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TMI Blog2025 (4) TMI 1596X X X X Extracts X X X X X X X X Extracts X X X X ..... red its final products within India on payment of excise duty. Apart from this, during this period, the Petitioner also cleared a part of its production for export on payment of excise duty. 5. It is the case of the Petitioner that, at the time of receipt of inputs within the Petitioner' factory premises, it was not possible to know as to whether the inputs would be used in the manufacture of final products cleared within India or exported by the Petitioner. Hence, the Petitioner had taken Cenvat credit of the duty paid on all the eligible inputs at the time of receipt in their factory. However, at the time of clearance of goods for export, the Petitioner reversed the Cenvat credit on inputs used in the finished goods exported. In other words, the Petitioner did not avail Cenvat credit of the duty paid on inputs used in finished goods that were exported. 6. In respect of inputs contained in the goods exported during the period January 2008 to April 2008, the Petitioner claimed drawback at the All Industry Rate on inputs under Customs Central Excise Duties and Service Tax Drawback Rules, 1995. (hereinafter referred to as the "Drawback Rules of 1995"). The Petitioner claimed dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al sanctioned the rebate claims of the Petitioner. The Petitioner has annexed as Exhibit "D" to the Petition a table showing details of the various Orders-in-Original passed by Respondent No. 4. 13. Simultaneously, the Petitioner was issued show cause notices for recovery of amount Rs.10,89,69,730 sanctioned as rebate to the Petitioner in respect of duty paid on the goods exported during the period January 2008 to April 2008. The Petitioner has annexed as Exhibit "F" to the Petition a table containing details of the show cause notices issued to the Petitioner during the period in dispute. 14. In the said show cause notices, the Department alleged that the Petitioner was claiming double benefit i.e., duty drawback at full rate on inputs under the Drawback Rules of 1995 and rebate of duty paid on the goods exported under Rule 18 under Central Excise Rules, 2002. 15. As per the Department, in respect of goods exported, the Petitioner can avail one of the following: (a) Duty Drawback under the Drawback Rules of 1995; or (b) Rebate of duty paid on materials used in the manufacture of goods exported in terms of Rule 18 of Central Excise Rules, 2002; or (c) Rebate of duty paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been satisfied by the Petitioner. Hence, the Petitioner is not entitled for drawback of duty paid on inputs. (b) The Petitioner paid the duty on the final product from the cenvat account and therefore, it shall be construed that the petitioner is availing the cenvat credit facility. Therefore, the declaration "we have not availed cenvat credit facility" required to be provided by the exporter for claiming rebate is not fulfilled by the Petitioner. Hence, the petitioner is not entitled for rebate claim. (c) From the scheme of Rule 18, it is clear that it was never the intention of the Government to allow All Industry rate of drawback on exported goods as also rebate of finished goods duty in respect of goods exported. (d) In case where, the exporters claim the rebate on the final product exported then he could have claimed only drawback of customs duty portion paid on the inputs. (e) The decision in the case of Spentex Industries Ltd. Vs. CCE-2015-TIOL-239-SC-CX is not applicable in the present case. (f) The petitioner is liable to pay interest on the excess amount of rebate claim received by them. 22. Being aggrieved and dissatisfied with the Order-in-Appeal dated 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules of 1995, the Government issued Notification No. 68/2007-Cus (N.T.) dated 16/07/2007 (hereinafter referred to as "Notification No. 68/2007") which prescribed the All Industry Rates of Drawback. Mr. Sridharan submitted that as per the Conditions of the said Notification, there were two types of Drawback Rates for every commodity i.e. (i) Drawback Rate when Cenvat facility has not been availed and (ii) Drawback Rate when Cenvat facility has been availed. Further, Mr. Sridharan submitted that, in case the exporter claims the rate of drawback where Cenvat facility has not been availed, he has to prove that he has actually not availed of the Cenvat facility. Mr. Sridharan submitted that, hence, if a person avails Cenvat, he is not eligible to input side rebate under Rule 18 of the Central Excise Rules 2002, nor is he eligible to drawback at the higher rate under the head of "Drawback when Cenvat facility has not been availed." 27. Further, Mr. Sridharan submitted that benefits or reliefs available to the manufacturer/exporter on the output side, i.e. in relation to the excise duty leviable on the manufacturer-exporter when he manufactures the exported goods in his factory are as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Vs. CCE (2015 (324) ELT 686 (SC)). He submitted that in this case, the assessee/manufacturer used duty paid inputs for manufacture of goods which were finally exported after payment of Central Excise duty. Rebate claims filed in respect of duty paid on inputs and on finished goods were rejected by the Department. This Court, in Commissioner v. Indorama Textiles Ltd. (2006 (200) E.L.T. 3 (Bom.)), was of the view that out of the two excise duties, Rule 18 of the Central Excise Rules, 2002, permits rebate only qua one of them and not on both the duties. Mr. Sridharan submitted that overruling the said judgement, the Hon'ble Supreme Court was of the view that exporters are entitled to both input and output rebate under Rule 18 of the Central Excise Rules 2002 and not just one kind of rebate. 33. Mr. Sridharan submitted that, hence, in light of the same, there was no double benefit availed by the Petitioner and that it is permissible in law to avail both input and output side benefits. Mr. Sridharan further submitted that there is no express or specific bar under Rule 18 of the Central Excise Rules 2002, read with Notification No. 19/2004, to deny the rebate of duty paid on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed only output rebate under Rule 18 of the Central Excise Rules 2002 and had not claimed any input side rebate under Rule 18 of the Central Excise Rules 2002. Mr. Sridharan submitted that the impugned Order had conflated the output rebate under Rule 18 of the Central Excise Rules 2002 claimed by the Petitioner with an input rebate under the said Rule 18. Mr. Sridharan submitted that there is absolutely no bar in law and nor is there a double benefit for the Petitioner to claim drawback on inputs and output rebate in respect of the excise duty paid on the exported goods. Mr. Sridharan further submitted that this finding in the impugned Order runs directly contrary to the law laid down by the Hon'ble Supreme Court in the judgement in Spentex (supra). 35. Mr. Sridharan further submitted that the impugned Order had also held that the Petitioner has tried to obtain undue advantage of export opportunity to encash additional amount lying idle in its Cenvat account. The impugned Order has also held that there was no necessity to pay duty on exported goods. Thus, allowing rebate would amount to double benefit which cannot be held admissible. 36. In the context of this finding, Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taken into account for ensuring that the sanction does not result in undue benefit to the claimant. Mr. Mishra submitted that the rebate of duty paid on excisable goods exported and duty drawback on exported goods are governed by Rule 18 of the Central Excise Rules, 2002 and by the Drawback Rules of 1995. Both the Rules are intended to give relief to the exporters by offsetting the duty paid. Mr. Mishra submitted that when the Petitioner had availed duty drawback of Customs, Central Excise and Service Tax on the exported goods, it was not entitled for rebate under Rule 18 of the Central Excise Rules, 2002, as it would result in double benefit. 42. In respect of the judgement of the Hon'ble Supreme Court in Spentex Industries Ltd. (supra), Mr. Mishra submitted that, in the said judgement, the Hon'ble Supreme Court had held that the benefits of rebate on input on one hand as well as on the finished goods exported on the other hand shall fall within the provisions of Rule 18 of the Central Excise Rules 2002 and the exporters are entitled to both the rebates under the said Rule. Mr. Mishra submitted that, in the present case, the benefits claimed by the Petitioner are covered under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o at Serial Nos.(iii) and (iv) of the previous paragraph are related to the benefits available to the manufacturer/exporter on the input side i.e. in relation to the burden of duties/taxes embedded in the inputs purchased by the manufacturer/exporter for use in the manufacture of exported goods. 48. A double benefit would arise in a case where, for a single incidence, relief is availed more than once i.e. if relief is claimed more than once on the output side or if relief is claimed more than once on the input side. If relief is claimed only once on the output side and once on the input side then the same would not amount to a double benefit to the manufacturer/exporter. 49. As stated earlier, the benefits or reliefs available to the manufacturer/exporter on the input side are (i) rebate of input excise duty paid by the manufacturer/exporter to its vendors on the material purchased by it and used in the manufacture of exported goods in terms of Rule 18 of the Central Excise Rules, 2002 read with Notification No.19/2004; or (ii) drawback i.e. rebate of duty or tax chargeable on any imported material or excisable material or input service used in the manufacture of exported goods u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has not been availed", used in the said Schedule, shall mean that the exporter shall satisfy the following conditions, namely:- (i) The exporter shall declare, and if necessary, establish to the satisfaction of the Assistant Commissioner of Customs or Assistant Commissioner of Central Excise or Deputy Commissioner of Customs or Deputy Commissioner of Central Excise, as the case may be, that no Cenvat facility has been availed for any of the inputs used in the manufacture of the export product, (ii) if the goods are exported under bond or claim for rebate of duty of central excise, a certificate from the Superintendent of Customs or Superintendent of Central Excise in-charge of the factory of production, to the effect that no Cenvat facility has been availed for the goods under export, is produced: Provided that the certificate regarding non-availment of Cenvat facility shall not be required in the case of exports of handloom products or handicrafts (including handicrafts of brass artware) or finished leather and other export products which are unconditionally exempt from the duty of central excise. 52. On a reading of the aforesaid conditions, it can be seen that there are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002-C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming CENVAT credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made before the stage of exemption. Similarly, on payment of duty on the input (yarn) the assessee got the credit which was never utilized. That before utilization, the entry has been reversed which amounts to not taking credit. Hence, in this case, both the conditions are satisfied. Hence item no. 1 of the table to Notification No. 14/2002-C.E. would apply and accordingly the grey fabrics would attract nil rate of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments on the plain and grammatical meaning that needs to be accorded to Rule 18 of the Rules by arguing that the word 'OR' used therein clearly signifies that it is one of the two duties to which the rebate can be granted and not both. For this purpose, reasoning given by the High Court was adopted with the submission that it was in accord with the cardinal principle of literal interpretation and, therefore, the view of the High Court was correct in law. 16. After giving due consideration to the respective submissions, in the light of statutory scheme envisaged for grant of rebate in the Act and Rules, we are constrained to hold that the High Court has not taken correct view, which we feel is a myopic view and ignores the overall scheme pertaining to grant of rebate in respect of goods exported out of India. There are multiple reasons for arriving at this conclusion which are discussed hereinafter. (i) Historical perspective of the statutory scheme: Central Excise Rules under the Act were first framed in the year 1944. Rule 12 thereof provided for rebate of duty and Rule 13 enabled exporter to export the goods without payment of duty. Relevant portion of these Rules was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials used in the manufacture of goods. The exporter could either claim rebate when the duty was paid. Or else, he was free not to pay excise duty at all on both types of goods by executing a bond in the prescribed form and fulfilling the conditions prescribed in this behalf. The grant of rebate, in either of the options, has always been in respect of both kinds of excise duties, i.e. on the final product that is exported as well as on the intermediate product on which excise duty is paid/payable and the same is used as raw material in the manufacture of goods. Under these Rules also, Notification No. 41/94-C.E (N.T.), dated September 12, 1994 and Notification No. 42/94-C.E. (N.T.), dated September 21, 1994 were issued for grant of rebate of duty on export of all excisable goods, except minerals oils and ship stores and rebate on materials used in manufacture of goods exported out of India, respectively. 18. The aforesaid Rules of 1944 were replaced by Central Excise Rules, 2001. In these rules, relevant provisions were Rules 18 and 19. It is not necessary to reproduce these Rules which are same as Rules 18 and 19 of the existing Rules. Under these Rules also similar Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive meaning to Rule 18 would not only be anomalous but would lead to absurdity as well. In fact, it would defeat the very purpose of grant of remission from payment of excise duty in respect of the goods which are exported out of India. It may also lead to invidious discrimination and arbitrary results. Let us visualize another situation. A particular exporter may opt for scheme under Rule 18, i.e., for claim of rebate insofar as, say, excise duty on material used in manufacture of goods is concerned. He would pay that duty and claim rebate. When it comes to payment of duty of export of excisable goods, he exercises the option under Rule 19 and executes a bond which enables him not to pay any duty on excisable goods. In this scenario, the exporter will still be able to get the benefit of not paying any excise duty on both final product as well as intermediate product. (iii) Government's own perception: As mentioned above, Rule 18 is enabling provision which authorises the Central Government to issue a notification for grant of these rebates. Exercising powers under this Rule, the Central Government has issued necessary notifications for rebate in respect of both the duties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y refer to the decision of the House of Lords in R (Westminster City Council) v. National Asylum Support Service - (2002) 1 WLR 2956: (2002) 4 All ER 654 (HL) and its interpretation of the decision in Pepper v. Hart-1993 AC 593: (1992) 3 WLR 1032 (1993) 1 All ER 42 (HL) on the question of "executive estoppel". In the former decision, Lord Steyn stated: (WLR p. 2959, para 6) "6. If exceptionally there is found in the Explanatory Notes a clear assurance by the executive to Parliament about the meaning of a clause, or the circumstances in which a power will or will not be used, that assurance may in principle be admitted against the executive in proceedings in which the executive places a contrary contention before a Court." 36. A similar interpretation was rendered by Lord Hope of Craighead in Wilson v. First County Trust Ltd. (No. 2) - (2004) 1 AC 816: (2003) 3 WLR 568 : (2003) 4 All ER 97 (HL), wherein it was stated: (WLR p. 600, para 113) "113....As I understand it [Pepper v. Hart-1993 AC 593: (1992) 3 WLR 1032: (1993) 1 All ER 42 (HL), it recognised a limited exception to the general rule that resort to Hansard was inadmissible. Its purpose is to prevent the executive seeki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and apply it. I do not suggest for a moment that such interpretation has by any means a controlling effect upon the Courts; such interpretation may, if occasion arises have to be disregarded for cogent and persuasive reasons, and in a clear case of error, a Court would without hesitation refuse to follow such construction." Of course, even without the aid of these two documents which contain a contemporaneous exposition of the Government's intention, we have come to the conclusion that on a plain construction of the notification the proviso permitted the closing out or liquidation of all outstanding transactions by entering into a forward contract in accordance with the rules, bye-laws and regulations of the respondent." 22. In this hue, we may now advert to the reasoning given by the Joint Secretary itself in the order passed in Revision Petition wherein he has discussed the issue in the following perspective: "..... Govt. notes that as a principle and a policy measure, Govt. has accepted that export of goods from India should be relieved of domestic levies (both Customs and Central Excise) in order to promote export of domestic products from India and to make then int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word 'OR' occurring in Rule 18 cannot be given literal interpretation as that leads to various disastrous results pointed out in the preceding discussion and, therefore, this word has to be read as 'and' as that is what was intended by the rule maker in the scheme of things and to carry out the objectives of the Rule 18 and also to bring it at par with Rule 19. 23. We are conscious of the principle that the word 'or' is normally disjunctive and 'and' is normally conjunctive (See Union of India v. Kamlabhai Harji wandas Parekh and Others (1968) 1 SCR 463). However, there may be circumstances where these words are to be read as vice versa to give effect to manifest intention of the Legislature as disclosed from the context. 24. Of course, these two words normally 'or' and 'and' are to be given their literal meaning in unless some other part of same statute or the clear intention of it requires that to be done. However, wherever use of such a word, viz., 'and'/'or' produces unintelligible or absurd results, the Court has power to read the word 'or' as 'and' and vice versa to give effect to the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of tax on profits which might have been intended, and the word "or" would have to be read in the context as meaning "and". Vide Maxwell's Interpretation of Statutes, Tenth Edition, pages 238-239. But that, however, does not affect the present question which is whether the word "derived" indubitably points to the business of the non-resident as the one taxable under S. 42(2) and for the reasons already given the answer must be in the negative." 27. The aforesaid discussion leads us to inevitable conclusion, namely, hat the exporters/appellants are entitled to both the rebates under Rule 18 and not one kind of rebate. The impugned judgments are, accordingly, set aside allowing these appeals. (emphasis supplied) 59. In our view, in light of the decision of the Hon'ble Supreme Court in Spentex Industries Ltd. (supra), there is no double benefit availed by the Petitioner and the Petitioner has correctly availed one benefit on the input side and one benefit on the output side. 60. Further, in our view, there is no express or specific bar under Rule 18 of the Central Excise Rules, 2002, read with Notification No.19/2004, to deny the rebate of duty paid on the exported goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is absolutely no bar in law nor is there a double benefit for the Petitioner to claim drawback on inputs and output rebate of the excise duty paid on the exported goods. Our view is supported by the aforesaid decision of the Hon'ble Supreme Court in the case of Spentex Industries Ltd. (supra) where the Court has held that the assessee is entitled to claim benefits both on the input side and on the output side. 65. Further, the impugned Order has held that the Petitioner has tried to obtain undue advantage of export opportunity to encash additional amount lying idle in its Cenvat account. It has further held that there was no necessity for the Petitioner to pay duty on exported goods and thus, allowing rebate to the Petitioner would amount to granting it double benefit, which is not permissible. In our view, there is no requirement that output rebate under Rule 18 of the Central Excise Rules, 2002 can only be claimed when the output duty on the exported goods is paid in cash. In our view, there would be no reason for a businessman to make payment of the output excise duty in cash just to claim back the same amount as a rebate under Rule 18 of the Central Excise Rules, 2002. In ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the manufacture of the exported goods. The finding in the impugned Order, if carried to its logical end, would result in absurdity. As per the impugned Order, if the Petitioner has ever availed Cenvat credit at any point of time, whether for the particular export to which rebate relates or for any other unrelated transaction, the Petitioner cannot claim that no Cenvat facility has been availed by it, and, hence, is disentitled on account of Condition No.12(ii) of Notification No. 68/2007. In our view, such an interpretation runs totally contrary to the export scheme as well as the law laid down by the Hon'ble Supreme Court in Spentex Industries Ltd. (supra), which clearly states that there should be no input or output embedded tax in an export transaction. In our view, a correct interpretation of Condition 12 is that no Cenvat credit should be availed in relation to the inputs used in the manufacture of the very exported goods for which rebate has been claimed. Since the Petitioner has not availed of Cenvat credit in relation to the inputs used in the manufacture of the very exported goods for payment of duty, it would be entitled to rebate as per the terms of Rule 18 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise Rules, 2002. 71. We respectfully disagree with the said interpretation of the Madras High Court. In our view, the decision of the Hon'ble Supreme Court in Spentex Industries Ltd. (supra) clearly lays down that the assessee is entitled to both input side benefit and output side benefit. In our view, it makes no difference whether the said benefits are claimed under one statute or under different statutes. 72. For all the aforesaid reasons, the following orders are passed:- a) The present Writ Petition is allowed in terms of prayer clause (a) thereto, which reads as under: a) that this Hon'ble Court be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other Writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioner's case and after going into the validity and legality thereof to quash and set aside the impugned Order No. 531-827/2021-CX (WZ)/ASRA/MUMBAI dated 30.11.2021 issued on 3.12.2021 (Exhibit A) passed by Respondent No. 2. b) The Orders-in-Original set out in Exhibit 'D' to the Petition stand reinstated. c) As a consequence, the Show Cause Notices s ..... 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