Export rebate for duty-paid goods cannot be denied by re-characterising them as exempt under the export incentive scheme.

Rebate of duty on exported goods was held admissible under Rule 18 of the Central Excise Rules, 2002, even though the Revenue treated the goods as exempt and challenged the assessee's classification. The Tribunal found that export rebate cannot be denied by re-characterising the goods in a manner that defeats the export incentive scheme, and noted that Rule 5 of the CENVAT Credit Rules, 2002 addresses input credit on exported final products. Applying the principle that domestic taxes should not be exported, and relying on Bombay High Court authority, the Tribunal held the rebate claims allowable and set aside the orders below.

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Issues: Whether rebate of duty paid on exported goods was admissible notwithstanding the Revenue's stand that the goods were exempted and that the classification adopted by the assessee was incorrect.

Analysis: Rule 18 of the Central Excise Rules, 2002 permits rebate of duty paid on exported goods, and Rule 5 of the CENVAT Credit Rules, 2002 deals with inputs used in final products cleared for export. The Tribunal held that these provisions do not exclude exported goods merely because the Revenue treats them as exempt, and that the benefit of export-related rebate cannot be denied on the basis of an opportunistic re-characterisation of the goods. The principle that domestic taxes are not to be exported was applied, and the Tribunal relied on the cited Bombay High Court decisions to reject the Revenue's approach.

Conclusion: The rebate claims were allowable and the orders below were unsustainable; the appeals were to be allowed in favour of the assessee.

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