1995 (4) TMI 61 - SC - Central Excise

Whether the appellant who exported the concerned excisable goods as ship s stores for consumption on board vessels bound for any foreign ports has to pay on these goods excise duty as per Rule 13 of the Central Excise Rules or whether the appellant s goods are liable to pay excise duty as per Rule 12 of these Rules ? Held that - It is not possible to agree with the view of the Calcutta High Court that because under Rule 12 the manufacturer earns more profit by selling in local market for home consumption, the exporter under Rule 12 may bear a larger burden of excise duty as compared to the exporter, manufacturer of the same type of goods under Rule 13. Similarly, it is not possible to appreciate the reasoning adopted by the Calcutta High Court in para 28 of the report to the effect that under Rule 13 what is sought to be secured is the proper exportation of goods and not duty to be borne by the exporter. It has to be kept in view that excise duties have nothing to do with the exports as such or with the charging of custom duty on export. They are only concerned with charging and recovery of excise duties which are attached to the manufacture of the goods and their clearance either for home consumption or for export as the case may be. The Calcutta High Court is also in error in taking the view that the words in the like manner be exported as found in Rule 13 deal with the procedure for export, as the procedure is already provided in the same rule by making an empress provision that such an export will be made in accordance with the procedure laid down in Chapter IX of these rules. It must therefore be held that when the rule 13 refers to the export to be made in the like manner, it would necessarily mean subject to the same conditions and requirements as laid down by the preceding Rule 12 which refers to the same topic, namely, export of excisable commodities and excise duty payable on them whether the manufacturer of articles has exported them after payment of duty or before payment of duty would make no difference on these aspects. It must therefore be held that the decision of Calcutta High Court cannot be treated to be laying down correct law. On the contrary as seen earlier the decision of the Delhi High Court in Hindustan Aluminium Corporation Ltd. v. Superintendent, Central Excise 1980 (11) TMI 49 - HIGH COURT OF DELHI AT NEW DELHI has correctly interpreted Rules 12 and 13. The Tribunal was therefore right in following the decision of Delhi High Court and coming to its conclusion in that light. In the result these appeals fail and are dismissed

Issues Involved:
1. Whether the appellant's goods exported as ship's stores for consumption on board vessels bound for any foreign ports are liable to pay excise duty as per Rule 13 or Rule 12 of the Central Excise Rules.
2. Whether the refund claims made by the appellants for the excise duty paid on Light Diesel Oil (LDO) and Furnace Oil supplied as ship's stores for foreign-going ships are valid.
3. Whether the Tribunal's reliance on the Delhi High Court's judgment in Hindustan Aluminium Corporation Ltd. v. Superintendent of Central Excise was correct.
4. Whether Rule 13 is independent of Rule 12 or both rules are complementary to each other.

Detailed Analysis:

1. Liability to Pay Excise Duty under Rule 13 or Rule 12:
The primary issue revolves around the interpretation of Rules 12 and 13 of the Central Excise Rules, 1944. Rule 12 deals with the rebate of duty on goods exported after payment of excise duty, while Rule 13 allows for the export of goods without initial payment of duty, provided a bond is executed. The Court concluded that both rules are complementary and cover the same topic of excise duty on exported goods. Rule 13 does not provide total exemption from duty but allows deferred payment, contingent on proof of export.

2. Validity of Refund Claims:
The appellants claimed a refund for excise duty paid on LDO and Furnace Oil supplied as ship's stores, arguing that no duty was payable under Rule 13. The Assistant Collector and the Tribunal rejected these claims, adjudicating them under Rule 12. The Court upheld this view, stating that Rule 13 does not grant total exemption but defers the duty payment, which must be reconciled with Rule 12's rebate provisions.

3. Tribunal's Reliance on Delhi High Court Judgment:
The Tribunal relied on the Delhi High Court's judgment in Hindustan Aluminium Corporation Ltd. v. Superintendent of Central Excise, which held that Rule 13 does not provide total exemption from excise duty but allows for deferred payment under a bond. The Supreme Court affirmed this reliance, agreeing that Rule 13 should be read in conjunction with Rule 12 to avoid discriminatory and inequitable results.

4. Independence or Complementarity of Rules 12 and 13:
The appellants argued that Rule 13 is independent of Rule 12, but the Court rejected this contention. It held that Rule 13 is not independent but complementary to Rule 12, ensuring that the burden of excise duty on exported goods is consistent, irrespective of whether the duty is paid initially or deferred under a bond. The Court emphasized that interpreting Rule 13 independently would lead to arbitrary and discriminatory outcomes, violating Article 14 of the Constitution.

Conclusion:
The Supreme Court dismissed the appeals, affirming that Rule 13 does not provide total exemption from excise duty but allows deferred payment, which must be reconciled with Rule 12's rebate provisions. The Tribunal's reliance on the Delhi High Court's judgment was deemed correct, and the interpretation that Rules 12 and 13 are complementary was upheld to ensure equitable treatment of excisable goods exported from India.

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