2013 (5) TMI 789 - CGOVT - Central Excise

Denial of rebate claim - payment of duty by way of debit in DEPB Scrip - Held that - SAD is levied on imported goods to counter balance the sales tax, value added tax, local tax, etc., which cannot be considered as duties of excise for being eligible for rebate benefit. Further, SAD collected under Section 3(5) is also not classified as a duty in list of duties provided in Explantation-1 of the Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004. Hence, such payment of SAD is not eligible for rebate claim. - Government holds that input rebate of Additional Customs Duty (CVD) paid through DEPB scrip is admissible under Rule 18 of Central Excise Rules, 2002 r/w Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004. The impugned Order-in-Appeal is partially upheld - Decided partly in favour of Revenue.

Summary

Issues Involved:

1. Eligibility of rebate on duty paid through DEPB scrip.
2. Compliance with Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004.
3. Inclusion of Additional Customs Duty (CVD) and Special Additional Duty (SAD) in rebate claims.

Issue-wise Detailed Analysis:

1. Eligibility of rebate on duty paid through DEPB scrip:

The primary contention from the department was that the payment of duty by way of debit in DEPB scrip should not be treated as payment of duty, and hence, such payments are not eligible for rebate benefits. The respondent, however, cited various statutory provisions and case laws supporting the admissibility of rebate on duty paid through DEPB scrip. Specifically, para 4.3.5 of the Foreign Trade Policy 2004-2009 and relevant circulars (Circular No. 57/2004-Cus., dated 21-10-2004, Circular No. 41/2005-Cus., dated 28-10-2005) clarified that additional customs duty paid through debit under DEPB scrip is allowed as Cenvat credit or duty drawback. The judgment concluded that since the additional customs duty paid through DEPB scrip is eligible for brand rate of drawback and Cenvat credit, it should also be treated as payment of duty for rebate purposes.

2. Compliance with Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004:

The department argued that the inputs used were imported and procured under various bills of entries, which are not covered under condition No. 3 of the Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004. The Commissioner (Appeals) found that the notification does not prescribe any particular procedure for the procurement of imported materials and that the use of imported materials for the manufacture or processing of export goods is permitted. The judgment upheld this reasoning, noting that once CVD is allowed to be rebated, the bill of entry being the duty-paying document has to be accepted.

3. Inclusion of Additional Customs Duty (CVD) and Special Additional Duty (SAD) in rebate claims:

The judgment addressed the issue of whether CVD and SAD paid through DEPB scrip are eligible for rebate. It was established that the rebate of CVD paid on imported raw materials used in the manufacture of final export products is admissible under Notification No. 21/2004-C.E. (N.T.) r/w Rule 18 of Central Excise Rules, 2002. However, the judgment clarified that the Special Additional Duty (SAD) levied under Section 3(5) of the Customs Tariff Act, 1975, is not eligible for rebate as it is intended to counterbalance sales tax, VAT, and other local taxes, which are not considered duties of excise.

Conclusion:

The judgment partially upheld the Order-in-Appeal, confirming the eligibility of input rebate for Additional Customs Duty (CVD) paid through DEPB scrip under Rule 18 of Central Excise Rules, 2002 r/w Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004, while denying the rebate claim for Special Additional Duty (SAD). The revision applications were disposed of accordingly.