Allahabad High Court has held that there is no specification under Excise Rule 18 that for the purpose of rebate, goods need to be manufactured inside country. The Court held that the rule talks about any goods, which includes both manufactured inside the country and received from outside. The High Court observed that LCD panels and parts were specified in schedule to Central Excise Tariff and had suffered countervailing duty.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Heard Sri M.P. Devnath, learned counsel assisted by Sri Nishant Mishra, learned counsel for the petitioner-assessee and Sri B.K.S. Raghuvanshi, learned counsel for the respondent-revenue.
2. Present petition has been filed by the petitioner against the order-in-original dated 28.6.2013 passed by the Assistant Commissioner, Central Excise, Div-IV Noida as upheld in order-in-appeal dated 18.11.2013 passed by the Commissioner (Appeals), Customs, Central Excise & Service Tax, Noida as conferred in revision by the Government in Revision No.195/143/2014 decided on 2.1.2018. By the order-in-original, the claim of taxguru.in rebate filed by the petitioner claiming rebate of excise duty paid on removal of LCD panels and parts of coloured televisions removed (as such), from its factory at Noida by way of export transaction outside the country had been rejected. The total rebate claim was Rs.1,58,89,518/- being equivalent at the time of their import into the country.
3. Learned counsel for the petitioner would submit that the petitioner is an international manufacturer of electronic goods, i.e. coloured television sets, air conditioner, computer monitors etc. falling under Chapter 84-85 of the Central Excise Act, 1985. During the period 2007-08, it had imported certain LCD panels and parts used in manufacture of coloured televisions from outside the country. On such imports, it had paid custom duties; additional custom duties and countervailing duty. By virtue of Rule 3 (vii) of the Cenvat Credit Rules 2004, the petitioner became entitled to avail CENVAT credit on the countervailing duty so paid, upto the amount specified under those Rules.
4. The petitioner made use of LCD panels and parts in the manufacturing activity conducted by it at its factory at Noida. However, owing to its business arrangements, some of those imported LCD panels and parts were not subjected to manufacturing activity inside the country but the same were re-exported to other manufacturing locations outside the country, in the same form and condition i.e. without subjecting those parts to any manufacturing or processing. Since such LCD panels and parts were being removed from its factory at Noida, again under the CENVAT Rules 2004, Rule 3 (5), the petitioner was obliged to and had paid an amount equal to the CENVAT credit availed by it when the goods were first imported into the country. The petitioner then set up a claim for rebate in terms of Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-Central Excise (N.T.), 06th Sep,2004 The petitioner thus, claimed rebate of Rs.1,58,89,518/-. That claim has been rejected by the authorities, on the reasoning that the goods re-exported had not been manufactured inside the country and therefore, they had not suffered any excise duty and hence no rebate may be claimed. The revising authority has also relied on Section 2 (d) of the Act in that regard.
5. Learned counsel for the petitioner would submit, Rule 18 read with Notification No. 19/2004-Central Excise (N.T.), 06th Sep,2004 is a complete scheme for the purpose of granting rebate. Relying on Rule 18, it has been submitted rebate is available on any goods irrespective of the fact whether they had actually been manufactured inside the country or not. The condition for grant of rebate as specified under the Rules, is only this much that the Central Government must have made a notification to grant such rebate of duty paid on any ‘excisable goods’. In so far as LCD panels and parts thereof are clearly ‘excisable goods’ within the meaning of said terms as defined under Section 2 (d) that condition stood satisfied. Those goods having been exported, there remained no other condition to be fulfiled under the Rule. As to the conditions imposed under the notification dated 6.9.2004, it has been submitted, only other condition remained requiring that such goods be exported after payment of duty, directly from the factory premises. As to the other conditions contained in Clause 2 (b to g) of the notification, there is no dispute of such conditions having been complied. Similarly, as for the other conditions contained in Rule 18 for grant of rebate with respect to duty paid on materials used in the manufacture or processing of goods, the same do not fall for consideration in the facts of the present case. Thus, it has been submitted that there can be no dispute that the goods in question had been exported from the factory of the petitioner. As to the payment of duty, it has been submitted that the payment of amount equal to the CENVAT credit availed under the CENVAT Rule (at the time of import) was payment of duty, inasmuch as that reversal of CENVAT was nothing but payment of countervailing duty which was equivalent to the central excise duty.
6. Learned counsel for the petitioner would further submit that there is no requirement of actual manufacture as a pre-condition of grant of rebate inside the country under Rule 18 of the Central Excise Rules, 2002 read with relevant Notification No. 19/2004-Central Excise (N.T.), 06th Sep,2004 Such a condition, therefore, can never be introduced by implication or by any interpretatiive process. Then referring to the pre-existing MODVAT Rules and the Circular No.283/117/96 dated 31.12.1996 issued there under, it has been submitted Rule 57 F (1) (ii) of the pre-existing MODVAT Rules was pani matenia to Rule 3 (5) of the CENVAT Credit Rules 2004 under that pre-existing Rule, circular dated 31.12.1996, was issued by the Central Government. There under, for grant of rebate in case of such re-export of goods, there was no condition of actual manufacture. In that regard, reliance has been placed on a decision of Bombay High Court in Commissioner of Central Excise RAIGAD Vs. Micro Inks Ltd. 2011 (270) E.L.T. 360 (Bombay) which has been upheld as SLP filed by the revenue against that judgment stands dismissed. A similar view has been taken by the Madras High Court in Ford India Pvt. Ltd. Vs. Assitant Commissioner of Central Excise, Chennai 2011 (272) ELT 353 (Madras).
7. On the other hand, Sri B.K.S. Raghuvanshi, learned counsel for the respondent-revenue would submit that under Rule 18 of the Rules relied upon by the petitioner, the rebate is available only on excisable goods. ‘Excisable goods’ being defined under Section 2 (d) of the Act as goods that may be subjected to duty of excise, it would necessarily have to be goods manufactured inside the country. Then referring to condition under Clause 2 (d) of the rebate notification dated 6.9.2014, it has been submitted that excisable goods must be exported directly from the ‘factory’ where they have been manufactured. Inasmuch as, the petitioner, admittedly did not manufacture the LCD panels and parts of coloured televisions but had imported the same from outside the country, that condition was never fulfilled. Therefore, in his submission, the authorities have not erred in rejecting the claim filed by the assessee.
8. Having heard learned counsel for the parties and having perused the taxguru.in record, in the first place, provisions of Rule 18 of the Central Excise Rules, 2002 in the context of which the dispute has arisen may be noted. It reads as below:-
“Rule 18. Rebate of duty- Where any goods are exported, the Central Government may, by notification, grant rebate of duty paid on such excisable goods or duty paid on material used in the manufacture or processing of such goods and the rebate shall be subject to such conditions or limitations, if any, and fulfilment of such procedure, as may be specified in the notification.”
9. Then, relevant to our purpose, the provision of Rule 3 (5) of the CENVAT Credit Rules 2004 reads as below:-
“(5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 9.”
10. Also, Clause 2 of Notification No. 19/2004-Central Excise (N.T.), 06th Sep,2004 read as below:
“(2) Conditions and limitations:-
(a) that the excisable goods shall be exported after payment of duty, directly from a factory or warehouse, except as otherwise permitted by the Central Board of Excise and Customs by a general or special order;
(b) the excisable goods shall be exported within six months from the date on which they were cleared for export from the factory of manufacture or warehouse or within such extended period as the Commissioner of Central Excise may in any particular case allow;
(c) that the excisable goods supplied as ship’s stores for consumption on board a vessel bound for any foreign port are in such quantities as the Commissioner of Customs at the port of shipment may consider reasonable;
(d) the rebate claim by filing electronic declaration shall be allowed from such place of export and such date, as may be specified by the Board in this behalf;
(e) that the market price of the excisable goods at the time of exportation is not less than the amount of rebate of duly claimed;
(f) that the amount of rebate of duty admissible is not less than five hundred rupees;
(g) that the rebate of duty paid on those excisable goods, export of which is prohibited under any law for the time being in force, shall not be made;”
11. Thus, it emerges that under Rule 18 there is no direct specification that the goods eligible to rebate must have been manufactured inside the country. In fact the requirement under that Rule is with respect to ‘any goods’. The word ‘any’ would clearly include both goods that may have been manufactured inside the country or may have been received from outside the country. The eligibility to rebate does not hinge on the fact that the goods may have been manufactured inside the country but on the fact whether the Central Government had notified the rebate on such goods, that goods must also be ‘excisable goods’. For any goods as to be described as ‘excisable goods’, the definition given to that term under Section 2 (d) of the Act would have to be read as the Central Excise Rules 2002, do not define the word ‘excisable goods’. However, under Rule 2 (i) of the Central Excise Rules 2002, words and expressions used under the Rules but not defined, shall carry the same meaning as has been assigned to under the Act. Therefore, the definition of the word excisable goods given under Section 2 (d) is clearly applicable. It reads:
“2(d) “excisable goods” means goods specified in [the First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986)] as being subject to a duty of excise and includes salt;”
12. Clearly for any goods to be described as ‘excisable goods’, the requirement is that they must be such as have been specified in the first schedule or the second schedule ( prior to the amendment made in 2017). LCD panels and parts were admittedly so specified. Therefore, the goods in question were clearly ‘excisable goods’ and therefore entitled to rebate. What then arises for consideration is whether there was any duty paid on such ‘excisable goods’.
13. Undisputedly, the goods had suffered countervailing duty and therefore by virtue of Rule 3 (1) (vii) of the CENVAT Rules 2004, it was eligible to CENVAT Credit. It cannot therefore, be said that goods did not suffer any duty for the purpose of Rule 18. Thereafter, only the conditions and limitations provided under the excise notification remained to be fulfilled. Here, in view of the fact that it is again undisputed that the CENVAT Credit availed had been reversed in entirety under Rules of 2004, the goods that were excisable goods clearly came to be exported after payment of duty. There is no dispute to the fact that they were exported directly by the petitioner to its other manufacturing units outside the country.
14. The objection raised by the revenue-respondent that the export must have been made after manufacture, is not substantiated by the statutory provisions. The words a ‘factory’ used in clause 2 (a) of the rebate notification only refers to the fact that the goods must be exported from a premises that is a ‘factory’. Again, the term ‘factory’ has not been defined under Rules under Section 2 (e) of the Act. It reads:-
“(e) “factory” means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on;”
15. Thus, it being undisputed that petitioner was carrying out, manufacturing activities at it’s ‘factory’ premises and that the goods had been exported from such premises, the removal of the goods (LCD panels and parts of coloured televisions etc.) was made in compliance of the rebate notification i.e. from it’s ‘factory’.
16. Thus, There found to exist no stipulation under the Rule or a condition under the rebate notification that the eligible goods must have been actually manufactured inside the country. The consequence that arises is that goods that may even be deemed to have been manufactured upon payment of excise duty would remain eligible to rebate on their export. The above construction also appears to be plausible as otherwise it may only lead to a situation where, the goods that may have been received during transit. In that regard, the interpretation placed by the Central Government itself in the context of the MODVAT scheme, is also pertinent. Under that scheme, in similar circumstances, the Central Government itself allowed for rebate on reexport of such goods. In absence of any change to the statutory scheme that view of the Central Government appears to relevant to the present CENVAT Rule as well. In the case of Commissioner of Central Excise RAIGAD Vs Micro Inks Ltd. (supra), that manufacturer was engaged in manufacture of printing inks. It had purchased various inputs/capital goods from domestic suppliers and manufactures. It exported the same on payment of duty by reversing the CENVAT availed on those inputs/capital goods. However, no manufacturing activity had been performed by that manufacturer on the inputs thus purchased. It then claimed rebate under Rule 18 of the Rules read with (amongst others) Notification No. 19/2004-Central Excise (N.T.), 06th Sep,2004. The Bombay High Court reasoned-under the Central Excise law, manufacturer of final product is entitled to take credit of specified duties paid on inputs/capital goods used in the final product and utilize the said credit to pay excise duty on final product by reversing the input credit. Taking note of Rule 3 of the CENVAT Credit Rules 2002, that Court further reasoned that a manufacturer who takes credit of duty paid on inputs/capital goods, and subsequently, removes such inputs/capital goods without utilizing the same in manufacture of any final product, is required to pay an amount equal to the duty of excise leviable on such inputs/capital goods, in view of Rule 3(4) and (5) of the CENVAT Rules. Once that duty is paid, it is liable to be treated as duty paid on clearance of inputs/capital goods. Then referring to circular no.283 of 1996 issued under the MODVAT scheme and considering the pari materia provisions of Rule 57F(1)(ii) of the Central Excise Rules, 1944 and Rule 3(4) of the CENVAT Credit Rules, 2004, the rebate of duty on exported inputs/capital goods was held allowable treating the exporter to be the deemed manufacturer. It was clarified that reversal of CENVAT Credit amounted to duty payment. The same reasoning was adopted by the Bombay High Court in the case of Union of India Vs Sterlite Industries (I) Limited 2017 (354) ELT 87 (Bom.), in that case the assessee had imported used aluminium casting machine as capital goods, CENVAT credit was taken by the assessee on countervailing duty. However, those capital goods were subsequently exported on payment of duty by debiting the credit of input duty. The said claim was also held to be allowable on the similar reasoning as was offered in the decision of Commissioner of Central Excise RAIGAD Vs. Micro Inks Ltd. (supra). Similar view appears to have been taken by the Madras High Court in the case of Ford India Pvt. Ltd. Vs Assistant Commissioner of Central Excise, Chennai (supra).
17. I find myself in complete agreement with the view taken by the Bombay high Court in Commissioner of Central Excise RAIGAD Vs. Micro Inks Ltd. (supra) and Union of India Vs Sterlite Industries (I) Limited (supra).
18. Accordingly, the petition is allowed. The order dated 2.1.2018 is set aside. The matter is remitted to the original authority for consequential effect in accordance with law, in light of the observations made above.