benefit claimed under DFIA Scheme can be claimed for the benefit of the rebate of duty?

PJ/Case Laws/2010-11/1178

Case: - IN RE: APTAR BEAUTY & HOME INDIA PVT. LTD.

Citation: - 2011 (267) E.L.T. 401 (G.O.I.)

Issue:- Whether the benefit claimed under DFIA Scheme can be claimed for the benefit of the rebate of duty?

Brief Fact: - Applicant were engaged in manufacture of Non-Aerosol Spray Pumps falling under heading 8424 89 90. It was held that applicant were also availing cenvat credit on inputs procured indigenously and while exporting goods duty was paid from cenvat account and not in cash. They were exporting the goods under rebate claim of the duty paid on export of finished goods under Rule 18 of the Central Excise Rules, 2002. On scrutiny of shipping bill it was noticed that the export made by assessee are towards the fulfillment of export obligation under DIFA Scheme.

The Dy. Commissioner rejected the rebate of duty on the ground that the claims were not admissible as applicant violated condition no. (v) of the Customs Notification No. 40/2006-Cus dated 01.05.2006. It was held that as the applicant was already availing benefit under DFIA scheme, they cannot claim the benefit of the rebate of duty as this would amount to double benefit and this was not the intention of the government.

In appeal, the Commissioner (Appeal) held that the condition no. (v) of the said Notification restricts the rebate of duties paid on inputs used in the manufacture of final products and said restriction does not prohibit rebate of duty paid on the final products themselves and allowed the appeal by the assessee.

Aggrieved by the same, the Commissioner has filed this revision application.

Appellant’s Contention: -The Commissioner contended that as the assessee have exported the final products under the DFIA scheme, they are expected to fulfill all the conditions/ export obligations stipulated in the said scheme or the notification issued to operationalise the scheme. When the assessee has not fulfilled any of such conditions/ export obligations, they are not entitled to the rebate of the duty paid on the final products, which are exported under the said DFIA Scheme.

It was submitted that one of the conditions stipulated in Notification No. 40/2006-Cus., dated 1-5-06 i.e. no Cenvat credit shall be availed in respect of raw materials under Cenvat Credit Rules, 2004 whereas the assessee have availed Cenvat credit of the duty paid on raw materials used in manufacture of the final products, which were in turn exported under the DFIA Scheme. Thus it was proved that the assessee has violated the said condition.

It was further submitted that when the final product is exported under DFIA Scheme, it should be deemed that the raw materials/ inputs (used in the manufacture of such exported goods) are also procured under that scheme only. So it cannot be claimed that such scheme is applicable only to final products and not to the raw materials/ inputs used in the manufacture of such final products.

It was contended that the intention of the Government was very clear that the inputs/raw materials used in the manufacture of the finished goods (which are in turn exported under DFIA scheme) should necessarily suffer duty or else it would amount to dual benefit to the exporter by way of allowing cenvat credit on inputs as well as granting rebate on the final product.

Respondent’s Contention:- Assessee contended that the points of dispute raised by the said Commissioner against the said order-in-appeal stands settled by the Tribunal in the case of M/s. TTP Technologies Pvt. Ltd. V/s CCE, Bangalore-II [2009 (240) E.L.T. 724 (Tri-Bang.)]. Thus the revision application is not sustainable neither on merits nor on points of law, and hence the same should not be admitted.

It was submitted that the facts and circumstances of the said case law are exactly the same to that of the present matter in the above SCN and the Tribunal has allowed the rebate claim under that case. It was held therein that the careful reading of the provisions clearly provided that the rebate on the inputs procured indigenously against authorization should not be taken. It was held that procurement of inputs in the normal course on payment of duty did not violate the Notification.

It was submitted that the the ratio of the decision of the above case is squarely applicable in the present matter also. The Commissioner is bound by the said judgments of the Tribunal, and is bound to follow the same, however has without taking into consideration of this decision has filed the present appeal.

It is also submitted that all the necessary conditions under the DFIA Scheme has been fulfilled and in case of any violation the jurisdiction to decide the matter was with DGFT or the customs authorities. The excise authorities did not have jurisdiction to initiate proceedings for violation of licensing conditions or for violation of Customs Act/Rules.

It was submitted that the para (v) of the said Notification did not prohibit the rebate of duty paid on excisable products which were exported but what is prohibited under the said para (v) is rebate of duty paid on materials used in the manufacture of the resultant product. In the present case, the assessee had exported “excisable goods” on payment of duty on the resultant product and rebate claim is for the excise duty paid on the resultant product and not for the rebate of duty paid on the materials used in the manufacture of resultant product. Reliance was placed on judgment given in A. V. Fernandes v/s State of Kerala [AIR 1957 SC 657] that the taxing statute should be construed strictly.

Reasoning of Judgment: - The Government observed that DFIA Scheme is governed by provisions of FTP and Customs Notification No, 40/2006-Cus dated 01.05.2006.

Para 4.4.7 of FTP provided that no cenvat credit will be available of inputs either imported or procured indigenously against the authorisation. A reading of Para v of the Notification provided that Cenvat credit will not be allowed if the materials are procured against the authorisation. But this is not the Department’s case. This point was further clarified by DGFT vide their letter no. 01/94/180/2006-07/AM-07/PC-I dated 28.07.2006 and 29.09.2006 which provided that in case the inputs used in the export product were on payment of applicable duty, the exporter is entitled for the Cenvat credit as per the Cenvat credit Rules. The said para is applicable only when the input in the export product were imported or procured against the authorisation because the DFIA allows exemption from the applicable duties.

It was submitted that as the assessee had procured the duty paid inputs without any authorisation, same is entitled to take cenvat credit.

It was held that Notification no. 17/2009 dated 19-2-09 amended Notification no. 40/2006, dated 1-5-06 by omitting the following phrase of condition (v) “and in respect of which facility under Rule 18 (rebate of duty paid on materials used in the manufacture of resultant products) of sub-rule (2) of Rule 19 of the Central Excise Rules, 2002 or CENVAT credit under CENVAT credit rules,2004 in respect of materials imported/ procured against the said authorization has not been availed.” It means that w.e.f. 19-2-2009, availment of Cenvat credit in respect of materials imported/ procured does not debar the assessee from claiming rebate of duty paid on export of finished goods under DFIA Scheme.

It was held that in the meantime, Finance (No. 2) Act, 2009, in the Second Schedule (Section 93), amended Notification no. 40/2006-Customs dated 1-5-06 retrospectively from the date of issue so as to allow the facility of rebate in respect of locally procured materials used in manufacture of goods exported under the Duty Free Import Authorization Scheme.

The effect of this retrospective legislation is that Notification No. 40/2006-Cus. never prohibited rebate on export of goods under DFIA Scheme, if the Cenvat Credit of duty paid on imported/ procured raw material have been availed.

In the view of above, The Government observed that rebate of duty paid on final products exported under DFIA Scheme is admissible as Notification in question has been amended retrospectively from the date of issue vide Section 93 of Finance (No. 2) Act, 2009. Impugned order set aside. Matter remanded for sanctioning of rebate claim in view of above mentioned amendment if said rebate claims are otherwise in order.

Decision: - Revision applications disposed off in terms of above.

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PJ/Case Laws/2010-11/1178

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