Refund of AED (T&TA) paid on inputs used in export goods on which Rebate claimed under Rule 18 of CER, 2002

PJ/Case Laws/2011-12/1535

Case: - COMMISSIONER OF C.EX, ROHTAK VERSUS INDO DANE TEXTILES INDUSTRIES

Citation: - 2012(275) E.L.T. 189 (P& H)

Issue:- Cenvat Credit of Additional Excise Duty (Textiles & Textiles Articles) paid on inputs used finished goods exported on payment of duty on which rebate claimed under Rule 18 of CER,2002 - Refund of AED paid on inputs allowed under Rule 5 of the Cenvat Credit Rules, 2002?

Brief Facts:- Assessee is engaged in the manufacture of textile goods like made-up & home furnishing articles. The Assessee is duly registered with the Central Excise Division, Panipat and has filed refund claim amounting to Rs. 9776/- under Rule of Cenvat Credit Rules, 2002 (for brevity, CC Rules, 2002) in respect of unutilized Cenvat Credit in respect of Additional Excise Duty (Textiles & Textiles Articles) paid on inputs. The Assessee had exported finished good on payment of Basic Excise Duty under Rebate Claim covered by Rule 18 of Central Excise Rules,2002 (for brevity, Excise Rules,2002 was granted to them. Thereafter the assessee filed refund claim of Additional Excise Duty (T&T) paid on input under Rule 5 of CC Rules, 2002.

The Assistant Commissioner, Central Excise, rejected the claim by passing the Order-In- Original dated 2-3-2006 (Annexure A-1), mainly on two ground; (a) that the refund claim made under Rule 5 of CC Rules, 2002 was not maintainable as the export was made on payment of duty whereas Rule 5 of CC Rules envisage for refund of Cenvat Credit in case the export was made under bond.

The Commissioner set aside the impugned order and allowed the refund claim on the ground that use of inputs was adequately proved. That the Adjudicating Authority has traveled beyond the scope of the show cause notice as there was no allegation that the refund under Rule 5 of CCR, 2002 was not admissible on the ground that assessee exported goods by paying excise duty as against the requirement of rule of exporting goods under a Bond.

On a further appeal filed by the Revenue, the Tribunal upheld the order of the Commissioner. According to the Tribunal, the basic requirement for refund under Rule 5 is that the input should be used in the final or intermediate products which should be cleared for export as per the rule. The Cenvat credit in respect of such input which are used is allowed to be utilized by the manufacturer toward the payment of Excise Duty on any final product cleared for home consumption or for export on payment of duty. If the manufacturer has availed of drawback or claimed the rebate of duty under CC Rules, 2002, then the manufacturer become disentitled for refund of Modvat Credit as per proviso to Rule 5.

The Tribunal clarified that the provision of the Act were to apply to CC Rules, 2002 and the Additional duty of excise (Textiles & Textiles Articles) Act, 1978. The word duty in Rule 5 of CC Rules, 2002 would necessarily mean the duty payable under Section 3 of the Act. The Additional Excise duty in Respect of textiles and textiles articles is levied under the provision of Section 3 of the Additional duty of excise (Textiles & Textiles Articles) Act, 1978(for brevity, 1978 Act). Under sub-section (3) of Section 3 of 1978 Act, it is provided that the provision of the Act and the ‘Rules’ framed thereunder including those related to refund and exemption from duties would apply to levy and collection of the duty of excise leviable under that section in respect of any good. In other word definition clause of Excise Rules of 2002 and other Provision including Rule 18 & 19 which have arisen for consideration would apply even in respect of additional duties imposable under 1978 Act.

The Tribunal further concluded that in the instant case no export was made without payment of excise duty and therefore, Rule 19 of the Central Excise Rules, 2002 was not applicable nor Rule 18 was attracted. It was held that assessee had exported goods by payment of excise duty on which rebate was claimed under Rule 18. No additional excise duty as payable on the final products and therefore, the rebate could have been claimed only in respect of the duty paid which was the specific excise duty relatable to Rule 28 read with Section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act. Therefore, application could be made for refund of of Additional excise duty under Rule 5 of CCR was not barred. Also they had not claimed rebate of Additional Excise duty under Rule 18, since no such claim could be made.

Against the same, Revenue is in appeal before the High Court.

Appellant’s Contention:- Revenue contended that as export was made under Rebate claim, the assessee was not entitled to any refund under Rule 5 of the CC Rules 2002.

Reasoning of Judgment:- The High Court held that the Tribunal has dealt the matter in detail as to how the refund claim made by the assessee was available within the four corner of Rule 5 of the CC Rules,2002. It has rightly held that the question of execution of Bond While making export while making export was not raised by the revenue at any stage and therefore, that ground was not available as the assessee was not granted opportunity to meet such a plea. Moreover on merit also it has been found as a fact that the assessee exported the good by payment of excise duty under the act for which rebate claim was made under Rule 18 and rebate is granted ‘of duty paid’ on the excisable goods contemplated by Rule 18 of CC Rules, 2002. It is on account of statutory definition, the situation would be same with regard to it application to Cenvat Credit Rules, 2002. However any special duty may not be covered unless there is express intention to the contrary in the Statute.

It was noted that the Supreme Court in the case of Union of India v Modi Rubber Ltd., (1986) 4 SCC 66 = 1986(25) E.L.T. 849 (S.C.), has taken the view against the assessee by concluding that the special duty is not covered by the provision of the Act. However, That view was adversely commented upon by the later judgment of the Supreme Court in the case of Collector of Central Excise, Jaipur v J.K.Synthetics, (2000)10 SCC 393 = 2000 (120)E.L.T.54 (S.C.), on the ground that it failed to consider Section 3 of the Custom Tariff Act,1975. Thus the High Court find that claimed question is dependent on the finding as to how the refund claim made by the respondent was relatable to the Additional Excise Duty which could not be utilized on clearance of final product because final product was not made subject to such additional duty and that the input were used in the final product. Therefore, there is no merit in the appeal and the same is accordingly dismissed.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1535

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