2015 (3) TMI 833 - CGOVT - Central Excise

Denial of rebate claim - Assessee paid duty @10% instead of @ 4% under Notification No. 4/2006, dated 1-3-2006 - Revenue contends that assessee did this in order to provide higher amount of rebate for the merchant-exporter - Held that - The plain reading of instructions issued by C.B.E. & C. regarding assessment of export goods, reveals that the export goods shall be assessed to duty in the same manner as the goods cleared for home consumption are assessed. Further the classification and rate of duty should be as stated in Schedule of Central Excise Tariff Act, 1985 read with any exemption notification and/or Central Excise Rules, 2002. These C.B.E. & C. Instructions clearly stipulate that applicable effective rate of duty will be as per the exemption notification. The said instruction is issued specifically with respect to sanctioning of rebate claim of duty paid on exported goods. Duty was payable @ 4% on the export goods also and rebate cannot be granted on the duty paid in excess of effective rate prescribed in the Notification No. 4/2006-C.E., dated 1-3-2006 as amended, as stipulated in the above said C.B.E. & C. Instructions. Respondent are clearing goods for home consumption on payment of duty @ 4% or 5% in terms of Notification No. 4/2006-C.E. as amended. The above said C.B.E. & C. Instructions state that export goods are to be assessed in the same manner as the goods for home consumption. So, respondent has to assess all goods whether cleared for export or home consumption in a same manner. He cannot assess export goods as higher rate of duty @ 10% and goods cleared for home consumption at lower rate of duty @ 4% or 5%. He has to choose any one notification and assess all clearance of goods in the same manner even if there are two effective rates of duty as per two notifications. In this case, the situation is different since Notification No. 2/2008-C.E. as amended prescribed duty at General Tariff rate of 10% whereas effective rate of duty is 4% or 5% vide Notification No. 4/2006-C.E. as amended. Even the Joint Secretary (TRU) C.B.E. & C. D.O. Letter, dated 29-2-2008 stipulated that rate of duty beneficial to assessee have to be extended. The said letter has not allowed payment of duty under both notifications. Assessee could have opted for one notification for all clearance even if it is considered as case of applicability of two notifications. Government finds that the respondents are not eligible to claim of rebate of duty paid @ 10% i.e. General Tariff Rate of Duty ignoring the effective rate of duty @ 4% or 5% in terms of exemption Notification No. 4/2006-C.E., dated 1-3-2006 as amended. As such Government is of considered view that rebate is admissible only to the extent of duty paid at the effective rate of duty i.e. 4% or 5% in terms of Notification No. 4/2006-C.E., dated 1-3-2006 as amended, on the transaction value of exported goods determined under Section 4 of Central Excise Act, 1944. The amount of duty paid in excess of duty payable at effective rate of 4% or 5% is to be treated as voluntary deposit made by manufacturer with the Government. The excess paid amount may be allowed to be re-credited in the Cenvat credit account of the manufacturer subject to compliance of the provisions of Section 12B of Central Excise Act, 1944. - Decided in favour of Revenue.

Summary

Issues Involved:

1. Eligibility of rebate claims by a merchant-exporter.
2. Applicability of different Central Excise duty rates.
3. Interpretation of relevant notifications and their amendments.
4. Compliance with Central Excise Rules and procedures.
5. The role of C.B.E. & C. instructions and circulars.
6. Legal precedents and their applicability.

Issue-wise Detailed Analysis:

1. Eligibility of Rebate Claims by a Merchant-Exporter:
The respondent, a merchant-exporter, filed rebate claims under Rule 18 of the Central Excise Rules, 2002, citing Notification No. 19/2004-C.E. (N.T.). The rebate claims were initially sanctioned by the Deputy Commissioner, Central Excise, Mumbai-III. The department contested this, arguing that the respondent, as a merchant-exporter, did not have the locus standi to claim rebates for duties paid by the manufacturer. The government found that the merchant-exporter could only claim rebates based on the effective tariff rate applicable to the manufacturer and not on a higher rate.

2. Applicability of Different Central Excise Duty Rates:
The department argued that the manufacturer paid Central Excise duty at 10% instead of the applicable 4%, aiming to claim a higher rebate. The government clarified that the duty should be paid at the effective rate prescribed by the relevant notifications, not at a higher general tariff rate. The rebate claims should be based on the effective rate of duty applicable for home consumption, which was 4% or 5%, as per Notification No. 4/2006-C.E. and its amendments.

3. Interpretation of Relevant Notifications and Their Amendments:
The government examined various notifications, including Notification No. 2/2008-C.E., which reduced the general tariff rate from 16% to 14%, and subsequent amendments that further reduced or adjusted the rates. The key point was that Notification No. 4/2006-C.E. provided the effective rate of duty, which was lower than the general tariff rate. The government emphasized that the effective rate should be applied for both home consumption and export purposes.

4. Compliance with Central Excise Rules and Procedures:
The government referred to the C.B.E. & C. Excise Manual on Supplementary Instructions, which states that export goods should be assessed to duty in the same manner as goods for home consumption. This means applying the effective rate of duty as per the exemption notifications. The instructions were binding on departmental authorities, and any excess duty paid beyond the effective rate should be treated as a deposit, not as duty eligible for rebate.

5. The Role of C.B.E. & C. Instructions and Circulars:
The government reiterated that C.B.E. & C. circulars and instructions are binding on departmental authorities. These instructions clarified that the duty paid on export goods should be at the effective rate prescribed by the relevant notifications. The government upheld the applicability of these instructions in determining the rebate claims, ensuring consistency and compliance with the prescribed procedures.

6. Legal Precedents and Their Applicability:
The respondent cited several Supreme Court judgments to argue that they could choose the beneficial notification. However, the government clarified that these judgments did not apply to the context of rebate claims under Rule 18 of the Central Excise Rules. The government also referred to relevant case laws, such as the Nahar Industrial Enterprises Ltd. case, which supported the view that rebate should be allowed only at the effective rate of duty, and any excess duty paid should be re-credited to the Cenvat account.

Conclusion:
The government concluded that the respondents were not eligible to claim a rebate at the higher general tariff rate of 10%. The rebate was admissible only to the extent of the duty paid at the effective rate of 4% or 5%, as per Notification No. 4/2006-C.E. The excess duty paid was to be treated as a voluntary deposit and could be re-credited to the manufacturer's Cenvat account, subject to compliance with Section 12B of the Central Excise Act, 1944. The original authority was directed to sanction the rebate claims accordingly. The revision applications were disposed of in these terms.