Export of excisable goods under Rule 18 of the Central Excise Rules, 2002 by using the materials imported under advance licence - Availing of rebate of duty paid on the said goods - Customs - F. No. 605/65/2006-DBK

Instructions F. No. 605/65/2006-DBK Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs New Delhi, dated 22-1-2007 Subject : Export of excisable goods under Rule 18 of the Central Excise Rules, 2002 by using the materials imported under advance licence - Availing of rebate of duty paid on the said goods - Regarding. I am directed to refer to your letter No. V(30)/10/CE/CC/ Tech./Kol/06/9746, dated 26-9-2006 on the above subject and to say that the matter has been examined by the Board. 2. To understand the issue in proper perspective, it will be necessary to know the relevant CE Rules and the notifications governing imports/exports under Advance License Scheme as they have evolved over the years. 2.1 The erstwhile Rule 12 of CE Rules, 1944 dealt with grant of rebate (a) of duty paid on the excisable goods; and (b) duty paid on materials used in the manufacture of export goods. Rule 13 dealt with (a) export of excisable goods in bond without payment of duty; and (b) removal of excisable materials without payment of duty for the manufacture of export goods. These rules have now been replaced by Rule 18 and Rule 19 of the new Central Excise Rules, 2002 . The erstwhile Rule 12 has now been introduced as Rule 18 and the provisions are similar except that the sub-clauses (a) and (b) of Rule 12(1) have now been combined in the new Rule 18 . In so far as new Rule 19 is concerned, the contents of the earlier rule 13 have more or less been retained in this rule. 2.2 Under the notifications governing Advance License Scheme, right from the beginning there was a provision [in the notifications] whereby, the licence holder could not avail of rebate of duty paid on materials used in the manufacture of export goods. However, there was no bar for making exports on payment of central excise duty (under claim for rebate) on the finished goods. This is because, at the time of clearance of the export goods from the factory premises the manufacturer may choose to pay the terminal excise duty on such goods instead of exporting the goods under bond without payment of duty. Therefore, in cases where such terminal excise duty was suffered on the resultant export goods, in terms of Rule 12(1)(a) of the earlier CE Rules, 1944, the advance licence holder was permitted to avail rebate of such terminal excise duty as well as the benefit of Advance Licence Scheme. Condition (v) of Notification 203/92-Cus., dated 19-5-1992 refers in this regard. 2.3 In 2002, the CE Rules, 1944 were superseded by CE Rules, 2002 and the provisions contained in Rule 12(1) of CE Rules, 1944 were re-corporated in Rule 18 of CE Rules, 2002 . However, at the time of issue of notification No. 43/2002-Cus. an inadvertent error occurred in condition (v) of the said notification inasmuch as, it debarred the benefit of the Advance Licence Scheme if the licence holder had availed of any rebate of duty under Rule 18 of the CE Rules 2002 [under which an exporter could avail of the rebate of excise duty paid on the materials used in the manufacture of export products as also the terminal excise duty paid on the export products]. Since right from the beginning the objective of condition (v) was to debar the simultaneous availment of rebate of duty paid on the materials and the benefit of Advance Licence Scheme only (there was no bar in the said condition from availing of rebate of terminal excise duty paid on the export goods and the benefit of Advance License Scheme), in order to set right the anomaly, a Corrigendum was issued vide PN 9/2002, dated 29-11-2002 to provide that an exporter operating under Advance Licence Scheme could also avail of the rebate on terminal excise duty paid on the resultant export product under Rule 18. This was a conscious decision because, as explained above, the earlier notifications issued under Advance Licence Scheme (e.g. Notification No. 203/92-Cus., dated 19-5-92 etc.) had contained the same provision all along. 3. After issue of this corrigendum the DGCEI sought a clarification about its validity on the ground that in the subsequent Notification No. 93/2004-Cus. issued under Advance Licence Scheme, the advance licence holder was debarred from availing the rebate facility under Rule 18 under which, as mentioned above, an exporter could avail of the rebate of excise duty paid on the materials used in the manufacture of export products as also the terminal excise duty paid on the export products. Subsequently, after examination of the issue, a corrigendum was issued to Notification 93/2004-Cus. vide Public Notice 2/2005, dated 17-5-2005 in order to restore the status quo ante i.e. the licence holder was debarred from availing of rebate of duty paid on materials used in the manufacture of export goods. The corrigendum was issued to set right an inadvertent error which occurred for the second time at the time of issuance of Notification No. 93/2004-Cus . pursuant to coming into force of the new Foreign Trade Policy w.e.f. 1-9-2004. The inadvertent error crept in because of a minor variation in the language of Rule 12(1) of CE Rules, 1944 (which had two parts - one dealt with rebate of duty paid on the excisable goods and the other dealt with rebate of duty paid on materials used in the manufacture of export goods) and the new Rule 18 under which both the facilities are available without differentiation being shown part wise. 4. Thus, the position as of now is that in case of exports under Advance Licence Scheme the exporter cannot avail of rebate of duty paid on the input materials but he can avail of the rebate of the terminal excise duty paid on the export goods. This was the position prevailing throughout prior coming into force of the new Central Excise Rules. In fact, insofar as availing of rebate of duty paid on inputs is concerned, a comparison between condition (5) of Notification No. 51/2000-Cus., dated 27-4-2000 (notification governing advance licence prior to coming into force of new CE Rules, 2002 ) and condition (5) of the present advance licence Notification No. 93/2004-Cus., dated 10-9-2004 read with corrigendum issued on 17-5-2005 would show that there is no difference whatsoever. 5. As regards the apprehension raised about export of the finished goods, manufactured from duty free imported raw materials and duty paid indigenous materials, on payment of duty from accumulated CENVAT credit under claim of rebate of excise duty paid on such exported goods, it may be stated that under Central Excise Law the duty can be paid through cash or through CENVAT credit. After all CENVAT credit is nothing but duty which has been paid by the manufacturer to the Exchequer. If terminal excise duty is paid utilising the CENVAT credit and the goods are exported, under Central Excise Law the exporter is entitled to refund/rebate. 6. You may issue necessary instructions to officers under your Charge to finalise the pending cases, if any, in the light of above clarification