By TIOL News Service

BANGALORE, OCT 10, 2018: THE petitioner is aggrieved by the order passed by the Revisional Authority namely, the Joint Secretary to Government of India.

All the three lower authorities have held against the petitioner-assessee that they are not entitled to the rebate of duty paid on export of goods, which goods were removed, cleared and sold for the units located in 'SEZ' (Special Economic Zones) which are deemed to be exports under the Rules.

The order in question is extracted below -

"7. On perusal of records, Government observes that the applicants made supply to SEZ under Rule 19 of Central Excise Rules, 2002 under UT-1 Bond. Subsequently, the applicant found to have paid duty on the said clearances through cenvat account by making consolidated debit entry at the end of the respective months of the clearances and claimed rebate of duty paid on such exported goods. Original authority held that whole export has been done under said Rule 19 ibid, however, the claim was filed under Rule 18 ibid; and as such conditions of the Notification No. 19/2004-CE (NT) dated 06-09-2004 issued under rule 18 ibdi, have not complied with. Accordingly, original authority held rebate claims non-admissible. Commissioner (Appeals) upheld impugned Order-in-Original. Now, the applicant has filed this Revision Application on grounds mentioned in para (4) above.

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8.2 Government observes that for the purpose of export of excisable goods Central Excise Rules 2002 provide for the facility of export under claim for rebate under Rule 18 or for export under bond under Rule 19. These two provisions are two different sets of Rules which provide export benefits to the exporters and applies in different circumstances. The exporter is free to opt for any one of these and once anyone of the options is exercised it attains finality and cannot be reverted back subsequently. In this case it is an undisputed fact that the applicant cleared the goods under bond and hence exercised the option to export goods under Rule 19 and in a way can now claim benefit of Rule 18.

8.3 As the applicant opted to export the goods under Rule 19 without payment of duty and not under Rule 18 on payment of duty, they failed to comply/follow conditions/procedure prescribed under Notification No. 19/2004-CE(NT) dated 06- 09-2004. Compliance of these conditions/procedure are substantial in nature and non-adherence to same may lead to denial of rebate claim. In this case mere payment duty at the end of month on consolidated basis, does not entitle the applicant the rebate claim as the substantial condition of statutory condition of statutory requirements are not met with. It has been rightly held by Commissioner (Appeals) that every system has its checks and balances which cannot be exercised other than at the relevant point of time.

9. Government notes that it is a settled issue that benefit under a conditional notification cannot be extended in case of non-fulfillment of conditions and/or non-compliance of procedure prescribed therein … As such there is no force in the plea of the applicant that the lapse should be considered as a procedural one which is condonable in nature. As such, as the applicant did not follow the requirements of the Notification No. 19/2004/CE(NT), the rebate claims are rightly held inadmissible.

9.1 The applicant has also alternatively requested for recredit of cenvat credit. In this regard, Government notes that recredit is allowed in the cases where the exporter was not required to pay duty at the time of export, however, he pays the same. Such amount paid by the exporter in his own volition cannot be retained by the Government and it is required to be paid back in the form it has been paid. In this case, the applicant was not required to pay duty and hence, the duty was rightly not paid. The duty was paid subsequently at the end of the month on consolidated basis and such duty cannot be treated at par with duty not payable at the time of export and as such, does not qualify for availing of recredit. As such, applicant's request for allowing recredit is not tenable…"

The petitioner argued that since the fact of export made by the assessee is not in dispute and the goods having been supplied to 'SEZ' unit, therefore, the relief of rebate of duty u/R.18 or in the alternative, export without payment of duty u/R.19, one of these reliefs had to be given to the assessee and since the assessee has paid the duty and debited its CENVAT account, therefore, the rebate u/R.18 for such deemed exports ought to have been allowed by the authorities below and they have erred in denying such relief to the assessee.

The High Court considered the submissions and observed thus -

“7. When the fact of export by way of supplying to 'SEZ' unit is not in dispute and the fact of payment of duty by debiting the CENVAT account is also not in dispute, there is no question of denying one of the reliefs viz. the Rebate of duty u/R.18 or Export without payment of duty u/R.19, which ought to have been allowed or the rebate of cash refund when once the duty has been paid by debit to CENVAT account u/R.18 ought to have been given. Both the reliefs could not have been simultaneously denied to the assessee on a combined and harmonious reading of Rules 18 and 19.

8. This Court is little surprised and also pained that the casual approach of the three authorities below concurrently although wrong. The tax gatherers though expected to protect the interest of Revenue are at the same time bound in law to act fairly and in accordance with law. They are not allowed to take a distorted and skewed view of the law by interpreting one Rule or the other while forgetting the effect of applicability of the relevant Rules to the facts and circumstances of the case."

Viewing that the present case is a glaring example of misuse of power by the authorities below, the impugned order was set aside by imposing exemplary personal costs on all the three authorities below.

The costs were quantified at Rs.50,000/- to be paid by each of the three authorities below namely, the Asst. Commissioner of Central Excise (E-1) Division, Bangalore, the Commissioner of Central Excise (Appeals-1), Bangalore, and the Joint Secretary to the Government of India.

The respective persons, were also directed to deposit the said costs from their personal resources with the Registrar General of the High Court within a period of three months and to be remitted to 'Prime Minister's Relief Fund', Delhi, for meeting the costs of relief to sufferers of natural disasters.

The Respondents were also directed to re-credit the amount of Rs.16,60,234/- in the GST Electronic Credit Ledger of the Assessee.

In passing: Also see - 2018-TIOL-2037-HC-KAR-CT.

(See 2018-TIOL-2117-HC-KAR-CX)