2009 (11) TMI 671 - CGOVT - Central Excise

Export under Notification No. 19/2004-C.E. - rebate claims - part rebate claims representing the amount of duty paid on freight and insurance elements were rejected Held that - Rebate is not admissible of the amount equal to duty paid erroneously on the post factory removal expenses of freight and insurance which do not form part of transaction value - duty which was not required to be paid can only be treated as deposit and is to be refunded back in the manner it was paid either from cenvat credit or cash

Issues Involved:
1. Rebate claims on export goods under Notification No. 19/2004-C.E. (N.T.).
2. Inclusion of freight and insurance costs in the assessable value for rebate purposes.
3. Admissibility of rebate based on the actual duty paid versus duty payable.
4. Procedural fairness regarding the issuance of show-cause notice and hearing opportunities.
5. Consistency with previous judgments and circulars.

Detailed Analysis:

1. Rebate Claims on Export Goods:
The respondents filed consolidated rebate claims under Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004, issued under Rule 18 of Central Excise Rules, 2001, claiming a rebate of duty debit on export goods. The jurisdictional Range Officer recalculated the assessable value based on CBEC Circular No. 510/6/2000-C.E., dated 3-2-2000, leading to the rejection of part of the rebate claims by the adjudicating authority.

2. Inclusion of Freight and Insurance Costs:
The Commissioner (Appeals) allowed the respondents' appeal, stating that the rebate should be granted on the whole duty paid on excisable goods, not just the duty payable. The Commissioner (Appeals) relied on the Supreme Court's ruling in M/s. Rukmani Pakkwell Traders (2004) and the Tribunal's decision in M/s. Bharat Chemicals v. CCE, Thane (2004), which emphasized that the actual amount of duty paid should be refunded as a rebate, irrespective of whether it included costs like freight and insurance.

3. Admissibility of Rebate Based on Actual Duty Paid:
The Commissioner filed revision applications arguing that rebate claims should be restricted to the duty paid on the Section 4 value, which excludes post-factory expenses like freight and insurance. The Commissioner cited Section 4(1)(a) and Section 4(3)(c) of the Central Excise Act, 1944, and CBEC Circular No. 510/06/2000-CX., dated 3-2-2000, to support the argument that the transaction value should exclude transportation and insurance costs.

4. Procedural Fairness:
The respondents argued that they were not issued a show-cause notice nor given a hearing before the rejection of their claims. The Commissioner (Appeals) agreed, stating that the applicants should have been given an opportunity to explain their case before the rejection of their claims.

5. Consistency with Previous Judgments and Circulars:
The Government referred to its Order No. 388-406/2006 dated 26-5-06 and other similar cases, which held that excise duty on exported goods should be paid on the transaction value as defined under Section 4(3)(d) of the Central Excise Act, 1944. The Government also cited CBEC Circular No. 203/37/96-CX., dated 26-4-1996, clarifying that AR4 value should be determined under Section 4 of the Central Excise Act. The Government concluded that the respondents were not required to pay Central Excise Duty on freight and insurance, which do not form part of the transaction value.

Conclusion:
The Government set aside the impugned Order-in-Appeal, agreeing with the applicant Commissioner that the excise duty should be paid on the transaction value excluding post-factory expenses like freight and insurance. The Government permitted the respondents to take back the Cenvat Credit related to the excess duty paid. The revision application was disposed of in these terms.

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