Commissioner of C. Ex. and Customs vs Imtiyaz Traders

Akil Kureshi, J.—Leave to amend Tax Appeals in terms of draft amendment presented today. Consequently, the Appellant is permitted to reframe the questions in paragraph No. 2 of the Appeals.

In this group of appeals common question of law in similar factual background arises. In response to the notice of final disposal issued by this Court on 13-1-2011, learned advocate Mr. Nanavati appeared for the Respondent. We have, therefore, heard learned advocates for the parties and propose to dispose of all the appeals by this common order.

Revenue has challenged the common judgment of Customs Excise & Service Tax Appellate Tribunal (CESTAT for short) dated 7-8-2009 [2010 (261) E.L.T. 495 (Tribunal)] raising following questions for our consideration:

2[a] Whether in the facts and circumstances of the case the Tribunal has committed substantial error of law by entertaining appeal of the Respondent even though jurisdiction of the Tribunal is expressly barred under Clause (b) of first proviso to Section 35B(1)(b) of the Central Excise Act, 1944?

2[b] Whether in the facts and circumstances of the case the Tribunal has committed substantial error of law by setting aside order passed by the Commissioner (Appeals) confirming order of the adjudicating authority, by observing absence of material on record as to how the rebate claim was sanctioned by the competent authority?

Facts, as arising in Tax Appeal No. 630 of 2010 for the purpose of this order, can be noticed, which are as under:

4.1 The Respondent exporters had presented before the Excise and Customs authorities its rebate claim of Rs. 2,79,956/- on the basis that the Respondent had exported certain goods upon which it was entitled to receive rebate of the excise duty. Such rebate claim was filed by the Respondent-exporters on behalf of the manufacturer after obtaining NOC from such manufacturer. Such claim was, in fact, passed by the Revenue in the year 2004.

4.2 Revenue, however, subsequently, upon finding that large-scale scam had been committed by several exporters, with respect to such rebate claims, carried out an investigation. Pursuant to such investigation in case of the Respondent exporters and other similar units, common show cause notice dated 31-1-2008 came to be issued indicating that as per the Revenue such claims were based on bogus documents. Respondent-exporters and other units were, therefore, called upon to produce such evidence as they intended. They were also permitted to file written explanations. They were given 30 days time for such purpose.

In pursuance of the said show cause notice and the proceedings carried out by the adjudicating officer, an order dated 27-8-2008 came to be issued by virtue of which he was pleased to order recovery u/s 11A of the Central Excise Act of Rs. 2,79,956/- for the rebate claim erroneously granted in favour of the Respondent-exporters. He also passed consequential orders of interest and penalties.

Such order of the adjudicating authority was challenged by the Respondents before the Commissioner (Appeals). Commissioner (Appeals), by order dated 10-12-2008, was pleased to dismiss the appeals. The issue was carried further by the present Respondent-exporters and others before the Tribunal. The Tribunal, by impugned common judgment dated 7-8-2009, was pleased to remand the proceedings before the adjudicating authority by setting aside the previous orders. The Tribunal made following observations:

A. After carefully considering the submissions made by both the sides, I find that Revenue''s case is based upon the Alert circular issued by the Board in the year 2006, indicting that M/s. Parshwanath Impex is a non-existing unit. I have seen said Circular. Apart from the fact that the Circular is to the effect that the listed units have been found to be non-existent/fake and bogus, there is no indication of any time in the said alert Circular. I also note that there is nothing on record as to whether the said M/s. Parshwanath Impex had actually paid the duty to the Revenue or not. This fact is easily verifiable from the records of Central Excise department. No efforts have been made by the authorities below to that effect. Even the Appellant have not made any effort to show that the said manufacturer was in existence in the year 2003-04, when they conducted their business with them. The Hon''ble Gujarat High Court in the case of Sheela Dyeing and Printing Mills Pvt. Limited v. CCE, Surat 2008 (232) E.L.T. 408 (Gujarat) has held that it is for the Assessee to take reasonable steps to ensure the identity and address of the suppliers. It is also not understood that as to how the rebate claim was sanctioned, if the manufacturer was a fictitious party during the relevant period, inasmuch as the relevant provisions of CBEC''s Instruction Manual as contained in Para 8.4 are to the effect that before grant of rebate, the authorities are required to be satisfied themselves about the goods cleared for export under the relevant ARE-1 and duty paid character of the said goods. Whether such satisfaction was arrived at by the officers sanctioning the refund or not, is also an issue required to be verified and examined. There is also nothing on record to show that if the goods were not obtained from the said M/s. Parshwanath Impex, then from where the same were received and exported. In my views, the disputed issue is required to be examined from all the above angles. Accordingly, I set aside the impugned order and remand the matter to Original Adjudicating Authority for a fresh decision in the light of the observations made above, including on limitation.

From the order dated 13-1-2011 by this Court, we find that the notice for final disposal was issued primarily on the contention of the counsel for the Revenue that in view of the provisions contained in Section 35B of the Central Excise Act, CESTAT has no jurisdiction to entertain the appeals.

We, have therefore, consider question No. 1 noted earlier as substantial question of law in these appeals.

Counsel for the Revenue invited our attention to the provisions contained in Section 35B of the Central Excise Act, to contend that in the appeals be-fore the Tribunal, order under challenge was one relating to rebate, therefore, the Tribunal had no jurisdiction to entertain the appeals.

On the other hand, counsel for the Respondent exporters urged that before adjudicating authority the issue was one of recovery of erroneous refund of excise duty. This was, thus, not a case of rebate. The Tribunal, therefore, had jurisdiction to entertain the appeals. The question of jurisdiction was never raised before the Tribunal. In short, he prayed that the appeals be dismissed.

Section 35B of the Central Excise Act pertains to appeals to the appellate Tribunal. Sub-section (1) of Section 35B of the Act which is relevant for our purpose reads as under:

Section 35B - (1) Any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order -(a) a decision or order passed by the [Commissioner of Central Excise] as an adjudicating authority;

(b) an order passed by the [Commissioner (Appeals) u/s 35A;

(c) an order passed by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) ( hereinafter in this Chapter referred to as the Board) or the Appellate [Commissioner of Central Excise] u/s 35, as it stood immediately before the appointed day;

(d) an order passed by the Board or the [Commissioner of Central Excise], either before or after the appointed day, u/s 35A, as it stood immediately before that day:

[Provided that no appeal shall lie to the Appellate Tribunal and the Appellate Tribunal shall not have jurisdiction to decide any appeal in respect of any order referred to in Clause (b) if such order relates to,-

(a) a case of loss of goods, where the loss occurs in transit from a factory to a warehouse or to another factory, or from one warehouse to another, or during the course of processing of the goods in a warehouse or in storage, whether in a factory or in a warehouse;

(b) a rebate of duty of excise on goods exported to any country or territory outside India or on excisable materials used in the manufacture of goods which are exported to any country or territory outside India;

(c) goods exported outside India (except to Nepal or Bhutan) without payment of duty;

(d) credit of any duty allowed to be utilized towards payment of excise duty on final products under the provisions of this Act or the rules made thereunder and such order is passed by the Commissioner (Appeals) on or after the date appointed u/s 109 of the Finance (No. 2) Act, 1998:

Provided further that the Appellate Tribunal may, in its discretion, refuse to admit an appeal in respect of an order referred to in Clause (b) of Clause (c) or Clause (d) where-

(i) in any disputed case, other than a case where the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment is in issue or is one of the points in issue, the difference in duty involved or the duty involved; or

(ii) the amount of fine or penalty determined by such order, does not exceed [fifty thousand rupees]

From the above provision of Sub-section (1) of Section 35B of the Central Excise Act, it can be seen that against the order passed by the Commissioner (Appeals) under Sectin 35A, appeal would lie to the appellate Tribunal. This is, however, subject to poviso to Sub-section (1), Clause (b) of which provides that no such appeal shall lie to the Tribunal and the Tribunal shall not have jurisdiction to decide any appeal in respect of any order referred to in Clause (b)if such order relates to rebate of duty of excise on goods exported to any country or territory outside India or on excisable materials used in the amnufacture of goods which are exported to any country or territory outside India.

Short question, therfore, calls for our consideration is whether the order of the Commissioner (Appeals) passed u/s 35A of the Central Excise Act related to "a rebate on duty of excise of goods exported to any country or territory outside India or on excisable materials used in the manufacture of goods, which are exported to any country or territory outside India."

The facts are not in dispute that the Respondent-exporters in the year 2003 had claimed rebate of excise duty of Rs. 2,79,956/-. Such rebate claim was granted in teh year 2004. Subsequently, however, upon investigation the department prima facie, believed that such rebate was claimed on the basis of non-genuine documents and issued show cause notice to the exporters, At the end, authority, by order in original concluded that such rebate was wrongly granted. In excise of powers under Sub-section (2) of Section 11A, he, therefore, ordered recovery of such rebate, which according to him was fraudulently claims, He also ordered recovery of interest and penalty. It was this order which was carried in appeal by the Respondent exporters before the Commissioner (Appeals). Commissiner (Appeals) therefore, was examining the challenge of the Respondent exporters to the order passed by teh adjudicating authority regarding recovery of the rebate allegedly fraudulently obtained. The Commissioner (Appeals) also concurred with teh view fo the adjudicating authority and dismissed the appeals.

We are of the opinion that the order of Commissioner (Appeals) relates to rebate of duty of excise on goods as already noted. Counsel for the Respondent-exporters strenuously urged that Sectin 11A of the Central Excise Act pertains to recovery of duty not levied or not paid or short paid or erroneously refunded and that therefore, order under challenge before the Tribunal was one pertaining to refund of recovery of excise duty erroneously refunded.

We are unable to accept such a contention. It may be that the proceedings pretained to recovery of duty erroneously refunded, the same was in the form of rebate of excise duty on goods exported to any country. In shorty, therfore, the order of the Commissioner (Appeals) pertains to rebate of duty of excise on goods. We see no distinction in teh languate used in SEction 35B of the Central Excise Act as teh bestow jurisdiction of the Tribunal in cases wher question of recovery of rebate wrongly granted as compared to the question of grant of rebate arises independently. In our view, in any orders of the Commissioner, one relating to rebate of duty of excise on goods would, therefore, be covered under the exemption Clause (b) of the proviso to Sub-section (1) of Section 35B of the Central Excise Act. The proviso emphasis in no unclear terms that in such a case, the Tribunal would have no jurisdiction to entertain an appeal against the order of Commissioner (Appeals). The proviso, as is clear, provides that no appeal shall lie to the Tribunal and that the appellate Tribunal shall not have jurisdiction to decide any such appeal.

We have further noticed that rebate is allowed under Rule 18 of the Central Excise Rules, 2002 in following terms:

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 materials used in the manufacture or processing of goods and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification.

Explanation. - "Export" includes goods shipped as provision or stores for use on board a ship proceeding to a foreign port or supplied to a foreign going aircraft.

Rule 18 of the Central Excise Rules empowers the Central Government to issue notice to grant rebate of duty under certain circumstances. In Clause 8 and in para 8.4 of Chapter 8 of the Abstract of Contents to CBEC''s Excise Manual of Supplementary Instructions provides for machinery for claiming such rebate. Neither of these provisions would decide the nature of proceedings before the Tribunal in the present case. We have ascertained the nature of the proceedings from the documents and orders on record. We are of the opinion that the orders of the Commissioner (Appeals) related to rebate of excise duty on goods and, therefore, further appeal to the Tribunal was not maintainable. When the question is one of pure question of law and when it pertains to jurisdiction of a Court or Tribunal, mere fact that such question was not raised before the Court below would not prevent us from examining the question.

In the result, we answer the first question in favour of the Appellant and on that basis hold that appeals were not maintainable before the Tribunal. When we have concluded that the appeals were not maintainable, we refrain from going into the second question raised by the Revenue which pertains to the merits of the order passed by the Tribunal.

Nothing stated in this order shall preclude the Respondents from availing further remedy against the order passed by the Commissioner (Appeals) in accordance with law.

In the result, all appeals are allowed by quashing and setting aside all orders of the Tribunal.