2011 (2) TMI 704 - CGOVT - Central Excise

Rebate of duty on exports - Asstt. Commissioner held that the rebate claims were filed under Rule 18 of Central Excise Rules, 2002 and in view of Rule 14 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, no rebate claim shall be granted under Rule 18 of the Central Excise Rules, 2002 as the applicants were paying duty on notified goods under Notification No. 42/2008-C.E - Held that - The Notification No. 32/2008 has been issued under Rule 18 of the Central Excise Rules, 2002 under which rebate duty can be allowed subject to Condition mentioned therein. So the stand of the department that no rebate can be allowed under Rule 14 of the Central Excise Rules, 2002 does not sustain, rebate claims are admissible to the applicant in terms of Rule 18 of Central Excise Rules, 2002 read with Notification No. 32/2008-C.E. subject to verification of duty paid on the exported goods as verified by the jurisdictional Central Excise Superintendent Export through merchant exporter - CBEC Circular No. 294/10-97-CX., dated 30-1-1997. - held that - as per CBEC Circular, Condition of direct export from the factory of manufacture or warehouse is condonable. - rebate/drawback etc. are export-oriented schemes and unduly restricted and technical interpretation of procedure etc. is to be avoided in order not to defeat the very purpose of such schemes which serve as export incentive to boost export and earn foreign exchange and in case the substantive fact of export having been made is not in doubt, a liberal interpretation is to be given in case of any technical breaches.

Issues Involved:
1. Rejection of rebate claims under Rule 18 of Central Excise Rules, 2002.
2. Non-compliance with Notification No. 32/2008-C.E. (N.T.) and Notification No. 19/2004-C.E. (N.T.).
3. Alleged procedural lapses in the export process.
4. Discrimination under Article 14 of the Constitution.
5. Procedural versus substantive compliance for rebate claims.

Issue-wise Detailed Analysis:

1. Rejection of Rebate Claims under Rule 18 of Central Excise Rules, 2002:
The Assistant Commissioner rejected the rebate claims filed by the applicant under Rule 18 of Central Excise Rules, 2002, stating that no rebate can be granted under this rule for units operating under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. This decision was based on Rule 14 of the said rules and Notification No. 32/2008 dated 28-8-08. However, the judgment clarified that Rule 14 does not preclude the applicability of Rule 18 for granting rebates. It was noted that Notification No. 32/2008 was issued under Rule 18 itself, thus allowing rebates subject to certain conditions.

2. Non-compliance with Notification No. 32/2008-C.E. (N.T.) and Notification No. 19/2004-C.E. (N.T.):
The rebate claims were also rejected due to non-compliance with the conditions and procedures prescribed under Notification No. 32/2008 and Notification No. 19/2004. Specifically, the applicant did not submit the triplicate copy of ARE-1 to the jurisdictional Superintendent for certification. The judgment noted that the applicant later provided certificates from the Superintendent certifying the duty-paid nature of the goods, which satisfied the substantial requirement of duty payment.

3. Alleged Procedural Lapses in the Export Process:
The Assistant Commissioner and Commissioner (Appeals) held that the goods were not exported directly from the factory or warehouse and were not examined by Central Excise Officers, as required. The judgment acknowledged these procedural lapses but emphasized that the substantial requirement of duty-paid goods being exported was met. It was observed that the goods were examined by Customs officers at the place of export, and the identity and quantity of the goods were verified, fulfilling the core requirement.

4. Discrimination under Article 14 of the Constitution:
The applicant argued that the rejection of their rebate claims was discriminatory, citing similar cases where rebates were allowed under similar conditions. The judgment referenced the Calcutta High Court's decision in Fitwell Fastner (India) Pvt. Ltd. v. CC, which held that discrimination between assesses in different cities is unfair and violative of Article 14. The judgment concluded that the applicant's claims should not be denied on discriminatory grounds.

5. Procedural versus Substantive Compliance for Rebate Claims:
The judgment highlighted the importance of distinguishing between procedural and substantive compliance. It cited several Supreme Court decisions emphasizing that procedural lapses should not deny substantive benefits if the core requirements are met. The judgment noted that the substantive requirement of duty-paid goods being exported was fulfilled, and procedural deviations should be condoned to avoid defeating the purpose of export incentive schemes.

Conclusion:
The judgment set aside the orders of the lower authorities and allowed the revision application, concluding that the applicant was entitled to the rebate claims under Rule 18 of Central Excise Rules, 2002, read with Notification No. 32/2008-C.E. (N.T.). The decision emphasized that procedural lapses should not deny the substantive benefit of rebates when the core requirements are met, aligning with the broader concept of justice and export promotion policies.

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