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TMI Blog2014 (1) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of yarn, fabric, etc. The petitioner manufactures fabrics and pays duty thereon and clears the same to approved job workers for the purpose of manufacturing cotton quilt covers. 4. During the period May 1994 to September 1994, the petitioner exported the quilt covers manufactured by the job workers and applied for refund of the excise amount paid on the inputs (i.e. cotton fabric used in the manufacture of quilt covers). 5. On 16.08.1995, the Assistant Commissioner of Central Excise, Division A, Bombay, issued a show cause notice to the petitioner to show cause as to why the rebate amount sanctioned should not be rejected as inadmissible under Section 11B of the Central Excise Salt Act, 1944 read with Rule 191A of the Central Excise Rules,1944. 6. The Assistant Commissioner, Central Excise, in the show cause notice mentioned that from the list of the products appended to notification issued under Rule 191A, the entry at serial No.17 was only "Cotton Quilts" and there was no entry of "Quilt Cover". 7. In reply to the show cause notice, on 25.08.1995, the petitioner submitted a representation contending that it was exporting Quilts/shells and not Quilt covers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Rule 191A read with Notification/Declaration issued by Central Board of Excise and Customs in this regard. There is no other Notification/Declaration of C.B.E.C. under which the rebate claim under Rule 191A could be allowed to Quilt Shell/Cover. Order In view of above, I reject the rebate claims amounting to Rs.218694.64 as listed in the annexure to the show cause notice as inadmissible under earstwhile Rule 191A of Central Excise Rules, 1944 read with Section 11B of Central Excise and Salt Act, 1944." 9. The petitioner assailed the order by filing an appeal before the Commissioner of Central Excise (Appeals). Vide order dated 25.03.1997, the Commissioner (Appeals) rejected the appeal of the petitioner holding that the notification issued under Rule 191A mentioned the name of the final product "Cotton Quilts (Rajais)" but the petitioner trying to cover their product "quit covers" under the said notification traded their product as "cotton quilts". He held that the product exported, to be eligible for the benefit under Rule 191A, should have been the cotton quilts and not quit covers. He rejected the contention of the petitioner that Rule 191B was an analogous Rule a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned counsel for the petitioner further contended that since the entries were similar, so the entry "Quilt Covers (Rajais) in the Schedule to notification under Rule 191A should also include Quilt Covers, as mentioned in the entry to the Schedule to notification issued under Rule 191B. 15. Learned counsel for the petitioner relied on the decision of the Supreme Court in HINDUSTAN PETROLEUM CORPORATION LTD. (SUPRA) to contend that in similar circumstances while interpreting Rules 12 & 13 of the Central Excise Rules, the Supreme Court had harmoniously construed Rules 12 & 13 as both the Rules provided for a facility being given to manufacturer of excisable goods for not paying excise duty when such goods are taken out of bonded warehouses and as common procedure had been provided both for the claim for rebate of duty on export of goods as envisaged by Rule 12 and also under bond executed under Rule 13 in connection with export of excisable goods. Similar parity and harmonious construction should be given to the entries in the respective Schedule to the notification under Rule 191A and Rule 191B. 16. Learned counsel for the petitioner further relied upon the Doctrine of Promissor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor is satisfied that the concession can be allowed to the applicant without danger of abuse, he may grant the application: Provided that no rebate of excise duty on the raw materials used in the manufacture and packing of goods exported out of India shall be allowed under this procedure if a claim for rebate for the said duty has been made under the Customs and Central Excise Duties Export Drawback Rules, 1971). (5) The list of articles proposed to be manufactured along with the manufacturing formulae shall be submitted in triplicate to the Collector and manufacturer shall give a guarantee in the form in Appendix 'B' that he shall not alter the formulae, or use excisable goods of the quality and tariff category different from the one mentioned in the formulae, without the previous permission of the Collector. (6) The original copy of the list and of the formulae countersigned by the Collector, shall be sent to the manufacturer and maintained by him at the factory and any officer of the Central Excise Department shall at any time have access to this copy. The duplicate copy shall be sent to the Assistant Collector of Central Excise for the purpose of granting refunds and the trip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to whom such article has been sent. (8) When the finished goods are ready for export, the manufacturer shall submit to the Assistant Collector of Central Excise an application in triplicate in the proper form showing the quantity of finished goods to be exported, the quantity of excisable goods contained in, and used in packing of such goods, the amount of duty involved and refund claimed and similar particulars. On receipt of the application, the Assistant Collector of Central Excise shall forward it to the proper officer (as notified by him from time to time) who shall verify the particulars with reference to the manufacturing formula and the accounts of production, and if satisfied, the proper officer shall seal the packages with Central Excise seal, to be supplied by the Department, and shall give a certificate on the application that the percentage and quantity of excisable goods contained as shown in the application are according to the approved formula and that the packages have been sealed by him with Central Excise seal. After endorsing the copies of the application, he shall deal with them in the manner completely specified by the Collector. (9) The manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of sub-rules (8), (9) and (10) shall, so far as may be, apply also to exporters who are not manufactures. (18) Notwithstanding anything contained in the foregoing provisions of this rule except sub-rule (9) relating to the time-limit for lodging claim for rebate together with proof of export, the Collector may, if he is satisfied that any article declared under sub-rule (1) has been exported, allow, for reasons to be recorded in writing, the whole or any part of the claim for rebate. Notification under Rule 191A Serial No. Name of article Authority (1) (2) (3) 1. ............... ................. 2. ............... .................. 17. Cotton quilts(Rajais) F.No.1/105/58-CX.III dated 16.8.58." 19. Rule 191B as applied laid down as under:- "Rule 191B. Manufacture in bond of articles from excisable goods on which duty has not been paid - (1) The provisions of section 100A of the Sea Customs Act, 1878 (now sections 65 and 66 of the Customs Act, 1962), modified and set out below shall be applicable to the manufacture in bond of articles from excisable goods on which duty has not been paid. (2) The Central Government may, from time to time by notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of which such breach has been committed shall also be liable to confiscation. Explanation - In this rule, the expression "manufacture" (with its grammatical variations and cognate expressions) includes the process of blending of any goods or making of other alterations therein. NOTIFICATIONS UNDER RULE 191B (1) In exercise of the powers conferred by rule 191B of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.129/58-C.E., dated 27.12.1958, the Central Government hereby permits for the purpose of export outside India, the manufacture in bond of the articles specified in column (2) of the Table hereto annexed, from the excisable goods specified in column (3) thereof, subject to the following conditions, namely:- (1) The manufacture of such articles shall apply for registration in such form as the Collector may prescribe, stating in particular - (a) the description of each of the excisable goods which is to be used in connection with the manufacture in bond; (b) every process of manufacture in bond desired to be carried on; and (c) the description of the premises to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion of operation. (8) Clearance ex-bond shall be allowed free of duty provided the articles are exported within three years of the date of the oldest consignment of excisable goods received by the manufacturer for manufacture of such articles, to any country or territory with a common land frontier with India (except Pakistan, Bangladesh and Burma), or shipped as provisions or stores for use on board a ship to a foreign port, and the packages containing all such articles shall be marked conspicuously with the words, ("FOR EXPORT EX-BOND). (Clearance for export of smoking mixtures may also be permitted under excise supervision, when applied for in Form A.R. 4 suitably adapted for that purpose. The packages covered by A.R.4 application shall similarly be put on board the ship under official supervision. (8A). The Collector may, at his discretion, permit exporters other than manufacturers to export the articles in bond subject to such conditions and requirements as he may consider necessary). (9) Any waste of by-product arising from the process of manufacture in bond unless, it is shown to the satisfaction of the Collector that such waste or by-product has arisen solely from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson, who has been concerned at any stage with the manufacture, sale and transfer of the articles under export to produce books of accounts and other documents of whatever nature relating to the quantity of non-duty paid excisable goods employed in the manufacture of such articles; and (h) require the maintenance of records and registers and making such returns relating to the manufacture in bond as he thinks fit. (12) On receipt of the manufactory unmanufactured tobacco which is to be used in the manufacture of such articles which are eventually meant for export shall be kept in separate rooms under double lock, that is, one by the department and other by the manufacturer. (13) The operation cared shall contain the following additional particulars, namely:- (a) Tariff variety and quantity of unmanufactured indigenous tobacco. (b) Number and date of document on which imported tobacco is received, if any. (c) Number and date of A.R.1 (if available) on which other materials used in the manufacture of said articles are received. (d) In the case of cigarettes the weight of the paper board utilized, and in the case of smoking mixtures the quantity and description of raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articles specified in Column (2) (1) (2) (3) 1. ............... ................. 2. (1)........ .................. (9) Cotton quilts (including quilt covers) 20. Rule 191A deals with the procedure for export of articles under rebate of duty in excisable goods used in their manufacture and packing. Rule 191A lays down a procedure whereby a manufacturer desiring to export any article can claim refund of the duty paid in excisable goods used in the manufacture and packing of the finished goods. The procedure stipulates that the manufacturer has to get a prior approval of the excisable goods that will be utilized for the purposes of the articles proposed to be manufactured alongwith a manufacturing formula and has to give a guarantee that the formulae shall not be altered and shall not use goods of the quality and tariff quantity different from the one mentioned in the formula. On the finished goods being ready, the manufacturer has to once again apply to the Assistant Collector for verification prior to export of the finished products and it is only on verification of the finished products and the compliance of the formula that refund is sanctioned. 21. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge number of entries are completely different. Thus the entries in the notification issued under Rule 191A and B are not synonymous and interchangeable. Two separate notifications have been issued. 25. The distinction, as mentioned above, between the Rules 191A and 191B and the procedure prescribed by the respective notifications and the Schedules there under clearly establishes that both operate in completely different fields and for different purposes. 26. The admitted case of the petitioner is that the petitioner had applied the procedure prescribed under Rule 191A and the notification issued there under. This is further fortified by the fact that consistently the petitioner had sought to bring its finished product in the entry "cotton quilts (rajais) which is an entry to the Schedule under Rule 191A and it is only when the petitioner did not succeed before the Commissioner of Customs that the petitioner took an alternative plea that the entry in Schedule to 191B should be read so as to enlarge the scope of the entry to the Schedule to notification under Rule 191A. This is clearly not permissible. 27. The registration of the petitioner was also under Rule 191A and all permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty is not paid in the first instance but which are covered under the bond duly executed in favour of the revenue by the owner of the goods has also to follow the procedure of Rule 185 found in Chapter IX. All that Rule 13 therefore seeks to do is that it provides for the facility of deferred payment of excise duty and what will be the extent of duty ultimately payable on such goods covered by bond executed under Rule 13 will have to be determined independently of Rule 13 and that is the reason why the liability to pay excise on such goods has to be ascertained before discharging the liability under the bond and for that purpose linkage with Rule 12 become relevant as per the phrase "may in the like manner be exported" as found in Rule 13. If Rules 12 & 13 arc not read in conjunction with each other an anomalous and also discriminatory result will follow. This can be demonstrated by taking a simple example. 16. If an excisable commodity like Sewing Machine is exported from a bonded warehouse under Rule 13 under a bond it may not have to bear excise duty till it is exported. But if the same commodity namely, sewing machine is cleared ex-factory gate on payment of full excise duty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of these rules must be made in such a manner as to avoid inequitable result and to ensure an equitable result. According to us the view taken by the Delhi High Court is quite justified and unexceptionable as it avoids such an inequitable result. On the contrary, the view expressed by Calcutta High Court in the case of Indian Aluminium Company Limited v. Union of India (supra) wherein it is held that Rule 13 is to be applied independently of Rule 12, would obviously result in the aforesaid inequitable consequences which cannot be countenanced, Turning to the Division Bench judgment of the Calcutta High Court, we find that the Calcutta High Court has placed emphasis on the words used in these rules, namely, "rebate on duty of excise paid" as found in Rule 12 as contra distinguished from the words used in Rule 13 to the effect "export under bond of commodities on which duties have not been paid". In our view if the common scheme of both these rules is appreciated in its proper perspective, mere difference of phraseology contained in these rules regarding the time and mode of payment of excise duty would pale into insignificance. It is true as observed by Calcutta High Court that Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will have no real impact on the extent of profit earned by the manufacturer on goods cleared for home consumption or on goods exported. Profit on such goods will be the difference between market price in home or foreign market and the cost price. In home market the margin may be less as excise duty will form part of cost. In foreign market it may be more if goods are exported under Rule 13 without payment of duty. Consequently, it is not possible to agree with the view of the Calcutta High Court that because under Rule 12 the manufacturer earns more profit by selling in local market for home consumption, the exporter under Rule 12 may bear a larger burden of excise duty as compared to the exporter, manufacturer of the same type of goods under Rule 13. Similarly, it is not possible to appreciate the reasoning adopted by the Calcutta High Court in Para 28 of the report to the effect that under Rule 13 what is sought to be secured is the proper exportation of goods and not duty to be borne by the exporter. It has to be kept in view that excise duties have nothing to do with the exports as such or with the charging of custom duty on export. They are only concerned with charging and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing execution of bonds for covering the entire duty payable on such excisable goods. Even apart from all these reasons, it is obvious that the conclusion to which the Calcutta High Court reached that Rule 12 is independent of Rule 13 would result in an anomalous and discriminatory situation as already discussed earlier such an interpretation cannot be countenanced on the touch stone of Article 14 of the Constitution of India. It must there be held that the decision of Calcutta High Court cannot be treated to be laying down correct law. On the contrary as seen earlier the decision of the Delhi High Court in Hindustan Aluminium Corporation Lid. v. Superintendent, Central Excise has correctly interpreted Rules 12 and 13. The Tribunal was therefore right in following the decision of Delhi High Court and coming to its conclusion in that light. In the result these appeals fail and are dismissed. In the facts and circumstances of the case there will be no order as to costs." 29. The Supreme Court was dealing with a case where the same procedure had been prescribed for claim under Rule 12 or Rule 13 however in Rule 13, there was a facility for deferment of payment of excise duty whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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