Madura Coats Ltd. vs Government of India and Others

Gokulakrishnan, J.—All these writ petitions raise a common question of law and they are for issue of a writ of mandamus except W.P. No.

2466 of 1978, which is for the issue of a writ of certiorari.

The facts of the case in all these writ petitions are similar. The petitioner is M/s. Madura Coats Limited in all these writ petitions. They are

manufacturing mill cloth and also cotton sewing thread among other things. The cotton sewing thread is mostly intended for export and some

varieties of cotton sewing thread are made out of imported cotton. Between 28th June, 1973, and 26th March, 1974, the petitioner exported

cotton sewing thread and filed the shipping bills for clearance of goods. They also made a claim for drawback as per annexure A appended to

each petition. The third respondent therein, viz., the Assistant Collector of Customs, Madras, rejected the claim for drawback on the ground that

there was no drawback rate for sewing thread in the drawback schedule. Since this has not been put in the drawback schedule, the petitioner

made repeated representations to the Government of India to consider their request to get the drawback for the exported cotton sewing thread. A

notification was issued fixing the rate at Rs. 2.34 per kg. It was stated in the notification that such drawback will be available for the exports made

during the period from Ist March, 1973, till 31st December, 1973. Such a notification issued by the Government of India has a statutory sanction

u/s 75(1) and (2) of the Customs Act, 1962, and hence, the exporters get a statutory right to claim the drawback as per the notification issued.

After this notification, the petitioner filed a claim once again before the Assistant Collector of Customs on 23rd April, 1976, drawing the

attention of the Assistant Collector of Customs to the letter received from the Government of India fixing the drawback at Rs. 2.34 per kg. A

reminder was also sent on 25th June, 1976, but not action has been taken by the Customs department till now. Simultaneously, the petitioner filed

an application u/s 130 of the Customs Act before the Collector of Customs, Madras, on 20th June, 1975, which in effect is against the order of the

Assistant Collector of Customs, who rejected the applications for drawback by the petitioner herein on the ground that there is no provision in the

Rules and the Notifications for claiming such drawback as it stood then. In the application filed on 20th June, 1975, the petitioner brought to the

notice of the Collector of Customs the notification dated 8th April, 1975, issued subsequently by the Government of India and prayed for the

drawback amount. The Collector of Customs by his order S. Miscs. 140/75 DBK dated nil rejected the application on the ground that there was

no drawback rate in the drawback schedule for the goods exported during the relevant period and the claims were not marked provisional. The

Collector has further stated that at the time of export of the goods, they were not eligible for drawback as there were no rates prescribed. Thus,

the petitioner was not able to get any relief either on the application filed before the Collector of Customs or on the application again submitted

before the Assistant Collector of Customs. As far as the application made before the Assistant Collector of Customs subsequent to the notification

dated 8th April, 1975, is concerned, the Assistant Collector of Customs has not taken any action on the same. In order to avoid any technical

difficulties, W.P. No. 2446 of 1978 has been filed to quash the order of the Collector of Customs by issue of a writ of certiorari and the other

writs have been filed for issue of a writ of mandamus, directing the Collector and the Assistant Collector of Customs to pay the respective sums

stated in each of the writ petitions, being the drawback due to the petitioner in respect of the export of cotton sewing threads. According to the

petitioner, the failure to pay back the drawback amount is against the provisions of the Customs Act. The petitioner is entitled to get the drawback

as per the notification dated 8th April, 1975, and since the export came within the period specified in the notification, the petitioner is entitled to get

the drawback amount. The petitioner further contends that the refusal on the part of the authorities concerned to take action on the demand made

for the drawback amount is illegal, and contrary to the Rules and notifications of the Government of India.

The respondents in their counter-affidavit have, inter alia, alleged that the petitioner on the relevant dates is not entitled to drawback, that in

order to be entitled to a drawback, the Central Government should be satisfied that the drawback should be allowed on duties of Customs

chargeable under the Customs Act on any class or description of imported material used in the manufacture of such goods and the Government

may by notification in the official Gazette direct that the drawback shall be allowed in respect of such goods but such drawback allowance shall be

in accordance with and subject to the Rules made under sub-section (2) of Section 75 of the Customs Act, and that to entitle to claim the

drawback amount, the exporter should at the time of the export of goods state in the shipping bill at what rate or rates it is claimed, the description

and quantity and the value of the goods exported and should also further make a declaration that a claim for drawback under these Rules is made

and the duties of Customs and Excise have been paid in respect of packing materials. It was further contended that the claims are not made

provisionally and that any claim for drawback is subject to the Rules. The petitioner''s claim made before the third respondent as late as 23rd April,

1976, is belated and that the grey sewing thread exported by the petitioner is not entitled to drawback amount as per the notification. It was also

contended that the Rules were not complied with by the petitioner herein and as such, the refusal to grant the drawback amount is neither hit by

article 19(1)(f) and (g) nor by article 14 of the Constitution. With these averments, the respondents prayed for the dismissal of all these writ

petitions.

Mr. Habibullah Badsha, the learned counsel appearing for the petitioner in all these writ petitions, submitted that the export of cotton sewing

thread in all these case was between 28th June, 1973, and 2nd July, 1973, and that inasmuch as the notification dated 8th April, 1975, had fixed

the rate of drawback for the cotton sewing thread at Rs. 2.34 per kg., the petitioner is entitled to the drawback amount. The learned counsel

further submitted that rule 11 of the Rules framed under the Act is only procedural and as far as the cases on hand are concerned, all the provisions

of the Act and the Rules made thereunder have been satisfied.

Mr. K. N. Balasubramanian, the learned counsel for the respondents in all these writ petitions, contended that the claims made on several dates

by the petitioner herein are belated, that the letter dated 8th April, 1975, which gives relief as per the contention of the petitioner herein, cannot be

of any avail to the petitioner inasmuch as it was not notified in the official Gazette nor do they satisfy the Rules made u/s 75(2) of the Customs Act.

The learned counsel further submits that writ of mandamus cannot be issued in this case. After reading rule 15 of the Customs and Central Excise

Duties Drawback Rules, 1971, Mr. K. N. Balasubramanian submits that the claim made by the petitioner is misconceived and that the petitioner

ought to have requested the Central Government to relax the rules before they have made any claim.

Mr. Habibullah Badsha in reply contended that all the points now raised by the respondents'' counsel are not mentioned in the counter-affidavit

and that in any event, the petitioner is claiming the drawback in accordance with the notification dated 8th April, 1975, which is within the Rules

framed under the Customs and Central Excise Duties Drawback Rules, 1971.

I shall presently consider as to how far the petitioner is entitled to succeed in the writ petitions. Mr. Habibullah Badsha the learned counsel for

the petitioner, submits that W.P. Nos. 3067 and 3070 of 1978 are overlapping and as such one of them may be dismissed. Accordingly W.P. No.

3070 of 1978 is dismissed as superfluous. There will be no order as to costs.

The letter P. No. 601/2501/1/74/DBK/294 dated 8th April, 1975, from the Joint Director (Drawback), Ministry of Finance, Government of

Indian, to the petitioner herein, viz., M/s. Madhura Mills, is in respect of Customs and Central Excise Duties Drawback Rules, 1971, which

specifies the rates of drawback. The said letter reads as follows :

I am directed to say that on the basis of data furnished by you and certified by the Central Excise Department it has been decided to allow

drawback at the rates indicated below on the export of the goods manufacture by you.

Note : The above rate is exclusive of drawback if any admissible on the packing materials used.

This rate of drawback which takes effect from 1st March, 1973, will remain in force until 31st December, 1973, unless withdrawn or modified

by the Central Government in accordance with the provisions of rule 4 of the Rules of replaced by all industry rate and will apply to exports made

from any port in India subject to the conditions of the Rules.

You are also requested to note that in case of any change such as import substitution or manufacture in bond or change in manufacturing

formulae or any other alteration leading to a change in the duty incidence as per the data furnished by you, you should immediately furnish fresh

data for review of rate and should not claim drawback at this rate and the export thereafter might be made under provisional claim for drawback

till the revised rate is communicated.

It is clear from the abovesaid letter that the same was issued only on the basis of the representations made by the petitioner herein. This letter

was issued in order to enable the petitioner to have the drawback at the rates indicated in respect of the goods manufactured by the petitioner. As

we have noticed already, the export involved in this case was between 28th June, 1973, and 26th March, 1974. The cotton sewing thread of the

varieties mentioned in the notification are eligible for drawback at the rate of Rs. 2.34 per kg. Such a facility for getting the drawback as per the

notification was confined to the period between 1st March, 1973, and 31st December, 1973, which definitely takes in the period in which the

petitioner has exported cotton sewing thread. Thus, the abovesaid notification dated 8th April, 1975, clearly makes out the right the petitioner has,

to get the drawback amount for the cotton sewing thread exported between 1st March, 1973 and 31st December, 1973. It is needless to say that

the export involved herein, for which the drawback amount is claimed, comes within the said period mentioned in the notification. In the light of this

letter, we can now look into the provisions of the Customs Act and the Customs and Central Excise, Duties Drawback Rules, 1971.

Section 75 of the Customs Act, 1962, reads as follows :

Drawback on imported materials used in the manufacture of goods which are exported. - (1) Where it appears to the Central Government

that in respect of goods of any class or description manufactured in India and exported to any place outside India, a drawback should be allowed

of duties of customs chargeable under this Act on any imported material of a class or description used in the manufacture of such goods, the

Central Government may, by notification in the official Gazette, direct that drawback shall be allowed in respect of such goods in accordance with,

and subject to, the rules made under sub-section (2).

(1) = A........

(2) The Central Government may make rules for the purpose of carrying out the provisions of sub-section (1), and, in particular, such rules may

provide -

(a) for the payment of drawback equal to the amount of duty actually paid on the imported materials used in the manufacture of the goods or as is

specified in the rules as the average amount of duty paid on the materials of the class or description used in the manufacture of (export goods of

that class or description) either by manufactures generally or by any particular manufacturer;

(b) for the production of such certificates, documents and other evidence in support of each claim of drawback as may be necessary;

(c) for requiring the manufacturer to give access to every part of his manufactory to any officer of Customs specially authorised in this behalf by the

Assistant Collector of Customs to enable such authorised officer to inspect to processes of manufacture and to verify by actual check or otherwise

the statements made in support of the claim for drawback.

From the abovesaid section it is clear that the Central Government may make rules for the purpose of carrying out of the provisions of sub-section

(1) of Section 75 of the Customs Act. In exercise of the powers conferred u/s 75 of the Customs Act, 1962, and Section 7 of the Central Excises

and Salt Act, 1944, the Central Government framed rules called the Customs and Central Excise Duties Drawback Rules, 1971. As per rule 3 of

the said Rules, a drawback could be allowed on the export of goods specified in Schedule II at such amount or rate as may be determined by the

Central Government. In item 27 of Schedule II, it is stated ""Made-up articles, garments, chiefly made from textile materials"". Cotton imported for

the purpose of manufacturing cotton sewing thread is definitely a textile material. The thread made out of this material is definitely a made-up article

chiefly made from the textile material. As peer Section 75(1) of the Customs Act, the notification contemplated is in respect of such goods which

are imported for the use in the manufacture of certain goods. The rules which are lawfully framed and notified definitely take in the imported cotton.

As regards the amount and the rate at which drawback may be allowed on the export of goods, the same can be determined by the Central

Government. This, in may view does not require any notification. The argument of Mr. K. N. Balasubramanian, the learned counsel for the Central

Government as if the Central Government''s letter, which gives the drawback facility cannot be enforced of notification of the same in the official

Gazette cannot be sustained. The materials that are available for drawback facilities have been properly notified as provided u/s 75(1) of the

Customs Act. The notification contemplated is only in respect of the imported goods and item No. 27 in Schedule II of the Customs and Central

Excise Duties Drawback Rules, 1971, takes in cotton imported for the purpose of manufacturing cotton sewing thread. Rule 3 of the said Rules

definitely gives power to the Government to specify the amount and rates for drawback. The letter dated 8th April, 1975, gives such rates for

drawbacks and it is within the powers conferred upon the Central Government both under the Act and the Rules referred to above. Hence, I do

not think any notification in the official Gazette for fixing such amount and rate in needed since the letter dated 8th April, 1975, gives statutory right

to the petitioner herein to claim drawback.

Mr. K. N. Balasubramanian, after reading rule 6 of the said Rules contended that the application ought to have been made by the petitioner

before exporting such goods for drawback amount and hence, the claim is not sustainable. Rule 6 deals with cases where amount or rate of

drawback has not been determined. Rule 6(1)(a) of the said Rules reads as follows :

(1)(a). Where no amount or rate of drawback has been determined in respect of any goods, any manufacturer or exporter of such goods, may

before exporting such goods, apply in writing to the Central Government for the determination of the amount or rate of drawback therefor, stating

all relevant facts including the proportion in which the materials or components are used in the production or manufacture of goods and the duties

paid on such materials or components.

By reading this rule, I do not think there is anything in the said rule which will disentitle the exporter if he applies for the drawback subsequent

to the export on the strength of the concession given much later to the export period. Further, a procedure is contemplated under rule 6 of the said

Rules to get the rate of drawback in cases where the amount or rate of drawback has not been determined prior to the said export. Mr. Habibullah

Badsha contended that prescribed application was made at the time of shipping the goods and subsequent representations have also been made to

entitle the petitioner to get the drawback amount. According to the learned counsel, it is only because of such representations, the Government of

India by letter dated 8th April, 1975, gave the facility to get the drawback amount as mentioned in the said letter. The Government, which has

given such concessions to the petitioner, cannot contend that the benefit is not available to the petitioner herein owing to some procedural defects in

claiming such drawbacks. The letter dated 8th April, 1975, has a statutory value as we have seen in the abovesaid paragraphs.

In the absence of any prohibition in the rules made under the Customs and Central Excise Duties Drawback Rules, 1971, prohibiting the

petitioner in claiming the drawback on the strength of the abovesaid letter, in my view, there is no need to apply for relaxation of any of the

provisions of the rules under rule 15 of the said Rules. Failure to make the application before exporting such goods, in my view, will not in any way

disentitle the petitioner to have the claim for the drawback on the strength of the letter dated 8th April, 1975. Correctly, the petitioner has applied

to the Assistant Collector of Customs, Madras, for getting the drawback amount as per annexure A, which gives particulars as regards the claim

made in respect of each of the writ petitions. It is incumbent upon the respondents to act as per the letter dated 8th April, 1975. A statutory right

has been conferred upon the petitioner as per the said letter to claim the drawback amount. Correctly such drawback amount has been claim by

the petitioner in all these write petitions and as such, the respondents made after satisfying themselves as regards the quantum claimed towards the

drawback amount in the schedule attached to the writ petitions, pay the drawback dues to the petitioner as expeditiously as possible. Inasmuch as

the petitioner''s claim for the drawback dues subject to the authorities verifying the correctness of the amount involved in it and the same coming

within the period during which the concession is permitted is valid as per law, the respondents are directed to pay back the drawback dues to the

petitioner in each of the writ petitions without any further delay. The rule nisi is made absolute in all the writ petitions except W.P. Nos. 2446 and

3070 of 1978. W.P. No. 3070 of 1978 is dismissed as superfluous.

As regards W.P. No. 2446 of 1978, which is for issue of a writ of certiorari, I do not think any separate order is needed since the claim made

by the petitioner has been answered in favour of the petitioner in the above writ petitions. Hence, W.P. No. 2446 of 1978 is also dismissed as

superfluous. There will be no order as to costs in all these writ petitions.