2015 (10) TMI 774 - SC - Central Excise

Denial of rebate claim - Export of manufactured goods - excise duty paid both on the inputs and on the manufactured product - Rule 18 - rebate / refund rejected on the ground that, the assessee is entitled to one of the two claims for rebate, i.e., either rebate of duty paid on exported goods or the duty paid on inputs used in the exported goods, and not on both of them - Held that - Rule 18 is enabling provision which authorises the Central Government to issue a notification for grant of these rebates. Exercising powers under this Rule, the Central Government has issued necessary notifications for rebate in respect of both the duties, i.e., on intermediate product as well as on the final product. Further, and which is more significant, these notifications providing detailed procedure for claiming such rebates contemplate a situation where excise duty may have been paid both on the excisable goods and on material used in the manufacture of those goods and enables the exporter to claim rebate on both the duties. This kind of procedure and format of prescribed Forms, already described above, becomes a clincher insofar as understanding of the Government of Rule 18 of the Rules is concerned. It is to be borne in mind that it is the Central Government which has framed the Rules as well as issued the notifications. If the Central Government itself is of the opinion that the rebate is to be allowed on both the forms of excise duties the government is bound thereby and the rule in-question has to interpreted in accord with this understanding of the rule maker itself. Of course, these two words normally or and and are to be given their literal meaning in unless some other part of same Statute or the clear intention of it requires that to be done. However, wherever use of such a word, viz., and / or produces unintelligible or absurd results, the Court has power to read the word or as and and vice-versa to give effect to the intention of the Legislature which is otherwise quite clear. Another principle of interpretation of statutes, namely, principle of contemporanea expositio also becomes applicable which is manifest from the act of the Government in issuing two notifications giving effect to Rule 18. This principle was explained by the Court in Desh Bandhu Gupta and Co. and others v. Delhi Stock Exchange Association Ltd. 1979 (2) TMI 175 - SUPREME COURT OF INDIA - exporters/appellants are entitled to both the rebates under Rule 18 and not one kind of rebate. The impugned judgments are, accordingly, set aside - Decided in favour of assessee.

Issues Involved:
1. Rebate entitlement on excise duty for both inputs and manufactured products exported.
2. Interpretation of Rule 18 of the Central Excise Rules, 2002.
3. Applicability of notifications issued under Rule 18.
4. Historical perspective and legislative intent behind the rebate scheme.
5. Government's interpretation and procedural guidelines for claiming rebates.
6. Judicial interpretation of the word "or" in Rule 18.

Detailed Analysis:

1. Rebate Entitlement on Excise Duty for Both Inputs and Manufactured Products Exported:
The primary issue addressed is whether a manufacturer/exporter is entitled to a rebate of excise duty paid on both the inputs and the manufactured product when such products are exported. The court examined the scheme under the Central Excise Act, 1944, which offers two options for excise duty exemption on exported goods: (a) exporting without payment of duty by executing a bond, or (b) paying the duty and claiming a rebate after export.

2. Interpretation of Rule 18 of the Central Excise Rules, 2002:
Rule 18 allows for a rebate of duty paid on excisable goods or materials used in manufacturing such goods, subject to conditions specified in notifications. The controversy centered on whether "or" in Rule 18 should be interpreted disjunctively (one of the two rebates) or conjunctively (both rebates). The court concluded that interpreting "or" as disjunctive would defeat the legislative intent and lead to absurd results.

3. Applicability of Notifications Issued Under Rule 18:
The court reviewed Notification No. 19/2004-CE(NT) and Notification No. 21/2004-CE(NT), which outline the procedures for claiming rebates on excisable goods and materials used in their manufacture. These notifications allow for the rebate of both types of duties, supporting the interpretation that Rule 18 should be read conjunctively.

4. Historical Perspective and Legislative Intent Behind the Rebate Scheme:
Historically, the Central Excise Rules have provided two methods for exporters to avoid excise duty: claiming a rebate or exporting under bond without paying duty. The court noted that the legislative intent has consistently been to relieve exporters from the burden of excise duty on both final products and inputs used in manufacturing.

5. Government's Interpretation and Procedural Guidelines for Claiming Rebates:
The court emphasized that the Central Government's interpretation, as reflected in the notifications and procedural forms, supports the view that exporters are entitled to rebates on both excisable goods and materials used in their manufacture. This understanding binds the government and should guide the interpretation of Rule 18.

6. Judicial Interpretation of the Word "or" in Rule 18:
The court held that the word "or" in Rule 18 should be read as "and" to align with the legislative intent and avoid absurd outcomes. This interpretation ensures that exporters can claim rebates on both the excisable goods and the materials used in their manufacture, maintaining consistency with the overall rebate scheme.

Conclusion:
The Supreme Court concluded that exporters are entitled to rebates on both the excise duty paid on the final exported products and the duty paid on the inputs used in manufacturing these products. The judgment set aside the High Court's decision, allowing the appeals and affirming the broader interpretation of Rule 18 to include both types of rebates.

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