2020 (1) TMI 531 - AT - Central Excise

Rebate of duty - export of goods - allegation that appellant had tried to claim excess duty rebate in respect of export goods, the purchase price of which was highly inflated by the manufacturer - Rule 18 of CER - whether the Appellant has claimed any extra amount of rebate by over valuing their export product while exporting the same? - HELD THAT - The Appellant is merchant exporter, who has obtained the export goods from manufacturer/supplier at payment of duty as per the rate specified in ARE-1 and also in the excise invoice. The Department was paid central excise duty on the price declared by the manufacturer/supplier and the Appellant has taken credit of the same and exported the product under the provisions of Rule 18 of Central Excise Rules. In the circumstances it will not be appropriate to ask the Appellant not to avail the rebate of the duty paid by it under the provisions of Rule 18 of the Central Excise Rules - also, the assessment has been completed by the Departmental officer at the manufacturers/suppliers end which cannot be changed by the jurisdictional officer of the Appellant unit in terms of Rule 3 of Cenvat Credit Rules 2004. Hon ble Supreme Court in case of OMKAR OVERSEAS LTD. VERSUS UNION OF INDIA 2003 (8) TMI 45 - SUPREME COURT has held that if there is any short payment, the benefit of rebate cannot be denied unless and until the same is by reason of fraud, collusion or wilful statement or suppression of fact. It has been not been brought on record in the impugned order that the Appellant has committed any fraud while obtaining the export goods from their supplier on payment of Central Excise duty in terms of Section 4 A of the Act. Rule 18 of the Central Excise Rules has been made to neutralise the duty incidence for export goods and ensure that the product remains expected in competitive foreign market. The purpose of said rule is to return the amount of duty that was paid by the exporter while exporting the goods outside India - the Appellant has not overvalued the exported goods at their end and the impugned order is, therefore, not sustainable. The appellant is entitled for the rebate at the declared price for the export made by it. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the Appellant claimed excess duty rebate by overvaluing their export product.
2. Validity of the valuation method under Section 4A versus Section 4 of the Central Excise Act.
3. Applicability of the extended period of limitation for issuing the Show Cause Notice.
4. Legitimacy of the Appellant's rebate claim under Rule 18 of the Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Excess Duty Rebate Claim:
The primary issue is whether the Appellant claimed any extra amount of rebate by overvaluing their export product. The Department alleged that the Appellant manipulated the price of the exported goods by adopting a higher assessable value in collusion with the supplier/manufacturer. The Commissioner found that the Appellant purchased mouth fresheners from the manufacturer at a highly inflated assessable value compared to the actual transaction value, resulting in an undue rebate claim. The Department argued that the Appellant exported goods at a very high price to get an excess amount of rebate, which is legally impermissible.

2. Valuation Method - Section 4A vs. Section 4:
The Department contended that the manufacturer/supplier should have determined the valuation of the export goods under Section 4 of the Act instead of Section 4A. The Commissioner noted that the manufacturer paid central excise duty based on the higher assessable value under Section 4A, facilitating the Appellant to claim a higher export rebate. The Appellant argued that they procured the goods on payment of excise duty as determined under Section 4A and exported the same, which was verified by the Central Excise and Customs Officers. They relied on the Supreme Court's decision in Om Overseas Limited vs. Union of India, which held that rebate cannot be denied unless there is fraud, collusion, or wilful misstatement.

3. Extended Period of Limitation:
The Appellant argued that the Show Cause Notice issued on 31.01.2012 was beyond the normal period for raising the demand under Section 11A of the Act read with Rule 18 of the Rules. The Department invoked the extended period of limitation, alleging that the Appellant tried to claim excess duty rebate through inflated prices.

4. Legitimacy of Rebate Claim under Rule 18:
The Appellant claimed that they followed the prescribed procedures for exporting the goods and received full payment from the overseas buyer. They argued that the valuation adopted by the manufacturer/supplier is not their concern, and they paid the duty as per the declared value. The Tribunal found that the Department did not provide evidence of a lower price for the export product and that the Appellant's transactions were genuine. The Tribunal relied on the Supreme Court's decisions in Commissioner of Central Excise and Customs vs. MDS Switchgear Limited and Commissioner of Customs vs. Crown International Limited, which supported the Appellant's position that the declared export price cannot be discarded without evidence of fraud or collusion.

Conclusion:
The Tribunal concluded that the Appellant did not overvalue the exported goods and was entitled to the rebate at the declared price. The Department's contention that the valuation under Section 4A is not permitted for exports was not supported by legal provisions. The Tribunal allowed the appeal, stating that the Appellant followed the correct procedures and the impugned order was not sustainable.

Order:
The appeal was allowed, and the Appellant was entitled to the rebate at the declared price for the export made. The order was pronounced in open court on 17 December 2019.