2011 (1) TMI 835 - CGOVT - Central Excise

Export of goods - Claim of rebate under rule 18 - export obligation under DFIA -exemption under Notification No. 40/2006-Cus., dated 1-5-06 - Notification No. 17/2009 dated 19-2-09 amended Notification No. 40/2006, dated 1-5-06 by omitting the following phrase of Condition (v) and in respect of which facility under Rule 18 (rebate of duty paid on materials used in the manufacture of resultant products) or sub-rule (2) of Rule 19 of the Central Excise Rules, 2002 or CENVAT credit under CENVAT Credit Rules, 2004 in respect of materials imported/procured against the said authorization has not been availed. - held that - Government observes that rebate of duty paid on final products exported under DFIA Schemes is admissible as Notification in question has been amended retrospectively from the date of issue vide Section 93 of Finance (No. 2) Act, 2009 - rebate / refund to be allowed.

Issues Involved:
1. Eligibility for rebate claims under Rule 18 of the Central Excise Rules, 2002.
2. Compliance with Condition V of Notification No. 40/2006-Cus., dated 1-5-06.
3. Interpretation of the DFIA Scheme and its implications on Cenvat Credit.
4. Jurisdiction of Central Excise authorities regarding violations of licensing conditions under the DFIA Scheme.

Issue-wise Detailed Analysis:

1. Eligibility for Rebate Claims under Rule 18 of the Central Excise Rules, 2002:
The applicant Commissioner contested the rebate claims filed by the assessee for the duty paid on exported excisable goods under Rule 18 of the Central Excise Rules, 2002. The Dy. Commissioner initially rejected the rebate claims, arguing that the assessee had availed Cenvat Credit on inputs and paid duty from the Cenvat account rather than in cash, which was not permissible under the DFIA Scheme. The Commissioner (Appeals-II) overturned this decision, stating that the restriction in Notification No. 40/2006-Cus. applied only to the rebate of duties paid on inputs, not on the final products themselves. The Government upheld this interpretation, noting that the rebate of duty on final products exported under the DFIA Scheme is admissible, especially in light of the retrospective amendment by the Finance (No. 2) Act, 2009.

2. Compliance with Condition V of Notification No. 40/2006-Cus., dated 1-5-06:
Condition V of Notification No. 40/2006-Cus. stipulates that no Cenvat Credit shall be availed on raw materials used in the manufacture of final products exported under the DFIA Scheme. The applicant Commissioner argued that the assessee violated this condition by availing Cenvat Credit on inputs. However, the Commissioner (Appeals-II) and the Government noted that the restriction applied only to inputs procured against the authorization. Since the assessee procured inputs on payment of duty in the normal course, they were entitled to Cenvat Credit. The Government further clarified that the retrospective amendment to Notification No. 40/2006-Cus. allowed for the rebate of duty on final products even if Cenvat Credit was availed on inputs.

3. Interpretation of the DFIA Scheme and its Implications on Cenvat Credit:
The DFIA Scheme, governed by the Foreign Trade Policy (2004-2009) and Customs Notification No. 40/2006-Cus., prohibits availing Cenvat Credit on inputs imported or procured against the authorization. The applicant Commissioner argued that exporting final products under the DFIA Scheme implied that inputs were also procured under the scheme, thus barring Cenvat Credit. The Government disagreed, stating that the prohibition on Cenvat Credit applied only to inputs procured against the authorization. Since the assessee procured inputs on payment of duty, they were entitled to Cenvat Credit and subsequent rebate on the final products.

4. Jurisdiction of Central Excise Authorities Regarding Violations of Licensing Conditions under the DFIA Scheme:
The respondent argued that any violations of the DFIA Scheme's licensing conditions should be addressed by the Directorate General of Foreign Trade (DGFT) or Customs authorities, not Central Excise authorities. The Government supported this view, noting that the Central Excise authorities lacked jurisdiction to initiate proceedings for violations of licensing conditions under the DFIA Scheme. The Government also referenced the Hon'ble Tribunal's decision in a similar case, which supported the respondent's claims and highlighted the need for show cause notices before recovering erroneous refunds.

Conclusion:
The Government set aside the impugned orders and remanded the case back to the original authority to sanction the rebate claim, considering the retrospective amendment to Notification No. 40/2006-Cus. The rebate of duty paid on final products exported under the DFIA Scheme was deemed admissible, provided the rebate claims met all other necessary conditions. The revision applications were disposed of accordingly.

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