16. Whether rebate can be claimed both on duty paid on excisable goods and on material used in processing of such goods, under rule 18 of the Central Excise Rules, 2002

The appeal was filed by Commissioner of Central Excise Nagpur against the order of Joint secretary, Government of India, Minister of Finance, Department of Revenue in the capacity of revisional authority u/s 35EE of the Central Excise Act in the case of M/s. Indorama Textiles Ltd. Joint Secretary Ministry of Finance and Indorama Textiles Ltd. word made respondents.

The company M/s. Indorama Textiles Ltd. filed 45 rebate claims of Rs. 1,46,90,995/-. The amount of rebate claimed includes Central Excise duty paid finished goods exported and also on duty paid on raw material used in the manufacture of exported goods. Thus, rebate claimed by the assessee complied duty paid on raw material as well as duty paid on finished goods.

A show cause notice was issued on the company whereby it was called up on to explain why rebate claimed by the assessee should not be rejected being contrary to the provision of Rule 18 of the Central Excise Rules, 2002.

The first authority rejected both the claims of rebate of the company being aggrieved the appeal was filed before Commissioner of Appeal who vide order dated 15-3-2005, held that company is entitled to rebate of duty paid on any one of the claims of rebate; i.e., either duty paid on exported goods or on inputs used in manufacturing of exported goods. The company was aggrieved by the said order and filed a revision application before Joint Secretary, Government of India finance department of revenue u/s 35EE of the Act. This authority allowed both the claims of refund to the company.

The Commissioner of Central Excise being aggrieved by the order of the Joint Secretary filed a write petition before the Nagpur bench of Bombay High Court.

The Assistance Solicitor General arguing on behalf of the Central Excise Department contended that:–

1. The revisional authority grossly erred in relying upon the old rule 12 of the Central Excise Rules to hold that the company is entitled to rebate on both the items. He completely ignored the current applicable provisions of the rule 18 of the Central Excise Rules, 2002. Which reads as under.

   "Rule 18. Rebate.- Where any goods are exported, the Central Government may, by notification, grant rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such goods and the rebate shall be subjected to such conditions or limitations, if any, and fulfilment of such procedure, as may be specified in the notification.

   Explanation. – "Export" includes goods shipped as provision or stores for use on board a ship proceeding to a foreign port or supplied to a foreign going aircraft" as well as notification number 19 of 2004 and 21 of 2004 issued under the said Rules.

2. He further contended that the word "or" occurring in rule 18 is conjunctive which means the usage of the word ‘or’ indicates that an assessee has a choice to make between two alternatives, it therefore cannot be constitute that assessee has an option or both the thing simultaneously in single case.
    

3. He further argues that rebate can be claimed either on the duty paid on final product or inputs used in the manufacture of final products which is exported. This is clear due to the fact that two separate notifications are issued under Rule 18 prescribing separate procedure to be followed for claiming the rebate Notification 19 by 2004 prescribes procedure for rebate on duty paid on exported goods and notice 21 by 2004 prescribes procedure for duty paid on inputs used in the manufacture of exported goods.

The council for the company M/s. Indorama Textiles Limited counter argued as under:-

1. He relied totally on the order of the Joint Secretary and drew the attention of the court on objective of framing rule 18. According to him the same is to relieve the exporter of goods from India from Central Excise duty with a view to promote export of Domestic Goods making them globally competitive. He quoted from the order of the revisional authority as under:

"Government notes that as a principle and a policy measure, Government has accepted that export of goods from India should be relieved of domestic levies (both Customs and Central Excise) in order to promote export of domestic products from India and to make them internationally competitive."

2. The learned senior council of the company contended that, there is no clause in both the notifications 19 by 2004 and 21 by 2004 laying down a condition that availment of rebate under one of them will bar the availment of rebate under the other. Thus the government has provided for simultaneous availment of rebate of duty on both; i.e., exported goods and inputs required in manufacture thereof. They drew the attention of the courts towards the circular issued by Central Government which stated that "there is no basic change it the rules now notified.
    

3. The learned representative also countered on the argument of his counter part to say that "or" is normally disjunctive word "and" conjunctive but at times have to be read interchargeably to give effect to the manifest intention legislature. He argued that if the word "or" is not read as and an inequitable result would follow Rule 19(1) of the 2002 Rules provides for export of goods without payment of duty and Rule 19(2) provides for procurement of inputs in the manufacture of exported goods without payment of duty. Thus, both the exported goods as well as inputs are free from payment of duty. If contention of the department is accepted, then the exporter, who follows Rule 18, will get rebate of duty paid either on the exported goods or on the inputs used in the manufacture of exported goods whereas exporter, who follows Rule 19 is exempted from duty at both stages and, therefore, analogy proposed by the department so far as Rule 18 is concerned, in the context of the above referred facts, would result in discrimination. He therefore contended that rules 18 & 19 of the Central Excise Rule 2002 are to be read complimentary to each other because if the department’s stand is accepted, inequitable result would follow which would result in discrimination.

The Hon'ble High Court on hearing the argument from both the side held as under:-

1. Rule 12 of the Central Excise Rules, 1944 has been superseded by the Central Excise Rules, 2001. Similarly, Central Excise Rules, 2001 were superseded by the 2002 Rules. It is, therefore, implicitly clear that the provisions of the Central Excise Rules, 1944 and Central Excise Rules, 2001 lost their legal force after coming into effect the 2002 Rules and, therefore, they are wholly irrelevant for deciding entitlement of the assessee for grant of rebate of duty after 1-3-2002; i.e., the date on which 2002 Rules came into force.
    

2. As per settled principles of statutory interpretation, if language of the statute or rule is clear, free from ambiguity and capable of conveying the purpose for which such rule is evolved and objective to be achieved, the Courts are required to interpret rule on the basis of language used in such rule.

The intention of the legislature was not to grant rebate on duty paid on exported goods as well as on inputs used in such goods simultaneously, which is evident from the language used in Rule 18 of the 2002 Rules. If the intension of the Legislature was to grant rebate on duty paid on excisable goods, in that event, there was no propriety to ask the assessee, first to pay excise duty on these goods when the department has to refund the same in the form of rebate to the assessee. On the other hand, keeping in view the object to promote export of domestic products, the Legislature wanted to give some concession by way of rebate of duty paid on excisable goods or on material used in manufacture or processing of such goods and not on both simultaneously. The language used in Rule 18 of the 2002 Rules is loud, clear, completely unambiguous and also capable of conveying the purpose for which Rule is evolved. After taking into consideration these vital aspects of the Rule, we are of the considered view that the rebate provided in Rule 18 of the 2002 Rules is only on duty paid on one of the items; i.e., either on excisable goods or on material used in manufacture or processing of such goods and, therefore, assessee, is not entitled to claim on both the item simultaneously.

3. The two notifications pertain to grant of rebate of duty paid on two different items. It is, therefore, evident that these two separate and distinct notifications used by the Central Government are consistent with the scheme of Rule 18 of the 2002 Rules to grant rebate of duty only on one item. However, the option is with the assessee. In other words if the assessee is entitled to get rebate of duty paid on both the items, there was no necessity for the Central Government to issue two separate notifications, requiring assessee to claim rebate separately on the duty paid on excisable goods and on inputs.
    

4. The contention canvassed by the learned Senior Counsel for the company that the word "or" may be read as "and" is misconceived since it is wholly inconsistent with the intention of the Legislature as well as object of Rule 18 of the 2002 Rules.
    

5. Another contention canvassed by Shri Bhangde, learned Senior Counsel for the company, that Rules 18 and 19 of 2002 Rules are required to be read as complementary to each other so as to provide equitable result is also misconceived. The area of operation and the situation in which these Rules operate are totally different and distinct and, therefore, cannot be quoted with each other.
    

6. The scheme and procedure prescribed under Rule 19 is altogether different than the one prescribed in Rule 18 and contemplates export of such excisable goods as well as material used in manufacture or processing of such goods without payment of duty subjected to conditions, safeguards and procedure specified by the notification issued by the Board and, therefore, it cannot be equated with Rule 18. Rule 18 is attracted after payment of duty whereas Rule 19 provides for exemption from duty at the threshold and, therefore, by very nature of contingencies mentioned in these Rules, the benefit provided to the assessee are in two different situations and at two different stages and, therefore, contention canvassed by the learned Senior Counsel for the company in this regard cannot be accepted.

The impugned order dated 22-8-2005 passed by the revisional Authority is quashed and set aside. The matter is remanded back to the competent Authority to decide the claim of the respondent No.1 for rebate of duty paid either on the exported goods or rebate of duty paid on materials used in the manufacture or processing of such goods, after granting personal hearing to the respondent No.1.

C.C.E. vs. M/s Indorama Textiles Ltd. 200 ELT 3 Bombay High Court.

17. When the appellant dealer fails to realize the sale proceeds of exports made within the stipulated time and thereafter whether the duty draw- back granted vide that export can be claimed back by the revenue

Held : Yes.

The appellant dealer is manufacturer and exporter of readymade garments. They exported the goods and claimed concession u/s 75 of customs Act 1962 and the same has been sanctioned paid to the appellant dealer. After the sanction for drawback way the appellant failed to realize sale proceeds within prescribed period and even under he extended period as per the provision of FEMA.

A show cause notice was issued by Addl. Commissioner of Custom requesting the appellant to repay the drawback amount as per Rule 16A of the Customs and Central Excise Duties Drawback Rules, 1995. The appellant dealer took up the matter in appeal but failed at all levels and hence filed writ petition in the High Court of Karnataka.

It was argued by the council of the appellant dealer that penalty proceeding under FEMA were concluded in favour of appellant observing that "in a helpless situation, the petitioner was unable to realize export goods". It was therefore contended that it is not a fit case to recover the drawback amounts paid. According to him the Central Government ought to have considered the prayer of the appellant u/r 17 of the Custom and Central Excise Drawback Rules for waiver and consequently should have allowed the dealer to retain the draw-back amount although the export proceeds were not received.

On behalf of the department it was argued that the Revisional Authority has in fact considered the request of the petitioner and refused to grant exemption under section 17 of the Customs and Central Excise Duties Drawback Rules, 1971. He further submitted that the proceedings before the Enforcement Directorate arising under the provisions of FERA/FEMA are entirely independent and different from the proceedings on hand which are arising out of the Customs Act relating to drawback amount and that therefore, even if the Enforcement Directorate has dropped the proceedings against the petitioner, the proceedings on hand remain unaffected.

The Hon'ble High Court held as under.

1. The proceedings under FERA are entirely independent of the proceedings relating to recovery of drawback amount paid to the petitioner by Central Government. Both proceedings were in dependent to each other.
    

2. The proviso to section 75 of the customs Act r/w. Rule 8 of Foreign Exchange Rules, 1974 make it clear that the drawback amount shall be disallowed if the full export value of the goods exported is not received by the exporter within stipulated time of six months from the date of the export of goods. These Rules do not provide for waiver of the condition on the ground negligence either on the part of the banker or any other agency. When the exports are made, an obligation is cast on the exporter in terms of the declaration made by him to realise the export proceeds within the statutory period of six months from the date of export, failing which, the paid drawback amount is recoverable. The records disclose that the goods were exported on 12-7-1993 and the export proceeds were not receive till the month of May 2000 (Date of issuing show cause notice). Because of the inaction on the part of the petitioner-Exporter in not recovering the sale proceeds, the State has lost revenue.
    

3. The prayer of the appellant to waive or relax the condition relating to realization of sale proceeds is rejected and consequently, his prayer for exemption under Rule 17 of the Customs and Central Excise Duties Drawback Rules, 1995 came to be rejected.