2016 (10) TMI 269 - HC - Central Excise

Availing SSI exemption and export of duty - differential duty - appellant exported the goods, on which no duty, as such, was payable and he could claim exemption and in case, any duty was paid, the same was refundable in totality - appellant, by mistake, paid the duty even on the exported goods at the same rate the duty for home consumption was leviable - Held that - for technical violation that the appellant, in case, was to pay duty on the export consignment, which was ultimately refunded to him, the same should have been at the normal rate, which was @16% and as the duty was paid @ 9.6%, he had violated the provisions and as a consequence, demand was raised. The fact that the entire transactions were revenue neutral is not in dispute, as whatever duty appellant would have paid on the export consignment, the same was refundable to the appellant. When the appellant paid the duty @ 9.6%, the refund was also granted at the same rate. There was no difference as such. The effect of the transactions being revenue neutral, the action taken by the Department in raising demand of the differential duty, which, in fact, was not leviable at all, was totally uncalled for. - Decided in favour of assessee

Summary

Issues:
1. Whether duty can be paid in terms of SSI exemption notification on goods exported out of the country?
2. Whether the demand is sustainable when the appellant was entitled to a refund had a higher amount of duty been paid?
3. Whether the impugned order is sustainable when the goods were actually exempted from duty?

Analysis:
1. The appellant, a small-scale industrial unit, exported goods outside India and cleared goods for home consumption. The appellant mistakenly paid duty on exported goods at a lower rate of 9.6% instead of the correct rate of 16%. The appellant was entitled to a refund of any duty paid on exports. The Adjudicating Authority issued a show cause notice for the differential amount of duty, which was confirmed along with interest and penalty. The Commissioner (Appeals) set aside the order, but the Tribunal upheld the demand with interest, setting aside the penalty.

2. The appellant argued that as per the Act and Rules, no duty was payable on exported goods, and any duty paid was refundable. The mistake in paying duty at a lower rate occurred due to confusion caused by the Central Excise Manual. The appellant relied on relevant case laws to support their claim of being entitled to a refund. The respondent contended that once duty was chosen to be paid on exports, it should be at the correct rate of 16%, and the demand was justified, stating that the refund application should have been filed within a year.

3. The Court found merit in the appellant's contentions. It was acknowledged that no duty was payable on the exported goods, and any duty paid was refundable. The appellant's actions were revenue neutral, as the duty paid was refunded at the same rate. The Department's demand for the differential duty, which was not leviable, was deemed unnecessary. The Court ruled in favor of the appellant, holding that the demand raised by the Department was unjustified. The substantial questions of law were answered in favor of the appellant, and the appeals were disposed of accordingly.