2012 (10) TMI 303 - CGOVT - Central Excise

Rebate claim export Notification No. 24/2003-C.E., - Held that - when an exemption under sub-section 5A(1) from payment of duty of excise is granted absolutely, the manufacture has no option to pay the duty - duty paid erroneously cannot be called as duty of excise but it becomes mere a deposit with Government as the applicant was not required to pay any duty in the instant case - erroneously paid duty is not rebatable under Rule 18 of Central Excise Rules, 2002. Since, Govt. cannot retain any amount which is not due to it, the amount so collected is allowed to re-credited in Cenvat Account

Summary

Issues Involved:
1. Entitlement to rebate claims by the claimant.
2. Legality of utilizing Cenvat credit post de-bonding.
3. Applicability of exemption notifications.
4. Validity of the show cause notice and recovery orders.
5. Interpretation of Section 5A(1A) of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Entitlement to Rebate Claims by the Claimant:
The claimant, M/s. Chef Set Houseware Pvt. Ltd., exported excisable goods and claimed rebates under Rule 18 of the Central Excise Rules, 2002. The initial rebate claims were settled and sanctioned, but later, it was noticed that the claimant had been operating as an Export Oriented Unit (EOU) and had not reflected this in the rebate claim documents. The adjudicating authority ordered the recovery of the rebate claims, which was contested by the claimant. The Commissioner (Appeals) allowed the rebate claims, but the department filed revision applications arguing that the rebate was erroneously paid since the goods were exempted from duty under Notification No. 10/2006-C.E.

2. Legality of Utilizing Cenvat Credit Post De-bonding:
The claimant's de-bonding process was completed, and they ceased to operate as an EOU from 26-4-2007. The department argued that the unutilized Cenvat credit lying in the account lapsed as the final products were fully exempted by Notification No. 10/2006-C.E. The claimant, however, contended that they were entitled to claim rebate on the duty paid inputs used in the manufacture of exported goods and that there was no unutilized credit available at the time of de-bonding.

3. Applicability of Exemption Notifications:
The goods exported by the claimant were fully exempted from duty under Notification No. 24/2003-C.E. and Notification No. 10/2006-C.E. The government observed that the goods were exempted from the whole of the duty of excise unconditionally, and therefore, no duty was required to be paid in terms of sub-section (1A) of Section 5A of the Central Excise Act, 1944. The Commissioner (Appeals) noted that the claimant was allowed to take Cenvat credit but could not utilize it for payment of duty on goods cleared for export.

4. Validity of the Show Cause Notice and Recovery Orders:
A show cause notice was issued to the claimant to recover the erroneously refunded rebate amount along with interest. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) allowed the rebate claims. The department's revision applications argued that the rebate was erroneously paid and should be recovered. The government noted that the duty paid erroneously cannot be called duty of excise but becomes a deposit with the government, which is not rebatable under Rule 18 of the Central Excise Rules, 2002.

5. Interpretation of Section 5A(1A) of the Central Excise Act, 1944:
The government emphasized that the amendment to Section 5A(1A) stipulates that when an exemption from payment of duty of excise is granted absolutely, the manufacturer has no option to pay the duty. The goods exported by the claimant were exempted from payment of duty under Notification No. 24/2003-C.E., and the duty paid erroneously was not rebatable. The government allowed the claimant to re-credit the erroneously paid amount in their Cenvat Credit Account and modified the impugned order-in-appeal to this extent.

Conclusion:
The revision applications were disposed of with the government allowing the claimant to take re-credit of the erroneously paid amount in their Cenvat Credit Account, thereby modifying the impugned order-in-appeal. The government highlighted that the duty paid erroneously is not rebatable under Rule 18 of the Central Excise Rules, 2002, and emphasized the applicability of Section 5A(1A) of the Central Excise Act, 1944.