Indian Oil Corporation Ltd. vs Union of India

Rule. Respondents waive service. By consent, rule made returnable forthwith. The challenge in this Writ Petition under Article 226 of the Constitution of India is to an order dated 11 November, 2009 passed by the Revisional Authority, namely the Joint Secretary to Government of India, Ministry of Finance in the Department of Revenue. The order dated 11 November, 2009 and communication thereof dated 11 March, 2010 are challenged in the below mentioned factual background.

The Petitioner is a Government of India undertaking and termed as a Government Company under Section 617 of the Indian Companies Act, 1956. It has its registered office at the address mentioned in the title to this Writ Petition. The Respondents are officers exercising powers under the relevant statute namely the Central Excise Act, 1944 end Rules framed thereunder. In this case, we concerned with Rule 18 of the Central Excise Rules, 2002.

The claim of the Petitioner is that it procured Aviation Turbine Fuel, for short (ATF) from the refinery of M/s. Bharat Petroleum Corporation Ltd., for short (BPCL), at Trombay. The said fuel was supplied to the Petitioner by BPCL on payment of duty of excise. That fuel was initially stored at the terminal and thereafter it was sold at NITC, IGI Airport, Delhi. A part quantity of ATF purchased from the said BPCL was for supply to aircrafts on foreign run. The invoice copies are annexed at Annexures A to D. The Petitioner pointed out that the safety requirements and lack of space at airport permits storage facility to BPCL at IGI Airport, New Delhi. In this case, ATF was purchased from BPCL and part of it was sold to BPCL itself. The other part of ATF acquired from BPCL was sold to aircraft on foreign run. The Petitioner obtained a joint certificate which is at Annexure-E and thereafter proceeded to lodge a claim for refund of Rs. 10,93,745/- being the duty paid on the ATF supplied to aircraft on foreign run. That was the ATF which was supplied from NITC-AFS. The claim was filed in terms of Rule 18 of the Central Excise Rules, 2002. All the relevant documents were annexed to Claim Application dated 25 August 2005. There were certain queries raised by Respondent No. 3 on this application for refund and those were forming part of Query Memo dated 30 September 2005, copy of which is at Annexure-G to the Writ Petition. The factual position was clarified by the Petitioner by replies at Annexures - H, I & J to this Writ Petition.

The Petitioner essentially pointed out that they have complied with the mandatory as also the procedural requirements under the Notification dated 6 September, 2004. Therefore, the refund should be granted.

However, that application was rejected on 3 February, 2006. Copy of this order is at Annexure-L to the Writ Petition. An appeal was filed against this order before the Commissioner of Central Excise (Appeals), and which appeal was dismissed on 21 June 2006.

In the order dated 21 June 2006, copy of which is at Annexure-N to the Writ Petition, it has been categorically observed by the Authority namely the Commissioner (Appeals) that the Petitioner complied with all the requirements and therefore, the claim should have been granted. The Petitioner relied upon the Notification, which permits supplies being made from a factory or a warehouse.

At page 74 of the Paper Book, following is the part of the order of the Appellate Authority, which has been relied upon by Shri Patil, learned Counsel appearing for the Petitioner : -

"A personal hearing was held on 10-5-2006. Shri M.E. Lakha, Deputy Manager appeared on behalf of the appellants and reiterated the arguments advanced in their written submission.

I have gone through the records of the case and considered the arguments advanced in their written submission and at the time of personal hearing. The issue involved is eligibility of rebate claim. The appellants had procured the Aviation Turbine Fuel (ATF) from the factory of M/s. BPCL and supplied to their Aviation Fuelling Station at New Delhi. They effected export of ATF from AFS, New Delhi to Aircraft on Foreign run under ARE-1. There is much force in the findings of lower authority. He has rightly observed that there is total contravention of the provisions of Notification No. 19/2004-CEX (N.T.), dated 6-9-2004. There is no dispute regarding the export of goods. The appellants have exported goods to aircraft on foreign run from the AFS. In the instant case, the goods are not exported directly from the factory and the AFS is not a warehouse. The provisions of Notification No. 19/2004 lays down 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 general or special order. Hence permission from C.B.E. & C. was a pre-requisite under the said Notification (supra). This cannot be said to be procedural condition as the identity of goods exported are required to be established. The rebate can be sanctioned, if the same goods which suffered duty are exported and necessary permission should have been obtained by them from C.B.E. & C. I observe that the appellants could not prove either before the lower authority or in the present appeal that the ATF exported had suffered duty and the very same ATF was actually exported. Therefore, the appellants failed to comply substantially the conditions laid down under Rule 18 ibid, and hence they are not entitled for rebate. As such the impugned order passed by the lower authority is sustainable and I do not want to interfere with the same.

In view of above, I uphold the impugned order and reject the appeal."

Aggrieved by this order of rejection of appeal, a Revision Application was filed before the Revisional Authority namely the Joint Secretary to the Government of India, Ministry of Finance (Department of Revenue). He proceeded to reject the same on 11 November, 2009 and copy of this order is at Annexure-P to the Writ Petition. From that order as well the Counsel relies on the factual position and which can be easily noted. The relevant findings are to be found in paras 7 & 8 of the impugned order, they read as under : -

"7. From the perusal of records, Govt. observes that the applicant has supplied the ATF to aircrafts on foreign run by transferring the duty paid product to the Aviation Fuelling Station (AFS) Mumbai-Delhi which has been registered as a warehouse of Excisable goods. As per condition of para 2(a) of the Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004, the goods have to be exported directly from the factory or warehouse except as otherwise permitted by the Central Board of Excise and Customs by general or special order. C.B.E. & C. has issued a Circular No. 294/10/97-CX, dated 30-01-1997 whereby this condition can be relaxed if the goods exported are identifiable and co-relatable with the goods cleared from the factory of manufacturer. Applicants have also failed to submit the documents as pointed out in above para 2.2.

In the instant case, the applicant has not supplied ATF to foreign run aircraft from factory or warehouse and they failed to establish the co-relation with the goods cleared from the factory to those supplied to foreign run aircraft. Hence the rebate is not admissible as they have failed to comply with the mandatory conditions of the Notification No. 19/2004-C.E. (NT), dated 6-9-2004 issued under Rule 18 of the Central Excise Rules, 2002. Applicants'' plea that their case is covered under para 3(d) of the said Notification and therefore the para 3(a) is not applicable to them is not correct as para 3(d) is regarding granting of rebate for such quantity of products as remain as board the aircraft after completion of an internal flight but prior to its reversion on foreign run."

Mr. Patil, learned Counsel appearing for the Petitioner, therefore, submits that there is complete compliance with the Notification and particularly the condition in para 2(a) of the same. Relying upon this condition, Mr. Patil would submit that on 12th November 2005 the Petitioner clarified that the Office of the Commissioner, Central Excise, Delhi-II granted permission to establish Export Warehouse at Aviation Fuelling Station, Delhi Airport, Terminal-II. Mr. Patil also invites our attention to the Notification, and which, inter alia, stipulated 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 general or special order. Mr. Patil submits that if the export is made after payment of duty directly from the factory, or warehouse, then there is no question of obtaining a permission from the Board, that is only when the goods are exported not from a factory or a warehouse. Mr. Patil submits that in identical circumstances and in the case of very Petitioner, a refund application was granted. The refund application was granted by the Appellate Authority and in that case reliance is placed on the order passed by another Appellate Authority. However, Mr. Patil would submit that in the present case, the Notification has been misread and deliberately to deny the claim.

Mr. Rao, learned Counsel appearing on behalf of the Revenue submits that in the present case, the finding of fact, in para 8 of the order under challenge, cannot be said to be perverse. It is not vitiated by any error of law apparent on the face of record. It is also not misreading or misinterpreting any conditions. Mr. Rao emphasizes that ATF was not supplied to foreign run aircrafts from the factory or the warehouse. Further, the Petitioner failed to establish the co-relation with the goods cleared from the factory to those supplied to foreign run aircrafts. In such circumstances, Mr. Rao would submit that the Petition should be dismissed. Alternately, he submits that for verification and scrutiny of the records, this Court should partly allow the Writ Petition and remand the matter back to the Revisional Authority, who will pass a fresh order after hearing the Petitioner.

With the assistance of Mr. Patil and Mr. Rao, we have perused the Petition and all the relevant Annexures including the impugned order.

On perusal of these documents and undisputed factual position emerging therefrom, we do not find substance in any of the submissions of Mr. Rao. The Revisional Authority so also the Appellate Authority have rendered consistent factual findings. They are that the Petitioner-Applicant has supplied the fuel to aircrafts on foreign run by transferring duty paid products to the Aviation Fuelling Station, Mumbai-Delhi (AFS) and which has been registered as a warehouse of excisable goods. Now, such a finding of fact based on the records would denote compliance with the condition in para 2(a) of the Notification No. 19/2004 C.Ex. (N.T.), dated 6th September, 2004. That condition reads as under : -

"2(a) that the excisable goods shall be exported after payment of duty, directly from a factory or warehouse, except as other permitted by the Central Board of Excise and Customs by a general or special order."

Upon perusal of this condition, we find much substance in the argument of Mr. Patil that if excisable goods are exported after payment of duty directly from a factory or warehouse, then nothing more is required to be considered and verified. That in this case, records have been verified and which demonstrate that the export of duty paid products is from a recognized warehouse namely AFS at Delhi. Therefore, the Appellate as well as the Revisional Authority could not have held that there is no compliance with the condition. The Revisional Authority has further observed that the Circular issued by the Central Board of Excise and Customs dated 30th January, 1997 has held that this condition can be relaxed if the goods exported are identifiable and co-relatable with the goods cleared from the factory of manufacturer.

We do not find any basis for placing reliance upon this Circular dated 30th January, 1997 of the Central Board, as the Notification is a subsequent document. That does not indicate as to how the refund can be denied merely because the goods, which are duty paid, have been exported from a warehouse. In such circumstances, there is no basis for the finding and conclusion that the condition in the Notification has not been fulfilled or satisfied by the Petitioner. All documents have been furnished and submitted and we do not find as to how a general and vague finding about non-submission of documents can be recorded by the Authorities. In fact, findings in paras 7 & 8 of the order of the Revisional Authority are inconsistent and contradictory. If the argument of the Petitioner is that the co-relation has been established and which has been considered in para 8, then, there was no necessity of rejecting it in the teeth of earlier clear observations and findings that perusal of records shows that fuel was supplied to air-crafts on foreign run by transferring the duty paid product to AFS, Mumbai-Delhi. If that is registered as a warehouse of excisable goods, then, there is absolutely no necessity of looking into any other compliance. Particularly, when the refund application has been rejected by the Authority concerned and equally by the Appellate Authority by cryptic conclusion and as reproduced above. In the Appellate order, there is a clear finding that the Petitioner has complied with all other conditions, save and except para 2(a) of the Notification.

In the light of this, we are unable to appreciate the argument of the Revenue and to the contrary. The Revenue has not produced before us any document, which superseded the Notification dated 6 September 2004 or modifies or amends the same in any manner. Further there is much substance in the argument of Mr. Patil that earlier identical finding and which is to be found in the order of the Assistant Commissioner, Central Excise, Chembur-I Dn. Mumbai-II dated 3rd February, 2006, at page 63 of the Paper Book, was set aside by the Re-visional Authority. The Revisional Authority has in its order passed in favour of the Petitioner before us has held that the refund claim was rejected on procedural infractions, which are condonable. In these circumstances and when there is an identical view taken in the case of M/s. BPCL, we are unable to sustain the impugned order.

Further, we do not accede to the alternate submission and request of Mr. Rao of remand of the matter to the Revisional Authority for the simple reason that there is no dispute about the factual position. The Revisional Authority has referred to the records and held as above. Further we have reproduced this specific finding of the Appellate Authority at page 74 of the Paper Book, which only shows that there is no dispute about the identity of the goods either. The Petitioner has exported goods and from the warehouse, which is registered, to aircraft on foreign run. Therefore, the goods are identifiable and they are ATF. They are duty paid products. In such circumstances, argument of the Revenue that the matter requires to be remanded cannot be accepted.

In the case of the Petitioner, the Gujarat High Court while deciding the Special Civil Application No. 12073 of 2011, decided on 15th December, 2011, [2012 (281) E.L.T. 209 (Guj.)] found necessity of remand because the peculiar factual position therein was not identical. There the procedure required storage for consumption on board an aircraft on foreign run and which is the condition stipulated in the exemption Notification dated 26th June, 2011. That was also the issue involved. That is how the remand was ordered. Such is not the factual position before us. In fact, there is no dispute about facts at all. In such circumstances, the alternate submission is also rejected. As a result of above discussion and for the reasons indicated by us, this Writ Petition succeeds. Rule is made absolute in terms of prayer clause (a). The rebate claim of the Petitioner is granted by quashing and setting aside all orders namely that of the Assistant Commissioner, Appellate Authority as also the Government. The incidental communication dated 11th March, 2010 is also set aside. The amount, which is subject matter of the refund claim, shall be disbursed and released in favour of the Petitioner within a period of eight weeks from the date of receipt of copy of this order. In the facts peculiar to this case, we refrain from imposing any costs, but expect the Government should not indulge in such exercise and particularly to harass its own arm or entity like Indian Oil Corporation.