TaxTMI 
TaxTMI 
2014 (1) TMI 1216
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. The petitioner is a company engaged in the manufacture of yarn, fabric, etc. The petitioner manufactures fabrics and pays duty thereon and clears the same to approved job workers for the purpose of manufacturing cotton quilt covers. 4. During the period May 1994 to September 1994, the petitioner exported the quilt covers manufactured by the job workers and applied for refund of the excise amount paid on the inputs (i.e. cotton fabric used in the manufacture of quilt covers). 5. On 16.08.1995, the Assistant Commissioner of Central Excise, Division A, Bombay, issued a show cause notice to the petitioner to show cause as to why the rebate amount sanctioned should not be rejected as inadmissible under Section 11B of the Central Excise Salt Act, 1944 read with Rule 191A of the Central Excise Rules,1944. 6. The Assistant Commissioner, Central Excise, in the show cause notice mentioned that from the list of the products appended to notification issued under Rule 191A, the entry at serial No.17 was only "Cotton Quilts" and there was no entry of "Quilt Cover". 7. In reply to the show cause notice, on 25.08.1995, the petitioner submitted a representation contending that it w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d not on Quilt Shell/Cover, party is not entitled to rebate in terms of Rule 191A read with Notification/Declaration issued by Central Board of Excise and Customs in this regard. There is no other Notification/Declaration of C.B.E.C. under which the rebate claim under Rule 191A could be allowed to Quilt Shell/Cover. Order In view of above, I reject the rebate claims amounting to Rs.218694.64 as listed in the annexure to the show cause notice as inadmissible under earstwhile Rule 191A of Central Excise Rules, 1944 read with Section 11B of Central Excise and Salt Act, 1944." 9. The petitioner assailed the order by filing an appeal before the Commissioner of Central Excise (Appeals). Vide order dated 25.03.1997, the Commissioner (Appeals) rejected the appeal of the petitioner holding that the notification issued under Rule 191A mentioned the name of the final product "Cotton Quilts (Rajais)" but the petitioner trying to cover their product "quit covers" under the said notification traded their product as "cotton quilts". He held that the product exported, to be eligible for the benefit under Rule 191A, should have been the cotton quilts and not quit covers. He rejected the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld be read into the entry in the Schedule to notification under Rule 191A. Learned counsel for the petitioner further contended that since the entries were similar, so the entry "Quilt Covers (Rajais) in the Schedule to notification under Rule 191A should also include Quilt Covers, as mentioned in the entry to the Schedule to notification issued under Rule 191B. 15. Learned counsel for the petitioner relied on the decision of the Supreme Court in HINDUSTAN PETROLEUM CORPORATION LTD. (SUPRA) to contend that in similar circumstances while interpreting Rules 12 & 13 of the Central Excise Rules, the Supreme Court had harmoniously construed Rules 12 & 13 as both the Rules provided for a facility being given to manufacturer of excisable goods for not paying excise duty when such goods are taken out of bonded warehouses and as common procedure had been provided both for the claim for rebate of duty on export of goods as envisaged by Rule 12 and also under bond executed under Rule 13 in connection with export of excisable goods. Similar parity and harmonious construction should be given to the entries in the respective Schedule to the notification under Rule 191A and Rule 191B. 16. L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....). (4) If, after such enquiry and inspection of the factory premises as he deems fit, the Collector is satisfied that the concession can be allowed to the applicant without danger of abuse, he may grant the application: Provided that no rebate of excise duty on the raw materials used in the manufacture and packing of goods exported out of India shall be allowed under this procedure if a claim for rebate for the said duty has been made under the Customs and Central Excise Duties Export Drawback Rules, 1971). (5) The list of articles proposed to be manufactured along with the manufacturing formulae shall be submitted in triplicate to the Collector and manufacturer shall give a guarantee in the form in Appendix 'B' that he shall not alter the formulae, or use excisable goods of the quality and tariff category different from the one mentioned in the formulae, without the previous permission of the Collector. (6) The original copy of the list and of the formulae countersigned by the Collector, shall be sent to the manufacturer and maintained by him at the factory and any officer of the Central Excise Department shall at any time have access to this copy. The duplicate copy shal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le to be removed by the manufacturer for export under the provisions of this rule from the premises of such assessee to whom such article has been sent. (8) When the finished goods are ready for export, the manufacturer shall submit to the Assistant Collector of Central Excise an application in triplicate in the proper form showing the quantity of finished goods to be exported, the quantity of excisable goods contained in, and used in packing of such goods, the amount of duty involved and refund claimed and similar particulars. On receipt of the application, the Assistant Collector of Central Excise shall forward it to the proper officer (as notified by him from time to time) who shall verify the particulars with reference to the manufacturing formula and the accounts of production, and if satisfied, the proper officer shall seal the packages with Central Excise seal, to be supplied by the Department, and shall give a certificate on the application that the percentage and quantity of excisable goods contained as shown in the application are according to the approved formula and that the packages have been sealed by him with Central Excise seal. After endorsing the copies of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctor may consider necessary for supervising operation in the factory for the effective implementation of this procedure. (17) The provisions of sub-rules (8), (9) and (10) shall, so far as may be, apply also to exporters who are not manufactures. (18) Notwithstanding anything contained in the foregoing provisions of this rule except sub-rule (9) relating to the time-limit for lodging claim for rebate together with proof of export, the Collector may, if he is satisfied that any article declared under sub-rule (1) has been exported, allow, for reasons to be recorded in writing, the whole or any part of the claim for rebate. Notification under Rule 191A Serial No. Name of article Authority (1) (2) (3) 1. ............... ................. 2. ............... .................. 17. Cotton quilts(Rajais) F.No.1/105/58-CX.III dated 16.8.58." 19. Rule 191B as applied laid down as under:- "Rule 191B. Manufacture in bond of articles from excisable goods on which duty has not been paid - (1) The provisions of section 100A of the Sea Customs Act, 1878 (now sections 65 and 66 of the Customs Act, 1962), modified and set out below shall b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of any conditions specified in the Notification issued under sub-rule (2), the owner shall be liable to a penalty not exceeding two thousand rupees and the excisable goods and the articles in respect of which such breach has been committed shall also be liable to confiscation. Explanation - In this rule, the expression "manufacture" (with its grammatical variations and cognate expressions) includes the process of blending of any goods or making of other alterations therein. NOTIFICATIONS UNDER RULE 191B (1) In exercise of the powers conferred by rule 191B of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.129/58-C.E., dated 27.12.1958, the Central Government hereby permits for the purpose of export outside India, the manufacture in bond of the articles specified in column (2) of the Table hereto annexed, from the excisable goods specified in column (3) thereof, subject to the following conditions, namely:- (1) The manufacture of such articles shall apply for registration in such form as the Collector may prescribe, stating in particular - (a) the description of each....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uantity of unmanufactured tobacco. (v) Quantity of imported tobacco used, if any. (vi) Quantity of waste tobacco arising out of operation. (vii) Number of cigars and cheroots manufactured and their total weight. (viii) Date of completion of operation. (8) Clearance ex-bond shall be allowed free of duty provided the articles are exported within three years of the date of the oldest consignment of excisable goods received by the manufacturer for manufacture of such articles, to any country or territory with a common land frontier with India (except Pakistan, Bangladesh and Burma), or shipped as provisions or stores for use on board a ship to a foreign port, and the packages containing all such articles shall be marked conspicuously with the words, ("FOR EXPORT EX-BOND). (Clearance for export of smoking mixtures may also be permitted under excise supervision, when applied for in Form A.R. 4 suitably adapted for that purpose. The packages covered by A.R.4 application shall similarly be put on board the ship under official supervision. (8A). The Collector may, at his discretion, permit exporters other than manufacturers to export the articles in bond subject to such co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture in bond; (e) specify the date or days on which, and the hours between which, the manufacture in bond may be carried on; (f) specify the conditions subject to, and the manner in which, the articles may be cleared for home consumption or export; (g) require any person, who has been concerned at any stage with the manufacture, sale and transfer of the articles under export to produce books of accounts and other documents of whatever nature relating to the quantity of non-duty paid excisable goods employed in the manufacture of such articles; and (h) require the maintenance of records and registers and making such returns relating to the manufacture in bond as he thinks fit. (12) On receipt of the manufactory unmanufactured tobacco which is to be used in the manufacture of such articles which are eventually meant for export shall be kept in separate rooms under double lock, that is, one by the department and other by the manufacturer. (13) The operation cared shall contain the following additional particulars, namely:- (a) Tariff variety and quantity of unmanufactured indigenous tobacco. (b) Number and date of document on which imported tobacco is received,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erence to the formula of manufacture and the composition of the blend as shown on the relevant operation sheets. The same formula shall be followed in respect of waste which has resulted from both imported and indigenous tobacco. Serial No. Article for Manufacture in bond Excisable goods for manufacture of articles specified in Column (2) (1) (2) (3) 1. ............... ................. 2. (1)........ .................. (9) Cotton quilts (including quilt covers) 20. Rule 191A deals with the procedure for export of articles under rebate of duty in excisable goods used in their manufacture and packing. Rule 191A lays down a procedure whereby a manufacturer desiring to export any article can claim refund of the duty paid in excisable goods used in the manufacture and packing of the finished goods. The procedure stipulates that the manufacturer has to get a prior approval of the excisable goods that will be utilized for the purposes of the articles proposed to be manufactured alongwith a manufacturing formula and has to give a guarantee that the formulae shall not be altered and shall not use goods of the quality and tari....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fulfillment of the conditions stipulated by Rule 191B and the notification issued there under, the exporter is permitted to export the said finished products without payment of excise. 24. The comparison of the Schedule to the notification issued under Rule 191A and Rule 191B shows that though some of the entries are overlapping or similar but a large number of entries are completely different. Thus the entries in the notification issued under Rule 191A and B are not synonymous and interchangeable. Two separate notifications have been issued. 25. The distinction, as mentioned above, between the Rules 191A and 191B and the procedure prescribed by the respective notifications and the Schedules there under clearly establishes that both operate in completely different fields and for different purposes. 26. The admitted case of the petitioner is that the petitioner had applied the procedure prescribed under Rule 191A and the notification issued there under. This is further fortified by the fact that consistently the petitioner had sought to bring its finished product in the entry "cotton quilts (rajais) which is an entry to the Schedule under Rule 191A and it is only when the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of duty on export of goods as envisaged by Rule 12 and also under bond executed under Rule 13 in connection with export of excisable goods. As per rule 13 exporter of excise goods on which duty had not been paid has also to follow the same procedure under Chapter IX as has to be followed for exports under Rule 12. Thus an exporter of excisable goods on which duty is not paid in the first instance but which are covered under the bond duly executed in favour of the revenue by the owner of the goods has also to follow the procedure of Rule 185 found in Chapter IX. All that Rule 13 therefore seeks to do is that it provides for the facility of deferred payment of excise duty and what will be the extent of duty ultimately payable on such goods covered by bond executed under Rule 13 will have to be determined independently of Rule 13 and that is the reason why the liability to pay excise on such goods has to be ascertained before discharging the liability under the bond and for that purpose linkage with Rule 12 become relevant as per the phrase "may in the like manner be exported" as found in Rule 13. If Rules 12 & 13 arc not read in conjunction with each other an anomalous and also disc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing conditions of Rule 13 will pay nil duty. It would put premium on non- payment of duty and result in treating equals inequally. On the other hand an equitable result would follow if Rules 12 and 13 are read as complementary to each other dealing as they do with the same subject of remission of duty on export of excisable goods. It is obvious that interpretation of these rules must be made in such a manner as to avoid inequitable result and to ensure an equitable result. According to us the view taken by the Delhi High Court is quite justified and unexceptionable as it avoids such an inequitable result. On the contrary, the view expressed by Calcutta High Court in the case of Indian Aluminium Company Limited v. Union of India (supra) wherein it is held that Rule 13 is to be applied independently of Rule 12, would obviously result in the aforesaid inequitable consequences which cannot be countenanced, Turning to the Division Bench judgment of the Calcutta High Court, we find that the Calcutta High Court has placed emphasis on the words used in these rules, namely, "rebate on duty of excise paid" as found in Rule 12 as contra distinguished from the words used in Rule 13 to the effe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther case the burden of duty borne by the exporter under Rule 13 or the manufacturer of goods cleared for home consumption would be nil as he would pass on the burden to the foreign importer under Rule 13 or to the purchaser for home consumption under Rule 12 who may cam in his turn rebate on duty paid if goods are exported as per Rule 12. Thus the duty of excise will have no real impact on the extent of profit earned by the manufacturer on goods cleared for home consumption or on goods exported. Profit on such goods will be the difference between market price in home or foreign market and the cost price. In home market the margin may be less as excise duty will form part of cost. In foreign market it may be more if goods are exported under Rule 13 without payment of duty. Consequently, it is not possible to agree with the view of the Calcutta High Court that because under Rule 12 the manufacturer earns more profit by selling in local market for home consumption, the exporter under Rule 12 may bear a larger burden of excise duty as compared to the exporter, manufacturer of the same type of goods under Rule 13. Similarly, it is not possible to appreciate the reasoning adopted by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso a part and parcel of these rules and it has a linkage with Section 37 of the rules. Rule 13 has nothing to do with exemption as wrongly assumed by the Calcutta High Court. If Rule 13 was dealing with total exemption from payment of excise duty on excisable goods exported from bonded warehouse, there would have been no occasion for the rule making authority for providing execution of bonds for covering the entire duty payable on such excisable goods. Even apart from all these reasons, it is obvious that the conclusion to which the Calcutta High Court reached that Rule 12 is independent of Rule 13 would result in an anomalous and discriminatory situation as already discussed earlier such an interpretation cannot be countenanced on the touch stone of Article 14 of the Constitution of India. It must there be held that the decision of Calcutta High Court cannot be treated to be laying down correct law. On the contrary as seen earlier the decision of the Delhi High Court in Hindustan Aluminium Corporation Lid. v. Superintendent, Central Excise has correctly interpreted Rules 12 and 13. The Tribunal was therefore right in following the decision of Delhi High Court and coming to its co....