TaxTMI 
TaxTMI 
2025 (4) TMI 1596
X X X X Extracts X X X X
X X X X Extracts X X X X
....January 2008 to April 2008, the Petitioner cleared its final products within India on payment of excise duty. Apart from this, during this period, the Petitioner also cleared a part of its production for export on payment of excise duty. 5. It is the case of the Petitioner that, at the time of receipt of inputs within the Petitioner' factory premises, it was not possible to know as to whether the inputs would be used in the manufacture of final products cleared within India or exported by the Petitioner. Hence, the Petitioner had taken Cenvat credit of the duty paid on all the eligible inputs at the time of receipt in their factory. However, at the time of clearance of goods for export, the Petitioner reversed the Cenvat credit on inputs used in the finished goods exported. In other words, the Petitioner did not avail Cenvat credit of the duty paid on inputs used in finished goods that were exported. 6. In respect of inputs contained in the goods exported during the period January 2008 to April 2008, the Petitioner claimed drawback at the All Industry Rate on inputs under Customs Central Excise Duties and Service Tax Drawback Rules, 1995. (hereinafter referred to as the "....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the Superintendent Central Excise, Range Butibori and by Orders-in- Original sanctioned the rebate claims of the Petitioner. The Petitioner has annexed as Exhibit "D" to the Petition a table showing details of the various Orders-in-Original passed by Respondent No. 4. 13. Simultaneously, the Petitioner was issued show cause notices for recovery of amount Rs.10,89,69,730 sanctioned as rebate to the Petitioner in respect of duty paid on the goods exported during the period January 2008 to April 2008. The Petitioner has annexed as Exhibit "F" to the Petition a table containing details of the show cause notices issued to the Petitioner during the period in dispute. 14. In the said show cause notices, the Department alleged that the Petitioner was claiming double benefit i.e., duty drawback at full rate on inputs under the Drawback Rules of 1995 and rebate of duty paid on the goods exported under Rule 18 under Central Excise Rules, 2002. 15. As per the Department, in respect of goods exported, the Petitioner can avail one of the following: (a) Duty Drawback under the Drawback Rules of 1995; or (b) Rebate of duty paid on materials used in the manufacture of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion No. 68/2007. Cus (NT) i.e., "when cenvat facility has not been availed" for claiming drawback at all industry rate has not been satisfied by the Petitioner. Hence, the Petitioner is not entitled for drawback of duty paid on inputs. (b) The Petitioner paid the duty on the final product from the cenvat account and therefore, it shall be construed that the petitioner is availing the cenvat credit facility. Therefore, the declaration "we have not availed cenvat credit facility" required to be provided by the exporter for claiming rebate is not fulfilled by the Petitioner. Hence, the petitioner is not entitled for rebate claim. (c) From the scheme of Rule 18, it is clear that it was never the intention of the Government to allow All Industry rate of drawback on exported goods as also rebate of finished goods duty in respect of goods exported. (d) In case where, the exporters claim the rebate on the final product exported then he could have claimed only drawback of customs duty portion paid on the inputs. (e) The decision in the case of Spentex Industries Ltd. Vs. CCE-2015-TIOL-239-SC-CX is not applicable in the present case. (f) The petit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....input stage rebate in claimed are not sought to be imported under a Quantity Based Advance License issued prior to 31-3-95." 26. Further, Mr. Sridharan submitted that in terms of the Drawback Rules of 1995, the Government issued Notification No. 68/2007-Cus (N.T.) dated 16/07/2007 (hereinafter referred to as "Notification No. 68/2007") which prescribed the All Industry Rates of Drawback. Mr. Sridharan submitted that as per the Conditions of the said Notification, there were two types of Drawback Rates for every commodity i.e. (i) Drawback Rate when Cenvat facility has not been availed and (ii) Drawback Rate when Cenvat facility has been availed. Further, Mr. Sridharan submitted that, in case the exporter claims the rate of drawback where Cenvat facility has not been availed, he has to prove that he has actually not availed of the Cenvat facility. Mr. Sridharan submitted that, hence, if a person avails Cenvat, he is not eligible to input side rebate under Rule 18 of the Central Excise Rules 2002, nor is he eligible to drawback at the higher rate under the head of "Drawback when Cenvat facility has not been availed." 27. Further, Mr. Sridharan submitted that benefits or reliefs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner has correctly availed one input side benefit and one output side benefit. 32. In support of this submission, Mr. Sridharan placed strong reliance on the judgement of the Hon'ble Supreme Court in the case of Spentex Industries Ltd. Vs. CCE (2015 (324) ELT 686 (SC)). He submitted that in this case, the assessee/manufacturer used duty paid inputs for manufacture of goods which were finally exported after payment of Central Excise duty. Rebate claims filed in respect of duty paid on inputs and on finished goods were rejected by the Department. This Court, in Commissioner v. Indorama Textiles Ltd. (2006 (200) E.L.T. 3 (Bom.)), was of the view that out of the two excise duties, Rule 18 of the Central Excise Rules, 2002, permits rebate only qua one of them and not on both the duties. Mr. Sridharan submitted that overruling the said judgement, the Hon'ble Supreme Court was of the view that exporters are entitled to both input and output rebate under Rule 18 of the Central Excise Rules 2002 and not just one kind of rebate. 33. Mr. Sridharan submitted that, hence, in light of the same, there was no double benefit availed by the Petitioner and that it is permissible in law to a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....completely conflated input and outside side benefits. Mr. Sridharan submitted that drawback is an input side benefit granting the Petitioner rebate of the duties/taxes embedded in the inputs purchased by it. Furthermore, the Petitioner had claimed only output rebate under Rule 18 of the Central Excise Rules 2002 and had not claimed any input side rebate under Rule 18 of the Central Excise Rules 2002. Mr. Sridharan submitted that the impugned Order had conflated the output rebate under Rule 18 of the Central Excise Rules 2002 claimed by the Petitioner with an input rebate under the said Rule 18. Mr. Sridharan submitted that there is absolutely no bar in law and nor is there a double benefit for the Petitioner to claim drawback on inputs and output rebate in respect of the excise duty paid on the exported goods. Mr. Sridharan further submitted that this finding in the impugned Order runs directly contrary to the law laid down by the Hon'ble Supreme Court in the judgement in Spentex (supra). 35. Mr. Sridharan further submitted that the impugned Order had also held that the Petitioner has tried to obtain undue advantage of export opportunity to encash additional amount lying idl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... result in double benefits to the Petitioner. 41. Mr. Mishra further submitted that while, sanctioning rebate, the exported goods being one and the same, the benefits availed by the Petitioner on the said goods under different claims are required to be taken into account for ensuring that the sanction does not result in undue benefit to the claimant. Mr. Mishra submitted that the rebate of duty paid on excisable goods exported and duty drawback on exported goods are governed by Rule 18 of the Central Excise Rules, 2002 and by the Drawback Rules of 1995. Both the Rules are intended to give relief to the exporters by offsetting the duty paid. Mr. Mishra submitted that when the Petitioner had availed duty drawback of Customs, Central Excise and Service Tax on the exported goods, it was not entitled for rebate under Rule 18 of the Central Excise Rules, 2002, as it would result in double benefit. 42. In respect of the judgement of the Hon'ble Supreme Court in Spentex Industries Ltd. (supra), Mr. Mishra submitted that, in the said judgement, the Hon'ble Supreme Court had held that the benefits of rebate on input on one hand as well as on the finished goods exported on the other han....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to at Serial No.(i) and (ii) in the previous paragraph relate to benefits or reliefs available to the manufacturer/exporter on the output side i.e. in relation to the excise duty leviable on the manufacturer/exporter when he manufactures the exported goods in his factory. The benefits referred to at Serial Nos.(iii) and (iv) of the previous paragraph are related to the benefits available to the manufacturer/exporter on the input side i.e. in relation to the burden of duties/taxes embedded in the inputs purchased by the manufacturer/exporter for use in the manufacture of exported goods. 48. A double benefit would arise in a case where, for a single incidence, relief is availed more than once i.e. if relief is claimed more than once on the output side or if relief is claimed more than once on the input side. If relief is claimed only once on the output side and once on the input side then the same would not amount to a double benefit to the manufacturer/exporter. 49. As stated earlier, the benefits or reliefs available to the manufacturer/exporter on the input side are (i) rebate of input excise duty paid by the manufacturer/exporter to its vendors on the material purchased by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ifference between the two columns refers to the central excise and service tax component of drawback. If the rate indicated is the same in both the columns, it shall mean that the same pertains to only customs component and is available irrespective of whether the exporter has availed of Cenvat or not. (12) The expression "when Cenvat facility has not been availed", used in the said Schedule, shall mean that the exporter shall satisfy the following conditions, namely:- (i) The exporter shall declare, and if necessary, establish to the satisfaction of the Assistant Commissioner of Customs or Assistant Commissioner of Central Excise or Deputy Commissioner of Customs or Deputy Commissioner of Central Excise, as the case may be, that no Cenvat facility has been availed for any of the inputs used in the manufacture of the export product, (ii) if the goods are exported under bond or claim for rebate of duty of central excise, a certificate from the Superintendent of Customs or Superintendent of Central Excise in-charge of the factory of production, to the effect that no Cenvat facility has been availed for the goods under export, is produced: Provided that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of Bombay Dyeing & Mfg. Co. Ltd. (supra), the Hon'ble Supreme Court has held that reversal of Credit amounts to and is equivalent to Credit never having been availed at all. Paragraph 8 of the said judgement is relevant and is set out hereunder: 8. There is no merit in this civil appeal. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002-C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming CENVAT credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made before the stage of exemption. S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of India further shows the mind of the Government itself, disclosing that both the duties are eligible for grant of rebate. On that basis, it is argued that Rule 18 has to be interpreted keeping in view the overall scheme of the statute and the Rules and the manner in which the Government itself operated the said Rule. Learned counsel for the respondent, on the other hand, predicated his arguments on the plain and grammatical meaning that needs to be accorded to Rule 18 of the Rules by arguing that the word 'OR' used therein clearly signifies that it is one of the two duties to which the rebate can be granted and not both. For this purpose, reasoning given by the High Court was adopted with the submission that it was in accord with the cardinal principle of literal interpretation and, therefore, the view of the High Court was correct in law. 16. After giving due consideration to the respective submissions, in the light of statutory scheme envisaged for grant of rebate in the Act and Rules, we are constrained to hold that the High Court has not taken correct view, which we feel is a myopic view and ignores the overall scheme pertaining to grant of rebate in respect ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... may be specified in the notification which the exporter undertakes to abide by entering into a bond in the proper form with such surety or sufficient security, and under such conditions as the Commissioner approves. 17. It is manifest from the reading of the aforesaid Rules that from the very beginning, two alternative methods were provided enabling an exporter of goods to get rid of the burden of paying the excise duty; both on excisable goods as well as on materials used in the manufacture of goods. The exporter could either claim rebate when the duty was paid. Or else, he was free not to pay excise duty at all on both types of goods by executing a bond in the prescribed form and fulfilling the conditions prescribed in this behalf. The grant of rebate, in either of the options, has always been in respect of both kinds of excise duties, i.e. on the final product that is exported as well as on the intermediate product on which excise duty is paid/payable and the same is used as raw material in the manufacture of goods. Under these Rules also, Notification No. 41/94-C.E (N.T.), dated September 12, 1994 and Notification No. 42/94-C.E. (N.T.), dated September 21, 1994 were i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... are meant for exports are free from any excise duty. It extends not only to the material which is used in the manufacture of goods but also on the goods that are produced and ultimately exported. Once we keep in mind this scheme, it cannot be the intention of the Legislature to provide rebate only on one item in case a particular exporter/manufacturer opts for other alternative under Rule 18, namely paying the duty in the first instance and then claiming the rebate. Giving such restrictive meaning to Rule 18 would not only be anomalous but would lead to absurdity as well. In fact, it would defeat the very purpose of grant of remission from payment of excise duty in respect of the goods which are exported out of India. It may also lead to invidious discrimination and arbitrary results. Let us visualize another situation. A particular exporter may opt for scheme under Rule 18, i.e., for claim of rebate insofar as, say, excise duty on material used in manufacture of goods is concerned. He would pay that duty and claim rebate. When it comes to payment of duty of export of excisable goods, he exercises the option under Rule 19 and executes a bond which enables him not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hin the purview of the maxim temporania caste pesto, even in certain situation a representation made by an authority like Minister presenting the Bill before Parliament may also be found bound thereby. 34. Rules of executive construction in a situation of this nature may also be applied. Where a representation is made by the maker of legislation at the time of introduction of the Bill or construction thereupon is put by the executive upon its coming into force, the same carries a great weight. 35. In this regard, we may refer to the decision of the House of Lords in R (Westminster City Council) v. National Asylum Support Service - (2002) 1 WLR 2956: (2002) 4 All ER 654 (HL) and its interpretation of the decision in Pepper v. Hart-1993 AC 593: (1992) 3 WLR 1032 (1993) 1 All ER 42 (HL) on the question of "executive estoppel". In the former decision, Lord Steyn stated: (WLR p. 2959, para 6) "6. If exceptionally there is found in the Explanatory Notes a clear assurance by the executive to Parliament about the meaning of a clause, or the circumstances in which a power will or will not be used, that assurance may in principle be admitted against the executive i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to as practical construction although not controlling, is nevertheless entitled to considerable weight it is highly persuasive. In Baleshwar Bagarti v. Bhagirathi Dass - (1908) ILR 35 Cal 701 at 713 the principle which was reiterated in Mathura Mohan Saha v. Ram Kumar Saha, ILR 43 Cal. 790: (AIR 1916 Cal. 136) has been stated by Muker jea J. thus: "It is a well-settled principle of construction that Courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it. I do not suggest for a moment that such interpretation has by any means a controlling effect upon the Courts; such interpretation may, if occasion arises have to be disregarded for cogent and persuasive reasons, and in a clear case of error, a Court would without hesitation refuse to follow such construction." Of course, even without the aid of these two documents which contain a contemporaneous exposition of the Government's intention, we have come to the conclusion that on a plain construction of the notification the proviso permitted the closing out or liquidation of all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r export on payment of duty and under bond in the erstwhile Rules 12 and 13 of Central Excise Rules. The fundamental objective of existing rules and the earlier ones is the same, i.e, to neutralise the duty element on the goods exported and hence no other interpretation denying the relief sought appears possible. Circular No. 129/40/95, dated 29-9-1995, para 1.5 of Chapter 8 of Part V of C.B.E. & C. Manual further leaves no room for any other interpretation." (iv) Interpretation of word 'OR' occurring in Rule 18: The aforesaid discussion leads us to the only inevitable consequence which is this: the word 'OR' occurring in Rule 18 cannot be given literal interpretation as that leads to various disastrous results pointed out in the preceding discussion and, therefore, this word has to be read as 'and' as that is what was intended by the rule maker in the scheme of things and to carry out the objectives of the Rule 18 and also to bring it at par with Rule 19. 23. We are conscious of the principle that the word 'or' is normally disjunctive and 'and' is normally conjunctive (See Union of India v. Kamlabhai Harji wandas Parekh and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the expression 'or' in that Section. We have already explained the statutory scheme contained in the Act and Rules which express manifest intention of the Legislature which provide for granting of both kinds of rebates to the assessee. In Mazagaon Dock Ltd. (supra), this aspect was explained in the following manner: "10. The word "or" in the clause would appear to be rather inappropriate as it is susceptible of the interpretation that when some profits are made but they are less than the normal profits, tax could only be imposed either on the one or on the other, and that accordingly a tax on the actual profits earned would bar the imposition of tax on profits which might have been intended, and the word "or" would have to be read in the context as meaning "and". Vide Maxwell's Interpretation of Statutes, Tenth Edition, pages 238-239. But that, however, does not affect the present question which is whether the word "derived" indubitably points to the business of the non-resident as the one taxable under S. 42(2) and for the reasons already given the answer must be in the negative." 27. The aforesaid discussion leads us to inevitable conclusion, namely,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpugned order that since the drawback availed by the Petitioner in the present case is nothing but a rebate of duty on inputs, therefore, the rebate of duty on export of goods claimed by the Petitioner is incorrect. We are unable to agree with the said finding in the impugned order. In our view, the impugned order has completely conflated input and output side benefits. Drawback is an input side benefit granting to the Petitioner rebate of the duties/taxes embedded in the inputs purchased by it. Further, the Petitioner has claimed only output rebate under Rule 18 of the Central Excise Rules, 2002 and has not claimed any input side rebate under the said Rule 18. In our view, there is absolutely no bar in law nor is there a double benefit for the Petitioner to claim drawback on inputs and output rebate of the excise duty paid on the exported goods. Our view is supported by the aforesaid decision of the Hon'ble Supreme Court in the case of Spentex Industries Ltd. (supra) where the Court has held that the assessee is entitled to claim benefits both on the input side and on the output side. 65. Further, the impugned Order has held that the Petitioner has tried to obtain undue advanta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t facility has been availed for the goods under export, is produced: Provided that the certificate regarding non-availment of Cenvat facility shall not be required in the case of exports of handloom products or handicrafts (including handicrafts of brass artware) or finished leather and other export products which are unconditionally exempt from the duty of central excise. (emphasis supplied) 67. From a reading of the said Condition No.12, it is very clear that the expression "inputs used in the manufacture of the export product" in Condition 12 (i) refers to the very export transaction under consideration. It does not relate to every input used in the past by the assessee and which has not been used in the manufacture of the exported goods. The finding in the impugned Order, if carried to its logical end, would result in absurdity. As per the impugned Order, if the Petitioner has ever availed Cenvat credit at any point of time, whether for the particular export to which rebate relates or for any other unrelated transaction, the Petitioner cannot claim that no Cenvat facility has been availed by it, and, hence, is disentitled on account of Condition No.12(ii) o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....present writ petition, is covered under two different statutes, the judgment relied upon by the learned counsel for the petitioner is not applicable to the facts of the present case." 70. In our view, the aforesaid interpretation, of the judgement of the Hon'ble Supreme Court, by the Madras High Court, is erroneous. The Madras High Court has sought to distinguish the judgement of the Hon'ble Supreme Court in Spentex Industries Ltd. (supra) on the ground that both the input and output side benefits in the said case fall under Rule 18 of the Central Excise Rules, 2002 while in the case before the Madras High Court, the issue involved was covered under two different statutes i.e. under the Drawback Rules of 1995 and under Rule 18 of the Central Excise Rules, 2002. 71. We respectfully disagree with the said interpretation of the Madras High Court. In our view, the decision of the Hon'ble Supreme Court in Spentex Industries Ltd. (supra) clearly lays down that the assessee is entitled to both input side benefit and output side benefit. In our view, it makes no difference whether the said benefits are claimed under one statute or under different statutes. 72. For all the aforesai....