2019 (8) TMI 528 - HC - Central Excise

Manufacturer entitled to rebate on excise duty for re-exported goods despite non-Indian production

The court held that the petitioner, an international manufacturer, was eligible for a rebate on excise duty for re-exported LCD panels and parts, despite ... Rebate of duty on export under Rule 18 of the Central Excise Rules, 2002 - Scope of notification No.19/2004 dated 6.9.2004 - conditions for rebate - Concept of 'excisable goods' and its application to imported goods re-exported as such - Reversal of CENVAT credit as equivalent to payment of duty - Export 'directly from a factory' requirement in rebate notificationsRebate of duty on export under Rule 18 of the Central Excise Rules, 2002 - Scope of notification No.19/2004 dated 6.9.2004 - conditions for rebate - Concept of 'excisable goods' and its application to imported goods re-exported as such - Rebate under Rule 18 read with notification No.19/2004 was available for LCD panels and parts re-exported as such even though they were imported and not manufactured in India. - HELD THAT: - Rule 18 authorises rebate on duty paid on 'such excisable goods' where the Central Government notifies rebate and prescribes conditions. The term 'any goods' in Rule 18 is wide and does not by itself require that the goods must have been manufactured within the country. The meaning of 'excisable goods' is taken from Section 2(d) and applies to goods specified in the Schedules as being subject to duty; LCD panels and parts fell within that description. Thus, the eligibility to claim rebate depends on satisfaction of conditions in the notification and payment of duty, not on actual manufacture in India. The Court rejected the contention that Rule 18 or the notification imports a separate pre-condition of domestic manufacture as a prerequisite to rebate. [Paras 8, 11, 12, 16]Rebate claim could not be denied merely because the goods were imported and not manufactured in India; the goods were 'excisable' and eligible under Rule 18 and the notification subject to the other conditions being fulfilled.Reversal of CENVAT credit as equivalent to payment of duty - Rule 3(5) of the CENVAT Credit Rules, 2004 - Reversal of CENVAT credit under Rule 3(5) amounted to payment of duty for purposes of claiming rebate under the notification. - HELD THAT: - It was undisputed that the imported goods had attracted countervailing duty and that CENVAT credit had been availed and subsequently reversed in entirety under the CENVAT Rules. Rule 3(5) requires payment of an amount equal to the credit availed when inputs or capital goods are removed as such. The Court accepted the reasoning in precedents that reversal of CENVAT credit constitutes duty payment and therefore satisfies the notification's requirement that goods be exported after payment of duty. Having regard to the parity with earlier MODVAT provisions and the consistent view in relevant High Court decisions, the reversal was treated as duty paid for the purpose of rebate. [Paras 9, 13, 16, 17]Payment by way of reversal of CENVAT credit is to be treated as payment of duty and does not preclude entitlement to rebate.Export 'directly from a factory' requirement in rebate notifications - Meaning of 'factory' under Section 2(e) - Export of the goods from the petitioner's factory premises satisfied the notification condition that excisable goods be exported directly from a factory, even though the goods were not manufactured there. - HELD THAT: - Clause 2(a) of the notification requires export after payment of duty directly from a factory or warehouse. The definition of 'factory' in Section 2(e) describes premises where excisable goods are manufactured or a manufacturing process is carried on. The petitioner was carrying out manufacturing activities at its factory premises and the goods were exported from those premises. The Court held there is no statutory requirement that the particular goods exported must have been manufactured at that factory; it is sufficient that export occurred from factory premises as defined. The revenue's contention that the goods must have been manufactured at the factory to qualify was not supported by the statutory language. [Paras 10, 14, 15]Export from the petitioner's factory premises met the 'directly from a factory' condition in the notification despite the goods being imported and re-exported as such.Remand for consequential effect - The authorities' orders rejecting rebate were set aside; the matter was remitted to the original authority for consequential action in accordance with law in light of the Court's conclusions. - HELD THAT: - Having held that the petitioner was entitled to rebate, the Court quashed the revisional order and remitted the matter to the original authority to give consequential effect to the conclusions reached in the judgment. The remand is for computation and other consequential formalities consistent with the legal conclusions already pronounced. [Paras 17, 18]The revisional order dated 2.1.2018 was set aside and the matter remitted to the original authority for consequential action in accordance with law.Final Conclusion: Petition allowed. The Court held that Rule 18 read with notification No.19/2004 permits rebate on export of imported inputs/capital goods re-exported as such where they are 'excisable goods', payment of duty is effected by reversal of CENVAT credit, and export was from the factory premises; the revisional order rejecting rebate was set aside and the matter remitted to the original authority for consequential action. Issues Involved:1. Rejection of rebate claim on excise duty for re-exported LCD panels and parts.2. Interpretation of Rule 18 of the Central Excise Rules, 2002.3. Applicability of Rule 3(5) of the CENVAT Credit Rules, 2004.4. Compliance with conditions under notification No. 19/2004 dated 6.9.2004.5. Definition and applicability of 'excisable goods' under Section 2(d) of the Central Excise Act, 1985.Detailed Analysis:1. Rejection of Rebate Claim on Excise Duty for Re-exported LCD Panels and Parts:The petitioner, an international manufacturer of electronic goods, filed a petition against the rejection of a rebate claim amounting to Rs. 1,58,89,518/-. The claim was for excise duty paid on LCD panels and parts of colored televisions, which were imported and then re-exported without any manufacturing process within the country. The authorities rejected the claim on the grounds that the goods were not manufactured in India and hence did not suffer any excise duty.2. Interpretation of Rule 18 of the Central Excise Rules, 2002:Rule 18 provides for a rebate of duty on goods exported, subject to conditions specified in the notification. The petitioner argued that Rule 18 does not specify that goods must be manufactured in India to be eligible for a rebate. The court noted that Rule 18 applies to 'any goods,' which includes both domestically manufactured and imported goods. The eligibility hinges on whether the Central Government has notified the rebate on such goods and if they qualify as 'excisable goods.'3. Applicability of Rule 3(5) of the CENVAT Credit Rules, 2004:Rule 3(5) mandates that when inputs or capital goods on which CENVAT credit has been taken are removed as such from the factory, an amount equal to the credit availed must be paid. The petitioner complied with this by reversing the CENVAT credit availed on the imported goods, which was equivalent to paying the countervailing duty. The court found that this reversal amounted to the payment of duty, making the goods eligible for a rebate under Rule 18.4. Compliance with Conditions under Notification No. 19/2004 Dated 6.9.2004:The notification outlines conditions for granting a rebate, including that goods must be exported directly from the factory after payment of duty. The petitioner argued, and the court agreed, that the goods were exported directly from the factory and that the reversal of CENVAT credit constituted payment of duty. The court found no requirement under the notification that the goods must be manufactured in India.5. Definition and Applicability of 'Excisable Goods' under Section 2(d) of the Central Excise Act, 1985:Section 2(d) defines 'excisable goods' as those specified in the First and Second Schedules of the Central Excise Tariff Act, 1985, subject to a duty of excise. The court noted that the LCD panels and parts were specified in these schedules, making them 'excisable goods.' Since the goods had suffered countervailing duty and the CENVAT credit was reversed, they were deemed to have paid excise duty, fulfilling the conditions for a rebate.Conclusion:The court concluded that there was no stipulation under Rule 18 or the rebate notification that the goods must be manufactured in India to be eligible for a rebate. The goods, being 'excisable goods' and having paid duty through CENVAT credit reversal, were eligible for a rebate. The court set aside the order dated 2.1.2018 and remitted the matter to the original authority for consequential action in accordance with the law.