application for rebate claim can be rejected on the ground that the assessee has been covered under of Rule 14 of the Pan Masala Packing Machines Rules, 2008

Case:- IN RE: SANKET INDUSTRIES LTD.

Citation:-2011(268) E.L.T. 125 (G.O.I.)

Issue:-Whether the application for rebate claim can be rejected on the ground that the assessee has been covered under of Rule 14 of the Pan Masala Packing Machines Rules, 2008 and the rebate claims were filed under Rule 18 of Central Excise Rules, 2002 and that the triplicate copy of ARE-1 has not been submitted on time with the concerned Range Superintendent with the rebate claim?

Brief Facts:-Appellant engaged in the manufacture of pan masala and gutkha falling under Chapter 24. They were paying duty under compounded levy scheme as per Section 3A of Central Excise Act, 1944 read with Pan Masala Packing Machines Rules, 2008. Appellants filed 10 rebate claims on the exports undertaken in the month of November 2009, December 2009 and January 2010. The Assistant Commissioner rejected all the rebate claims of the appellants on the ground that the rebate claims were filed under Rule 18 of Central Excise Rules, 2002 and in view of Rule 14 of the Pan Masala Packing Machines Rules, 2008, no rebate claim shall be granted under Rule 18 of CER, 2002 as they were paying duty on notified goods under Notification No. 42/2008-CE dated 1.7.08. It was also held that the applicant had not followed statutory conditions as prescribed under Notification no. 32/2008-CE dated 28.8.08 and also not followed the procedure prescribed under Notification no. 19/2004-CE dated 6-9-04. The appellant had attached the triplicate copy of ARE-1 with the rebate claim and had not sent the same to the Superintendent for verification. Therefore the triplicate copies of ARE-1 were not certified by the jurisdictional superintendent with necessary verification in regard to duty paid or payable on the subject goods which showed that the triplicate copies of the ARE-1 have not been given to the jurisdictional excise authorities within 24 hours of the export clearance.

As per Para 5.2.1 of Chapter 8 of CBEC’s Central Excise Manual of Supplementary Instructions, 2005, where goods are not exported directly from the factory of manufacturer or warehouse, the triplicate copy of the application shall be sent to the officer with whom rebate claim is to be filed.
Aggrieved by the said order-in-original, the appellant filed appeal before the Commissioner (Appeals) who rejected the same. The appellant has filed Revision application.

Appellant’s Contention:-The applicant submitted that in case of Royal Marwar Tobacco Products Ltd. Gandhinagar, the rebate of excise duty had been allowed where goods were exported by the Merchant- exporter M/s Shree Meenakshi Food products Pvt. Ltd. in similar conditions. It was a fundamental right under Article 14 of Constitution that the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. It was submitted that the Revenue has not taken the stand that rebate claim should be given in direct export and not to export routed through merchant exporter; uniformly in respect of every manufacturer. Therefore, the stand taken in their case was discriminatory and as it affects the financial well being of shareholders of the company it is violative of fundamental rights of the shareholders. Reliance in this regard, was placed on the judgment given in Fitwell Fastner (India) Pvt Ltd v/s CC [1993 (68) ELT 50 (Cal)].
It was contended that in the ground taken by the Assistant Commissioner to reject the refund claim that no rebate claim could be sanctioned under Rule 18 of CER, 2002 for a unit working under Pan Masala Packing Machines (Capacity) Determination and Collection of Duty Rule, 2008. It was contended that this stand was not taken in the show cause notice.

It was submitted that a bare reading of Rule 14 made it clear that the said Rule had not stipulated that no rebate shall be granted under Rule 18 of Central Excise Rules, 2002 or rebate claim must be filed under Rule 14 of Pan Masala Rules, 2002. Rule 14 of Pan Masala Rules had not provided the non applicability of Rule 18 of Central Excise Rules in case of impugned goods. In fact Rule 14 says that rebate has to be granted under Rule 18 of Central Excise Rules, 2002 alone, however extra restrictions may be put in place. Since Notification No. 32/2008 dated 28.8.08 had been issued under Rule 18 of Central Excise Rules, 2002 itself granted rebate of duty paid on impugned goods compounded levy scheme under section 3A of the Act, the finding of the Assistant Commissioner that no rebate can be granted because applicant has not filed the rebate claim under Rule 18 of Central Excise Act, 2002 was not maintainable at all.

It was further submitted that the applicant had fulfilled all the conditions under Notification No. 19/2004-CE(NT) dated 06.09.2004 for grant of rebate under Rule 18 of CER, 2002. It was submitted that under the relevant Notification there is no condition that the merchant exporter desirous of exporting the goods on which claim of rebate shall be made under Rule 18 must get the goods sealed by Central Excise officer. Similarly, there is no condition that the triplicate and quadruplicate copies of ARE-1 should be given to jurisdictional excise authorities within 24 hours if export. Therefore, the requirements being insisted upon are beyond the authority of law.

It was further contended that Para (3) (a) of the Notification No. 19/2004 provides procedure for sealing of goods which is applicable to both the Merchant-exporter as well as manufacturer-exporter. It was submitted that the procedure prescribed under Para 3(a) is not compulsory at all. Further, the law gives a clear option to both categories of exporter to choose either sealing by central excise officers or self-sealing. The law does not prescribe a mandatory procedure for compulsory sealing by central excise officer in the case of export by merchant exporter.
Applicant referred to additional conditions and limitations prescribed in Notification No. 32/2008 and submitted that they have fulfilled all requirements of law.

Referring to provisions regarding examination of goods at the place of esport prescribed under Para 7 of Part-I of Chapter 8 of Excise Manual, it was submitted that the goods exporter by them through merchant exporter have actually been examined at the place of export on behalf of officer of Central Excise under Para 7.3 and thus Central Excise officer cannot doubt the correlation between the goods shown in ARE-1 and goods exported. The Let export order was given only after the revenue officers were satisified about the identity of goods. Thus, the said goods have not only been examined for the purposed of customs but also for central excise purposed to establish the identity and quantity i.e. the goods which were cleared from the factory and shown in the invoices. The result of examination and verification by Customs officer has been incorporated on ARE-1 in the form of endorsement from customs side.

Further the sealing by the Central Excise officer was optional at the option of merchant exporter. As there was no requirement of sealing by Central Excise officer in respect of exports because merchant exporter have directly procured the goods from manufacturer, the allegation of non sealing by the Central Excise Officer was not sustainable hence the claim should be allowed.

With regard to corrigendum issued alleging additional grounds, preliminary objection was raised by the applicant that it was issued after the reply was given by them and the revenue has gone through the same. In this regard, reliance was placed on Mahindra & Mahindra Ltd v/s CCE, Mumbai-V [2006 (196) ELT 62 (Tre-Mumbai)].

With regard to grounds raised in the corrigendum it was contended that there is no condition prescribed that the goods have to be exported from the factory directly. It was submitted that as long as the duty paid character of goods and their export is not in dispute rebate cannot be denied. The requirement of condition (iii) of Notification No. 32/2008 is for basically to establish the identity of the goods being cleared from factory or warehouse and goods actually exported. In their case the goods were packed in retail foods packages attracting provisions of Weights and Measures Act, 1976 and provisions of Prevention of Food Adulteration Act, 1954 and it was submitted that details were mentioned on each package identifying the goods. These were also mentioned on the ARE-1.

It was contended that once substantial requirement of export was proved, substantive benefit of rebate could not be denied.

Respondent’s Contention: - Revenue contended that the goods were not directly exported from factory rather a merchant exporter had been involved in between as was prescribed in the provisions. Hence, applicant were ineligible for availing rebate. The procedure prescribed for sealing of goods was not scrupulously followed by the applicant and therefore, correlation between the excisable goods claimed to have been clearedfor export from factory of manufacturer and the export documents as relevant to such export clearances cannot be established. No agreement between manufacturer and exporter regarding supply of goods, invoices issued by manufacturer etc.

Reasoning of Judgment:-The Government observed that applicant has applied to the Department for permission regarding examination and stuffing of excisable cargo and permission was granted accordingly. But in the intermediate export was done without any permission/supervision. It was observed that the rebate sanctioning authority had to compare the original copy of the ARE-1 with the duplicate copy of the ARE-1 duly endorsed by the Customs officer at the Port of export with the triplicate copy of ARE-1 received from the concerned Range Superintendent to satisfy himself about the export of duty paid goods as prescribed under Notification No. 19/04-CE(NT). The purpose of endorsement on the triplicate copy of the ATRE-1 by Superintendent range is to ensure that the proper duty has been paid by the manufacture at the time of clearance of goods from factory/warehouse. The applicant had given a certificate which confirmed the duty paid nature of exported goods. The substantial requirement of duty paid on goods was established. Once it is proved the procedural lapse for not getting the triplicate copy of the ARE-1 endorsed by the concerned range Superintendent can be condoned.
It was held that Rule 14 does not stipulate that no rebate shall be granted under Rule 18 of CER, 2002. Notification No. 32/2008 has been issued under Rule 18 under which rebate duty can be allowed subject to Condition mentioned therein. So the stand of the Department is not sustainable.

The Government further observed that the objection of Revenue regarding non-establishment of correlation between the goods exported and goods cleared from factory was not sustainable. It was observed that perusal of various documents submitted by applicant as ARE-1s, Shipping Bills, invoices, Bill of lading etc. establish the identity of the goods cleared as goods actually exported, which meets the substantial/mandatory condition of export of duty paid goods. In these cases, as per CBEC circular, condition of direct export from the factory of manufacture or warehouse is condonable.

The Government further observed that the goods exported were examined at the port of export by the customs authorities and had endorsed on the back of the triplicate copy of the ARE-1 also certification was given by jurisdictional Superintendent that the goods were intended for export on the relevant ARE-1s on payment of duty.

The Government held that the applicant had proved the export of goods on payment of duty and correlation of goods cleared from the factory and goods exported was established. The judgment in M/s Gujarat Trading Co., Rajkot v/s CCE, Rajkot was squarely applicable.

It was observed that the rebate/drawback schemes were export oriented schemes and unduly restricted and technical interpretation of procedure etc is to be avoided in order not to defeat the very purpose of such schemes and incase the substantive fact of export having been made is not in doubt, a liberal interpretation is to be given in case of any technical breaches. Reliance was placed on Sukhsha International v/s UOI [1989 (39) ELT 503 (SC)], Formica India v/s Collector of Central Excise [1995 (77) ELT 511 (SC)], Union of India v/s A. V. Narasimhalu [1983 (13) ELT 1534 (SC)], Mangalore Chemicals and Fertilizers Ltd v/s Dy. Commissioner [1991 (55) ELT 437 (SC)].

It was held that the view of condoning procedural infractions in favour of actual export having been established has been taken by Tribunal/Govt. of India as held in various judgments.

The Government held that rebate claim was admissible to the appellant. Impugned order set aside.

Decision:- Revision application allowed.

Comment:- Very detailed and good decision. The procedural lapses cannot come in way to allow the substantial benefit of rebate claim.

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PJ/Case Laws/2011-12/1197

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