2019 (11) TMI 557 - HC - Central Excise

International Competitive Bidding - benefit of deemed exports under Notification No. 1(FT)/DEA/2010 dated 5th May, 2010 - only ground raised for rejecting the claim for exemption from terminal excise duty is that the petitioner did not comply with the conditions of the Customs Notification. HELD THAT - Once the petitioner complies with the requirements of the Notification issued in terms of Rule 19 of the Central Excise Rules, 2002, then his entitlement for the benefit of exemption from terminal excise duty has to be recognized in accordance with the provisions of Chapter 8 of the Foreign Trade Policy read with the Central Excise Rules - Ext.P8 communication, to the extent it denies the benefit of exemption from terminal excise duty to the petitioner, for removal of the two transformers, cannot be legally sustained. The petitioner is entitled for exemption from terminal excise duty in respect of the supplies of the two transformers - Petition allowed.

Summary

Issues:

1. Entitlement to benefit of deemed exports under Foreign Trade Policy.
2. Compliance with Central Excise Exemption Notification No. 12/2012-C.E.
3. Interpretation of Rule 19 of the Central Excise Rules, 2002.

Analysis:

Entitlement to Benefit of Deemed Exports:
The petitioner, a Government Company engaged in manufacturing electric transformers, entered into a contract for a project financed by a multilateral agency. The petitioner contended that it was entitled to the benefit of deemed exports under the Foreign Trade Policy, Chapter 8. The 5th respondent confirmed the petitioner's entitlement to deemed export status and exemption from terminal excise duty for supplies made against International Competitive Bidding. The court agreed that the petitioner's entitlement should be acknowledged based on the provisions of the Foreign Trade Policy, specifically clause 8.2(d)(i) and 8.3(c), irrespective of compliance with Central Excise Exemption Notification No. 12/2012-C.E.

Compliance with Central Excise Exemption Notification:
While the respondents argued that the petitioner did not meet the conditions of the Central Excise Exemption Notification No. 12/2012-C.E., the court emphasized that compliance with this notification was not necessary for the petitioner to claim the benefit of exemption from terminal excise duty. The court clarified that the entitlement for such benefits should be determined by the provisions under the Foreign Trade Policy and Rule 19 of the Central Excise Rules, 2002, rather than the specific terms of the mentioned notification.

Interpretation of Rule 19 of the Central Excise Rules, 2002:
The court highlighted Rule 19 of the Central Excise Rules, 2002, which allows for export without payment of duty subject to specified conditions. It noted that once the petitioner complied with the requirements of the notification issued in terms of Rule 19, their entitlement to exemption from terminal excise duty should be recognized in accordance with the provisions of the Foreign Trade Policy. The court, therefore, quashed the communication denying the benefit of exemption and declared the petitioner's entitlement to exemption from terminal excise duty for the supplied transformers.

Conclusion:
The court allowed the writ petition, quashed the impugned communication, and declared the petitioner's entitlement to exemption from terminal excise duty. Additionally, it directed the respondents to return the bank guarantee furnished by the petitioner during the pendency of the petition.