India’s Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has held that knitted ready-made garments exported from the country fall squarely under Customs Tariff Heading (CTH) 6102, entitling exporters to a duty drawback at the 10% rate, subject to a maximum of Rs. 45 per piece.
In its judgement, the tribunal clarified that items such as gents’ shirts, ladies’ dresses, long coats and blouses, as described in the relevant shipping bills, are “in the nature of knitted ready-made garments” and therefore correctly classifiable under CTH 6102 in terms of Public Notice No. 5/1995.
The two-member bench noted that the principal adjudicating authority had previously assigned multiple tariff subheadings to the consignments, including CTHs 6102, 6103, 6104, 6105 and 6106, in its determination of drawback eligibility. However, tribunal members concluded that this approach lacked specific reasoning and that classification must be based on the goods’ descriptions as declared in the shipping bills.
The appellant in the case had argued that all exported garments were eligible for classification under a single tariff heading and that the relevant shipping bills should be treated as drawback claims. The tribunal agreed, finding that the department had not conducted material testing to ascertain the constituent materials of the goods originally, and that classification should therefore rely on the information furnished by the exporter.
CESTAT held that the exporter is entitled to the 10% drawback rate of the free-on-board (FOB) value under drawback serial number 2704 for the goods falling under CTH 6102, together with the applicable interest at 6% in respect of the 34 shipping bills in question. For two shipping bills classified under CTH 6110, the tribunal upheld the drawback rates as determined in the impugned order. In light of its analysis, the tribunal allowed the appeal in favour of the exporter.
Exporters of textiles and garments are likely to view the ruling as a favourable clarification of tariff classification and duty drawback entitlements, potentially reducing contention with customs authorities over eligibility criteria under the Drawback Rules that seek to mitigate excise and customs duties on exported goods.
