Exporters eligible for refund on duty paid on both input as well as final products: Supreme Court

New Delhi, Apr 12 (KN) An exporter is eligible for refund on duty paid on inputs as well as duty paid on final product cleared from factory on payment of duty for exported final products under Rule 18 of the Excise Rules, the Supreme Court has clarified.

According to Rule 18 of the Excise Rules is, “Where any goods are exported, the Central Government may, by notification, grant rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such goods and the rebate shall be subject to such conditions or limitations, if any, and fulfilment of such procedure, as may be specified in the notification.”

The ruling came while the Supreme Court of India recently dismissed the Review Petition filed by the Department of Revenue against the judgement of the Hon’ble Apex Court in the case of  Spentex Industries Ltd. Vs. Commissioner of Central Excise [2015 (10) TMI 774 – SUPREME COURT] (“the Spentax case”), wherein it was said that the exporters are entitled to both the rebates i.e. amount of duty paid on inputs used in the manufacturing of exported goods as well as the amount of duty paid on exported final goods, under Rule 18 of the Central Excise Rules, 2002 (“the Excise Rules”).

While dismissing the Review Petition of the Revenue, the apex court said, “...We have carefully gone through the review petitions and the connected papers. We find no error, much less apparent, in the judgment impugned. The review petitions are, accordingly, dismissed….”

Elaborating the matter, SS Gupta, an FTP Consultant, said, “The roll of commissioner of drawback is to refund duty paid on inputs only by way of all industry rate of drawback and also by brand rate of drawback.”

Therefore refund on duty paid on input is eligible and Supreme Court is absolutely right in dismissing the appeal of the department as regards to refund on duty paid on inputs, he added.

For refund of duty on final product removed from factory for export, he explained, “The excise department permits you to remove the final product from factory for export on furnishing of bond without payment of duty.  If this is allowed and eligible then refund will also be eligible if duty is paid at the time of removal of goods from factory. 

As per the policy existing today, if the material is removed from factory on payment of duty, exporter is required to get the relevant ARE form signed by the Excise office in evidence of having paid the duty.  The said ARE Form is produced to customs when material is exported and it is signed by the customs in evidence for material having exported from the country.

This excise and customs certified ARE form along with other documents are required to be filed to range office of excise of the factory for issue of cheque for refund and in other cases refund chq can be claimed from maritime commissioner of customs  in whose jurisdiction the refund is to be filed, Gupta explained. 

Spentex Industries Ltd. (“the Appellant”) is engaged in the business of manufacturing of polyester cotton blended yarn and polyester viscose blended yarn falling under Chapter 55 of the Central Excise Tariff Act, 1985 (“the goods”) which were cleared domestically  as well as exported. For manufacturing of the goods, the Appellant used the raw materials, which was an intermediate product and paid Excise duty thereupon.

Thereafter, the Appellant had exported these goods on payment of Excise duty, and filed forty five Rebate claims in terms of Rule 18 of the Excise Rules for an amount of Rs. 1,46,90,995/- (Rs. 75,42,487/- + Rs. 71,48,508/-) in the months of November and December, 2004 respectively. The Rebate claims were filed for both the amount of duty paid on inputs used in the manufacturing of exported goods as well as the amount of duty paid on exported final goods.

The Department rejected the Rebate claims filed by the Appellant holding that  the Rebate claims are contrary to the provisions of Rule 18 of the Excise Rules read with Section 11B of the Central Excise Act, 1944 (“the Excise Act”) and Notification issued there under i.e. Notification No. 19/2004-CE-NT dated September 06, 2004 (“Notification No. 19”). On appeal being filed to the Ld. Commissioner (Appeals), it was held that the Appellant is eligible to either rebate of the duty paid on inputs used in the manufacturing of exported goods or duty paid on exported goods but not eligible to both claims.

The Appellant preferred Revision Application before the Joint Secretary to the Government of India under Section 35EE of the Excise Act, which was allowed and it was learnt that the Appellant was eligible to claim rebate of duty paid on inputs used in exported goods as well as the duty paid on exported goods.

Thereafter, the Department filed a writ petition with Hon’ble High Court of Bombay wherein it was found that the Appellant was eligible to claim only one rebate claim i.e. either rebate of duty paid on exported goods or the duty paid on inputs used in the exported goods but not eligible to both claims.

Further, the Appellant preferred Special Leave Petition before the Hon’ble Apex Court against the Judgment of the Hon’ble High Court of Bombay, which was allowed in favour of the Appellant.

Apex Court made the decision after considering historical perspective of the Statutory Scheme and relying upon the judgments: J. Jayalalitha Vs. Union of India [(1999) 5 SCC 138]; · State of Bombay Vs. R.M.D. Chamarbaugwala [(1957) 1 SCR 874]; Union of India Vs. Kamlabhai Harjiwandas Parekh and others [(1968) 1 SCR 463]; Desh Bandhu Gupta and Co. and others Vs. Delhi Stock Exchange Association Ltd. [(1979) 3 SCR 373]; and R & B Falcon (A) Pvt. Ltd. Vs. Commissioner of Income Tax [(2008) 12 SCC 466]. (KNN Bureau)