2018 (10) TMI 26 - HC - Central Excise

Rebate of duty - export/deemed export of goods - goods were removed, cleared and sold for the units located in SEZ which are deemed to be exports under AREs 1 Rules - validity of SCN. Held that - A bare perusal of the impugned order shows the utter confusion of the Respondent-Revisional authority when he seeks to quote Rule 19 in para-8 of the order, he actually quotes Rule 18 but in para-8.1, when he seeks to quote Rule 18, he actually quotes R.19. This cannot be taken as a simple typographical error by a senior officer of the Department dealing with the matter in the third round of litigation by the assessee. This on the other hand, reflects the lack of understanding on the part of the said authority in applying both the Rules on a harmonious reading of the said Rules. When the fact of export by way of supplying to SEZ unit is not in dispute and the fact of payment of duty by debiting the CENVAT account is also not in dispute, there is no question of denying one of the reliefs viz. the Rebate of duty u/Rule 18 or Export without payment of duty u/Rule 19, which ought to have been allowed or the rebate of cash refund when once the duty has been paid by debit to CENVAT account u/R.18 ought to have been given. Both the reliefs could not have been simultaneously denied to the assessee on a combined and harmonious reading of Rules 18 and 19. The present case is a glaring example of such misuse of power by the authorities below. The impugned order therefore deserves to be set aside by imposing exemplary personal costs on all the three authorities below namely, the Asst. Commissioner of Central Excise (E-1) Division, Bangalore, the Commissioner of Central Excise (Appeals-1), Bangalore, and the Joint Secretary to the Government of India. The petition is allowed with exemplary costs quantified at ₹ 50,000/-.

Summary

Issues:
1. Denial of rebate of duty paid on export of goods to SEZ under Rule 19.
2. Confusion in applying Rules 18 and 19 by the Revisional Authority.
3. Dispute over denial of relief under Rule 18 or Rule 19.
4. Allegations of misuse of power and unfair interpretation of rules by tax authorities.

Analysis:

Issue 1: Denial of rebate of duty paid on export of goods to SEZ under Rule 19:
The petitioner, a company, challenged the order denying rebate of duty paid on exported goods to SEZ by the Central Excise Department. The authorities held that the petitioner did not comply with the conditions of Notification No.19/2004-CE(NT) for claiming rebate under Rule 18. The Government emphasized that the exporter opted to clear goods under bond (Rule 19) and could not subsequently claim benefits under Rule 18. The Court noted the importance of compliance with statutory requirements and upheld the denial of rebate claims.

Issue 2: Confusion in applying Rules 18 and 19 by the Revisional Authority:
The Revisional Authority's order displayed confusion in quoting Rules 18 and 19 interchangeably. The Court criticized this error as a lack of understanding and failure to harmoniously apply both rules. The confusion led to the incorrect denial of relief to the petitioner, highlighting the authority's flawed interpretation of the rules.

Issue 3: Dispute over denial of relief under Rule 18 or Rule 19:
The Court acknowledged that the petitioner's export to SEZ and duty payment were undisputed. It criticized the authorities for simultaneously denying relief under both Rule 18 and Rule 19. The Court emphasized that the petitioner was entitled to either rebate of duty under Rule 18 or export without payment of duty under Rule 19. The denial of both reliefs was deemed unjust and incorrect.

Issue 4: Allegations of misuse of power and unfair interpretation of rules by tax authorities:
The Court condemned the casual approach of the tax authorities in denying rightful relief to the petitioner. It highlighted the authorities' duty to act fairly and in accordance with the law. The Court deemed the authorities' actions as a misuse of power and ordered exemplary personal costs on all three authorities involved. The impugned order was set aside, and the authorities were directed to re-credit a specific amount in the Assessee's GST Electronic Credit Ledger.

In conclusion, the Court allowed the writ petition, imposed exemplary costs on the authorities, and directed re-credit of the specified amount to the Assessee. The judgment emphasized the importance of proper application and interpretation of rules by tax authorities to ensure justice and fairness in legal proceedings.