Rebate under Rule 18 of CER, 2002-effectiveness of Corrigendum to Notification

PJ/Case Laws/2012-13/1084

Case: JUBILANT ORGANOSYS LTD v/s ASSTT. COMMR. OF C. EX., MYSORE-III

Citation: 2012 (276) ELT 335 (Kar)

Issue:- Rebate under Rule 18 of CER, 2002 – Effect of corrigendum to a Notification – whether prospective or retrospective?

Brief Facts:- Petitioner is engaged in the manufacture of bulk drugs. In the usual course of its business, it avails credit of duty paid on inputs and such credit is utilised either for payment of duty on goods cleared into the domestic tariff area or towards payment of duty on goods exported under Rule 18 of the Central Excise Rules, 2002. Petitioner has been regularly exporting bulk drugs and for the export so undertaken, it has obtained advance licenses for duty free import/procurement of inputs required for the manufacture of bulk drugs. The advance licenses so obtained are being re-deemed from time to time after discharge of export obligation. Petitioner has been paying central excise duty on the finished products exported and has been claiming rebate on duty so paid under Rule 18 of the Rules, 2002. Petitioner filed 13 rebate claims for a total amount of 1,02,63,079/- during the period 2005-2006 which was sanctioned by the first respondent herein.

Petitioner has also received the amount from department in terms of the rebate order. The second respondent issued a show cause notice dated 7-7-2006 for recovery of rebate sanctioned under Section 11A of the Central Excise Act, 1944 on the ground that the petitioner was not eligible for the rebate sanctioned unless they had availed the benefit of the Notification No. 43/2002-Cus dated 19-4-2002 in respect of inputs imported under advance license. Petitioner filed its reply dated 20-7-2006 to the show cause notice stating that the show cause notice relied on the original text of Notification No. 43/2002-Cus., and that the condition No. (v) of the said notification has been corrected by corrigendum and that petitioner has not claimed the rebate of duty paid on materials used for manufacture of export goods but on the goods exported and that the interpretation of the said notification is inconsistent with the provisions of the EXIM policy and the Rules and the rebate claim not to be recovered by invoking the provisions of the said notification and requested to drop the notice.

In addition to the issue of show cause notice dated 7-7-2006, Department filed separate appeals against each of the above mentioned orders before the third respondent challenging the grant of rebate on the ground that the Assessing Authority had erred in sanctioning the rebate without verifying as to whether the petitioner had fulfilled the restriction imposed in condition No. (v) of Notification No. 43/2002-Cus dated 19-4-2002. The petitioner filed objections to the said appeal and sought dismissal of the said appeals.

The Appellate Authority passed an order-in-appeal No. 19/2007-C.E., dated 16-1-2007 allowing the appeals filed by the department and held that the Assessing Authority has erred in granting the rebate and has wrongly granted rebate of duty paid on goods exported inasmuch as the petitioner availed of exemption from customs duty under Notification No. 43/2002-Cus., dated 19-4-2002 on inputs imported and used in the manufacture of the products exported.

Feeling aggrieved, petitioner filed a revision application along with stay application before the 4th respondent. After hearing the petitioner, respondent No. 4 passed an order dated 9-2-2010 wherein it is held that petitioner had exported the goods except in one case during the period i.e., March, 2005 to May, 2005 when the original Notification No. 93/2004-Cus., dated 10-9-2004 was applicable and hence the rebate was disallowed in the case referred to above.

Therefore, petitioner has filed this writ petition seeking the following reliefs:

(a) issue an appropriate writ, order or direction to quash and set aside the impugned order dated 9-2-2010 passed by the Revisionary Authority. (b) Issue an appropriate writ to quash order-in-appeal No. 19/2007-CE., dated 16-1-2007 passed by respondent No. 3 (c) direct the respondents to pay the petitioner the cost of this petition. (d) issue appropriate writ, order/direction sanctioning interest under Section 11BB on the above amount. (e) grant opportunity of hearing and ad interim order staying the order dated 9-2-2010 and granting consequential relief, and Corrigendum

Petitioner’s Contention:- Petitioner contended that in exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962, the Central Government has issued the notification exempting materials imported into India against an advance license issued in terms of sub-paras (a) and (b) of paragraph 4.1.1, of export and import policy from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 and from the whole of the additional duty and anti-dumping duty leviable thereon under Sections 3, 8 and 9A of the Customs Tariff Act, subject to various conditions. It is argued that condition No. (v) is a condition relating to export obligation which states that the export obligation as specified in the said license is discharged within the period specified in the said license or within such extended period as may be granted by the licensing authority by exporting resultant products, manufactured in India which are specified in the said license and in respect of which facility under Rule 18 or Rule 19 of the Central Excise Rules, 2002 has not been availed. The said condition in the notification has been corrected by a corrigendum No. 43/2002-Cus., dated 29-11-2002 wherein it has clarified that after the words "under Rule 18", the words "under Rule 18 (rebate of duty paid on materials used in the manufacture of resultant product)" shall be corrected. The said corrigendum relates back to the date of the notification dated 19-4-2002. If that is so, the order of the assessing authority has to be sustained. In this connection, petitioner relied on decision of the Allahabad High Court in Commissioner, Sales Tax, UP., Lucknow v. Dunlop India Limited - (1994) 92 STC 571 and the decision of the Supreme Court in State of Rajasthan and Another v. J.K. Udaipur Udyog Ltd. and Another - (2004) 7 SCC 673.

It is argued by Petitioner that in matters of taxation, strict construction must be adopted and that if the assessee is entitled to any advantage or benefit on account of any error or mistake of the assessing authority it should not be denied to him.

Respondent’s Contention:- Revenue submits that the corrigendum referred to is prospective in nature and it will not have retrospective operation from 19-4-2002. In this connection, they have relied on the decision of the Kerala High Court in Commissioner of Central Excise v. Mustion tang Rubbers Industrial Estate - 2009 (237) E.L.T. 257.

Reasoning of Judgment:- The High Court noted that the issue before them was whether the corrigendum dated 29-11-2002 has retrospective effect from the date of Notification dated 19-4-2002?

The High Court referred to the definition of Corrigendum in P. Ramanatha Aiyar’s Advanced Law Lexicon.

It was noted that the Allahabad High Court in Dunlop India Limited's case was considering the meaning of expression 'corrigendum'. It has concluded that corrigendum is nothing but a correction and therefore, it relates back to the date of Notification corrected.

It was noted that in J. K. Udaiplur Udyog Ltd, the Apex Court has held that the use of the word ‘corrigendum’ itself indicates, the intention was to correct and to rectify what the state govt. thought had been erroneously done. It is clear from the judgment that a corrigendum is nothing but a correction and it relates back to notification itself.

It was noted that in Mustang Rubbers Industrial Estate’s case on the facts therein it was held that the scope of notification has to be considered with reference to the statutory provision under which it is issued. It was held that notification issued under Section 5 (a) (i) of the Central Excise Act will come into force on the date of its issue. The notificiation did not provide for retrospectivity. Therefore, it will come into force on the date of its issue i.e. 11.8.2003.

The High Court noted that this is not the position in the present case. The Notification itself states that the words and figues ‘under Rule 18’ shall be corrected to read as "under Rule 18 (rebate of duty paid on materials used in the manufacture of resultant product)". A corrigendum indicates intention to correct and rectify notification. Therefore, it was held that the said decision is not applicable in present case.

It was held that a Corrigendum in question has been issued for correction of the notification and it relates back to the date of the notification corrected. It ceases to be a correction if it is effective from the date of its issuance. It then becomes an amendment. A correction relates back to the date of the notification itself. If that is so, the orders of the Appellate Authority as also the Revisional Authority are contrary to the Notification dated 29-11-2002. Therefore orders of the Revisional Authority and the Appellate Authority are quashed and the order of the Assessing Authority is restored.

Decision:- Petition Allowed

Comment:- This decision of High Court has defined the meaning of “Corrigendum”. Whether it will be applicable from the date of its issuance or from the date of notification itself? This has been held by High Court that the corrigendum relates to the date of notification and will apply retrospectively. Hence, this is very landmark judgment.

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PJ/Case Laws/2012-13/1084

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