2010 (8) TMI 267 - HC - Central Excise

Rebate - rejection of the rebate claimed was only for the non-fulfilment of conditions laid down in Notification No. 197/62 - duty suffered yarn twisted into thread and the same yarn in the form of thread transferred from one of the sister concerns to that of the Respondent and got twisted into thread - Polyester thread even after twisting as thread, the yarn has not lost its character/identity - counsel for Respondent therefore contended that even if proviso (i) to Notification no. 197/62 i.e., the goods are exported after payment of duty in cash direct from factory or warehouse is not satisfied, once the goods are exported it is always open to the Collector to order whole or any part of the claim for such rebate, notwithstanding that the conditions of notification not satisfied - authorities taken the view that the Respondent is not entitled to the rebate claimed on the duty paid on the yarn Order holding rebate sustainable set aside

Issues Involved:
1. Entitlement to rebate of Central Excise duty on yarn used for making thread.
2. Exhaustion of statutory remedies before invoking writ jurisdiction under Article 226.
3. Compliance with conditions stipulated in Notification No. 197/62 for rebate claims.
4. Discretion of the Collector in granting rebate under Rule 12 of Central Excise Rules.

Issue-wise Detailed Analysis:

1. Entitlement to Rebate of Central Excise Duty on Yarn Used for Making Thread:
The Respondent filed multiple rebate claims for the duty paid on yarn used to make thread, which was then exported. The Maritime Collector rejected these claims, stating that the duty paid on the yarn, which was processed into thread (exempt from duty), did not qualify for rebate as per Rule 12 and relevant notifications. The learned single Judge, however, held that the yarn, even after being twisted into thread, retained its identity, and thus the rebate claims were valid. The High Court, upon appeal, disagreed, emphasizing that the yarn and thread are distinct in excise terms and that the yarn, once processed into thread, does not retain its original identity for rebate purposes.

2. Exhaustion of Statutory Remedies Before Invoking Writ Jurisdiction:
The Appellants argued that the Respondent had already exhausted statutory remedies by appealing to the Collector of Central Excise (Appeals) and further to the Government of India, both of which were dismissed. The Respondent then filed a writ petition without exhausting the statutory appeal process under Section 35 of the Central Excise Act. The High Court highlighted the principle that when a statutory remedy is available, it must be pursued before invoking writ jurisdiction, except in cases of complete lack of jurisdiction or violation of natural justice. The Court found no such exceptions here and held that the writ petition was not maintainable.

3. Compliance with Conditions Stipulated in Notification No. 197/62 for Rebate Claims:
The central issue was whether the conditions of Notification No. 197/62, which required goods to be exported directly from the factory after payment of duty, were met. The Respondent's goods (thread) were processed from duty-paid yarn at a different site before export. The High Court ruled that the conditions were not satisfied as the goods were not exported directly from the factory in their duty-paid form. The learned single Judge's view that the yarn retained its identity after being made into thread was rejected.

4. Discretion of the Collector in Granting Rebate under Rule 12 of Central Excise Rules:
The Respondent contended that under the proviso to Rule 12, the Collector could allow rebate even if conditions were not fully met, provided the goods were exported. The High Court clarified that this discretion lies solely with the Collector and cannot be directed by a writ of mandamus. The Court emphasized that the Collector's decision not to grant the rebate was within his discretion and supported by the statutory framework.

Conclusion:
The High Court allowed the appeal, setting aside the single Judge's order and ruling that the Respondent was not entitled to the rebate claims. The Court underscored the necessity of exhausting statutory remedies and adhering to the conditions of relevant notifications for rebate claims. The decision reaffirmed the discretionary power of the Collector under Rule 12, which cannot be overridden by judicial direction. The Department was permitted to recover the refunded excise duty from the Respondent in accordance with the law.

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