2016 (4) TMI 792 - HC - Central Excise

Revision under Section 35EE of the Central Excise Act - drugs exported by the petitioner in bulk quantities were exempted from duty and the petitioner ought not to have been paid any duty thereon to claim rebate thereof - whether clause (A) or clause (B) under the column of description of excisable goods pertaining to the relevant entry would be applicable in this case? - Held that - If the goods exported by the petitioner were covered by the description under clause (A) of the relevant entry, such goods were absolutely exempted from any duty of excise leviable thereon. As a consequence, there was no occasion for the petitioner to pay any duty for removing the goods from the petitioner s manufacturing facility for the export thereof. The matter may have been considered liberally if there was no possibility of mischief being involved. If it was possible for the petitioner to have made a mistake and claim a refund, the payment of the excise duty at the time of exports in this case could have been regarded as a mistake with a subsequent application for undoing the same. However, as it appears, the payment of the duty was not made in cash, whereas the rebate is payable in cash. The payment was made by using the Cenvat credit built up by the petitioner; which becomes relevant and whether there may have been some mischief afoot, cannot be answered merely on the basis of the adjudication conducted in course of the proceedings under Rule 18 of the said Rules of 2002. It appears that both the appellate and the revisional authorities have taken a view possible on the set of facts. In exercise of the limited superintendence under judicial review at this level, the Court will not supplant its view for that of the administrative authority that is challenged in this jurisdiction. As long as the decision-making exercise is found to be reasonable and fair and the opinion expressed appears to be plausible, the Court will refrain from interfering with the order. In the present case, the view taken by the appellate and the revisional authorities appear to be eminently justified on the basis of notification no. 4/2006 and there is no occasion for the petitioner to feel aggrieved thereby.

Summary

Issues:
Challenge to order under Section 35EE of the Central Excise Act, 1944 regarding duty exemption for exported drugs.

Analysis:
The petitioner, a bulk drug manufacturer exporting drugs like Paclitaxel, Docetaxel, and Irinotecan, challenged an order denying duty rebate based on the drugs' duty exemption status. The dispute arose from whether the drugs fell under clause (A) or (B) of a notification granting duty exemption. The petitioner argued that as a bulk drug manufacturer, clause (B) applied, necessitating duty payment for exports. The authorities contended that the drugs were unconditionally exempted under Lists 3 and 4, insinuating misuse of Cenvat credit for rebate claims.

The court analyzed the notification's language, distinguishing between drugs covered under clause (A) and bulk drugs under clause (B). It emphasized that drugs listed in Lists 3 and 4 were duty-exempt, while bulk drugs under clause (B) required certificates for duty exemption. The court referenced a Gujarat judgment on exporters' rebate entitlement and highlighted Rule 18's two limbs for duty rebate claims.

Moreover, the court discussed the essence of the revisional authority's order, clarifying the distinction between bulk drugs used in formulations and those directly exempted under Lists 3 and 4. It cited Section 5A(1A) of the Act, stating that duty-exempt goods under clause (A) did not require duty payment. The court noted the possibility of mischief in claiming rebates using Cenvat credit, emphasizing the need for fair decision-making by administrative authorities.

Ultimately, the court dismissed the petitioner's challenge, upholding the authorities' view as reasonable based on the notification's provisions. It refrained from interference, deeming the decision justified and fair. The judgment highlighted the importance of complying with duty exemption conditions and refraining from misusing Cenvat credit for rebate claims, ultimately dismissing the petitioner's case without costs.