Rebate of Duty under Rule 18 of CER, 2002- availability of

PJ/Case Laws/2011-12/1491

Case: PARSHVA OVERSEAS v/s JOINT SECRETARY

Citation: 2011 (274) E.L.T.496 (Del.)

Issue:- Rebate - declaration Form ARE-2 as ‘have not availed of Cenvat credit under Cenvat Credit Rules’ – whether means and include even a part utilization of Cenvat credit in respect of which no rebate is sought or refer to non-utilization of Cenvat credit in its entirety?

Brief Facts:- The petitioner was a manufacturer and exporter of stainless steel circles and utensils. For this purpose it purchases stainless steel coils/flats which are an input or raw product which is first converted into stainless steel circles and then in the second stage is used to manufacture stainless steel utensils. Conversion of stainless steel coils/flats into stainless steel circles attracts payment of excise duty under the Central Excise Rules, 1944 but conversion of stainless steel circles into stainless steel utensils is exempt from payment of excise duty as per Notification No. 10/2003, dated 1st March, 2003. The petitioner had purchased Stainless Steel Coils/flats from registered dealers for manufacture of stainless steel circles. Central Excise duty was paid on Stainless Steel Flats/Coils when the said raw materials were converted into stainless steel circles. The petitioner also purchased stainless steel circles on which excise duty was paid. The duty paid on the inputs/raw material as well as manufacture of stainless steel circles was duly credited in the RG 23 part II register maintained under the provisions of Central Excise Rules.

Scrap was generated in the manufacture of stainless steel utensils and also at the time of conversion of Stainless Steel Flat/Coils into stainless steel circles. The scrap was sold by the petitioner in the markets in India. Purchasers of scraps were given benefit of the excise duty paid by the petitioner by debiting an amount in the Cenvat credit account of the petitioner.

It is the case of the petitioner that they do not make any domestic sales and the entire production of stainless steel utensils and circles was exported. Cenvat credit therefore was not fully utilized. On 19th July, 2004, the petitioner filed a claim for refund of Cenvat Credit in proportion to the material used in the manufacture of the exempted exported product, i.e. stainless steel utensils of Rs. 23,62,737/-. It was submitted that the petitioner could not utilize the Cenvat credit and the same should be refunded as the end product was exported. The petitioner invoked Rule 18 of the Central Excise Rules, 2002 (Rules, for short) and the procedure laid down in Notification No. 41/2001-C.E. (N.T.), dated 26th June, 2001. The petitioner had on 19th January, 2004 filed an application for fixation of input output norm, which was fixed on 18th June, 2004. It may be noted here that the refund/rebate was claimed for the exports made during the period December, 2003 till February, 2004. In these circumstances, it is not possible to agree with the contention of the petitioner that the delay in disposal of the fixation of input output norm was due to the fault of the respondent. As noticed above, the petitioner had filed the application only on 19th January, 2004. The respondent have to be given reasonable time for finalization of the said norm.

Appellant’s Contention:- The Appellant contended that the impugned Order refers to/relies upon the principle of double benefit and urged that it was not the case of the Revenue that the petitioner had enjoyed double benefit. In this connection, their attention was drawn to the Order dated 8th December, 2008 passed by the Assistant Commissioner, rejecting the application of the petitioner for refund/rebate of Rs. 23,62,737/-.

Respondent’s Contention:- The responded argued in respect of the applicability of provision of Rule 6(6)(v) of Cenvat Credit Rules, 2004, that Rule is not relevant in their case as that Rule relates to export of goods without payment of duty under Bond.

They placed reliance on the order No. 218 to 223-R dated 30-7-2008 in the matter of M/s. Pawan Jain and Sons under which the Assistant/Deputy Commissioner has sanctioned the rebate claims on the similar matter. In this regard, Government observes that M/s. Pawan Jain and Sons vide their letter dated 18-2-2009 has intimated the Assistant Commissioner Central Excise Division I, New Delhi that they have reversed the input cenvat credit availed on account of refund/rebate claim sanctioned vide those orders. Hence, the ratio of these orders is not applicable in their case.

Further they relied upon Form ARE-2 to contend that a declaration has to be furnished by the applicant that they have not availed of Cenvat credit under Cenvat Credit Rules. No doubt the Form and declaration have to be examined, but what is important and relevant is the interpretation of the words 'not availed of facility of Cenvat credit' in the Form/declaration. It has to be examined whether these words mean and include even a part utilization of Cenvat credit in respect of which no rebate is sought or refer to non-utilization of the Cenvat credit in its entirety. In this l connection, it may be relevant to refer to paragraph 4(c) of the notification No. 41/2001-C.E. (N.T.), dated 26th June, 2001. The said clause permits removal of waste on payment of duty if such waste is manufactured or processed outside the factory of the applicant seeking rebate. Therefore, removal of waste, or sale thereof in home or domestic market, does not prohibit or bar a claim for rebate under the said Rule or notification. Paragraph 4(c) does refer to payment of duty but the said clause applies when there is removal of material or the same is partially processed at the location different from or outside the factory of the applicant.

Reasoning of Judgment:- The High Court held that distinction must be made between a provision in a statute which is substantive and enacted with certain specific objective to fulfill objective of policy; and provisions which are procedural and technical in nature. The eligibility condition is to be given strict meaning; whereof the notifications have to be interpreted in terms of their language. But once the applicant-assessee satisfies and meets the eligibility conditions, procedural provisions have to be construed liberally. Then doctrine of substantial compliance applies. The said doctrine is equitable in nature and designed to avoid hardship. Substantial compliance depends upon facts and circumstances of each case, the purpose and object to be achieved in the context of exemption and purpose of the Rule and the Regulations. However, such defence cannot be pleaded if there is a clear statutory prerequisite which effectuates the object and purpose of the statute which has not been met. Substantial compliance means "actual compliance in respect of the substance essential to every reasonable objective of the statute".

Further they said that Learned counsel for the petitioner had extensively referred to decision of Bombay High Court in Repro India Ltd. v. Union of India, 2009 (235) E.L.T. 614 (Bom.). The said decision deals with Rule 6 of the Rules which is not the subject matter of the present writ petition. However, while interpreting Rule 6 with reference to exports, certain observations have been made. As they are remanding the matter back, the observations made in the said judgment which also throws light on the question of the object and purpose behind the provision for rebate/refund will be kept in mind by the Revisionary Authority. Further it may be noted that after the said judgment, Notification No. 24 of 2010 was issued by the respondent on 26th May, 2010 but the said notification has not been given retrospective effect.

Decision:- Petition disposed of.

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PJ/Case Laws/2011-12/1491

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