2016 (10) TMI 275 - HC - Central Excise

High Court rules in favor of cash refund for excise duty on exported goods, citing Circular No.687

The High Court of Himachal Pradesh dismissed the petitions regarding the mode and manner of refund of excise duty to the assessee(s) engaged in the ... Rebate of excise duty - refund in cash as opposed to re-credit into Cenvat Credit Account - binding nature of Board circulars - Circular No.687/3/2003-CX dated 03-01-2003 - entitlement to rebateRebate of excise duty - refund in cash as opposed to re-credit into Cenvat Credit Account - Circular No.687/3/2003-CX dated 03-01-2003 - entitlement to rebate - binding nature of Board circulars - Whether rebate claims of the assessees were to be allowed in cash or sanctioned by re-credit into their Cenvat Credit Account, and whether the Board's Circular No.687 is binding on the department in that regard. - HELD THAT: - The assessees were admitted to be entitled to rebate after verification of export declarations and assessable value; the sole controversy concerned the mode of refund. The Board's Circular No.687/3/2003-CX clarified that duty paid through actual credit or deemed credit accounts on exported goods must be refunded in cash and that the sanctioning authority has no discretion to refund such duty by way of re-credit. The judgment distinguishes the decision in M/s Nahar Industrial Enterprises Ltd. on its facts, noting that the Circular there was inapplicable because of a different factual matrix (lesser duty paid on domestic product and higher duty on export product). Here, since there was no dispute on nature, value, duty paid character and admissibility of the rebate, Circular No.687 applied and mandated cash refund. The court reaffirmed the settled principle that Board circulars are binding on the department and the Revenue cannot take a stand contrary to such instructions; therefore the assessing authority erred in sanctioning rebate by re-credit when Circular No.687 required cash refund. [Paras 11, 13, 14, 15, 18]Assessees entitled to rebate but refund must be made in cash in terms of Circular No.687; petitions dismissed.Final Conclusion: The petitions are dismissed; rebate claims, while admitted, must be refunded in cash in accordance with Board Circular No.687/3/2003-CX and the department is bound by that instruction. Issues:1. Mode and manner of refund of excise duty - cash or re-credit.Analysis:The judgment by the High Court of Himachal Pradesh involved a dispute regarding the mode and manner of refund of excise duty to the assessee(s) engaged in the manufacture and export of cotton yarn and woven fabrics. The primary issue was whether the rebate claims of the assessee(s) should be allowed in cash or sanctioned by way of re-credit. The Central Board of Excise and Customs had issued Circular No.687 clarifying that duty paid through credit accounts on exported goods must be refunded in cash. The Court examined the contentions of both parties and emphasized the binding nature of circulars issued by the Board, citing various Supreme Court judgments to support this principle.The Court distinguished a previous judgment in M/S Nahar Industrial Enterprises, highlighting that the facts of the present cases were different as there was no dispute regarding the duty paid, quality, quantity, or actual export of goods by the assessee(s). The Court reiterated that once the assessee(s) were held entitled to the rebate, the duty paid on exported goods had to be refunded in cash as per Circular No.687. The judgment emphasized that the circulars issued by the Board were binding on the department, and the department could not take a stand contrary to these circulars.Referring to Commissioner of Customs v. Indian Oil Corporation Ltd., the Court outlined principles stating that the Revenue was bound by operational circulars and could not raise contentions contrary to them. The judgment also cited Union of India v. Arviva Industries India Ltd. to reinforce the importance of adhering to circulars issued by the Board. Ultimately, the Court found no merit in the petitions and dismissed them, directing the parties to bear their costs and disposing of any pending applications.In conclusion, the judgment provided a comprehensive analysis of the legal issues surrounding the mode and manner of refund of excise duty to the assessee(s), emphasizing the binding nature of circulars issued by the Central Board of Excise and Customs and the department's obligation to adhere to them in matters of duty refund on exported goods.