2023 (9) TMI 866 - AT - Central Excise

CENVAT Credit - goods exported on FOC basis where no sale proceeds were received during the period from 13.04.2015 to 23.03.2017 - goods exported free of cost, being sent for promotional purposes - scope of SCN - HELD THAT - The appellant has exported the goods on FOC basis without receipt of foreign currency. Further, there is no condition under Rule 19 of Central Excise Rules, 2002 read with Notification 42/2002-CE (N.T.) dated 26.06.2001 mandating receipt of foreign currency in case of FOC exports by an exporter - at the time of export no objection was raised by the department neither at the time of export nor at the time of submission of document with Central Excise department that receipt of sale proceedings in foreign currency is required for FOC exports. Further, perusal of form A.R.E.1 shows that the export goods were having no commercial value and the value was declared for customs excise purpose only and no sale proceeds were realized against the exports. Further, in the invoices also it is clearly mentioned that the impugned goods are for export, free of cost being sent for promotional purposes as trade sample on no returnable basis. The impugned order relying upon the RBI Master Circular No. 14/2012-13 dated. 02.07.2012 is not justified because there is no allegation regarding the same in the show cause notice which is the foundation upon which the department has to build its case. Therefore, the entire demand is bad in law at the impugned order has travelled beyond the show cause notice which cannot be done in view of the decision of the Supreme Court in the case of CCOMMISSIONER OF C. EX., BANGALORE VERSUS BRINDAVAN BEVERAGES (P) LTD. 2007 (6) TMI 4 - SUPREME COURT . The impugned order is not sustainable in law - Appeal allowed.

Summary

Issues:
The issues involved in the present case include demand of duty, interest, and penalty under Section 11AA and Section 25 of Central Excise Rules, 2002 read with Section 11A(1) of the Central Excise Act for goods exported on FOC basis without receipt of sale proceeds.

Summary:

Demand of Duty:
The appellant, a public limited company engaged in manufacturing two-wheelers, exported goods on FOC basis without receiving sale proceeds, leading to a demand of duty amounting to Rs. 5,12,692/-, interest, and penalty. The Commissioner (Appeals) upheld the demand, which was contested by the appellant.

Appellant's Arguments:
The appellant contended that the impugned order did not properly appreciate the facts and law. They argued that the export was in compliance with Rule 19 of Central Excise Rules, 2002 and Notification No. 42/2002-CE(N.T.). The appellant believed they were eligible to avail Cenvat credit and that there was no willful suppression or wrongdoing. They cited relevant legal precedents to support their case.

Department's Response:
The Department reiterated the findings of the impugned order, stating that the export was in violation of procedures and RBI master circulars. They claimed that the appellant did not provide supporting documents to prove the goods were sent as samples or for testing purposes.

Tribunal's Decision:
After considering submissions and evidence, the Tribunal found that the export was on FOC basis without receipt of foreign currency, as permitted under Rule 19. The Tribunal noted that no objection was raised by the Department at the time of export. The export goods were declared as having no commercial value and were sent for promotional purposes as trade samples. Citing a legal precedent, the Tribunal held that the demand for duty cannot be imposed if goods were exported under bond/LUT without a stipulated period for receipt of export proceeds. The Tribunal also found fault with the impugned order for relying on an RBI circular not mentioned in the show cause notice. Consequently, the Tribunal set aside the impugned order, allowing the appeal of the appellant.

Conclusion:
The Tribunal ruled in favor of the appellant, finding the impugned order unsustainable in law and setting it aside with consequential relief, if any, as per law.