Export under rebate-non realization of export proceeds

[arbs sarma]

Sirs,

We exported our final product on payment of duty under claim of rebate. We have also received rebate from department on the FOB value. However, subsequent to export, depending on the market conditions abroad we offered discounts to the foreign customers which resulted in short receipt of export proceeds. As the discounts were offered subsequently, the same was not considered while sanctioning rebate.

Rebate is covered under Rule 18 of CER, 2004 read with Notfn No. 19/2004-CE (NT). In the Rule as well as in the Notfn, no condition has been stipulated that grant of rebate is subject to realization of export proceeds.

In the above scenario:

1 . Are we liable to pay back excess rebate sanctioned ,if any, back to govt due to short receipt of export proceeds.

2. What are the consequences in case of non realization of export proceeds.

3. Will there be any liability in case where goods are exported under LUT, and export proceeds are short realized/ non realized.

4. If we compute and payback the excess rebate sanctioned ,if any, back to department in PLA, are we entitled to get refund of same in cenvat.

regards

 

[KASTURI SETHI]

Sir,

Point-wise reply is as under :-

1. YES.

2. You cannot claim rebate claim. If exported under LUT/Bond without payment of duty and export proceeds are not received, pay CE duty along with interest.

3. Reply in point no. 2

4. NO.

Pl note that Govt. is concerned with foreign exchange, if you do not receive foreign exchange by any reason, clearance will be treated as home consumption for the purpose of payment of duty.

[arbs sarma]

Dear Kasturin Sethi Sir,

Thank for swift reply.

can you please provide legal backing (supported case law citation or circular) for your comments.

[KASTURI SETHI]

That is very much within Central Excise Rules. However, I shall trace out the case law in this context.

[Suryanarayana Sathineni]

Dear Sarma,

In this context I differ with shri. Kasturi Sethi Ji, on the following grounds.

Under central Excise Rule 18 Rebate of duty paid on the goods exported is paid based on Proof of Export and the sanction is nothing to do with the realization of export proceeds. Neither the Rule nor the Notification issued thereunder does not prescribe such condition of submission of export proceeds realization for sanction of rebate except in the below circumstance

When goods are exported by Sea and the exporter is not submitted the transperent copy ( Mate Receipt) which is equal to proof of shipment, then the exporter is under obligation to submit the Bank Realization certificate as proof of receipt of export proceeds within 6 months from the date of sanction in terms of a circular issued by CBE&C which is not readily available and I will try to provide you the same by tomorrow positively if you require the same.

If your export effected by air and you have submitted the proof of export given by the customs on the back side of the ARE1 and based on which if the department sanctioned the rebate, there is no such requirement for submission of BRC.

The rebate is provided under central excise considering the concept that goods only are exported and not the taxes. hence, once goods are proved as exported, whatever duty paid on such export need to be refunded in form of rebate to the exporter.

Further, the requirement of submission of BRC is mandatory in case of an exporter claiming any export incentives from DGFT or Duty Drawback from customs on exports and this is not applicable to Rebate under Rule 18 of CER,2002.

Hope the issue is clear.

Best Regards

Suryanarayana

[CSSANJAY MALHOTRA]

Excise Duty Rebate has no linkage with Realization and endorse the views of Mr. Suryanarayana.

Duty is leviable on manufacture but payable at the time of removal of goods, even the removal to Buyer is on payment of goods / without payments of goods (FOC basis).

Samples are being exported on FOC basis, same are also subject to Excise Rebate being granted. Objective is to returned back the duty paid on inputs used in the Exported Product as Constitution says that Taxes can't be exported.

As Duty payment is linked to Manufacture, similarly Rebate is linked to Export of goods. Two conditions needs to be satisfied i.e. Duty has been paid on Inputs used for manufacture of Export Product and Export has been established.

Am not recollect exactly but Apex Court decision is there for Medley Pharma..... Will check and revert.

[arbs sarma]

Thank suyra narayana sir and sanjay sir for your valuable comments.

[MADAN RAHEJA]

Sir,

I would like to draw your attention to decision of JS(RA) in an identical in the case of Panacia Biotech Ltd. repoted at 2012 (276) E.L.T. 412 (G.O.I.), -  2009 (12) TMI 652 - GOVERNMENT OF INDIA, MINISTRY OF FINANCE wherein it was held that amount shown in BRC was transaction value as it was actually paid by buyer of goods, and exporter was entitled to rebate only to that extent. It was further held that amount paid in excess is not duty but deposit with government . Re-credit of excess amount was allowed.

2.The aforesaid decision supports views of Shri Kasturi Sethiji

[arbs sarma]

Sirs,

There is a judgment of Delhi Tribunal in the case of Jindal Stainless Limited Vs Commissioner Of Central Excise, Rohtak  2012 (10) TMI 949 - CESTAT NEW DELHI (though relates to stay hearing) wherein tribunal has ,inter alia, held that there is absolutely no condition providing that grant of rebate is subject to realization of the export proceeds either in Rule 18 of CER, 2002 or related Notification and allowed the stay application. .

Relevant paras 5 and 6 are reproduced below,

5. We have considered the rival submissions and perused the record. It is not the allegation of the Department that goods cleared from ICD for export were ultimately not exported out of India; or that the proof of export in form of transference copy of the shipping bill was not received. The Department’s only objection is that full export proceeds have not been received.

6. Rebate of duty under Rule 18 of Central Excise Rules, 2002 provides for rebate of duty in respect of export of goods in terms of the conditions and limitations as prescribed under Notifications issued under this rule. Central Government has issued Notification No. 19/2004-C.E. (N.T.) which prescribes conditions subject to which rebate is to be granted in terms of Rule 18 of Central Excise Rules, 2002 and there is no dispute that the exports under rebate claim had been made in terms of the procedure prescribed in this notification. On going through this notification, we find that there is absolutely no condition providing that grant of rebate is subject to realization of the export proceeds. Moreover, we also find that it is not the department’s case that export proceeds have not been received at all. The allegation is that export proceeds are less than the exports value declared by the appellant for which explanation given by the Appellant is that this is due to exchange rate fluctuation, which prima facie appears to be correct. In view of this there is prima facie a case in favour of the appellant. Therefore, the requirement of per-deposit of duty demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed till disposal of the appeal.

[KASTURI SETHI]

SH.MADAN RAHEJA JI,

Thanks a lot. You have done my job. Practically the department waits for BRC and even grants extension for producing BRC. Despite that in case the party fails to produce BRC as documentary evidence, SCNs are being issued. This is the practice prevalent at present. There is also Board's circular in this context.

There are conflicting judgements of the Tribunals some in favour of assessee and some against assessee/exporters. The party may or may not win in the Tribunal but nobody likes litigation.

Regarding the latest judgement referred by Sh.Sarma Ji, I am of the opinion that there is a great difference between "NOT receiving BRC at all" and "Receiving less amount due to fluctuation in international market prices"

It is a fact that Govt. forgoes so many taxes just because of foreign exchange to be earned on account of exportation. If foreign exchange is not received, why Govt. should suffer loss of so many taxes in the form of EXPORT SOPS.

These views based on my experience in the department.

[Suryanarayana Sathineni]

Dear Kasturi Sethi Ji,

Again I differ with your views sir with due respects becasue,

The Government forego so much money for want of earning foreign exchange and hence there is nothing wrong in insisting for the realization of export proceeds (BRC). This is a truth and nobody can differ with it.

However, the insistence is only with regard to DBK and various export incentives being sanctioned by DGFT on exports as already stated.

Further, Rebate of duty paid on export consignments is not an Export incentive and hence the amount of duty paid on export consignment need to be rebated on providing proof of export on the concept that goods only are exported and not the taxes.

Further, you are kindly aware that while sanctioning the rebate, the Department consider various factors to arrive at Section 4 value like difference in freight, insurance and amount of local freight from factory to port of export etc., and restrict the cash rebate to that extent and whatever the excess duty paid used to be sanctioned as cenvat credit which is the general practice prevailing in the Department.

As such, there is no requirement of submission of BRC except in the event of non-submission of Mate Receipt/transference copy as per the CBE&C Circular.

Even I am afraid, the case law of Revisionary Authority referred by our learned friend , might be in a different context.

Hope I am clarified the issue in detail.

Best Regards

Suryanarayana

[KASTURI SETHI]

Sh.Sarma Ji,

Pl. go through this case law ;-

2016 (7) TMI 232 - GOVERNMENT OF INDIA Commissioner of Central Excise, Bangalore. Versus M/s. Globe Technologies, Bangalore.

AI Summary

Rebate of excise duty may be limited by realization of export proceeds, creating potential recovery liability despite proof of export. Sanction of rebate under Rule 18 and Notification No.19/2004-C.E. (N.T.) is contested: one view limits entitlement to proof of export (shipping bill, mate receipt, ARE-1) without linking it to realization of export proceeds; another view and some authorities treat short or non-realization as a ground for recovery or conversion to home consumption, leading to duty plus interest, especially where exports are under LUT/bond; BRCs are required in specific circumstances and repayment into PLA does not automatically permit cenvat credit.