REBATE OF DUTY ON BOTH INPUTS AND FINAL PRODUCT IS NOT ADMISSIBLE

[Mr. M. GOVINDARAJAN]

Rule 18 of Central Excise Rules, 2002 ('Rules' for short) deals with the rebate of duty. It provides that 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 of processing of such goods and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification. The term 'Export' includes goods shipped as provision or stores for use on board a ship proceeding to a foreign port or supplied to a foreign going aircraft.

A plain reading of the aforesaid Rule indicates that the Central Government has power to grant rebate and that too by Notification in respect of duty paid on excisable goods which are exported 'or' on duty paid on materials used in the manufacture or processing of such goods. By virtue of the said Rule the Central Government issued Notification No. 21/2004-CE (N.T) dated 06.09.2004 for rebate on inputs and Notification No.19/2004-CE (N.T.), dated 06.09.2004 for rebate on finished excisable goods.

The rebate as per the said is eligible only for one category either for excisable goods for export or duty paid on materials used in the manufacture of processing of such goods and could not be availed for both of the categories. The same has been confirmed by the High Courts.

In 'Commissioner of Central Excise, Nagpur V. Inforama Textiles Limited' - 2006 (200) ELT 3 the Bombay High Court held that in principle the Government had accepted that goods, which are exported from India, should be relieved of domestic levies in order to promote export of domestic products from India and to make them internally competitive and, therefore, the intention of the Legislature was to grant some concession on duty paid on excisable goods or inputs and in order to achieve this objective, Rule 18 was framed whereby rebate of duty paid either on excisable goods, which are exported, or in inputs is provided. The Court clearly read the provisions of Rule 18 as prescribing an 'either-or' situation meaning thereby that the word 'or' appearing in Rule 18 should be read as it is and should not be read as 'and'. The Court further observed that if the word 'or' is read as 'and' it would be wholly inconsistent with the intention of the legislature as well as object of Rule 18 of the said rules. The Court further held that the intention of the Legislature was not to grant rebate of duty paid on exported goods as well as on inputs used in such goods simultaneously, which is evident from the language used in Rule 18 of the said Rules itself.

In 'Grasim Industries Limited V. Union of India' - 2010 -TMI - 76123 - HIGH COURT OF DELHI the petitioner manufactures man made fabrics as well as polyester/viscose blended yarn falling under Chapter 55 of the Schedule to the Central Excise Tariff Act, 1985. The petitioner enjoys duty paid inputs as well as other inputs for the purpose of manufacturing the said final products. The duty paid for inputs include polyester staple and viscose staple fibre as well as other packing materials and consumables. The products manufactured by the petitioner are cleared for home consumption as well as exports. The petitioner is of the plea that the Central Government had issued Notifications for exemption for both the excise duty paid for the goods exported and the excise duty paid on materials for inputs. Further the petitioner having complied with the conditions stipulated in the notifications, the petitioner was entitled to grant of rebate under both the Notifications. But the Revenue has taken the view that the grant of rebate of duty paid could be availed either on the duty paid on excisable goods or on the duty paid on the materials used in the manufacture or processing of such goods and not for both. The contention of the Department is that the notifications are only machinery provisions implementing the principles laid down in Rule 18 of the said Rules. Thus even where a case falls for grant of rebate under both the notifications, the same cannot be granted because the rule itself prescribes that the grant of rebate shall be made on duty paid on excisable goods 'or' on duty paid on materials used in the manufacturing or processing of such goods.

The Assistant Commissioner passed orders rejecting the rebate claims in respect of raw materials as well as final products. The Commissioner of Central Excise (Appeals), on the appeal filed by the petitioner, gave part relief to the petitioners in the sense that he allowed the rebate claim in respect of the duty paid on final products but rejected the claim in respect of the duty paid on raw materials. The petitioner further approached the Government of India under Section 35EE by way of revision. The Joint Secretary, Government of India disallowed the claim allowed the Commissioner of Central Excise (Appeals). Therefore the petitioner approached the High Court by writ petition.

The Government of India in its revisional order had placed reliance on the decision of the decision of Bombay High Court in 'Commissioner of Central Excise, Nagpur V. Inforama Textiles Limited' (supra). The High Court held that the Government of India, in exercising its revisional power under Sec. 35EE, has correctly followed the decision of Bombay High Court in coming to the view that the petitioner was not entitled to rebate of duty paid on raw materials after it had already been granted rebate in respect of duty paid on finished products. There is no fault in the impugned order. The High Court dismissed the petition.