2013 (8) TMI 716 - AT - Central Excise

Appellate tribunal rules in favor of appellant on duty liability for export goods.

JAY FORMULATION LTD. Versus COMMISSIONER OF C. EX., AHMEDABAD

The appellate tribunal ruled in favor of the appellant, holding that they were not liable for interest payment on duty for goods cleared for export but ... Merchant exporter - Failure to export the goods - goods procured against CT1 certificate - appellant discharged the duty liability - Interest liability on Duty Liability - Whether the appellant was eligible for refund of amount paid by him as an interest on the duty liability on the goods which were cleared for export but could not be exported by merchant exporters - Held that:- Both the lower authorities had mis-interpreted the provisions of Section 11AB of Central Excise Act, 1944, in a narrow sense inasmuch as they had held that the appellant herein had paid the duty under Section 11A(2B) of Central Excise Act, 1944, was liable to pay the interest also - the appellant was not a person who was chargeable to duty cannot be saddled with the duty liability under any provisions of Central Excise Act, 1944 - Accordingly, the question of payment of interest by the appellant may not arise. COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, VADODARA-II Versus M/s GUJARAT NARMADA FERTILIZERS CO LTD [2012 (4) TMI 309 - GUJARAT HIGH COURT] - The section would be applicable to the person who was chargeable with the duty - as had already been recorded that the appellant was not chargeable to duty’ as the goods were cleared for export under CT-3 for which B-1 bond had been executed by merchant exporters - Both the lower authorities had held against the appellant only on the ground that the appellant’s action of discharge of duty liability on the goods cleared for export but could not be exported, was covered under the provisions of Section 11A(2B) of Central Excise Act, 1944 - Order set aside - Decided in favor of Assesse. Issues:- Eligibility for refund of interest paid on duty liability for goods cleared for export but not exported.Analysis:1. The case involved a dispute regarding the eligibility of the appellant for a refund of the interest paid on the duty liability for goods cleared for export but not exported by the merchant exporters.2. The appellant had cleared the goods for export under CT-3 certificates issued by the merchant exporters. Due to heavy rains in Mumbai in July 2005, the goods could not be exported, leading the appellant to discharge the duty liability on the goods, which was later reimbursed by the merchant exporters.3. The appellant contended that as per the terms of Notification No. 42/2001-C.E. (N.T.), the duty and interest liability in cases of non-export rests with the merchant exporters who had furnished the B-1 bond. The appellant argued that they were not chargeable to duty as the goods were cleared under the bond executed by the merchant exporters.4. The lower authorities rejected the refund claim citing Section 11A(2B) of the Central Excise Act, 1944, which they interpreted to hold the appellant liable for interest payment since they had paid the duty. However, the appellate tribunal disagreed with this interpretation.5. The tribunal found that the appellant, not being the person chargeable to duty, cannot be held liable for interest payment under Section 11AB. The duty liability, if any, would fall on the merchant exporters as per the terms of the B-1 bond executed by them.6. Referring to the judgments of various High Courts, including the Hon'ble High Court of Gujarat, the tribunal emphasized that holding the appellant liable for interest payment in such cases would lead to incongruent situations and defeat the legislative intent behind the relevant provisions.7. Consequently, the tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The decision was pronounced on 21-9-2012, in favor of the appellant.