2011 (9) TMI 901 - CGOVT - Central Excise

Denial of rebate claim - Export of goods without payment of duty - original authority initially sanctioned rebate claims filed by the respondent - Failure to submit copy of BRC (Bank Realization Certificate) w.r.t. exports in question within 160 days from the date of sanction of rebate in terms of Board s Circular No. 354/70/97-CX. dated 13-11-1997 - original authority confirmed the demand of already sanctioned rebate - appellate authority decided the case in the favour of respondent - Held that - foreign buyer went into liquidation and hence could not repatriate foreign exchange to the respondent. However the respondents were insured for their exported goods by Export Credit Guarantee Corporation (ECGC) who settled their claim in Indian Rupees - RBI Master Circular No. 9/2008-09 dated 1-7-2008 provides that the claims settled by ECGC and Private Insurance Companies regulated by IRDA should not be construed as export realization in foreign exchange. Exports are entitled for rebate benefit only if the export realization is received in foreign currency. Such settlement cannot be taken as actual realization of the impugned export sale proceeds for the purpose of grant of rebate. As such action for recovery of sanctioned rebate is legal and proper for non-compliance of provisions contained in Board s Circular No. 354/70/97-CX. dated 13-11-1997. Decided in favour of Revenue.

Summary

Issues:
Recovery of erroneously granted rebate claims due to non-realization of export proceeds in foreign exchange.

Analysis:
The case involved a dispute regarding rebate claims filed by a company engaged in the manufacture of Polyester Film against Central Excise duty paid on export goods. The rebate claims were initially sanctioned but were later challenged by the Audit Branch for post facto verification of export and non-receipt of Bank Realization Certificate (BRC) within the stipulated time frame. Show Cause Notices were issued for recovery of the erroneously granted rebate. The adjudicating authority confirmed the recovery, which was upheld in the Order-in-Appeal.

The revision application was filed by the Commissioner of Central Excise, Meerut-II, arguing that the appellate order failed to consider provisions under the Foreign Exchange Management Act, 1999, and related regulations, emphasizing the requirement for realization of export proceeds in foreign exchange. The applicant contended that settlement in Indian Rupees by Export Credit Guarantee Corporation (ECGC) should not be considered as export realization in foreign exchange, as per RBI guidelines.

The respondent argued that they had followed the terms and conditions of the notification governing rebate claims and that the requirement to realize export proceeds within a specific period was outdated due to changes in export procedures. They also highlighted that the export proceeds were insured through ECGC, and the settlement in Indian Rupees was due to the overseas buyer's liquidation, beyond their control.

The Government, after reviewing the case records, noted that the exporter failed to realize sale proceeds in foreign exchange, despite the insurance settlement in Indian Rupees. The Government emphasized that the purpose of export benefits is to promote foreign exchange earnings, and settlement in Indian Rupees does not absolve the exporter of their obligation to realize proceeds in foreign exchange. The RBI guidelines clarified that claims settled in Indian Rupees should not be considered as export realization in foreign exchange.

The Government concluded that the exporter was not entitled to rebate benefits as the export realization was not received in foreign currency. They upheld the action for recovery of sanctioned rebate, citing non-compliance with the provisions requiring foreign exchange realization. Consequently, the appellate order was set aside, and the revision application was allowed, restoring the impugned order-in-original.