2017 (3) TMI 653 - HC - Central Excise

Rejection of refund claim - benefit of N/N. 10/2004/C.E. (N.T.) dated 3rd June, 2004 - retrospective effect or prospective effect? - whether the impugned order passed by the adjudicating authority is contrary to the decision of this court in the case of Zenith Spinners v. Union of India 2005 (11) TMI 440 - GUJARAT HIGH COURT ? - Held that - A perusal of the decision of this court in the case of Zenith Spinners v. Union of India clearly shows that the same does not in any manner say that the same would be applicable only to the retrospective applicability of the notification. In the said decision, the court has held that the impugned notification being N/N. 10/2004/C.E. (N.T.) dated 3rd June, 2004 is bad in law for the reasons recorded in the order, namely, that it is not in consonance with the principal provisions, namely, rules 18 and 19 of the rules, and that it is, even otherwise, revenue neutral. The court held that the Central Board of Excise and Customs cannot exercise powers under rule 19 of the rules to negate a notification issued by the Central Government under rule 18 of the rules and has, accordingly, declared the same to be bad in law and quashed and set aside the same. Therefore, it is the entire notification which has been set aside and not merely the retrospective applicability thereof. The decision would be squarely applicable to the facts of the present case, and the distinction sought to be drawn by the adjudicating authority is misconceived. This court having struck down N/N. 10/2004-CE(NT) dated 3rd June, 2004 it was not permissible for the adjudicating authority to place reliance upon the same for the purpose of denying the benefit of rebate to the petitioners. The impugned order being in direct conflict with the law laid down by the jurisdictional High Court, therefore, cannot be sustained. Since the rebate claims have been disallowed solely on the basis of N/N. 10/2004-CE(NT) dated 3rd June, 2004, no useful purpose would be served by remanding the matter to the adjudicating authority and the rebate claims deserve to be allowed. Petition allowed - decided in favor of petitioner.

Issues Involved:
1. Jurisdiction of the adjudicating authority.
2. Compliance with the High Court's decision in Zenith Spinners v. Union of India.
3. Validity of Notification No. 10/2004-CE(NT) dated 3rd June 2004.
4. Entitlement to rebate claims under Rule 18 of the Central Excise Rules, 2004.

Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority:
The petitioners contended that the order passed by the Assistant Commissioner was ex-facie without jurisdiction. The authorities in Gujarat are duty-bound to follow the pronouncements of the Gujarat High Court. The Assistant Commissioner’s attempt to distinguish the High Court’s decision was deemed inappropriate and beyond his jurisdiction. The High Court emphasized that once a decision is settled by a direct ruling of the court, the adjudicating authority cannot disallow rebate claims by distinguishing that ruling.

2. Compliance with the High Court's Decision in Zenith Spinners v. Union of India:
The petitioners highlighted that the adjudicating authority failed to adhere to the Gujarat High Court’s decision in Zenith Spinners, which declared Notification No. 10/2004-CE(NT) ultra vires the Central Excise Rules. The adjudicating authority’s reliance on this notification to reject the rebate claims was contrary to the High Court’s ruling. The High Court reaffirmed that its decision in Zenith Spinners was applicable and binding, and any attempt to distinguish it was unwarranted.

3. Validity of Notification No. 10/2004-CE(NT) dated 3rd June 2004:
The High Court reiterated its previous ruling in Zenith Spinners, where Notification No. 10/2004-CE(NT) was struck down as it was not in consonance with Rules 18 and 19 of the Central Excise Rules. The notification attempted to negate the rebate provisions under Rule 18 by imposing conditions under Rule 19, which was beyond the powers of the Central Board of Excise and Customs (CBEC). The High Court held that the entire notification was invalid, not just its retrospective applicability.

4. Entitlement to Rebate Claims under Rule 18:
The petitioners exported goods on payment of duty and claimed rebates under Rule 18, which allows for a rebate of duty paid on exported goods. The adjudicating authority’s rejection of these claims based on the invalid Notification No. 10/2004-CE(NT) was incorrect. The High Court clarified that Rule 18 provides a complete code for claiming rebates and operates independently of Rule 19, which deals with duty-free exports. The court emphasized that the rebate claims should be allowed as the notification relied upon by the adjudicating authority had been invalidated.

Conclusion:
The High Court quashed the impugned order dated 24.08.2016 by the Assistant Commissioner, Vadodara, and allowed the rebate claims of the petitioners. The court held that the adjudicating authority’s reliance on the invalidated Notification No. 10/2004-CE(NT) was impermissible and contrary to the binding precedent set by the Gujarat High Court. The rebate claims were allowed without remanding the matter, as the sole basis for their rejection was the invalid notification. The petition was allowed with no order as to costs.

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