2011 (8) TMI 1063 - CGOVT - Central Excise

Issues Involved:
1. Eligibility of rebate claim under Rule 18 of Central Excise Rules, 2002.
2. Compliance with Notification No. 43/2001-C.E. (N.T.) and its amendments.
3. Interpretation of Rule 19 of Central Excise Rules, 2002.
4. Validity of the penalty imposed under Rule 27 of Central Excise Rules, 2002.
5. Applicability of precedents and previous judgments.

Detailed Analysis:

1. Eligibility of Rebate Claim under Rule 18 of Central Excise Rules, 2002
The assessee exported goods on payment of duty and claimed a rebate under Rule 18 of the Central Excise Rules, 2002. The Assistant Commissioner initially rejected the rebate claim, citing that the value considered for payment of Central Excise duty included freight charges, which are not allowed under Section 4 of the Central Excise Act. However, the Commissioner (Appeals) allowed the rebate claim, stating that the assessee used both duty-paid and non-duty-paid raw materials, thus the restrictions under Notification No. 43/2001-C.E. (N.T.) do not apply when both types of materials are used.

2. Compliance with Notification No. 43/2001-C.E. (N.T.) and its Amendments
The Department contended that the assessee procured raw materials duty-free under Notification No. 43/2001-C.E. (N.T.) and thus should comply with Rule 19(1) of the Central Excise Rules, 2002. The Notification, amended by Notification No. 10/2004-C.E. (N.T.), mandates that goods manufactured using duty-free materials must be exported under bond without payment of duty. The Commissioner (Appeals) allowed the rebate claim, but the Department argued that this contravenes the conditions specified in the amended notification.

3. Interpretation of Rule 19 of Central Excise Rules, 2002
Rule 19 allows for the export of excisable goods without payment of duty and removal of materials without payment of duty for manufacturing export goods. The Department argued that the amendment to Notification No. 43/2001-C.E. (N.T.) clarifies that goods manufactured using duty-free materials must be exported under Rule 19(1) without payment of duty. The Government upheld this interpretation, stating that allowing a rebate under Rule 18 would contravene the conditions of Rule 19 and the notification.

4. Validity of the Penalty Imposed under Rule 27 of Central Excise Rules, 2002
The Assistant Commissioner imposed a penalty of Rs. 5000 under Rule 27 for non-compliance with the provisions of the Central Excise Rules. The Commissioner (Appeals) dropped the penalty, observing no attempt to misuse the concession. However, the Government's decision to restore the original order implies the penalty stands valid as per the original adjudication.

5. Applicability of Precedents and Previous Judgments
The assessee cited previous judgments, including Murli Agro Products and Banswara Syntax Ltd., to support their claim. However, the Government differentiated these cases, noting they pertained to periods before the amendment of Notification No. 43/2001-C.E. (N.T.) by Notification No. 10/2004-C.E. (N.T.). The Government emphasized adherence to the amended notification and relevant statutes, as clarified by the C.B.E. & C. Circular No. 792/25/2004-CX.

Conclusion:
The Government concluded that the rebate claim under Rule 18 is not admissible when goods are manufactured using both duty-free and duty-paid raw materials procured under Notification No. 43/2001-C.E. (N.T.). Such goods must be exported under bond without payment of duty as per Rule 19(1). The impugned order-in-appeal was set aside, and the original order rejecting the rebate claim and imposing the penalty was restored. The revision application succeeded in favor of the Department.

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