A.G. Enterprises vs Union of India

Sudhir Agarwal, J.—Heard Sri Udit Chandra, Advocate, for petitioner. Sri Siddharth Shukla, who has appeared on behalf of Government of India, is not prepared with the matter and could not render any assistance to the Court. In the circumstances, after hearing Counsel for petitioner, I proceed to decide the matter. Petitioner is engaged in manufacture and export of certain commodities including Diesel Engines. Certain Diesel Engines were exported and the petitioner submitted two rebate claims for duty drawback on custom to the tune of Rs. 1,02,242/- and 84,441/- on 4-3-2008 through respective Bills. The Assistant Commissioner Central Excise served a notice dated 22-4-2008 upon petitioner requiring him to show cause as to why his claim be not rejected inasmuch the benefit of input stage rebate, where finished goods are exported under claim for duty drawback, is not admissible vide para 1.5(i) part-V of Chapter 8 of CBE&C''s Excise Manual of Supplementary Instructions. Petitioner submitted reply dated 28-4-2008 stating that if the exporter claims duty drawback of excise duty, then rebate claim of Excise duty is not permissible, but that is not applicable on duty drawback of Customs duty and petitioner has claimed duty drawback of only Customs duty and not of Excise duty. The matter was examined by Assistant Commissioner and he rejected petitioner''s claim vide order dated 31-7-2008. Petitioner preferred appeal before the Commissioner, Central Excise, Kanpur which was allowed vide order dated 21-11-2008. Commissioner has considered the aforesaid aspect of the matter and recorded its findings as under:

"I notice that it is on record that the goods were exported under bond under Rule 19 of the Central Excise Rules, 2002 for which ARE-2 forms were filed. It is also on record that proper declaration was made on the ARE-2 forms that the goods shall be exported under claim of input stage rebate. It is again a fact that Central Excise form ARE-2 is filed only in the case when input stage rebate is claimed. Thus, from the aforesaid facts, it can very well be concluded that the appellant were clear in their mind that they will avail rebate of input stage'' credit and accordingly they filed their documents.

The department has denied the benefit on the ground that the para 1.5(i) of Part-V Chapter 8 of the CBE&C''s Excise Manual of Supplementary Instructions has laid that the input stage rebate was not admissible, where the finished goods were exported under claim of duty drawback. I have gone through the said para 1.5 and observe that the words "input stage rebate" appearing in the said para have been used for the "Central Excise Duty paid on the inputs", therefore, the words "claim for duty drawback" shall also have to be read in relation to the "Central Excise Duty paid on the inputs" and shall have to be interpreted accordingly. From the reading of the entire provision, I find that the restriction for availment of duty drawback has been imposed in respect of Central Excise Duty. For determining the fact as to whether the appellant has availed drawback of Central Excise Duty or not, the shipping bills filed by the appellant are required to be examined. On perusal of the shipping bills filed by the appellant, I have noticed that the exported goods have been classified under CSH No. 84089090 of the CETYA, 1985 and the drawback has been sanctioned @ 1.3% ad valorem of the FOB value. Now the next fact to be verified is as to whether the aforesaid rate of drawback is the rate inclusive of Central Excise Duty component or otherwise. The "All Industry rates of Duty Drawback" are notified by the Government under two heads i.e. "Drawback when Cenvat facility has been availed" and "Drawback when Cenvat facility has [not] been availed". The drawback rates in the condition when Cenvat facility has not been availed are generally higher as compared to drawback rates when Cenvat facility has been availed. In the condition 5 of the Notification No. 68/2007-Cus. (N.T.), dated 16-7-2007 that determines the rates of drawback as specified in the Schedule and was effective at the particular time period. It has clearly been mentioned that the difference between two columns relates to the Central Excise and Service Tax component of drawback and in case the rates indicated are the same in both the columns, it shall mean that the same pertains only to Customs component, which is available irrespective of whether the exporter has availed Cenvat credit or not. The said condition No. 5 is being reproduced below for better understanding of the provisions.

"(5) The figures shown under drawback rate and drawback cap appearing below the column "Drawback when Cenvat facility has not been availed" refer to the total drawback (Customs, Central Excise and Service Tax component put together) allowable and those appearing under the column "Drawback when Cenvat facility has been availed" refer to the drawback allowable under the Customs component. The difference 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."

In this case, the drawback rates mentioned in both the column is 1.3% which means that the drawback pertains to Customs component only. Thus the appellant''s submission that they did not claim drawback in respect of Central Excise component is correct. It has clearly been mentioned in the said condition that the drawback in respect to Customs component was available irrespective of the fact that the appellant has availed Cenvat or not. Therefore, under the circumstances, when the appellant have not been granted the drawback in respect of Central Excise component, their claim for rebate of Central Excise Duty paid on the inputs used in manufacture of exported goods, succeeds."

The Department thereafter preferred Revision before Central Government which has been allowed by impugned order dated 12-5-2011 [2012 (276) E.L.T. 122 (G.O.I.)] and Commissioner''s Order has been set aside.

Sri Udit Chandra, learned Counsel for petitioner, contended that without considering reasons and findings given by Commissioner, the Central Government in a cursory manner has allowed revision and reversed the decision of Commissioner. The question raised by petitioner has not at all been discussed and in effect the order of Central Government is wholly non-speaking.

I find that the so called findings given in the Revisional Order whatsoever as contained in paras 8,9 and 10 only which read as under:

"8. The issue to be decided is whether rebate of Excise duty paid on inputs is inadmissible when the benefit of drawback has been claimed on the exported goods.

Government observes that the original authority had rejected the rebate claim in terms of para 1.5(i) of Part-V of Chapter 8 of CBE&C''s Excise Manual of Supplementary Instructions, wherein it is stated that the benefit of input stage rebate cannot be claimed if the finished goods are exported under claim of duty drawback. The said provision does not differentiate the drawback into excise portion and Customs portion and restricts the availment of input stage rebate, if the export of finished goods has been done under claim for drawback. In the instance case, the respondent has exported the goods under Duty Drawback and hence, they are not entitled for rebate as inputs.

Therefore, Government, going for the observations of Hon''ble Supreme Court in Case (i) I.T.C. Ltd. Vs. Commissioner of Central Excise, New Delhi and Another, and (ii) The Paper Products Ltd. Vs. Commissioner of Central Excise, is of the considered opinion that the plain and simple wordings of the (clarified/stipulated) statute are to be strictly adhered to, is of the considered opinion that the claimed input stage rebate is not admissible in this case of exports made under Drawback scheme."

The Government has not at all found anything in the finding recorded by Commissioner incorrect. The order of Tribunal in Meghdoot Pistons v. C.C.E., Kanpur - 2011 (263) E.L.T. 610 (T), relied on by Assessee in the memo of appeal has also not been referred at all. Though two judgments of Apex Court are referred, but they are on the principle of interpretation and as such do not answer the question raised in this matter. The order of the Government, therefore, is bad for want of reasons and discussions on the question raised, as also for want of any finding of reversal before setting aside order of Commissioner. The reasons assigned by Commissioner in allowing Appeal have not been noticed and nothing has been found as to why they are bad or incorrect, yet Commissioner''s order has been set aside by simply referring to relevant provisions and reiterating what is stated therein. The revisional order, therefore, in my view, cannot sustain.

Besides, having gone through the impugned revisional order, in my view, Respondent No. 1 has also not considered the provisions in Part-V of Central Excise Manual as also the Government of India''s Notification dated 16-7-2007 and Duty Drawback Scheme which need be re-examined after considering the same in proper perspective and a reasoned order need be passed on the part of Respondent No. 1.

In the result, the writ petition is allowed. The impugned Revisional Order dated 12-5-2011 is hereby set aside. Matter is remanded to Central Government to re-consider the revision of Department and pass fresh order in accordance with law. Petitioner shall also be entitled to cost, which I quantify to Rs. 10,000/-.