2014 (12) TMI 902 - CGOVT - Central Excise

Denial of rebate claim - Processing of the goods for the DTA unit of the assessee by the EOU unit - The applicants have exported goods from the EOU but duty is paid by the DTA unit. Later rebate was claimed for the duty paid on the goods exported - Held that - DTA unit will be eligible for brand rate of drawback with regard to duty suffered on inputs. This condition nowhere debars the DTA exporter from availing any rebate benefit, of duty paid at final product if the same is otherwise admissible to DTA unit for such exports. This condition nowhere stipulates that rebate of duty paid at final stage on finished goods is not admissible. Hence, legitimate claim of rebate of duty paid at final stage cannot be held inadmissible by applying provision of Sr.No.(1) of the above said permission. - no cenvat credit can be allowed to DTA unit on the duty paid on inputs procured from DTA and supplied to EOU for job work. In these cases, it has been alleged that the DTA unit has availed cenvat credit of duty paid on inputs supplied to EOU for job work. Government finds in some cases, the applicant availed cenvat credit, which is clearly in violation of permission granted to them. Further, the applicants contended that condition of non-availment of cenvat credit of duty involved on inputs supplied for job work to EOU, imposed vide above said permissions is inconsistent with existing statutory provisions. Government finds that when the applicant supplied the goods to EOU for Job work, subject to condition imposed on permission to do so, they cannot selectively choose or reject the provisions in their favour. There is no allegation that duty on finished goods for which rebate has been claimed in impugned cases, has been paid from improperly availed cenvat credit. Further, there is different statutory provision for recovery of cenvat credit, if availed improperly. Hence, as discussed in this para above, the rebate of duty paid at final stage cannot be held inadmissible provided the same has been paid from property availed cenvat credit. Similarly, in certain cases the applicant also availed benefit of DEPB, which is clearly in violation of condition No.(6) of the said letter. However, Government finds that there is no statutory bar on availing rebate of duty paid at final stage, if DEPB benefit is availed. Further, if DEPB benefit has been availed improperly there are different statutory provisions available for recovery of the same. - export is not covered under the parameter of export scheme EOU scheme and no benefit will accrue to the EOU. If the export is not to be made in scheme of EOU, then it is improper on the part of department to contend that provisions of Section 5A(1A) of Central Excise Act 1944 read with notification No.29/2003 dated 31.3.2003 will be applicable in the impugned cases. Once; the impugned exports brought out the ambit of EOU scheme, the same cannot be applied to deny benefit of rebate by stating that the impugned export was required to be carried out by EOU. The contentions of department are therefore, in total contradiction to conditions of permission granted to the EOU unit for job work and hence, can t be held sustainable. Applicant has violated some of the conditions in impugned permission letters and contended that such conditions are inconsistent with law. - the applicant cannot be allowed to commit such procedural lapses in regular and habitual manner. Hence, they are cautioned and directed to remain compliant to various statutory procedural requirement in future. Failing to do so, rebate claims may be held inadmissible in future for non-compliance of such procedural requirements. Rebate allowed - Decided in favour of assessee.

Issues Involved:
1. Legality of the adjudicating authority's decision beyond the show cause notice.
2. Eligibility of rebate claims for duty paid on goods exported by the DTA unit.
3. Compliance with conditions in job work permissions.
4. Applicability of previous legal precedents.
5. Procedural infractions and their impact on rebate claims.
6. Interpretation of statutory provisions and permissions.

Detailed Analysis:

1. Legality of the adjudicating authority's decision beyond the show cause notice:
The applicant argued that the adjudicating authority decided the matter on issues not included in the Show Cause Notice (SCN), thus exceeding its jurisdiction. The adjudicating authority's order was considered not legal and tenable, and the Commissioner (Appeals) upholding this order was also deemed non-speaking and pre-determined.

2. Eligibility of rebate claims for duty paid on goods exported by the DTA unit:
The applicants, a DTA unit, sent raw materials to an EOU for job work and exported the finished goods from the EOU premises, with the DTA unit paying the duty. The adjudicating authority rejected the rebate claims on the grounds that no duty can be paid on goods manufactured by an EOU. However, it was observed that the DTA unit should be treated as the exporter, and the rebate of duty paid at the final stage cannot be held inadmissible if the duty was paid from properly availed CENVAT credit.

3. Compliance with conditions in job work permissions:
The permissions granted to the EOU for job work included several conditions, such as the prohibition of taking back finished goods to the DTA unit and the requirement that the export be made from the EOU premises. The applicants were found to have violated some conditions, such as availing CENVAT credit and DEPB benefits, which were against the permissions. However, the Government noted that there is no statutory bar on availing rebate of duty paid at the final stage, even if DEPB benefits were availed improperly. The procedural infractions were condoned as the substantial conditions of export of duty-paid goods were met.

4. Applicability of previous legal precedents:
The Commissioner (Appeals) referred to decisions in VIDI ARBHA CABLES and MAHENDRA CHEMICALS, which were found not applicable to the present case. The applicant cited other precedents where procedural infractions were condoned if the substantive conditions of export were met.

5. Procedural infractions and their impact on rebate claims:
The Government observed that procedural lapses, such as non-mentioning of the full address of the EOU on invoices and ARE-1, should be condoned if the substantial conditions of export were fulfilled. The Supreme Court and other legal precedents have established that procedural infractions should not deny substantive benefits if the core requirement of export is met.

6. Interpretation of statutory provisions and permissions:
The Government examined the permissions in light of statutory provisions and found that the conditions did not debar the DTA unit from claiming rebate benefits. The permissions allowed the DTA unit to export from the EOU premises and claim rebates, provided the duty was paid from properly availed CENVAT credit.

Conclusion:
The Government set aside the impugned orders in appeal and allowed the revision applications, cautioning the applicant to comply with statutory procedural requirements in the future. Procedural infractions were condoned, and the substantive benefit of rebate was granted as the core conditions of export were met.

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