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2015 (10) TMI 774 - SUPREME COURT

2015 (10) TMI 774 - SUPREME COURT - 2015 (324) E.L.T. 686 (SC), 2016 AIR 2034, 2015 (11) SCR 487, 2016 (1) SCC 780, 2015 (9) JT 288, 2015 (10) SCALE 618 - Denial of rebate claim - Export of manufactured goods - excise duty paid both on the inputs and on the manufactured product - Rule 18 - rebate / refund rejected on the ground that, the assessee is entitled to one of the two claims for rebate, i.e., either rebate of duty paid on exported goods or the duty paid on inputs used in the exported goo .....

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where excise duty may have been paid both on the excisable goods and on material used in the manufacture of those goods and enables the exporter to claim rebate on both the duties. This kind of procedure and format of prescribed Forms, already described above, becomes a clincher insofar as understanding of the Government of Rule 18 of the Rules is concerned. - It is to be borne in mind that it is the Central Government which has framed the Rules as well as issued the notifications. If the C .....

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es unintelligible or absurd results, the Court has power to read the word 'or' as 'and' and vice-versa to give effect to the intention of the Legislature which is otherwise quite clear. - Another principle of interpretation of statutes, namely, principle of contemporanea expositio also becomes applicable which is manifest from the act of the Government in issuing two notifications giving effect to Rule 18. This principle was explained by the Court in Desh Bandhu Gupta and Co. and others v. D .....

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rasad JUDGMENT A. K. Sikri, J. In all these appeals, the basic question of law which arises for consideration is as to whether or not the manufacturer/exporter is entitled to rebate of the excise duty paid both on the inputs and on the manufactured product, when excise duty is paid on a manufactured product and also on the inputs which have gone into manufacturing the product and such manufactured product is exported? 2) We may point out at the outset that, as per the scheme provided by the rele .....

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s, to earn the exemption from payment on excise duty. Other option is to pay the duty on intermediate products and/or final products and thereafter claiming rebate from the Government once the goods are actually exported. When the manufacturer/exporter exercises first option, admittedly no duty is to be paid either on intermediate products or on final products. However, the dispute has arisen when second option is executed. In such a case, the Department has taken the stand that as per the relev .....

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perspective, that has arisen for consideration we may take note of the factual background. For the purpose of convenience, it would be sufficient if we traverse through the facts that emerge from Civil Appeal No. 1978 of 2007. The appellant/assessee, in this appeal, is engaged in the manufacturing of polyester cotton blended yarn and polyester viscose blended yarn and both these products fall under Chapter 55 of the Schedule to the Central Excise Tariff Act, 1985. For manufacture of the aforesa .....

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rebate claims were filed under the provisions of Rule 18 of the Central Excise Rules, 2002 (hereinafter referred to as the 'Rules'). 4) On receipt of the aforesaid rebate claims, the Department issued show cause notice dated January 11, 2005 whereby the assessee was called upon to show cause as to why the rebate claimed by the assessee be not rejected as it was contrary to the provisions of Rule 18 of the Rules read with Section 11B of the Act and the Notification issued thereunder, i.e .....

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was decided by orders dated March 15, 2005 holding that in terms of Rule 18 of the Rules, the assessee is entitled to one of the two claims for rebate, i.e., either rebate of duty paid on exported goods or the duty paid on inputs used in the exported goods, and not on both of them. He, thus, remitted the case back to the Deputy Commissioner to decide the claim of the assessee after granting personal hearing to the assessee and taking its option as to which of the two claims assessee wanted to pr .....

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s as well as inputs used in the exported goods. It was now the turn of the Department to feel dissatisfied with the aforesaid outcome and, therefore, it challenged the aforesaid revisional order by filing the writ petition in the High Court of Bombay, Nagpur Bench. This writ petition has been decided in favour of the Revenue whereby the view taken by the Joint Secretary to the Government of India is reversed and that of Commissioner (Appeals) is upheld holding that out of the two excise duties, .....

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, it is imperative to scan through those provisions. First of all, we take note of the relevant statutory provision in the Act which is Section 11B thereof. That portion of this long provision, which is relevant for us, is extracted below: S. 11B. Claim for refund of duty and interest, if any, paid on such duty.- (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest if any, paid on such duty to th .....

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y him and the incidence of such duty and interest if, any, paid on such duty had not been passed on by him to any other person: 8) Thereafter, Central Excise Rules, 2002 were framed by the Central Government in exercise of powers contained in Section 37 of the Act. As mentioned above, the scheme of the relevant Rules or the subject matter of the issue at hand provides for two options insofar as payment of excise duty on the products meant for exports are concerned. Under Rule 18, an exporter has .....

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such procedure, as may be specified in the notification. Rule 19. Export without payment of duty.- (1) Any excisable goods may be exported without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, as may be approved by the Commissioner. (2) Any material may be removed without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, for use in the manufacture or processing of goods which ar .....

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n and it is to be interpreted whether it postulates grant of one of the two duties or both the duties can be claimed. It is also to be noted at this stage itself that Rule 18 is only an enabling provision which empowers the Central Government to issue a notification for grant of these rebates and prescribes the procedure for claiming such rebate(s). 10) As is clear from the bare reading of Rule 18, the manner of getting the rebate under the said Rule has to be as per the procedure that may be sp .....

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26th June 2001, [G.S.R. 469(E), dated the 26th June, 2001] insofar as it relates to export to the countries other than Nepal and Bhutan, the Central Government hereby directs that there shall be granted rebate of the whole of the duty paid on all excisable goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) exported to any country other than Nepal and Bhutan, subject to the conditions, limitations and procedures specified hereinafter- xxx xxx xxx 12) It als .....

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y that the above-mentioned goods have been manufactured. (a) availing facility/without availing facility of Cenvat credit under Cenvat Credit Rules, 2002. (b) availing facility/without availing facility under Notification No. 21/2004-Central Excise (N.T.), dated the 6th September, 2004 issued under rule 18 of Central Excise Rules, 2002. (c) availing facility/without availing facility under Notification No. 43/2001-Central Excise (N.T.), dated the 26th June, 2001 issued under rule 19 of Central E .....

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e of the powers conferred by rule 18 of the Central Excise Rules, 2002 and in supersession of the Ministry of Finance, Department of Revenue, notification No. 41/2001-Central Excise (N.T.), dated the 26th June, 2001 [G.S.R. 470(E) dated the 26th June 2001], the Central Government hereby, directs that rebate of whole of the duty paid on excisable goods (hereinafter referred to as 'materials') used in the manufacture or processing of export goods shall, on their exportation out of India, t .....

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l as duty paid on the final product for export. This form, thus, enables the manufacturer of the final product exported to claim rebate of both kinds of duties paid. That becomes evident from the following portion of the said form: Form A.R.E. 2 Combined application for removal of goods for export under claim for rebate of duty paid on excisable materials used in the manufacture and packing of such goods and removal of dutiable excisable goods for export under claim for rebate of finished stage .....

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f which are given in Table 1 below) to ____ (country of destination) by air/sea/land/post parcel under claim for rebate of duty paid on excisable materials used in the manufacture and packing of such goods. 3. *The finished goods being exported are not dutiable. Or We intended to claim the rebate of Central Excise Duty paid on clearances of goods for export under notification No. 19/2004-Central Excise (N.T.), dated the 6th September, 2004 issued under Rule 18 of Central Excise Rules, 2002. 15) .....

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uty paid on excisable goods as well as duty paid on material used in the manufacture of goods. Even the notifications which prescribe the procedure contemplate a situation where duty may have been paid not only on the excisable goods but on the material used in the manufacture of goods and provide for claiming the rebate in respect of duty paid on both these goods. It was also argued that the order of the Joint Secretary, Government of India further shows the mind of the Government itself, discl .....

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t 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 .....

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t portion of these Rules was as under: Rule 12. Rebate of duty.- The Central Government may, from time to time, by notification in the Official Gazette, grant rebate of - (a) duty paid on the excisable goods; (b) duty paid on materials used in the manufacture of goods; if such goods are exported outside India or shipped as provision or stores for use on board a ship proceeding to a foreign port, or supplied to a foreign going aircraft to such extent and subject to such safeguards, conditions and .....

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ods regarding which the rebate is granted under sub-rule (i) of rule 12 from a factory of manufacture or warehouse or any other premises as may be approved by the Commissioner of Central Excise; (b) specify materials, removal of which without payment of duty from the place of manufacture or storage for use in the manufacture in bond of export goods may be permitted by Commissioner of Central Excise; (c) Allow removal of excisable material without payment of duty for the manufacture of export goo .....

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he exporter undertakes to abide by entering into a bond in the proper form with such surety or sufficient security, and under such conditions as the Commissioner approves. xxx xxx xxx 17) It is manifest from the reading of the aforesaid Rules that from the very beginning, two alternative methods were provided enabling an exporter of goods to get rid of the burden of paying the excise duty; both on excisable goods as well as on materials used in the manufacture of goods. The exporter could either .....

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s. Under these Rules also, Notification No. 41/94-CE(NT), dated September 12, 1994 and Notification No. 42/94-CE(NT), 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 t .....

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Central Excise Rules, 2001 were superseded by the present Rules, viz. Central Excise Rules, 2002 and the exact provisions thereof have already been quoted. The aforesaid historical narration of the relevant provisions from time to time depict one common theme, namely, to provide rebate of duty paid on the excisable goods as well as the duty paid on material used in the manufacture of goods. (ii) Scheme of the Rules : A cumulative reading of the scheme enshrined in Rules 18 and 19 of the Rules, 2 .....

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ides for execution of a bond which, inter alia, lays down the condition that the goods which are cleared are actually meant for export and he is to furnish the proof that those goods are actually exported. What is important is that when the exporter opts for this method, with the approval of the Commissioner, he is not required to pay duty either on the final product, i.e., on excisable goods or on the material used in the manufacture of those goods. The intention is loud and clear, namely, the .....

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rictive 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 .....

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al 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, i.e., on intermediate product as well as on the final product. Further, and which is more significant, these notifications providing detailed procedure for claiming such rebates contemplate a situation where excise duty may have been paid both on the excisable goods and on material used in the manu .....

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ise duties the government is bound thereby and the rule in-question has to interpreted in accord with this understanding of the rule maker itself. Law in this respect is well settled and, therefore, it is not necessary to burden this judgment by quoting from various decisions. Our purpose would be served by referring to one such decision in the case of R & B Falcon (A) Pty Ltd. v. Commissioner of Income Tax (2008) 12 SCC 466 wherein interpretation given by the Central Board of Direct Taxes ( .....

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construction is not only same as contemporaneous which would come within the purview of the maxim temporania caste pesto, even in certain situation a representation made by an authority like Minister presenting the Bill before Parliament may also be found bound thereby. 34. Rules of executive construction in a situation of this nature may also be applied. Where a representation is made by the maker of legislation at the time of introduction of the Bill or construction thereupon is put by the exe .....

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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), .....

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xecutive estoppel useful reference may be to the article authored by Francis Bennion entitled Executive Estoppel: Pepper v. Hart Revisited , published in Public Law, Spring 2007, p. 1 which throws a new light on the subject-matter. 21) We are also of the opinion that another principle of interpretation of statutes, namely, principle of contemporanea expositio also becomes applicable which is manifest from the act of the Government in issuing two notifications giving effect to Rule 18. This princ .....

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ions were to be closed or liquidated. The principle of contemporanea expositio (interpreting a statute or any other document by reference to the exposition it has received from contemporary authority) can be invoked though the same will not always be decisive of the question of construction. (Maxwell 12th Edn. p. 268). In Crawford on Statutory Construction (1940 Edn.) in para 219 (at pp. 393-395) it has been stated that administrative or executive officers charged with executing a statute) gener .....

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construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute 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 .....

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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 internationally competitive. In order to achieve this objective, two schemes operate, namely, export under bond and export under payment of dut .....

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which are detailed in Notfn. No. 42/2001 - CE(NT) dt. 26.06.2001 and Notification No. 43/2001-CE(NT) dtd. 26.06.2001 further relieves the burden of duty on inputs used to manufacture such goods by obtaining them duty free under bond. Thus, export goods are relieved of the burden of excise duty both on finally exported goods as well the inputs used vide these legislative and machinery provisions. As both schemes are comparable as objective to serve the common goal of relieving the burden of domes .....

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es the detailed procedural provisions for input stage rebate also. Similar provisions and export relief existed for export on payment of duty and under bond in the erstwhile Rule 12 and 13 of Central Excise Rules. The fundamental objective of existing rules and the earlier ones is the same i.e. to neutralise the duty element on the goods exported and hence no other interpretation denying the relief sought appears possible. Circular No. 129/40/95 dt. 29.09.95, para 1.5 of Chapter 8 of Part V of C .....

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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 Harjiwandas 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 .....

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e of Bombay v. R.M.D. Chamarbaugwala (1957) 1 SCR 874 and while doing so, the Court observed as under: ...Considering the nature, scope and effect of the impugned Act, we entertain no doubt whatever that the first category of prize competitions does not include any innocent prize competitions. Such is what we conceive to be the clear intention of the Legislature as expressed in the impugned Act read as a whole and to give effect to this obvious intention as we are bound to do, we have perforce t .....

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