2022 (2) TMI 558 - HC - Central Excise

Rebate u/r 18 of CER - Payment of duty from inadmissible CENVAT credit availed - Advance Authorisation scheme - benefits of duty free imports - petitioner had obtained advance authorisations and imported goods without payment of duty in terms of notification dated 11.09.2009 - HELD THAT - It appears quite undisputable that the petitioner had availed the facility of importing goods under advance licences without payment of duty. In some cases such advance licence were invalidated in order to procure raw material duty free from local manufacturers. Raw materials so procured were utilised for manufacturing the export goods. At that time the petitioner availed the CENVAT credit and later on claimed the rebate under rule 18. As is well known, the rules of 2002 recognise two regimes for equalising excise duty element on raw material used for export of course subject to the conditions specified by the Government of India. Under rule 18 the Central Government may by notification grant rebate on duty paid on excisable goods which are used for production of export goods. Under rule 19 a manufacturer can procure such goods without payment of duty on a condition that same would be used for manufacture of goods which would be exported. Both these rules 18 and 19 of the rules of 2002 concern payment of duty. Under Rule 18 there would be rebate of duty paid. Under rule 19 the duty which is otherwise payable is waived subject to condition of using raw material for manufacturing export goods. The amount was not deposited in cash but by encashing CENVAT credit. Various judgments have made observations to the effect that payment of duty through CENVAT facility is as good as duty paid. However as observed earlier, it is not an instance of duty being paid. It is an instance of depositing certain sum with Government of India which was not payable. We therefore are in agreement with the view of appellate and revisional authorities that by this means the petitioner cannot claim refund of the amount which was offered through CENVAT credit. As is well known unused CENVAT credit can be encashed subject to certain terms and conditions. The petitioner cannot encash the CENVAT credit without following the procedure for making application and inviting a scrutiny whether the terms and conditions under which such unused CENVAT credit can be encashed are satisfied. Petition dismissed.

Summary

Issues:
1. Rebate claim under rule 18 of Central Excise Rules, 2002.
2. Interpretation of duty payment and rebate eligibility.
3. Application of CENVAT credit for duty payment.
4. Dismissal of revision petition for rebate claim.
5. Legal implications of depositing amount with the Government.
6. Refund entitlement for mistakenly paid duty.
7. Authority to retain sum collected without legal basis.

Analysis:
1. The group of petitions involves a common issue regarding a rebate claim under rule 18 of the Central Excise Rules, 2002. The petitioner, engaged in manufacturing automobile tyres, imported raw materials duty-free under advance authorizations. The petitioner made a rebate claim of ?97.74 lacs, which was initially allowed by the Assistant Commissioner but later rejected by the Commissioner of Appeals, leading to a revision petition against the appellate order.

2. The key contention revolves around the interpretation of duty payment and rebate eligibility. The appellate authority held that the petitioner paid duty deliberately to encash CENVAT credit, which was not permissible under the advance license scheme. The revisional authority upheld this decision, emphasizing that the duty paid did not qualify as duty under the Central Excise Rules, 2002, and therefore, the rebate claim was rightly rejected.

3. The case delves into the application of CENVAT credit for duty payment. The petitioner argued that payment through CENVAT credit is equivalent to duty paid, citing precedents supporting this claim. However, the authorities maintained that the duty paid through encashing CENVAT credit, where no duty was actually payable, does not entitle the petitioner to a rebate under rule 18.

4. The revision petition for the rebate claim dismissal was based on the premise that the duty paid did not meet the criteria of duty under the Central Excise Rules, 2002. The revisional authority concluded that the petitioner was not entitled to a rebate under the specific scheme regulations, leading to the rejection of the revision petition.

5. The judgment also addresses the legal implications of depositing an amount with the Government, where the nature of the payment does not qualify as duty under the rules. The court emphasized that the amount paid through encashing CENVAT credit, without an actual duty liability, cannot be considered as duty paid and therefore, does not warrant a rebate claim.

6. Furthermore, the issue of refund entitlement for mistakenly paid duty was discussed, highlighting that any amount paid in excess of duty liability, without the character of duty, should be treated as a voluntary deposit with the Government. The court referred to relevant case law to support the position that such amounts are subject to refund under specific circumstances.

7. Lastly, the judgment clarifies the authority's power to retain a sum collected without a legal basis. It underscores that the Government cannot withhold a sum collected without the authority of law, and in cases where the payment does not align with duty obligations, the petitioner cannot claim a refund or rebate based on such payments.

In conclusion, the court dismissed the petitions, affirming the authorities' decision to reject the rebate claim based on the specific circumstances of duty payment and rebate eligibility under the Central Excise Rules, 2002.