2013 (8) TMI 612 - HC - Central Excise

Proof of Export - incompatibility in description - Challenge to show cause notice though reply was filed - Bar of Limitation - Admission of writ petition - Held that - The provisions of the Central Excise Act suggest that the time limit prescribed thereunder was absolute and unextendable by a court under Section 5 of the Limitation Act - it was the duty of the court to respect the legislative intent and that liberal interpretation contrary thereto ought not be granted Following Commissioner of Customs & Central Excise Versus M/s Hongo India (P) Ltd. & Anr. 2009 (3) TMI 31 - SUPREME COURT - by the time the revision petition under Section 35EE was filed not only the period of limitation prescribed therefor had expired but also the term of relaxation grantable had lapsed. We are left unpersuaded by the petitioner s plea for condonation of delay on the ground of its bona fide litigating before a wrong forum. The assertion of the respondents to the effect that in the other accompanying instances, the petitioner had rightly identified the forum, in the overall factual backdrop cannot also be lightly discarded. However, the above rejection of the petitioner s revision application under Section 35EE being only on the ground of limitation and not on merits, the arguments against merger thereof with the order of the Commissioner (Appeals), Jaipur has substance. Proof of Export - Duty Demand u/s 11A - Interest u/s 11AB and Penalty - Assesse submitted the proof of export before the authority for acceptance under the provision of the Rules and the authority had accepted the same - authority withdrew the acceptance of the proof of export covering the consignments - Held that - The action of the authorities on the ground of misdescription of the goods by the petitioner, on a cumulative consideration cannot be construed to be untenable - The relief claimed by the petitioner was 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. The present determination had been based on the materials laid before - As the show cause notice(s) would demonstrate, it was open for the assesse to produce relevant records, documents and other evidence to substantiate its plea of export of goods manufactured by it, making those worthy of the exemption from payment of central excise duty as envisioned by Rule 19 of the Rules - it was worth-mentioning that the observations made and the conclusions reached were in the context of the debate addressed in the petitions and it would be open for the petitioner to participate in the proceedings arising out of the show cause notice(s) in spite of this adjudication - In such an eventuality, needless to say, the Department 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 assesse - Stay application Also rejected.

Issues Involved:
1. Withdrawal of acceptance of proof of export.
2. Issuance of show cause notice for realization of excise duty with interest and penalty.
3. Bar of limitation under Section 35EE of the Central Excise Act, 1944.
4. Misdescription of goods in export documents.
5. Eligibility for exemption under Rule 19 of the Central Excise Rules, 2002.
6. Bona fide litigation in a wrong forum.
7. Adjudication on merits of the case.

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 between October 2005 and April 2006 under Rule 19 of the Central Excise Rules, 2002. Initially, the jurisdictional Assistant Commissioner accepted the proof of export. However, this acceptance was later withdrawn, leading to the issuance of a show cause notice. The withdrawal was based on discrepancies between the descriptions of goods in the ARE-1 forms and other export documents like Bills of Lading and Shipping Bills.

2. Issuance of Show Cause Notice for Realization of Excise Duty with Interest and Penalty:
Following the withdrawal of acceptance, a show cause notice dated 27-10-2006 was issued, demanding the recovery of central excise duty amounting to Rs. 69,73,481/- along with interest and penalties. The notice alleged that the petitioner had mentioned BP/USP standards in its Bills of Lading/Shipping Bills, which did not match the descriptions in the ARE-1 forms, suggesting an attempt to evade duty by exporting goods not manufactured by the petitioner.

3. Bar of Limitation under Section 35EE of the Central Excise Act, 1944:
In one of the petitions, the petitioner's revision application under Section 35EE was rejected as time-barred. The petitioner argued that it had been pursuing its appeal before the wrong forum (the Tribunal) and thus the delay should be condoned. However, the Court, referencing the Supreme Court's decision in Commissioner of Customs and Central Excise v. Hongo India (P) Ltd., held that the time limit prescribed under the Act is absolute and unextendable, thereby rejecting the plea for condonation of delay.

4. Misdescription of Goods in Export Documents:
The petitioner admitted that it did not possess a drug license to manufacture Menthol Powder/Crystal as per pharmacopoeia standards (BP/USP). The Court found that the mismatch between the descriptions in the ARE-1 forms and other export documents was significant. This discrepancy suggested that the goods exported were different from those cleared from the petitioner's factory, thereby justifying the withdrawal of the acceptance of proof of export.

5. Eligibility for Exemption under Rule 19 of the Central Excise Rules, 2002:
The Court emphasized that the benefit of Rule 19, which allows export without payment of duty, is conditional upon the goods being manufactured by the exporter. Since the petitioner could not manufacture Menthol Powder/Crystal with pharmacopoeia standards without a drug license, it was not entitled to the exemption under Rule 19. The actual export of goods not manufactured by the petitioner did not qualify for the exemption, and the proposed recovery of duty was deemed justified.

6. Bona Fide Litigation in a Wrong Forum:
The petitioner's argument of bona fide litigation in a wrong forum was rejected. The Court noted that the petitioner had correctly identified the forum in other instances and thus could not claim ignorance or mistake in this case. The rejection of the revision application under Section 35EE on the ground of limitation was upheld.

7. Adjudication on Merits of the Case:
Despite the procedural issues, the Court decided to examine the merits of the case. It concluded that the petitioner's claim for exemption under Rule 19 was invalid due to the misdescription of goods and lack of a drug license. The Court dismissed the petitions, allowing the excise authorities to proceed with the show cause notice and related actions.

Conclusion:
The Rajasthan High Court dismissed the petitions, upholding the withdrawal of acceptance of proof of export and the issuance of a show cause notice for recovery of excise duty with interest and penalty. The Court found that the petitioner was not entitled to the exemption under Rule 19 due to the misdescription of goods and lack of a drug license. The plea for condonation of delay in filing the revision application under Section 35EE was also rejected.

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