Case Note & Summary
The case involved appeals by manufacturers of polyester fibre yarn against the rejection of their claim for a full drawback of customs duty paid on di-methyl-terephthalate (DMT) imported for manufacturing purposes. The appellants had entered into a contract with Imperial Chemical Industries, Singapore, for the supply of DMT, which was to be converted into polyester fibre and exported. They obtained customs clearance for importing DMT and paid the corresponding customs duty. However, the Central Government's notification exempting DMT from customs duty was issued after the appellants had already imported the material. The appellants contended that they were entitled to a drawback of the customs duty paid, as the DMT was used in the manufacture of goods that were exported. The Central Government rejected their application, stating that the rules only allowed for an average drawback based on industry standards, not the actual duty paid by individual manufacturers. The High Court upheld this decision, leading to the present appeals. The Supreme Court dismissed the appeals, affirming that the rules did not provide for a full refund of customs duty and that the determination of drawback rates was based on average industry practices. The court recommended that the Central Government consider the appellants' case on equitable grounds, given their contribution to foreign exchange earnings and the circumstances surrounding their importation of DMT. The appeals were dismissed, but the court suggested the possibility of relief on equitable grounds (Paras 300-304).
Headnote
A) Customs Law - Drawback of Customs Duty - Entitlement to Full Drawback - Customs Act, 1962, Section 75 - The court held that the rules framed under the Customs Act do not provide for a refund of the entire customs duty paid by individual manufacturers but rather an average amount based on general industry rates. The assessees' claim for full drawback was rejected as the rules did not envisage such a refund (Paras 300A-301B).
Issue of Consideration
Whether the assessees are entitled to full drawback of customs duty paid on the import of di-methyl-terephthalate (DMT) for the manufacture of polyester staple fibre yarn.
Final Decision
The Supreme Court dismissed the appeals, affirming the rejection of the assessees' claim for full drawback of customs duty paid on DMT, while recommending the Central Government to consider the case on equitable grounds.
Law Points
- Customs duty drawback
- Central Excises & Salt Act
- 1944
- Customs Act
- 1962
- Drawback Rules
- 1971
- Section 75
- Section 37
