By TIOL News Service

MUMBAI, NOV 30, 2017: THE petitioner seeks to impugn orders passed by the Joint Secretary, GOI in Revisions Applications filed by the petitioners challenging rejection of claims for rebate under specified notifications granting export related benefits.

The petitioners are engaged in the manufacture of biscuits, confectionery and wheat flour. Apart from manufacturing biscuits themselves, the petitioners would get biscuits manufactured from other Contract Manufacturing Units ('CMUs') across India in terms of  Notification no 36/2001-CE(NT)  and these are brought into the petitioners factory and stuffed into containers along with goods manufactured at their own factory and thereafter cleared for export.

It is submitted that in view of the rising transaction costs of exports, the petitioner shifted their export activities to the premises of M/s. Bunty Foods Pvt. Ltd.("BFPL") with effect from September, 2004. BFPL itself manufactured biscuits and would also receive variety of biscuits and confectionery manufactured by other units in terms of the Notification 36. It transpires that in order to receive duty paid goods manufactured by the CMUs in the factory of BFPL, BFPL made an application to the jurisdictional Commissioner of Central Excise requesting permission to receive goods under rule16(3) of the Central Excise Rules, 2002 ('the Rules'). The letter mentioned that no processing had been undertaken in BFPL factory and the goods brought in, were stored and stuffed directly into the export containers. Permission was sought on the basis that similar permission had been granted to the principal manufacturer viz, the petitioners.

The AC, CEX declined to grant permission. Later, the Joint Commissioner of Central Excise advised BFPL to follow the procedure under Rule 16(1) and (2) of the CER, 2002. BFPL started receiving biscuits and confectionery manufactured by CMUs of the petitioner for export and upon receipt of these goods, BFPL would file form D-3 intimating to the Range Office who verified the consignments which were reportedly received in original packing with duty paid documents in the form of excise invoices. During the period September 2004 to July, 2005 goods were cleared from the BFPL factory under76 ARE-1s on payment of duty and in respect of which the petitioners claimed rebate.

The Assistant Commissioner rejected all 76 rebate claims for an amount of Rs.25,72,908/- on the basis that (i)rebate is admissible to export only when goods are directly cleared from the place of manufacturer as per conditions prescribed in Notification No. 41/2001-CE(NT) and Notification No. 19/2004-CE(NT) (ii) letter dated 26-5-2004 from the Commissioner was not a permission under Rule 16(3) (iii) goods were not exported directly form place of manufacture and (iv) the letter dated 26-5-2004 from the Thane Commissionerate was misused and remarks were entered in the ARE 1s to the effect that stuffing permission had been granted.

Appeals filed before the Commissioner() and the Revisionary authority did not fetch any favourable response, hence the petitons came to be filed.

After considering the elaborate submissions made by both sides, the High Court found it apt to reproduce the alleged permission dated 26.05.2004 granted (as claimed by the petitioner) and which reads –

"I am directed to your letter dated 4.3.2004 on the above subject.

In this connection reference is invited to the discussions held with you on 5.4.2004 when it was clarified that unless the difficulties in observing the provisions of Rule 16(1) and (2) were established, there was no case for granting permission by Commissioner under Rule 16(3). No difficulties were pointed out by you during the discussions and also in your letter dated 25.2.2004. Accordingly you were advised to follow the provisions of Rule 16(1) and (2).

Since no difficulties in following Rule 16(1) and (2) have been reported the question of seeking the permission of the Commissioner under Rule 16(3) should not arise.

You may therefore follow the procedure as specified in Rule 16(1) (2) of Central Excise Rules, 2002."

The High Court, therefore, observed –

"22. Perusal of this letter reveals that in response to the prior correspondence attention of the BFPL was invited to discussions held on 5th April, 2004 when the Commissioner had apparently clarified that unless difficulties in observing the provisions of Rule 16(1) and (2) were established, no case had been made out for granting permission by Commissioner under Rule 16(3). During discussions, it was apparent that no difficulties were pointed out. Furthermore, in an earlier communication dated 25th February, 2004 BFPL was advised to follow the provisions of Rule 16(1) and (2) and since there was no difficulties in following Rule 16(1) and (2) the question of seeking the permission of the Commissioner under Rule 16(3) did not arise.

23. x x x

24. x x x

25. A fair reading of the letter reveals that it is in fact a denial of permission. It records in unequivocal terms that during discussions no difficulties were pointed out by BFPL in following the provisions of rules 16(1) and (2) and since no difficulties in following rules 16(1) and (2), the question of seeking permission of the Commissioner under rule 16(3) should not arise. There was a clear direction in the letter to follow procedure as specified under Rule 16(1) and (2) of Central Excise Rules, 2002. In the circumstances, we are of the view that the contention of Mr. Patil to the effect that the authorities of Commissioner had given permission is devoid of merit. In our view in both these matters there was no permission given for bringing goods to the factory of BFPL and for stuffing them in the containers. Since the products have not been manufactured by BFPL there was no occasion to export them. In the circumstances, the contention that the permission granted was in the nature of a misrepresentation and an attempt to mislead the authorities and this Court."

Concluding that the impugned orders cannot be faulted, the Writ Petitions were dismissed.

The High Court also imposed costs of Rs.10,000/- each in the each of the matters.

(See 2017-TIOL-2497-HC-MUM-CX)