2011 (6) TMI 600 - HC - Central Excise

Rebate claims - order of the revisionary authority granted rebate - Rule 18 of the Central Excise Rules, 2002 provides that when any goods are exported, the Central Government may by notification grant rebate of duty paid on such excisable goods. Whether duty on the excisable goods has, in fact, been paid to be determined. According to the Excise Department, the duty has not, in fact, been paid. The duty was sought to be paid by utilising Cenvat credit. The Cenvat credit was accumulated on the basis of duty paid documents brought up in collusion with nonexistent or bogus firms. These allegations would have to be enquired into by the adjudicating authority. We are, therefore, of the view that the proper course of action for the revisional authority would have been to allow the order of remand to stand so as to enable the First Respondent to have a full and proper opportunity of establishing its case for the grant of rebate. Instead the revisional authority has purported to make a finding of fact in the absence of virtually any material whatsoever and in the face of the case of the Department that the chain of events in the present case will show a fraudulent attempt to evade the payment of duty. Hence, we are of the view that the order passed by the revisional authority is unsustainable. - matter remanded back.

Summary

Issues:
Challenge to order passed by revisional authority under Section 35EE of Central Excise Act, 1944 regarding rebate claim rejection. Examination of First Respondent's entitlement to claim rebate based on export of goods and duty paid by manufacturer. Judicial review of revisional authority's decision to allow rebate claim.

Analysis:
The petition by the Union of India challenges the order passed by the revisional authority under Section 35EE of the Central Excise Act, 1944, regarding the rejection of rebate claims by the First Respondent amounting to Rs. 13.57 lakhs. The Assistant Commissioner initially rejected the rebate claims, which were later remanded back for reconsideration by the Commissioner after complying with principles of natural justice. The revisional authority, in the impugned order, concluded that the First Respondent is entitled to claim rebate, leading to the Union of India challenging this decision.

The First Respondent, a merchant exporter, purchased finished goods from a manufacturer claiming Cenvat Credit on duty paid inputs. The dispute arose when the manufacturer was found to have wrongly availed credit based on documents from bogus firms, leading to the rejection of the rebate claim by the Assistant Commissioner. The First Respondent argued that it should not be penalized for the manufacturer's actions without evidence of its involvement in any fraudulent activities.

The Commissioner (Appeals) remanded the proceedings to allow the First Respondent to present evidence before the Assistant Commissioner. However, the revisional authority, in reliance on a previous decision, allowed the rebate claim stating that the First Respondent had purchased and exported goods in good faith, paying the entire amount inclusive of duty, without evidence of any wrongdoing on its part.

The High Court found that the revisional authority's decision was unsustainable as it made a finding of fact without sufficient material and contrary to the Department's case of fraudulent evasion of duty. The Court quashed the impugned order and upheld the decision of the Commissioner (Appeals) to remand the proceedings back to the Assistant Commissioner for further examination.

Regarding the payment made to the First Respondent during the pendency of the case, the Court directed the Union of India to recover the amount in accordance with the final decision on the rebate application, which must be decided expeditiously within three months from the date of the Court's order.

In conclusion, the High Court allowed the rule in the aforementioned terms, with no order as to costs.