2016 (12) TMI 920 - AT - Central Excise

Sanctioned rebate claim to be reversed - recovery - export of goods under Rule 18 of Central Excise Rules - Held that - the realization of export proceeds is governed by the Foreign Exchange Management Act, 1999, whereas the rebate of duty on goods which are exported is governed by the provisions of Central Excise Act and Rules thereunder. In the present case, the goods have been exported under bond and the bond stands discharged on production of proof of export. The fact that the export proceeds have not been received is a development subsequent to the export and cannot be the condition for recovery of duty. In particular, it is noted that the goods exported have not been re-imported back into India. There is also no allegation of any deviation of the export goods. Under these circumstances, there is no justification for demand of duty applicable on the goods which stands exported - appeal allowed - decided in favor of appellant.

Issues:
1. Duty demand on exported goods under Rule 18 of Central Excise Rules.
2. Rejection of goods by foreign buyer and subsequent recovery of value.
3. Applicability of duty payment in case of rejected goods.
4. Interpretation of provisions under Central Excise Act and Foreign Exchange Management Act.
5. Justification for the demand of duty on exported goods.

Analysis:
1. The appeal was against an Order-In-Appeal passed by the Commissioner (Appeals), Bhopal, concerning the export of goods under Rule 18 of Central Excise Rules. The appellant, a manufacturer of machine parts, exported goods under a claim for rebate but faced a situation where some goods were rejected by the foreign buyer, leading to a demand for the proportionate rebate taken against the rejected goods. A penalty equivalent to the rebate rejected was also imposed under Section 11AC of the Central Excise Act, 1944.

2. The appellant argued that they had cleared goods for export without duty payment, and after export, the foreign buyer rejected some pieces, issuing a debit note to recover the value of the rejected goods. They contended that the demand for duty was unjustified as it was not a case of diversion of goods cleared for export but a situation of short realization of export proceeds. The appellant sought to set aside the order based on these grounds.

3. During the hearing, the appellant's advocate and the respondent's representative presented their arguments. The contention revolved around the non-receipt of export proceeds due to the rejection of goods by the foreign buyer. The department upheld the duty demand based on this non-receipt. However, it was highlighted that the realization of export proceeds falls under the Foreign Exchange Management Act, while duty rebate on exported goods is governed by the Central Excise Act and Rules.

4. The Tribunal observed that the goods were exported under bond, which was discharged upon proof of export. The non-receipt of export proceeds post-export should not be a basis for duty recovery since it is a subsequent development. Importantly, there was no re-importation of the exported goods into India, and no deviation of the goods was alleged. Therefore, there was no justification for demanding duty on goods that had been successfully exported.

5. Ultimately, the Tribunal allowed the appeal, providing consequential relief as necessary. The judgment emphasized the distinction between export realization governed by the Foreign Exchange Management Act and duty rebate governed by the Central Excise Act, ultimately ruling in favor of the appellant due to the circumstances surrounding the rejected goods and the absence of grounds for duty recovery on the exported items.

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