordingly, writ petition is dismissed. Noorder as to costs.tsSd/-Asst. Registrar//True Copy//Sub Asst. Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1.The Joint Secretary, Government of India, Ministry of Finance, (Department of Revenue), 14, Hudco Vishala Buildings, B Wing, 6th Floor, Bhikaji Cama Place, New Delhi-110 066.2.The Commissioner of Customs (Appeals), Custom House, No.33, Rajaji Salai, Chennai-600 001.3.The Deputy Commissioner of Customs (Drawback), Air Cargo Complex, Meenambakkam, Chennai-600 027.4.The Commissioner of Customs, Air Cargo Complex, Meenambakkam, Chennai-600 027. + 1 cc to Mr. S.Murugappan, Advocate SR No.66329+ 1 cc to Mr. A.P. Petergunasekaran, Advocate SR No.65896RJ(CO)SR/15.12.2009 Order in W.P.No.5871 of 2006