2020 (2) TMI 1372 - HC - Central Excise

Rebate Claim - petitioner challenged the order denying rebate of Central Excise duty all the way up to the 1st respondent the Joint Secretary Revision Application New Delhi under Section 35EE Central Excise Act 1944 - Rule 18 of the Central Excise Rules 2002 - period August to September 2009 - HELD THAT - The petitioner has opted to pay Excise duty in terms of the Notification No. 29/2004-C.E. dated 9-7-2004. Therefore it cannot be said that the organic cotton yarn exported by the petitioner was not liable to Excise duty so as to deny the benefit of rebate claim under Rule 18 of the Central Excise Rules 2002 - Notification No. 30/2004 is a conditional notification which allows the manufacturer to clear the goods at nil duty provided no credit is availed on inputs of capital goods under the provisions of the Cenvat Credit Rules 2002. As per sub-clause (1A) to Section 5A of the Central Excise Act 1944 in case of excisable goods which is fully exempt from payment of excise duty the manufacturer cannot be levied Excise duty. However in the facts of the case it is noticed that organic cotton yarn is exempt under Notification No. 30/2004-C.E. dated 9-7-2004 under a conditional notification which the petitioner has not fulfilled - It is the choice of the manufacturer whether to opt for the benefit of one of the notification. It cannot be forced on the petitioner merely because the revenue would stand to gain by denying rebate of central excise duty paid on the exported organic cotton yarn under Rule 18 of the Central Excise Rules 2002. The fact that the petitioner had availed Cenvat credit on the inputs and capital goods and debited the same itself shows that the petitioner was not entitled to the benefit of Notification No. 30/2004-C.E. dated 9-7-2004 - Since the petitioner has utilised Cenvat credit for discharging Excise duty on the final product show that the petitioner was therefore incapable of availing the benefit of Notification No. 30/2004-C.E. dated 9-7-2004. The denial of rebate of Central Excise duty paid by the petitioner on the exported goods under Rule 18 of the Central Excise Rules 2002 cannot be sustained - 2nd respondent is therefore directed to pay the rebate of excise duty paid on the exported organic cotton yarn within a period of 45 days from the date of receipt of copy of this order together with interest under Section 11BB of the Central Excise Act 1944 - petition allowed.

Summary

Issues:
1. Denial of rebate claim under Rule 18 of the Central Excise Rules, 2002.
2. Interpretation of Notification No. 29/2004-C.E. and Notification No. 30/2004-C.E.
3. Discrepancy in availing Cenvat credit and claiming rebate.
4. Legitimacy of export incentives and denial of the same.

Analysis:
1. The petitioner, a manufacturer of 100% Organic Cotton Yarn, exported goods and filed a rebate claim under Rule 18 of the Central Excise Rules, 2002. The claim was denied by the Deputy Commissioner, leading to subsequent rejection by the Assistant Commissioner of Central Excise.
2. The appeal before the Commissioner of Customs and Central Excise (Appeals) resulted in a direction to reconsider the rebate claim under Notification No. 29/2004-C.E. based on a decision in Valli Textiles Case. However, the respondent informed that the Valli Textiles Case was dismissed, and the petitioner's revision petition was remitted to await the order of the CESTAT in the same case.
3. The crux of the issue lies in the interpretation of Notification No. 29/2004-C.E. and Notification No. 30/2004-C.E. The petitioner claimed to have paid excise duty at a concessional rate under Notification No. 29/2004-C.E., while the respondents argued that the goods were exempted under Notification No. 30/2004-C.E., making the rebate claim invalid.
4. The court analyzed the provisions of both notifications, emphasizing that the petitioner's choice to pay excise duty under Notification No. 29/2004-C.E. made them eligible for the rebate claim. The denial of the rebate was deemed unsustainable, as the petitioner had availed Cenvat credit and fulfilled the conditions of Notification No. 29/2004-C.E.
5. Ultimately, the court allowed the writ petition, directing the 2nd respondent to pay the rebate of excise duty on the exported organic cotton yarn to the petitioner within 45 days, along with interest under Section 11BB of the Central Excise Act, 1944. The judgment highlighted the importance of honoring legitimate export incentives and rectifying the wrongful denial of such benefits.