2015 (1) TMI 527 - HC - Central Excise

Court upholds denial of rebate claim under Rule 18 of Central Excise Rules, 2002.

MESSRS PLASTENE INDIA LTD & ANOTHERS Versus UNION OF INDIA & OTHERS

The court upheld the Revisional Authority's decision to deny the rebate claim under Rule 18 of the Central Excise Rules, 2002, finding that the ... Claim of rebate on export of goods while availing the benefit of area based exemption (Kutch area) Notification No.39/2001CE( NT) dated 31.07.2001 - Rule 18 of the Central Excise Rules, 2002 - Held that:- for availing the exemption benefit under Notification No.39/2001, the industrial unit ought to have been set up on or before the cutoff date i.e. 31.12.2005 and the exemption shall be applied for a period not exceeding 5 years from the date of commencement of commercial production by such unit. - petitioners established their units in the Kutch area and installed the plant and machinery prior to 31.12.2005 (cutoff date) and also started manufacturing the goods and exported the goods after availing the benefit of exemption Notification No.39/2001CE. However, the petitioners installed additional machineries after 31.12.2005 and claimed the rebate with respect to the export of goods which are manufactured on the additional machinery installed after 31.12.2005 by submitting that with respect to the exports of such goods which are manufactured on the additional machinery installed after 31.12.2005, they will not claim the benefit under the exemption Notification No.39/2001CE and they will claim the rebate of the duty on export of goods. The aforesaid is rightly rejected by the Revisional Authority. The petitioners cannot be permitted to claim the rebate under Rule 18 of the Rules on the exported goods manufactured on additional machinery installed after 31.12.2005, may be on maintaining the separate accounts. Under the circumstances, as such the Revisional Authority has rightly denied the rebate to the petitioners on the exported goods on additional machinery installed after 31.12.2005, relying upon clause 2(h) of the notification under Rule 18 of the Rules. - admittedly, there is no new product by installing fresh plant, machinery or capital goods after the cutoff date i.e. 31.12.2005. The same product is manufactured / continued to be manufactured however, some additional machineries have been installed. Under the circumstances, the petitioners shall not be entitled to the benefit of exemption under Notification No.39/2001CE. The further distinction is sought to be canvassed by the petitioners i.e. the goods manufactured on the machinery installed prior to 31.12.2005 and the same product manufactured on the additional machinery installed after 31.12.2005, for the purpose of claiming the exemption under Notification No.39/2001CE is not permissible. Once the petitioners’ unit started and availed the benefit of exemption under Notification No.39/2001CE, considering clause 2(h) of the notification issued under Rule 18 of the Rules, the petitioners shall not be entitled to rebate of the duty on export of the goods manufactured. Under the circumstances, the petitioners are rightly denied the rebate. The impugned order passed by the Revisional Authority does not suffer from any illegality. - Decided against Assessee. Issues Involved:1. Eligibility for rebate claim under Rule 18 of the Central Excise Rules, 2002.2. Interpretation and application of Notification No.39/2001CE dated 31.07.2001.3. Impact of SEZ Act on rebate claims.4. Interpretation of Circular No.110/21/2006CX. 3 dated 10.07.2008.5. Distinction between goods manufactured before and after the cutoff date (31.12.2005).Detailed Analysis:1. Eligibility for Rebate Claim under Rule 18 of the Central Excise Rules, 2002:The petitioners sought a writ to quash the impugned order by the Revisional Authority, which denied the rebate claim under Rule 18 of the Central Excise Rules, 2002. The petitioners argued they were eligible for the rebate on goods exported to SEZ units, claiming that the SEZ Act deems such supplies as exports entitled to benefits similar to those for goods exported out of India.2. Interpretation and Application of Notification No.39/2001CE dated 31.07.2001:The petitioners established their unit in Kutch and availed the area-based exemption under Notification No.39/2001CE. They argued that goods manufactured using machinery installed after 31.12.2005 should be eligible for rebate, as they maintained separate accounts for goods manufactured before and after the cutoff date. However, the Revisional Authority rejected this claim, stating that once the unit availed the exemption, it could not claim rebate under Rule 18 for goods manufactured on additional machinery installed after the cutoff date.3. Impact of SEZ Act on Rebate Claims:The petitioners contended that the SEZ Act's provisions should override other laws, including the Central Excise Act, allowing them to claim rebate on goods supplied to SEZ units. They cited Section 26(c) of the SEZ Act, which exempts SEZ units from excise duty on goods brought from the Domestic Tariff Area (DTA). However, the court found that the petitioners' reliance on the SEZ Act was misplaced in the context of claiming rebate under Rule 18.4. Interpretation of Circular No.110/21/2006CX. 3 dated 10.07.2008:The petitioners argued that Circular No.110/21/2006CX. 3 clarified that goods manufactured using new machinery installed after the cutoff date should be eligible for rebate if separate accounts were maintained. However, the court noted that the circular applied to new products introduced with new machinery, not to the same products manufactured with additional machinery. Thus, the circular did not support the petitioners' claim for rebate.5. Distinction between Goods Manufactured Before and After the Cutoff Date (31.12.2005):The court examined whether goods manufactured on machinery installed after the cutoff date could be treated differently for rebate purposes. The court concluded that once the unit availed the exemption under Notification No.39/2001CE, it could not claim rebate on goods manufactured using additional machinery installed after the cutoff date, even if separate accounts were maintained. The court emphasized that the exemption applied uniformly to the unit, not to specific machinery installations.Conclusion:The court upheld the Revisional Authority's decision to deny the rebate claim, finding that the petitioners were not entitled to rebate under Rule 18 of the Central Excise Rules, 2002, as they had availed the exemption under Notification No.39/2001CE. The court dismissed the petition, stating that the Revisional Authority's order was consistent with the relevant notifications and did not suffer from any illegality.