2011 (3) TMI 1370 - HC - Central Excise

Cenvat credit wrongly claimed - department has issued notice to the original firms namely Ms. Amar Enterprise and M/s. Flarikrishna Enterprise for recovery of duty and penalty. This would thus show that department is pursuing the original entities for recovery of cenvat credit wrongly claimed whereas on other hand it is denying rebate claim of the manufacturer exporters - counsel contended that without cancellation of cenvat credit granted to M/s. Unique Exports rebate claimed by respondent M/s. Roman Overseas cannot be declined - Held that - issue cannot be raised by respondent M/s. Roman Overseas in facts of the present case. As already noted before the competent authority the stand of respondent M/s. Roman Overseas was clear that fraud was not disputed but that respondent M/s. Roman Overseas was not part of such fraud and that all reasonable care was taken to ensure that goods were duty paid respondent M/s. Roman Overseas was either part of the fraud in non-payment of excise duty or had knowledge about the same or even had failed to take care as envisaged under sub-rule(2) of Rule 7 of the Cenvat Credit Rules situation would have been different Petitions therefore fail. Same are dismissed

Issues Involved:

1. Entitlement of M/s. Roman Overseas to claim rebate under Rule 18 of the Central Excise Rules, 2002.
2. Validity of cenvat credit passed on by M/s. Unique Exports.
3. Allegations of fraud and due diligence by M/s. Roman Overseas.
4. Decisions of Commissioner (Appeals) and the Government confirming rebate claims.

Issue-Wise Detailed Analysis:

1. Entitlement of M/s. Roman Overseas to claim rebate under Rule 18 of the Central Excise Rules, 2002:

The primary issue was whether M/s. Roman Overseas was entitled to claim a rebate for the duty paid on goods exported, as per Rule 18 of the Central Excise Rules, 2002. The court noted that M/s. Roman Overseas had purchased goods from M/s. Unique Exports and availed cenvat credit passed on by the supplier. The goods were eventually exported, giving rise to rebate claims. The court emphasized that there were no allegations against M/s. Roman Overseas regarding involvement in any fraud or knowledge of non-payment of duty by M/s. Unique Exports. The court held that M/s. Roman Overseas had taken all necessary precautions and was a bona fide purchaser. Therefore, they were entitled to the rebate claimed.

2. Validity of cenvat credit passed on by M/s. Unique Exports:

The court examined the validity of the cenvat credit passed on by M/s. Unique Exports. It was found that M/s. Unique Exports had passed on cenvat credit for goods on which no duty was paid. However, there were no allegations that M/s. Roman Overseas was part of this fraud or had knowledge about it. The court noted that Rule 18 allows for a rebate of duty paid on excisable goods or materials used in their manufacture. Since M/s. Roman Overseas had paid duty partly by paying directly to the Government and partly by availing cenvat credit, they were within their rights to claim the rebate.

3. Allegations of fraud and due diligence by M/s. Roman Overseas:

The court addressed the allegations of fraud and the due diligence required by M/s. Roman Overseas. It was noted that the competent authority had relied on Rule 9(3) of the Cenvat Credit Rules, 2004, which requires manufacturers to verify that appropriate duty has been paid on inputs. However, this was not part of the show cause notice, and no allegations were made against M/s. Roman Overseas regarding failure to take necessary care. The Commissioner (Appeals) and the Government both concluded that M/s. Roman Overseas had taken all necessary precautions. The court found no evidence to suggest that M/s. Roman Overseas was part of the fraud or had failed to take reasonable steps to ensure the goods were duty paid.

4. Decisions of Commissioner (Appeals) and the Government confirming rebate claims:

The court reviewed the decisions of the Commissioner (Appeals) and the Government, which had allowed the rebate claims of M/s. Roman Overseas. The Commissioner (Appeals) had emphasized that there was no allegation that M/s. Roman Overseas and the manufacturers were related persons or that the sale was not on a principal-to-principal basis. The Government, in its revision order, had dismissed the department's appeal, confirming the rebate claims. The court found no error in these decisions and upheld them, noting that M/s. Roman Overseas had taken all necessary care and was not part of any fraud.

Conclusion:

The court concluded that M/s. Roman Overseas could not be denied the benefit of rebate claims, as there were no allegations or evidence of their involvement in the fraud or failure to take necessary precautions. The petitions filed by the Commissioner of Central Excise, Surat, were dismissed, and the orders of the Commissioner (Appeals) and the Government were confirmed. The court reiterated that the facts of the case were peculiar, and had there been any allegations of fraud or lack of due diligence, the situation would have been different.

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