Welspun Corp. Ltd. (formerly known as Welspun Gujarat Stahi) Vs Union of India and Others

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Judgment

235 paragraphs · 4,897 words

Akil Kureshi, J.—Heard learned counsel for the parties for final disposal of the petition. The petitioner has challenged the order-in-appeal

dated April 27, 2011 passed by the Appellate Commissioner and one dated May 18, 2012 passed by the Government of India as a revisional

authority.

The petition arises in the following factual background:

The petitioner is engaged in the manufacturing and exporting of goods. The petitioner has one such manufacturing unit situated in Kutch area. Such

unit avails of the benefit of Exemption Notification No. 39/2001, dated July 31, 2001, which was issued by the Government of India in exercise of

powers u/s 5A of the Central Excise Act, 1944 (""the Act"" for short) granting special benefits to units situated in Kutch District of the State of

Gujarat in order to encourage setting up of manufacturing units in the District after earthquake of January 26, 2001, which devastated the said

region.

To the goods manufactured by the petitioner, which were ultimately exported, the petitioner also availed of Exemption Notification No. 19 of

2004, dated September 6, 2004. Such notification was issued by the Government of India in exercise of powers under rule 18 of the Central

Excise Rules, 2002 (""the Rules"" for short). The notification granted exemption in the form of a rebate of whole of the duty of excise falling under

First Schedule to the Central Excise Tariff Act, 1985 when such goods are exported to countries other than Nepal and Bhutan. Availment of such

exemption was subject to several conditions contained in the said notification, to which we would refer to at a later stage.

The petitioner cleared its goods manufactured in the unit situated in Kutch region for export during the period between August 24, 2007 and

August 31, 2007. Admittedly such goods though were cleared for export after following the conditions mentioned in Exemption Notification No.

19/ 2004, the actual export took place on or around September 23, 2007. In the meantime, on September 17, 2007 the Government of India

issued amendment Notification No. 37/2007 amending Notification No. 19/2004 and added condition (h) in paragraph 2 of the said notification.

By virtue of such amendment, rebate was made inadmissible in the case of exports of goods by the manufacturers availing of benefits under various

notifications mentioned therein including Kutch area exemption Notification No. 39/ 2001. The central controversy in the present petition is

whether to the exports made by the petitioner, after such amendment was made, such condition could be applied even though the goods were

cleared from the factory for export before such date.

To complete the sequence of events, upon finally exporting the goods, the petitioner filed two rebate claims for a sum of Rs. 2,39,09,690 with the

adjudicating authority. The adjudicating authority, however, issued a show-cause notice dated December 28, 2007 calling upon the petitioner why

such rebate claims should not be rejected. He relied upon a clarification issued by the CBEC dated December 8, 2006 to contend that since the

petitioner was already availing of exemption under Kutch area exemption notification, it was not entitled to rebate upon export. He was, prima

facie, of the opinion that there can be no rebate of duty when duty had not been paid.

The petitioner replied to the said show-cause notice under communication dated January 21, 2008 and opposed the proposal. The petitioner

contended that its claim of exemption under Kutch area exemption notification would not disentitle it from claiming rebate on the exported goods.

The petitioner also contested the validity of the CBEC circular. Significantly, the petitioner itself brought up the issue of applicability of the

amendment dated September 17, 2007 in Notification No. 19/2004. The petitioner''s contention in this regard may be noted:

4.9 We further submit that Notification No. 37/2007-CE (N.T.), dated September 17, 2007 was issued clarifying that rebate on exports not

available when manufacturer availing of area based exemption, amending Notification No. 19/2004-CE (N.T.), dated September 6, 2004. The

said notification dated September 17, 2007, has clarified that ''the rebate shall not be admissible under this notification'' to the units availing of

benefits of Notification No. 39/2001-CE, dated July 31, 2001, pertaining to the noticee. Since this notification has expressly made the rebate

inadmissible to the notice since September 17, 2007, it can be construed that the rebate claims cannot be made on any goods cleared for export

on or after September 17, 2007, the date from which the notification is effective. Notification No. 37/ 2007-CE (N.T.), dated September 17,

2007 has only prospective effect and cannot be implied retrospectively. Therefore, the notices are eligible for the rebate on the goods cleared for

export on or before September 16, 2007, under claim of rebate.

The counsel for the petitioner submitted that the adjudicating authority did not pass final order in view of the petitioner''s challenge to the CBEC

circular dated December 8, 2006, which was pending before this court. He pointed out that this court by judgment in the case of Welspun Gujarat

Stahl Rohren Ltd. and Another Vs. Union of India (UOI) and Others, struck down the circular. Such decision has also been upheld by the

Supreme Court. Thereupon, the adjudicating authority proceeded to examine the petitioner''s refund claims. By an order dated December 3, 2010,

the adjudicating authority granted the rebate and passed the following order:

13.

(i) I hereby sanction the rebate of Rs. 2,25,35,758 (rupees two crore twenty five lakhs thirty five thousand seven hundred and fifty eight only)

in cash to M/s. Welspun Corp. Limited (earlier known as M/s. Welspun Gujarat Stahl Rohren Ltd.) Vill: Varsamedi, Taluka Anjar (Kutch),

Gujarat u/s 11B of the Central Excise Act, 1944 read with rule 18 of the Central Excise Rules, 2002.

(ii) I also allow M/s. Welspun Corp. Limited, Vill: Varsamedi, Taluka Anjar (Kutch), Gujarat to take a credit of Rs. 13,73,922 (rupees thirteen

lakhs seventy three thousand nine hundred and twenty two only) in their PLA account.

Against such order of the adjudicating authority, the Department preferred an appeal before the Appellate Commissioner. It is undisputed that in

such appeal, the Department pressed in service the amended notification dated September 17, 2007 and strongly urged that by virtue of such

amendment in Notification No. 19/2004, rebate claims were not maintainable.

The appellate authority, by an order dated April 27, 2011, partly allowed the Department''s appeal. To the extent that the goods, which were

actually exported prior to September 17, 2007 amendment, rebate claims were held eligible. For those exports effected after the said date, the

claims were rejected. The appellate authority passed the following order:

18.

In view of the above facts, discussions and findings, I pass the following order:

(i) I set aside the impugned order so far as it relates to allowing claim of rebate filed by the respondent in respect of export of the goods after the

crucial date, i.e., September 17, 2007.

(ii) I hereby upheld the impugned order so far as it relates to sanction of rebate claim for the goods exported on or before September 16, 2007,

subject to verification by the lower authority. In case the goods are found to be exported prior to September 17, 2007, the lower authority should

calculate the admissible rebate amount within fifteen days from the receipt of this order. In case the whole export is on or after September 17,

2007, the whole impugned order is set aside.

18.

The appeal is decided in the above terms.

Aggrieved by such order of the Appellate Commissioner, the petitioner preferred a revision petition before the Government of India. The

Government of India rejected the revision petition by an order dated May 18, 2012. In such order, it was observed, inter alia, as under:

The applicant has mainly pleaded that goods were cleared for export from the factory under the Central excise invoices dated August 24, 2007

to August 31, 2007 along with ARE-I 171 to 178 all dated August 24, 2007 to August 31, 2007 by complying all the conditions and provisions of

the notification prevalent at that time, and right to rebate vested in exporter once the goods are cleared from factory for export, that Notification

No. 37/2007-CE (N.T.), dated September 17, 2007 cannot be made applicable to the said exports, as the said notification does not have a

retrospective effect, that relevant date prescribed under the Explanation to section 11B of the Central Excise Act, 1944 is for computation of time

limit for filing refund claim and it does not affect their eligibility to refund claim.

The Government notes that the governing statutory provisions for grant of rebate of duty paid on exported goods are contained in rule 18 of the

Central Excise Rules, 2002 which read as under:

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 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.

The above statute very clearly stipulates that where any goods are exported, the Central Government may by notification grant rebate of duty paid

on such excisable goods subject to condition and limitation and fulfilment of procedure as prescribed in the notification. So the fundamental

condition for grant of rebate is that duty-paid goods are exported out of India subject to compliance of condition or limitation and procedure

prescribed in the notification. Notification No. 19/ 2004-CE (N.T.), dated September 6, 2004 issued under rule 18 ibid prescribes the

condition/limitation and procedure to be complied with for becoming entitled for the grant of rebate claims. The said notification was amended vide

Notification No. 37/2007-CE (NX), dated September 17, 2007 and condition 2(h) was added in the said notification. The said condition 2(h) is

as under:

(h) that in case of export of goods which are manufactured by a manufacturer availing of the notifications of the Government of India in the Ministry

of Finance (Department of Revenue) No. 32/1999-Central Excise, dated 8th July, 1999 (G.S.R. 508(E), dated 8th July, 1999) or No. 33/1999-

Central Excise, dated 8th July, 1999 (G.S.R. 509(E), dated 8th July, 1999) or No. 39/2001-Central Excise, dated 31st July, 2001 (G.S.R.

565(E), dated 31st July, 2001) or the notification of the Government of India in the erstwhile Ministry of Finance and Company Affairs

(Department of Revenue) No. 56/2002-Central Excise, dated 14th November, 2002, (G.S.R. 764(E), dated 14th November, 2002) or No.

57/2002-Central Excise, dated 14th November, 2002, (G.S.R. 765(E), dated 14th November, 2002) or the notification of the Government of

India in the Ministry of Finance (Department of Revenue) No. 56/2003-Central Excise, dated 25th June, 2003 (G.S.R. 513(E), dated 25th June,

2003) or No. 71/2003-Central Excise, dated 9th September, 2003) (G.S.R. 717(E), dated 9th September, 2003) or No. 20/2007-Central

Excise, dated 25th April, 2007 (G.S.R. 307(E), dated 25th April, 2007), the rebate shall not be admissible under this notification.

The condition 2(h) envisaged that in case of export of goods which are manufactured by manufacturer availing of specified notifications granting

area based exemption, the rebate shall not be admissible under this notification. In the instant case the manufacturer-exporter-applicant has

exported the goods manufactured by availing of such Notification No. 39/2001-CE, dated July 31, 2001.

The Government notes that the rebate becomes admissible when duty paid goods are exported and condition or limitation of said notification are

complied with. The entitlement of rebate benefit arises as soon as goods are exported. So the conditions or limitations as prescribed in notification

must be satisfied on the date when export takes place. If the argument of the applicant that rebate claim has accrued on the date of clearance for

export from factory, is to be accepted then another argument that rebate becomes admissible as soon as goods are manufactured for export can

also be raised. The Government finds that as per rule 18 read with Notification No. 19/2004-CE (N.T.), the entitlement of rebate claim takes

place on the export of goods and therefore it cannot be related to clearance of goods from factory.

Against such orders passed by the Appellate Commissioner and the revisional authority, the petitioner has preferred this petition.

Learned counsel Mr. Modh for the petitioner raised the following two contentions.

10.

First contention was that the amendment dated September 17, 2007 in Notification No. 19/2004 would not apply to the petitioner in the facts

of the present case. His contention was that once the goods were cleared for export from the factory of the petitioner, right to claim rebate

accrued. Such accrued right cannot be affected by any subsequent change in the exemption scheme. In essence, therefore, his contention was that

the amendment notification dated September 17, 2007 would not adversely affect the petitioner''s claim of rebate on goods manufactured and

cleared from the factory for export before such date.

In support of his contentions, the counsel relied on the following decisions:

(1) On the decision of the Calcutta High Court in the case of Rasoi Ltd. v. Union of India reported in [2004] 176 ELT 101 (Cal).

(2) On the decision of the Division Bench of this court in the case of Dipak Vegetable oil Industries Ltd. Vs. Union of India, .

11.

The counsel''s second contention was that the show-cause notice only stated that the rebate claim was not maintainable because the petitioner,

availing of benefit of Kutch area exemption notification, would not be entitled to rebate since, by virtue of the clarification issued by the CBEC,

such goods cannot be stated to be duty paid. He submitted that such notification came to be quashed by the decision of the Division Bench of this

court in the case of Welspun Gujarat Stahl Rohren Ltd. and Another Vs. Union of India (UOI) and Others, . The appellate authority and the

revisional authority therefore committed a serious error in relying on the amendment in Exemption Notification No. 19/2004 to deny the

petitioner''s rebate claim, which was never part of the show-cause notice. He, therefore, contended that the authorities travelled beyond the show-

cause notice.

12.

On the other hand, learned counsel Mr. Oza for the Department opposed the petition contending that the right to claim rebate would arise

upon actual exports. In the present case, the exports were made after September 17, 2007. To such exports, the amended notification would

apply. Since the petitioner did not fulfil condition (h) of paragraph 2 inserted by amendment dated September 17, 2007, the rebate claims were

rightly rejected. In this context he relied on the decision of the apex court in the case of Union of India v. Rajindra Dyeing and Printing Mills Ltd.

reported in [2005] 180 ELT 433 (SC). He further contended that the show-cause notice was eloquent and referred to the petitioner''s right to

claim rebate on the basis of Exemption Notification No. 19/2004. The appellate and the revisional authorities, therefore, cannot be said to have

travelled beyond the scope of the show-cause notice.

13.

Learned counsel Mr. Champaneri, representing the Government of India reiterated such contentions.

14.

Having thus heard learned counsel for the parties, we may proceed on facts which are virtually undisputed. To recapitulate such facts, the

petitioner claimed benefit under Exemption Notification No. 39/2001 granting such benefits to the manufacturing units located in Kutch District. To

the goods manufactured in such unit, which were exported, the petitioner also claimed benefit under Exemption Notification No. 19/2004. Such

exemption grants rebate of the excise duty falling under the First Schedule to the Central Excise Tariff Act, 1985. Such exemption is subject to

certain conditions and limitations. Condition (h) in paragraph 2 was inserted by amendment Notification No. 37/2007, dated September 17, 2007.

The petitioner made exports of goods after September 17, 2007 but claimed rebate on the ground that such goods were cleared from the factory

premises for export before September 17, 2009. The short question, therefore, is whether to such export, the amended notification can be applied.

15.

Exemption Notification No. 19/2004 has been issued under the powers conferred under rule 18 of the Rules. The said rule provides that

where any goods are exported, the Central Government may, by the 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 prescribed in the notification. Thus, the rebate of duty is envisaged upon the exports of goods. Under such

circumstances, the Central Government may grant rebate of duty paid by issuing appropriate notification. Such claim of rebate, however, would be

subject to conditions or limitations that may be contained in the notification and also upon fulfilment of the procedure, as may be specified. It, thus,

immediately becomes clear that a claim of rebate of duty would be related to export of goods. Actual export of goods therefore would be a pre-

condition for claiming rebate.

16.

In addition to actual export of goods, the claimant would also have to fulfil the conditions and submit to limitations contained in the notification

as also the procedure prescribed for claiming the rebate. Exemption Notification No. 19/2004 contained conditions and limitations for claim of

rebate in paragraph 2 thereof. Prior to September 17, 2007 conditions relevant for our purpose read as under:

(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;...

(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;

17.

Paragraph 3 of the said Notification No. 19 of 2004 lays down procedure for claim of rebate and, inter alia, provides as under:

(b) Presentation of claim for rebate to Central excise

(i) Claim of the rebate of duty paid on all excisable goods shall be lodged along with original copy of the application to the Assistant Commissioner

of Central Excise or the Deputy Commissioner of Central Excise having jurisdiction over the factory of manufacture or warehouse or, as the case

may be, the Maritime Commissioner;

(ii) The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise having jurisdiction over the factory of

manufacture or warehouse or, as the case may be, Maritime Commissioner of Central Excise shall compare the duplicate copy of application

received from the officer of customs with the original copy received from the exporter and with the triplicate copy received from the Central Excise

Officer and if satisfied that the claim is in order, he shall sanction the rebate either in whole or in part.

18.

From the above provisions, it can be gathered that the exporter would be entitled to file the rebate claim only upon export of goods. Clearance

of such goods from the factory for export directly is just one of the conditions subject to which such refund/rebate claim could be granted.

Fulfilment of such condition, however, cannot be equated with the right to claim rebate. Such right is hedged by requirement of fulfilling of

conditions and limitations contained in the exemption notification and all the requirements of fulfilling the procedure. Mere fulfilment of such

conditions and limitations and following the procedure would not give right to a person to claim rebate in the absence of the fundamental

requirement of export of goods. The rebate claim arises out of the export of goods. The conditions, limitations and the procedural requirements are

additional requirements to be fulfilled by an exporter in order to seek actual rebate.

19.

Above observations gather support from rule 18 of the Rules, which permits the Central Government, by issuing the notification, to grant

rebate of excise duty upon the export of goods. Exemption Notification No. 19/2004, as noted above, has been issued in exercise of powers

conferred under the said rule 18.

20.

This also gets support from section 11B of the Act, which pertains to claim for refund of duty. Sub-section (1) thereof enables any person

claiming refund of any excise duty and interest to make an application for refund in this regard to the prescribed authority within a period of one

year from the relevant date. The term ""relevant date"" has been defined in the Explanation below clause (B) to section 11B. Sub-clause (a) thereof,

provides as under:

(B) ''relevant date'' means,--

(a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case

may be, the excisable materials used in the manufacture of such goods,--

(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of despatch of goods by the post office concerned to a place outside India;

21.

Thus, the starting point of computation of time limit of one year available to a claimant of rebate upon export of goods is the time when, as

contained in sub-clauses (i), (ii) and (iii), the goods are actually exported. In this context, we may refer to the decision of the apex court in the case

of Union of India v. Rajindra Dyeing and Printing Mills Ltd. [2005] 180 ELT 433 (SC). In such case, the exporter had despatched the goods

through ship for export. Due to the accident to the ship within the territorial waters of India, the ships sank and the goods were destroyed. The

exporter claimed duty drawback on the ground that the goods were actually exported. The Supreme Court, basing reliance on the concept of

movement of goods outside the territorial waters of India to complete the export, held that the claim of duty draw-back was not valid. It was

observed as under:

Learned counsel for the appellants contends that, in the instant case, there was no export as contemplated by the said Rules inasmuch as the

said cargo had not been taken out of India to a place out of India; in fact, the vessel had sunk and the said cargo was destroyed within the

territorial waters of India. Our attention was drawn to the judgment of this court in Collector of Customs, Calcutta Vs. Sun Industries, . This was a

case where goods had been loaded on to a vessel in India and the vessel had sunk after it moved out of the territorial waters. This court said:

When the ship got clearance and moved out of the territorial waters, the export was complete... But the expression ""taking out to a place outside

India"" would also mean a place in high seas. It is beyond the territorial waters of India. High seas would also mean a place outside India, if it is

beyond the territorial waters of India. Therefore, the goods were taken out to the high seas outside territorial waters of India, they will come within

the ambit of expression ""taking out to a place outside India"". Indubitably the goods had been taken out of India.

The emphasis in the judgment aforementioned is on the movement of the goods outside the territorial waters of India. It is then that an export

may be said to have taken place. In the instant case, the said cargo was destroyed when the vessel sunk within the territorial waters of India. There

was, therefore, no export of the said cargo. Accordingly, no duty drawback was available in respect of the said cargo.

22.

We are of the opinion that the claim for rebate under Exemption Notification No. 19/2004 would accrue upon actual export of goods. Mere

clearance of the goods for export from the factory premises would not be sufficient. Fulfilment of such a condition is necessary but not sufficient for

exporter to claim rebate. Therefore, on all the exports made by the petitioner after September 17, 2007, the petitioner had no accrued right to

claim rebate on the basis of unamended notification on the basis of clearance of goods from the factory. The mere fact that such goods were

cleared from the factory premises for export before such date, would not give rise to an indefeasible claim of rebate. When by an amendment in

Exemption Notification No. 19/2004 an additional clause (h) to paragraph 2 was added and an additional condition was introduced, such

amended notification would apply to all exports made after September 17, 2007. Such condition reads as under: