2012 (11) TMI 1065 - CGOVT - Central Excise

Denial of rebate claim - Denial on the ground that final debonding was effective from 31-3-2008 and therefore till 31-3-2008 applicant being 100% EOU was not required to pay duty as there was an absolute exemption from payment of duty under Notification No. 24/2003-C.E., dated 31-3-2003 - Held that - Normally the 100% EOU has to clear all the goods manufactured by them for exports as per the EOU scheme. Such units can clear the goods in DTA with prior permission of Development Commissioner. Since there is no condition in the notification for availing exemption to goods manufactured by 100% EOU and cleared for export, the provisions of sub-section (1A) of Section 5A are applicable and no duty was required to be paid on such exported goods. The duty paid without authority of law cannot be treated as duty paid on the exported goods. As such rebate claim is not admissible in terms of Rule 18 of Central Excise Rules, 2002, read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004. - duty paid in this instant case is to be treated as voluntary deposit made by the applicants at their own volition which is required to be returned to them in the manner it was initially paid, because the Government cannot retain the same without any authority of law as held by Hon ble High Court of Rajasthan in the case of CCE, Jaipur v. Suncity Alloys Pvt. Ltd. reported as 2007 (2) TMI 137 - HIGH COURT, RAJASTHAN . - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for rebate claim on duty paid for goods exported before final debonding.
2. Interpretation of debonding date and its effect on rebate eligibility.
3. Applicability of Notification No. 24/2003-C.E. and Section 5A(1A) of the Central Excise Act, 1944.
4. Treatment of duty paid during the debonding process.
5. Claim for interest on delayed refund.

Issue-wise Detailed Analysis:

1. Eligibility for Rebate Claim on Duty Paid for Goods Exported Before Final Debonding:
The applicant filed a rebate claim amounting to Rs. 3,55,673/- for Central Excise duty paid on 100% cotton yarn exported to China. The claim was rejected on the basis that the goods were exported before the final debonding of the unit, which occurred on 31-3-2008. The adjudicating authority and Commissioner (Appeals) upheld the rejection, stating that the unit was still under the 100% EOU Scheme at the time of export and thus not eligible for the rebate.

2. Interpretation of Debonding Date and Its Effect on Rebate Eligibility:
The applicant argued that upon payment of all Customs and Central Excise duties on 4-3-2008 and obtaining a "No Dues Certificate," the unit should be considered debonded. However, the Government observed that as per Para 6.18 of the Foreign Trade Policy 2004-2009, a unit is treated as debonded only after the issuance of a final debonding order by the Development Commissioner, which was issued on 31-3-2008. Therefore, the unit was not debonded at the time of export, and the rebate claim was not admissible.

3. Applicability of Notification No. 24/2003-C.E. and Section 5A(1A) of the Central Excise Act, 1944:
Notification No. 24/2003-C.E. exempts goods manufactured by a 100% EOU from duty if cleared for export. Section 5A(1A) mandates that if an exemption is granted absolutely, the manufacturer cannot pay the duty. The Government found that the exemption under Notification No. 24/2003-C.E. was absolute for goods cleared for export, meaning the applicant had no option to pay duty. Consequently, the duty paid was without authority of law, and the rebate claim under Rule 18 of the Central Excise Rules, 2002, was not admissible.

4. Treatment of Duty Paid During the Debonding Process:
The Government concluded that the duty paid by the applicant should be treated as a voluntary deposit. As per the precedent set by the Hon'ble High Court of Rajasthan in CCE, Jaipur v. Suncity Alloys Pvt. Ltd., the Government cannot retain such a deposit without authority of law. Therefore, the duty paid must be returned to the applicant in the manner it was initially paid.

5. Claim for Interest on Delayed Refund:
The applicant sought interest on the delayed refund of the rebate claim. However, since the rebate claim itself was not legally sustainable, the question of interest on delayed refund did not arise. The Government did not grant interest on the delayed refund.

Conclusion:
The revision application was disposed of with the modification that the duty paid by the applicant should be returned as a voluntary deposit. The rebate claim was not admissible, and no interest on delayed refund was granted. The Government upheld the interpretation that the unit was not debonded until the final debonding order was issued on 31-3-2008, and the exemption under Notification No. 24/2003-C.E. was absolute, leaving no option to pay duty on the exported goods.