Export benefits cannot be denied even when export proceeds are not realized

We are sharing with you an important judgement of the Hon’ble CESTAT, New Delhi in the case of Commissioner of Central Excise, Delhi-III Vs. Shyam Telecom Ltd. [(2015) 58 taxmann.com 117 (New Delhi – CESTAT)] on the following issue:

Issue:

Whether the benefit of export can be denied on account of non-realisation of export proceeds when goods are exported without payment of Excise duty under Bond?

Facts & Background:

Shyam Telecom Ltd. (“the Assessee” or “the Respondent”)are manufacturers of Repeaters falling under Chapter sub-heading No. 85.25 of the Central Excise Tariff Act, 1985.During the years 2005-2006 and 2006-2007, the Assessee exported the finished goods manufactured by them without payment of duty, under bond, in terms of the provisions of Rule 19 of the Central Excise Rules, 2002 (“the Excise Rules”) read with Notification No. 42/2001-C.E. (N.T.) dated June 26, 2001 (“the Notification”).

The Department denied benefit of export to the Assessee on the ground that since the remittance for the goods exported has not been received, such clearances cannot be treated as exports. Later on, the demand was confirmed along with interest and penalty by the Ld. Assistant Commissioner.

However, on appeal being filed before the Ld. Commissioner (Appeals), it was held that there is no condition regarding receipt of the export proceeds under Rule 19 of the Excise Rules or in the Notification issued in this regard.

Being aggrieved, the Department preferred an appeal before the Hon’ble CESTAT, Delhi pleading that due to non-receipt of the export proceeds, the goods cannot be treated as having been exported and thus the duty foregone in respect of these exports are recoverable.

Held:

The Hon’ble CESTAT, Delhi held that Rule 19 of the Excise Rules permits export of the goods under bond/ Letter of Undertaking (LUT) without payment of duty, subject to following the procedure and conditions as may be prescribed. The Notification issued under Rule 19(3) of the Excise Rules prescribes the conditions and the procedure for this purpose and in this Notification, there is no condition that in respect of the goods exported, the export proceeds must be received within any stipulated period.

Further, there is no such condition even in the Rule 19 of the Excise Rules. In view of this, the condition regarding receipt of export proceeds cannot be imposed to demand duty foregone in respect of the goods cleared for export under bond/LUT.

The Hon’ble CESTAT further held that the duty on the goods can be demanded only if the goods have not been exported out of India within the stipulated period but there is no such allegation in the instant case.

Accordingly, the matter was decided against the Revenue.