2014 (5) TMI 171 - HC - Central Excise

Denial of rebate claim - Duty paid mistakenly - export of goods - Held that - when the petitioner is not liable to pay duty in light of the absolute exemption granted under Notification No. 29/2004 as amended by Notification No. 59/2008-C.E. read with the provision of Section 5A(1A) of the Act and when it has not got any other benefit in this case, other than the export promotion benefits granted under the appropriate provision of the Customs Act and Rules (which even otherwise he was entitled to without having made such payment of duty), we are of the firm opinion that all the authorities have committed serious error in denying the rebate claims filed by the petitioner under Section 11B of the Act read with Rule 18 of the Rules. The treatment to the entire issue, according to us, is more technical rather than in substance and that too is based on no rationale at all - Decided in favour of assessee.

Issues Involved:
1. Legality and validity of Circular No. 937/27/2010-CX.
2. Wrongful denial of rebate of duty paid on the export of cotton fabrics and garments.
3. Applicability of Notification No. 29/2004, Notification No. 58/2008, and Notification No. 59/2008.
4. Entitlement to rebate under Rule 18 of the Central Excise Rules, 2002.
5. Compliance with Section 5A(1A) of the Central Excise Act, 1944.
6. Treatment of rebate claims by revenue authorities.

Detailed Analysis:

1. Legality and Validity of Circular No. 937/27/2010-CX:
The petitioner initially challenged the legality and validity of Circular No. 937/27/2010-CX, dated November 26, 2010, issued by the Central Board of Excise and Customs (C.B.E. & C.). However, this challenge was subsequently given up, and the petition was decided without considering this aspect.

2. Wrongful Denial of Rebate of Duty Paid on Export:
The primary issue was the alleged wrongful denial of rebate of duty paid on the export of cotton fabrics and garments. The petitioner argued that they were not liable to pay duty on these goods as they were exempt under Notification No. 29/2004, as amended by Notification No. 58/2008. Despite this, the petitioner paid the duty and claimed a rebate, which was denied by the authorities.

3. Applicability of Notifications:
The petitioner contended that Notification No. 29/2004 exempted textile products from the whole of the duty of excise, and Notification No. 59/2008 exempted these products from duty in excess of 4% ad valorem. The petitioner exported goods on payment of 4% duty under the claim for rebate. The authorities, however, rejected the rebate claims, stating that the petitioner was not required to pay duty due to the absolute exemption provided by the notifications.

4. Entitlement to Rebate under Rule 18:
The petitioner claimed a rebate under Rule 18 of the Central Excise Rules, 2002, as they had paid duty on inputs used in manufacturing the exported goods. The authorities denied the rebate, arguing that the petitioner was not liable to pay duty on the final products due to the exemption notifications.

5. Compliance with Section 5A(1A) of the Central Excise Act, 1944:
The respondent argued that under Section 5A(1A) of the Central Excise Act, 1944, when an exemption is granted absolutely, the manufacturer is not required to pay excise duty on such goods. Therefore, the petitioner was not entitled to take Cenvat credit on inputs used in manufacturing the exempted goods.

6. Treatment of Rebate Claims by Revenue Authorities:
The authorities consistently denied the rebate claims, leading to the petitioner challenging these decisions. The court found that the authorities had committed a serious error in denying the rebate claims. The court noted that the petitioner had not availed any other benefits and was entitled to the rebate under Section 11B of the Act read with Rule 18 of the Rules. The court criticized the treatment of the issue by the authorities as overly technical and lacking rationale.

Conclusion:
The court allowed the petitions, quashing and setting aside the impugned orders. The respondents were directed to grant the petitioner the rebate amounts claimed, along with interest under Section 11BB of the Central Excise Act, 1944, within eight weeks from the date of receipt of the judgment. The rule was made absolute to the extent specified, with no order as to costs.

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