CX - In view of retroamendment by FA, 2003 withdrawing benefit of area-based exemption and dept. initiating recovery proceedings, very basis of rejection of rebate claim that M/s NETCL had not actually paid any duty ceased to exist: HC
By TIOL News Service
NEW DELHI, JULY 29, 2016: THE claim of rebate on the cigarettes exported by the petitioner has been rejected by the lower authorities and the revision petition filed before the Jt. Secretary also met the same fate.
So, the petitioner is before the High Court.
The Petitioner was purchasing cigarettes from M/s North East Tobacco Company Limited (NETCL) located in the State of Assam and who were clearing cigarettes after availing the benefit of area-based exemption from payment of central excise duty under Notification Nos. 32/99-CE and 33/99-CE dated 8th July 1999. In terms of the said notifications, NETCL was required to first pay duty on the clearances upfront and thereafter could claim refund on such amount of the said duty as had been paid through the Personal Ledger Account (PLA).
On its part, the Petitioner invoked Rule 12(1)(a) of the CER, 1944 and filed a refund claim of Rs.15,12,000/- and which rejection is the center of this petition. The Petitioner also invoked Notification No. 41/94-CE (NT) dated 12th September 1994.
The case of the Department is that the rebate scheme envisaged that proper duty on goods exported is 'paid' whereas in the present case the goods exported were fully exempted from payment of duty.
Inasmuch as since the duty paid by NETCL was refunded to NETCL under Notification Nos. 32/99-CE and 33/99-CE dated 8th July 1999, therefore, no duty was actually paid by NETCL which could have been claimed by the Petitioner as refund.
The petitioner submitted that on account of the enactment of Section 154 of the Finance Act, 2003 the benefit under Notification Nos. 32/99-CE and 33/99-CE stood withdrawn retrospectively from 8th July 1999 insofar as cigarettes were concerned. Further, since the recovery of the refund earlier granted to the cigarette manufacturers like NETCL had been initiated, there was no bar to the granting rebate to the Petitioner.
The High Court extracted the referred amendments made by the Finance Act, 2003 and observed –
"10. The net result of the above change is that the area based refund is no longer available to manufacturers of cigarettes in the North East and this includes NETCL as well. Under Section 154(4) of the Finance Act 2003, the Government is bound to recover all amounts of duty or interest which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, which would have not been refunded if Section 154 had been in force at all material times. The consequence is that the refund under Notification No. 32/99 is no longer available and with recovery proceedings having been initiated against NETCL, the cigarettes purchased by the Petitioner from NETCL will have to be considered as goods in respect of which duty was paid by NETCL. Thus the Petitioner cannot be denied the refund due to it in terms of Rule 12(1)(a) of the CE Rules read with Notification No. 41/94-CE (NT) dated 12th September 1994.
11. Consequently, the very basis of the rejection of the Petitioner's refund application by the order dated 13th August 2001 of the Deputy Commissioner and the order dated 29th November 2001 passed by the Commissioner of Excise (Appeals), and order of the Government of India dated 27th August 2002 ceases to exist. The said orders are liable to be set aside."
The High Court also noted that there was no corresponding amendment in notification 41/1994-CE(NT) akin to that made in notification 19/2004-CE(NT) by notification 37/2007-CE(NT) so as to deny rebate in case of export of goods secured under area based exemption notification.
The petition was allowed and it was directed that the petitioner be granted the refund together with interest within eight weeks.
(See 2016-TIOL-1558-HC-DEL-CX)
