Cummins India Ltd. vs Union of India

Rule. The Respondents waive service. By consent of the parties, Rule is made returnable forthwith. Heard finally. This Writ Petition under Article 226 of the Constitution of India challenges the order passed by the Revisional Authority, namely, Respondent No. 2 dated 17th December, 2012.

Prayer clause (b) of this Writ Petition at page 16 reads as under:--

"(b) that this Hon''ble Court be pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ or order or direction under Article 226 of the Constitution of India directing the Respondent No. 2 to forthwith sanction supplementary claim of drawback amounting to Rs. 1,53,69,337/-."

At the outset, we wish to clarify that we have not issued any writ in terms of this prayer clause (b) and, therefore, our order shall be treated as confined and restricted to the validity and legality of the order dated 17th December, 2012 passed by the Respondent No. 2.

Very few facts in relation to this order are necessary to be stated. Both sides do not dispute that the factual position as noted in the order passed by the Revisional Authority, namely, Joint Secretary in the Department of Revenue, Ministry of Finance, Government of India, is correct.

M/s. Cummins India Limited, the Petitioners before us are manufacturer-exporters of IC Engines and parts thereof falling under Tariff Item No. 8408. From May 2005 to February 2010, they exported these products and claimed drawback by filing shipping bills under advance licenses and drawback scheme for claiming drawback against the brand rate letters issued under Rule 6(1)(a) of the Drawback Rules, 1995. The brand rate letters were issued by the office of the Commissioner of Central Excise, Pune-III Commissionerate. It was noticed that All Industry Drawback rates had indeed been notified in respect of the goods exported by the Petitioners, they were so notified under Rule 3 of the Drawback Rules and the Notification in that behalf is dated 2nd May 2005. The rates were effective from 5th May, 2005. The Revisional Authority was of the opinion that the department proceeded on the basis that the Petitioners filed for drawback determination invoking Rule 6(1)(a) and the rates were determined by the jurisdictional Commissioner under Rule 6(1)(b) of the Drawback Rules. Rule 6(1)(a) comes into play only where no amount or rate of drawback has been determined in respect of any goods in terms of Rule 3. The Revisional Authority referred to the exception as provided in Rule 7 and, then, referred to the fact that even if All Industry Drawback rates had been notified in respect of the goods imported by the Petitioners under Rule 3 of the Drawback Rules, they had the option to go for determination of the amount or rate of drawback under Rule 7. That could have been done provided the rate or amount determined under Rule 3 was less than four-fifth of the duties or taxes paid on the raw materials or components or input services used in the production or manufacture of goods.

We are not concerned with the observations of the Revisional Authority in the impugned order. Suffice it to hold that the Revenue initiated proceedings for recovery of the excess drawback paid under Rule 16 of the Drawback Rules by issuance of three show cause notices dated 4th October, 2010, 25th October, 2010 and 3rd December, 2010. These show cause notices were adjudicated by a common order dated 21st March, 2011 of the Commissioner of Customs, Pune.

The Petitioners had filed an Appeal against the order of the Commissioner to the Customs Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai. This Appeal was decided on 12th April, 2012. From the order of the Revisional Authority, it appears that the case or matter has been remanded for reconsideration of the claims under Rule 7 of the Drawback Rules. On 22nd March, 2011, the Petitioners filed a supplementary claim by applications dated 22nd March, 2011 for the period from May 2005 to February 2010 with the Deputy Commissioner of Customs, Drawback Department, under Rule 15 of the Drawback Rules, 1995, claiming an amount of Rs. 1,53,69,337.34. The Petitioners urged that the Revenue has not taken into account the shipping bills mentioned by them in the supplementary claim. The Assistant Commissioner of Customs, rejected these supplementary claims as time barred and also on the ground that the Order-in-Original No. 31/2011 dated 21st March, 2011 passed by the Commissioner of Customs, Pune, did not cover drawback claims pertaining to the shipping bill covered in the supplementary claim.

On being aggrieved with this order of the Assistant Commissioner dated 1st June, 2011, an Appeal was filed before the Commissioner and he allowed it on 9th November, 2011. The Respondent No. 3 to this Writ Petition approached the Central Government under Section 129DD of the Customs Act, 1962 and by the impugned order passed on the said Revision Application allowing it that the Petitioners have approached this Court in writ jurisdiction. Several contentions have been raised before us by Mr. Sridharan, learned Senior Counsel, appearing for the Petitioners. He invited our attention to the compilation which has been tendered on behalf of the Petitioners containing the requisite Rules and Circulars. In the submission of Mr. Sridharan, the Revisional Authority erred in holding that the supplementary claims were barred by limitation. Mr. Sridharan submits that even if the language of Rule 15 of the Drawback Rules contains a period of limitation, yet, the delay beyond the same can be condoned by the Central Government in exercise of its powers under Rule 17 of the said Rules. Mr. Sridharan submits that the language of Rule 17 enables the Central Government to exercise the powers and which have been invoked in this case. That is a power to relax. If the Central Government is satisfied that in relation to the export of any goods, the exporter or his authorised agent has, for reasons beyond his control, failed to comply with any provisions of these Rules and has thus, been entitled to drawback, the Central Government after considering the representation, if any, made by such exporter or his agent record reasons in writing and exempt the exporter or agent from the provisions of such Rule and allow drawback in respect of such goods. Mr. Sridharan submits that there was nothing which can prohibit the Central Government and in this case from exercising this power to relax. The power to relax was invoked by the Petitioners for bonafide reasons. They could have made a supplementary claim only because of the stand which was taken by the authorities and in pursuance of the show cause notices and the order made thereon. Thus, if the stand is changed by the Assessee and on account of interpretation placed on certain Rules, then, such subsequent change can be a sufficient cause for the delay. The subsequent events as well enable the exercise of the powers to relax because the parties like the Petitioners have acted bonafide. The Petitioner''s case may not fall strictly in the Rule 15 but the power under Rule 17 is not circumscribed and in that regard Mr. Sridharan has placed reliance upon a passage from the well known work, namely. Administrative Law by Sir William Wade Eighth Edition.

On the other hand, Mr. Jetly appearing on behalf of the Respondents supported the impugned order. He submits that the concession of the Petitioners that their case may not strictly fall under Rule 15 is enough for the Central Government to interfere with the Appellate Order and in its revisional jurisdiction, in these circumstances and when Rule 15 was not attracted, then, the revisional order does not require any interference in this Court''s writ jurisdiction. The Writ Petition is devoid of merits and must be dismissed.

With the assistance of the learned counsel appearing for both sides, we have perused the Writ Petition and its Annexures including the impugned order. We have perused the relevant Section 129DD of the Customs Act, 1962 and the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (for short referred to as the ''Drawback Rules''). We have also perused the copies of the Circular dated 29th October, 1998 and a Notification No. 68/2007 dated 16th July, 2007.

In the light of the admitted factual position and noted above, it was open for the Petitioners to have argued before the Revisional Authority that the Appellate order is correct on facts and in law. They could have pointed out that the Appellate order rightly refers to the legal provisions. The Appellate order has permitted the Petitioners not only to file the Appeal beyond the stipulated period, namely, before the Commissioner (Appeals) but equally the Commissioner in allowing the Appeal did not commit any error of law apparent on the face of the record. The Commissioner examined the case records and referred to the ground taken therein that the supplementary claim was delayed because though All Industry rate has been determined, the Petitioners made an application for brand rate of Drawback under Rule 6. The Central Excise has issued the brand letters against the application on the basis of which the Customs Department sanctioned the claim. Now, there is an order of adjudication on the show cause notices and the Customs Department holds that the Petitioners are not entitled to file application under Rule 6. The Petitioners are held to be entitled for drawback under All Industry rate only. The Petitioners claim that the drawback sanctioned in respect of shipping bills mentioned while invoking Rule 6 is lower than All Industry rate of drawback. Therefore, the Petitioners are entitled to drawback under Rule 3. The Appellate Authority, namely, the Commissioner (Appeals), the Customs, Central Excise Duties and Service Tax, Goa, holds that this is a sufficient and bonafide reason for filing supplementary claim in terms of Rule 17 of the Drawback Rules read with Circular No. 82/1998-Customs dated 29th October, 1998 . He, therefore, was of the view that the Petitioners claim cannot be treated as time barred. He directed the Assistant Commissioner to admit the claim and to process the same as per law. It is this direction of the Commissioner (Appeals) which was challenged in the revisional jurisdiction of the Central Government. In Paras 5.2 and 5.3 of the impugned order, the Revisional Authority specifically notes the argument of the Petitioners and canvassed in the alternative and without prejudice. However, what we find is that in Para 8 of the impugned order, the Revisional Authority refers to the adjudication made by the show cause notices and terms that it was a recovery proceeding to recover drawback granted erroneously under Rule 6(1)(a) of the Drawback Rules. It holds that the supplementary claims are not covered by the show cause notices. It, then, proceeds to hold that the Order-in-Original is not related to the present case. Thereafter the Joint Secretary reproduces the direction of the Appellate Authority in Para 8.2 and concludes that the Department has initiated proceedings only in respect of those shipping bills where the claimed amounts of drawback was more than the amount as calculated at the applicable All Industry rate. Therefore, those shipping bills where the amount claimed was less than the All India rate were not subject matter of the proceedings which were concluded on 21st March, 2011. Hence, the Government agrees that the claims which are made attract the provision of lime limit as provided under proviso (i) to Rule 15(1) of the Drawback Rules. Once the period prescribed in these Rules has expired, no further extension can be granted, is the conclusion reached.

However, in para 10 of the order, the Revisional Authority observes thus:--

"10. Finally in reference to consideration of without prejudice submission of the respondent herein for the grant of extension under Rule 17 of the DBK Rules 1995, this authority is constrained to accede as respondent has not produced any such extension granted by competent authority of Central Government. In the absence of any such extension/condonation of delay on record, Government holds this case matter as hit by time limitation."

We are of the view that the essential contention raised before the Revisional Authority specifically has not been adverted to leave alone considered and decided. The contention of the Petitioners was that if Rule 15(1) was the applicable Rule and that provided a time limit, could the time limit have been relaxed by the Government in exercise of its power to relax conferred by Rule 17 of the Drawback Rules. Assuming and without further admitting that Rule 15 was not the rule invoked, could under the general power to relax the Central Government have relaxed the time limit and condoned the delay and thereafter considered the supplementary claims on their merits and in accordance with law. The Central Government is the Revisional Authority in terms of Section 129DD. The section itself opens with the words "the Central Government may". The Re-visionary powers under the section can be invoked by any person aggrieved and equally by the principal Commissioner of Customs or Commissioner of Customs, if he is of the opinion that the order passed by the Commissioner (Appeals) under Section 128-A is not legal or proper. He can direct the proper officer to make an application on his behalf to the Central Government for revision of such order. If the legality or propriety of the order passed by the Commissioner (Appeals) was under consideration of the Central Government, then, in the given facts and circumstances and peculiar to the Petitioners case, it was equally open for the Revisional Authority to consider and decide the alternate and without prejudice contentions. If the power to relax is conferred in the Central Government, then, whether that power can be invoked by the Petitioners during the course of the present Revisional Proceedings was equally a vital issue. In the given facts and circumstances and to curtail further legal proceedings and in the larger public interest and equally interest of justice, the Central Government could have gone into this contention and decided this aspect as well. We are of the opinion that by the reasons assigned in para 10 of the impugned order, the Revisional Authority has failed to decide these contentions and render the findings on them. This failure vitiates the exercise of the revisional powers by the Central Government. If the legality or propriety of the order of the Commissioner (Appeals) was under consideration and that was the guiding test, then, the Joint Secretary was obliged to consider all contentions including those raised alternate and without prejudice. It was necessary for the Joint Secretary to have rendered a finding as to whether the power to relax under Rule 17 has been invoked and if invoked before him, could the power be exercised at the stage at which the matter is brought before him. Once the Commissioner has held that Rule 17 enables the consideration of the supplementary claim on merits, then, the above exercise in its entirety was necessary. It was incumbent upon the Revisional Authority to render complete findings and conclusion and not leave the matter half way and by some cryptic observation and reasoning.

As a result of the above discussion, the Writ Petition succeeds. The Revisional order passed by the Joint Secretary, Ministry of Finance, Department of Revenue, dated 18th December, 2012 is quashed and set aside. The Revision Application is restored to the file of the Central Government for being decided afresh and in accordance with law. We clarify that we have not expressed any opinion on the rival contentions and specifically on the merits of the supplementary claim. Equally, we have not rendered any conclusive opinion as to whether the power to relax conferred by Rule 17 can be exercised and in favour of the Petitioners in the given facts and circumstances. All that we have impressed upon the Revisional Authority is that it should decide the matter entirely and completely. It was obliged to do so in the given facts and circumstances. It is, therefore, that its findings as rendered in para 10 cannot be sustained. Now, it would be open for the Petitioners to urge before the Revisional Authority that not only they have invoked Rule 17 before the Commissioner (Appeals) and who has applied it in condoning the delay, if any, in bringing the supplementary claim but the supplementary claims being on record, it is the Central Government which can still exercise the power to relax as that power can be relied upon before the Revisional Authority in a revision filed by the Commissioner (Respondent No. 3). Merely because such a stand is taken by the Petitioners, the Revisional Authority should not once again render the same findings but deal with all these issues and contentions based thereon. It must decide whether the order passed by the Commissioner (Appeals) and specifically referring to Rule 17 in the above background, is legal or proper.

With the above directions, we dispose of this Writ Petition and further expect the Revisional Authority to deal with and decide the revision application as expeditiously as possible. We expect that the same shall be disposed of within three months from the date of receipt of copy of this order. Rules is made absolute in above said terms. No costs.