2013 (3) TMI 141 - CGOVT - Central Excise

Government rejects rebate claims due to irregular credit use, goods non-duty paid per Notification No. 56/2002-C.E.

IN RE : FORTUNE INTERMEDIATES (I) PVT. LTD.

The Government rejected the rebate claims in the case due to the confirmed irregular credit utilization by the supplier, rendering the goods non-duty paid ... Misuse of area based exemption and undue availment of rebate claims - held that:- Government therefore is of the opinion that on having been availed the said Notification No. 56/2002-C.E., and/or No. 57/2002-C.E., dated 14-11-2002 (as amended), the legal and statutory bindings of all the provisions/changes of the same would, continue to remain as enforced for the purpose of all the consequential claims. In view of provisions contained in clause ‘g’ of para 2(A) of Notfn. No. 56/2002-C.E., dated 14-11-2002, the goods cleared on payment of duty from irregular or excess credit, the said goods are to be treated as non-duty paid. Therefore, the fundamental requirement of “export of duty paid goods”, for grant of rebate in terms of Rule 18 of Central Excise Rules read with Ntfn. No. 19/2004-C.E. (N.T.), dated 6-9-2004 remains unfulfilled and the said rebate claims are not admissible to the respondents under Rule 18 of Central Excise Rules, 2002. - Decided in favor of revenue. Issues Involved:1. Admissibility of rebate claims.2. Bona fide nature of transactions.3. Interpretation of Notification No. 56/2002-C.E.4. Applicability of Cenvat Credit Rules.5. Legal repercussions of irregular credit utilization.6. Impact of pending Supreme Court decision.Detailed Analysis:1. Admissibility of Rebate Claims:The core issue was whether the rebate claims were inadmissible due to the supplier, M/s. Gitanjali Industries, availing excess/inadmissible credit under Notification No. 56/2002-C.E., dated 14-11-2002. The Commissioner (Appeals) had observed that rebate claims should be decided based on the date they were filed and that there was no requirement to wait for the stipulated period for credit reversal by the supplier. However, the Government noted that the goods cleared using irregular credit should be considered non-duty paid as per clause (g) of the notification, making the rebate claims inadmissible.2. Bona Fide Nature of Transactions:The respondent argued that their transactions with M/s. Gitanjali Industries were bona fide and that they were not involved in any fraud or collusion. They relied on case laws such as Omkar Overseas Ltd. v. UOI, which stated that rebate should not be denied unless there was fraud or collusion. The Government, however, refrained from commenting on the bona fide nature due to the pending Supreme Court decision and lack of complete investigation reports.3. Interpretation of Notification No. 56/2002-C.E.:The notification's clause (g) was pivotal, stating that if irregular or excess credit is used for duty payment, the goods are considered cleared without duty to that extent. The Government emphasized strict adherence to this provision, noting that the confirmed illegal act of M/s. Gitanjali Industries rendered the export goods as non-duty paid.4. Applicability of Cenvat Credit Rules:The respondent cited various case laws under the Cenvat Credit Rules, 2004, arguing that the rebate should be granted despite the supplier's irregular credit. However, the Government noted that the specific provision in Notification No. 56/2002-C.E. differed from the Cenvat Credit Rules, which did not categorically declare goods cleared with irregular credit as non-duty paid.5. Legal Repercussions of Irregular Credit Utilization:The Government highlighted that the confirmed demand against M/s. Gitanjali Industries and the pending appeal in the Supreme Court indicated that the goods were non-duty paid due to the irregular credit. This non-compliance with the notification's requirements meant that the rebate claims could not be sanctioned.6. Impact of Pending Supreme Court Decision:The case was sub-judice before the Supreme Court, and the Government noted that the final decision could impact the rebate claims. However, based on the current legal framework and confirmed irregularities, the Government concluded that the rebate claims were not admissible.Conclusion:The Government set aside the order-in-appeal and restored the order-in-original, rejecting the rebate claims. The revision application succeeded, emphasizing the strict interpretation of Notification No. 56/2002-C.E. and the inadmissibility of rebate claims for goods cleared with irregular credit.