2013 (3) TMI 549 - HC - Central Excise

Withdrawal of acceptance of export - Exporting without payment of duty under Rule 19 of the Rules - Duty U/s 11A - Interest U/s 11AB - Mismatch between description of the commodities laid for export, as referred to in the AREs, and those mentioned in the other documents - Held that - the petitioner cannot/could not have claimed the benefit of Rule 19 for such goods not having been manufactured by it. Such exemption of excise duty would not only be opposed to the letter and spirit of this provision of the Rules, but would also result in its undue enrichment at the cost of public revenue. Actual export of the consignments of the goods not manufactured by the petitioner per se would not entitle it to the benefit of Rule 19. The identification of the goods, thus, claimed to have been exported is of definitive significance and can by no means be compromised with, notwithstanding the fact that initially, the acceptance of the proof of export had been issued by the authorities and the same had been cleared for export after examination of the same at the place of export as required by CBEC guidelines to ascertain the identity and the quantity thereof. The view taken by the Revenue, having regard to the entire gamut of the facts involved, does not appear to be wholly implausible and absurd so as to be discarded as preposterous. Thus its plea of similar antecedents of the petitioner also cannot be lightly ignored. The relief claimed by the petitioner is statutory in nature and would be logically available to it on strict compliance of the prescriptions in connection therewith. The mere contingency that at some earlier point of time, the acceptance of the proof of export had been issued by the concerned excise authorities, would not entitle it to the benefit of Rule 19, in the singular facts and circumstances of the case. No final decision, as yet, has been taken by the excise authorities on the reply/explanation filed by it to the show cause notice(s). - the respondents would take an appropriate decision in accordance with law in the said proceedings without being influenced by the above observation after affording due opportunity of participation to the petitioner.

Issues Involved:
1. Withdrawal of acceptance of proof of export.
2. Bar of limitation under Section 35EE of the Central Excise Act.
3. Misdescription of goods in export documents.
4. Eligibility for exemption from central excise duty under Rule 19 of the Central Excise Rules.
5. Validity of proceedings initiated by show cause notice.

Detailed Analysis:

1. Withdrawal of Acceptance of Proof of Export:
The petitioner, a manufacturer of Menthol Powder, Menthol Crystal, D.M.O, and Menthol Oil, exported six consignments without payment of duty under Rule 19 of the Central Excise Rules. Initially, the jurisdictional Assistant Commissioner accepted the proof of export. However, this acceptance was later withdrawn by the central excise authorities, leading to the issuance of a show cause notice for the recovery of central excise duty with interest and penalty. The authorities alleged that the goods described in the export documents did not match those in the ARE-1 forms and that the petitioner did not possess a drug license to manufacture the goods as per pharmacopoeia standards.

2. Bar of Limitation under Section 35EE of the Central Excise Act:
In D.B.Civil Writ Petition No.12226/2011, the petitioner's revision application under Section 35EE was rejected as it was filed beyond the prescribed limitation period and the extendable period. The petitioner argued that it had been pursuing its relief bona fide before the wrong forum (the Tribunal) and thus, the delay should be condoned. However, the court, referencing the Supreme Court decision in Hongo India (P) Ltd., held that the scheme of the Central Excise Act excluded the applicability of Section 5 of the Limitation Act, thereby rejecting the plea for condonation of delay.

3. Misdescription of Goods in Export Documents:
The central excise authorities contended that there was a mismatch in the description of goods between the ARE-1 forms and other export documents like Bills of Lading and Shipping Bills. The petitioner admitted to not holding a drug license to manufacture Menthol Powder/Crystal as per pharmacopoeia standards, which were mentioned in the export documents. The authorities argued that this misdescription indicated that the goods exported were not manufactured by the petitioner, thereby suggesting an attempt to evade central excise duty.

4. Eligibility for Exemption from Central Excise Duty under Rule 19 of the Central Excise Rules:
The petitioner claimed exemption from central excise duty under Rule 19, which allows export of excisable goods without payment of duty. The court noted that for such an exemption, the goods must be manufactured by the exporter. Since the petitioner did not have a drug license to manufacture the goods as per pharmacopoeia standards, it could not claim the benefit of Rule 19. The court emphasized that the identification of goods is crucial and any misdescription undermines the eligibility for exemption.

5. Validity of Proceedings Initiated by Show Cause Notice:
The show cause notice issued by the authorities required the petitioner to explain why the central excise duty should not be recovered and why a penalty should not be imposed. The petitioner's reply asserted that the goods were indeed exported and inspected by customs authorities. However, the court found the explanation unconvincing due to the admitted misdescription and lack of a drug license. The court upheld the validity of the proceedings initiated by the show cause notice, emphasizing that the petitioner could still participate in the ongoing proceedings and provide relevant evidence.

Conclusion:
The court dismissed the petitions, upholding the withdrawal of acceptance of proof of export and the proceedings initiated by the show cause notice. The petitioner's plea for condonation of delay was rejected, and the court emphasized the importance of accurate description and compliance with legal requirements for claiming exemptions under Rule 19. The petitioner was allowed to continue participating in the proceedings arising from the show cause notice.

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