2015 (4) TMI 163 - CGOVT - Central Excise

Denial of rebate claim - Commissioner (Appeals) mainly on the ground that the rebate claims were sanctioned of duty paid on value which was more than transaction value and the claims should be restricted to duty paid on transaction value - Held that - Applicant has stated that while clearing the goods from factory they prepared ARE-1 No. 199/09-10 dtd. 27-10-2009 in the month of October 2009, when exchange rate was 47.70 Rs. Per US and ARE-1 No. 400/09-10 dtd. 22-02-2010 when exchange rate was 45.70. However, the goods covered vide both AREs-1 could be exported only in the month of April 2010 vide single shipping Bill No. 8341080 dtd. 09-04-2010, when exchange rate reduced to ₹ 45 per US due to this reason, the difference in ARE-1 value and FOB has occurred. Government notes that CBEC has clarified in circular No. 510/06/2000-Cx dtd. 03-02-2000 that there is no question of requantifying the amount of rebate by applying same other rate prevalent to subsequent the date to which duty was paid. In this case applicant has stated the different in ARE-i value and FOB value is due to difference in foreign exchange rates. This pleading is not examined by lower authorities. This factual position is required to be verified by the original authority, and if said contention is found correct, then rebate claims cannot be reduced as clarified in the above said CBEC circular. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Rebate claim sanction, Correct transaction value determination, Violation of Rule 18 of Central Excise Rules, 2002, Exchange rate fluctuation impact on rebate claim.

Rebate Claim Sanction:
The revision application was filed against the Orders-in-Appeal by M/s. Medrel Pharmaceutical (India) Pvt. Ltd. regarding the sanction of the rebate claim by the original authority. The department appealed, arguing that the rebate claim was wrongly sanctioned as the value declared in the ARE-1 was higher than the value declared in the Shipping bills. The department contended that the excess amount paid on the ARE-1 value over the FOB value should be considered as "Excess Payment" and not admissible as rebate. The Commissioner (Appeals) ruled in favor of the department, leading to the revision application.

Correct Transaction Value Determination:
The key issue revolved around determining the correct transaction value for the purpose of Section 4 of the Central Excise Act, 1944. The applicant argued that the value after deducting freight and insurance from the commercial invoice value should be considered the transaction value. The difference in the value of goods shown in the ARE-1 and the FOB value in the invoice was attributed to the reduction of Freight and Insurance charges. The excess amount paid on the ARE-1 value over the FOB value was deemed as "Excess Payment," not Central Excise duty, violating Rule 18 of Central Excise Rules, 2002.

Violation of Rule 18 of Central Excise Rules, 2002:
The crux of the matter lay in whether the sanction of rebate for the "Excess payment" was in violation of Rule 18 of the Central Excise Rules, 2002, which governs the rebate of Central Excise duty paid on exported goods. The contention was that the excess amount paid over the FOB value should not be considered for rebate as it was not Central Excise duty but an "Excess Payment," thereby challenging the validity of the rebate claim.

Exchange Rate Fluctuation Impact on Rebate Claim:
The applicant highlighted the impact of exchange rate fluctuations on the rebate claim. Discrepancies in the ARE-1 values and FOB values were attributed to significant fluctuations in the exchange rates between the months of October 2009 and February 2010, leading to a decline in the US Dollar rate by the time the goods were exported in April 2010. The Government noted that the difference in values was due to the varying exchange rates, which needed further examination by the original authority to determine the validity of the rebate claims.

In conclusion, the Government set aside the Order-in-Appeal and remanded the case back to the original authority for a fresh consideration of the claim, emphasizing the need to verify the impact of exchange rate fluctuations on the rebate claim. The decision aimed to provide a reasonable opportunity for the applicants to present their case in light of the observations made, ensuring justice in the resolution of the dispute.