M/S PAWAN JAIN & SONS vs UNION OF INDIA
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 04 October 2023
Judgment pronounced on : 13 October 2023
+ W.P.(C) 2239/2020
M/S PAWAN JAIN & SONS. …. Petitioner
Through: Mr. Rajiv Tuli and Mr.
Himanshu G., Advs.
versus
UNION OF INDIA ….. Respondent
Through: Mr. Asheesh Jain, CGSC with
Mr. Gaurav Kumar, Adv. for
R-1.
Mr. Satish Aggarwal, Sr.
Standing Counsel
CORAM:
HON’BLE MR. JUSTICE YASHWANT VARMA
HON’BLE MR. JUSTICE DHARMESH SHARMA
J U D G M E N T
DHARMESH SHARMA, J.
1. The petitioner invokes the extra ordinary jurisdiction of this
Court under Article 226 of the Constitution of India for issuance of a
Writ of Certiorari and/or any other appropriate writ challenging the
impugned order dated 27 September 2019 passed by the Revisionary
Authority, Additional Secretary to the Government of India, Ministry
of Finance, New Delhi1, whereby the claim for refund of duty paid on
inputs for executing the export obligations under Rule 18 of the
1 Revisionary Authority
Central Excise Rules, 20022 read with notification No. 41/2001-CE
(NT) dated 26 June 2001 was declined.
2 CER
3 C.No.V(87)18/REF/IO/PJS/D-I/2003
FACTUAL BACKGROUND:
2. The petitioner, having its registered office in Delhi, is engaged
in the business of manufacturing and export of S.S. Utensils etc. and it
was having Central Excise Registration No. AAOPJ7853NXM001. It
is stated that certain exports obligations were duly undertaken during
the period 2003-2004 for which the petitioner filed six separate Rebate
Claims in the year 2004 pertaining to the period from September 2003
to March 2004, thereby seeking rebate of duty amounting to a total of
Rs. 97,71,926/- that was claimed to have been paid on the inputs used
in the manufacturing of the end product. It is stated that the Rebate
Claims were lodged in terms of Rule 18 of the CER and in terms of
Notification No. 41/2001 dated 26 June 2001. All the relevant
documents were submitted with the respondent except that a request
was also made by the petitioner to condone the procedural lapse of
filing A.R.E. 1 instead of A.R.E. 2 besides submitting a request for
fixation of the input-output norms in terms applicable during the
export period in terms of letter from the Office of Assistant
Commissioner, Central Excise dated 18 March 20043.
3. To cut the long story short, six Orders-in-Original dated 30
July 2008 were passed separately by the Adjudicating Authority,
thereby granting total refund amounting to Rs.49,15,971/-. Aggrieved
thereby the petitioner filed an appeal before the Commissioner
(Appeal) on 06 January 2009 which was dismissed in limine vide
order dated 29 September 2009 primarily for the same being time
barred as it was claimed by the Department that the copy of the
impugned six orders in original had been supplied to the authorised
representative of the petitioner on 21 August 2008. The revision
application filed by the petitioner before Revisionary Authority was
allowed vide order dated 30 August 2011, thereby setting aside the
orders in Appeal dated 29 September 2009 and remanded the matter
back to the Commissioner (Appeal) with a direction to decide the case
afresh on merits after affording a reasonable opportunity of hearing to
the petitioner.
4. It is stated by the petitioner that he moved an application dated
10 January 2012 before the Commissioner (Appeal) submitting, inter
alia, if the copies of the six orders-in-original were dispatched on 30
July 2008 by post, there was no occasion to hand over physical copies
of the orders on 21 August 2008, but the application was dismissed by
the Commissioner (Appeal) vide order dated 29 October 2012,
whereby again holding that there was inordinate delay of 139 days in
the filing of the appeal, thus, rendering it time barred, and hence, no
findings on merits were warranted. The petitioner then approached the
Revisionary Authority, which vide order dated 04 December 2014
allowed the Revision, thereby setting aside the order dated 29 October
2012 passed by the Commissioner (Appeal), but again the
Commissioner (Appeal) proceeded to deal with the issue of limitation
and passed orders dated 03 February 2016 dismissing the appeal,
which was then challenged before the Revisionary Authority on 18
March 2016. The revision application came to be dismissed vide
impugned order dated 27 September 2019, assigning the following
reasons:
4. The issue of time bar raised by the Commissioner (Appeals) in the
impugned order has been settled by the earlier revision order no.
373/14-CX dated 04.12.2014 of the government. Therefore the matter
is being taken up on merits for a decision.
5. The applicant has claimed that rebate should have been sanctioned
as per actual consumption of raw material (steel flats) used in the
manufacture of steel utensils which were subsequently exported. The
department has sanctioned the rebate on the basis of SION (Standard
Input Output Norms) for coils/springs (1.30: 1.00) whereas the special
norms for steel flats were fixed by the department as 1.88: 1.00 on
18.03.2004.
5. The Government has examined the matter. The procedural
requirement as provided in the notification no. 41/2001 dated
26.06.2001 specifies that
(1) the ratio of input and output has to be mentioned in the prescribed
declaration before the commencement of export of such goods.
(2) the jurisdictional Assistant Commissioner has to call for sample or
even carry out an inspection in factory or process to satisfy the
correctness of claim.
Since the impugned goods were exported prior to fixation of the
special input/output norms for steel flats by the jurisdictional central
excise authorities, the mandatory conditions of Notification No.
41/2001 dated 26.06.2001 regarding declaration and subsequent
verification remain unfulfilled. These are substantive conditions of
Notification No. 41/2001 dated 26.06.2001 for claiming rebate under
Rule 18 of Central Excise Rules, 2002. Hon’ble CESTAT in the case of
M/s Arun Intomational Vs CCE [2015(317)ELT465(TRI-DEL)] has
held that non-declaration of Input-output ratio in respect of export
of fully exempted steel utensils manufactured from duty paid
inputs is a substantive condition of notification 41/2001 and is not
condonable. The above judgement squarely covers the facts of the
present case.
6. It is observed by the Adjudicating Authority in the impugned orders
that the applicants themselves requested to grant the rebate as per
SION norms fixed by DGFT. No evidence as advised during the
course of Personal Hearing that the applicant had subsequently
requested the respondent to consider the special input- output norms
fixed for steel flats in respect of the impugned rebate claims has been
produced.
7. As per the Central Excise Rules, 2001 duty on the scarp generated
has to be paid from PLA account as per Notification No. 41/2001 dated
26.06.2001 wherein the exporter has to furnish a declaration that
CENVAT Credit has not been availed. Notification 41/2001 dated
26.06.2001 clearly specifies that any waste arising during the
manufacture of export goods may be removed on payment of duty as if
such waste has been manufactured in the factory of the manufacturer.
As the applicant paid duty from CENVAT account in respect of such
waste generated during the manufacture of impugned export goods, it
is observed that the Commissioner (Appeals) has correctly upheld the
original authority’s order deducting the impugned amount from the
rebate claims. The issue regarding payment of duty thrice has already
been decided by Commissioner (Appeals) and needs no Interference.
8. Accordingly, the revision application filed by the applicant is
rejected.
GROUNDS FOR CHALLENGE:
5. The impugned order dated 27 September 2019 is assailed in the
instant writ petition, inter alia, on the grounds that the Revisionary
Authority totally misconstrued Clause 4 (c) of the Notification dated
26 June 2001 which permitted removal of waste on payment of duty if
such waste was manufactured or processed out of the factory of the
applicant seeking rebate; and that the petitioner was entitled to seek
rebate in terms of modified SION4 norms fixed in terms of the letter
dated 18 March 2004 issued by the Office of Assistant Commissioner,
Central Excise and not as per the norms fixed by the DGFT; and that
the petitioner accordingly manufactured the product consuming 1.882
kgs of SS Flats for the manufacture of 1.00 kg of SS Utensils. Thus,
the grievance of the petitioner is that rebate claims have been
disallowed in an arbitrary manner. The relevant details are compiled
in tabular form as under:
4 Standard Input Output Norms
S.no
Order
No
Rebate Claim
as per SION
norms 1.882:1
Rebate Claim
allowed as per
SION norms fixed
by DGFT 1.30:1
Reduction in
claim by change
in SION norms.
1.
218-R
Rs.14,76,143
Rs. 10,46,193
Rs.4,29,950
2.
219-R
Rs.13,78,593
Rs.9,51,614
Rs.4,26,979
3.
220-R
Rs.18,23,931
Rs. 13,87,353
Rs.4,36,578
4.
221-R
Rs.17,68,788
Rs. 12,21,775
Rs.5,47,013
5.
222-R
Rs.14,04,633
Rs.6,95,199
Rs.7,09,434
6.
223-R
Rs.19,19,838
Rs. 13,60,755
Rs.5,59,083
Total
Rs.31,09,037
REPLY BY THE RESPONDENT:
6. On behalf of respondent No. 2, Mr. Aman Singla, Assistant
Commissioner, Central Goods & Service Tax (North), Delhi, has
filed a short affidavit and the stand of the department is reiterated that
the petitioner filed declaration as per ARE-1 in terms of notification
No. 41/2001 dated 26 June 2001 that made application of input-output
norms applicable as existing at the time of exports; and that it was
mandatory for the exporter to file a declaration containing details,
inter alia, about the manufacturing formula with particular reference
to quantity or proportion to which raw material were actually used as
well as about the quality before commencement of export of such
goods, but the assessee/petitioner failed to file the relevant details in
terms of notification No. 41/2001 dated 26 June 2001. As regards, the
scraps/waste generated during the course of manufacturing of S.S.
Utensils, it is deposed that the waste product of the petitioner was
marketable and arose regularly in the ordinary course of business, and
therefore, dutiable, despite the fact that the main product, viz. S.S.
Utensils was exempted from duty under notification No. 10/2003
dated 01 March 2003; and since, no CENVAT credit facility was
available to the petitioner during the relevant period, hence, it was
liable to pay duty on scrap from the cash ledger. Lastly, it has been
reiterated that the copies of the six Orders-In-Original dated 30 July
2008 had been handed over to Sh. Shiv Kumar, the representative of
the petitioner on 21 August 2008, and therefore, the appeals were filed
beyond the prescribed period of limitation.
ANALYSIS AND FINDINGS:
7. We have given our thoughtful consideration to the submissions
made by the learned counsels for the parties and have perused the
relevant documents placed on the record.
8. First things first, insofar as the issue of statutory appeals
initially filed beyond period of limitation is concerned, it is manifest
that the issue was set to rest by the Revisionary Authority vide its
order dated 04 December 2014 calling upon the Commissioner
(Appeal) to decide the claim on merits. Further, the Revisionary
Authority in its subsequent order dated 27 September 2019 too,
refused to go into the issue of limitation. Since the said orders had not
been assailed by the department, we find no legal imperative to
interfere in such disputed question of facts as to whether or not the
impugned Orders-In-Original were served upon the representative of
the petitioner on 21 August 2008 and hence, find it unpersuasive to
hold that the initial statutory appeals against the orders in original
were time barred.
9. As regards the rebate claims of the petitioner and the plea of
non-application of correct SION, it is borne out from the record that
pursuant to application moved by the petitioner on 08 January 2004,
the office of the Assistant Commissioner of Central Excise vide letter
dated 18 March 2004 (Annexure P-2) fixed the input output ratio for
different categories of work as under:-
S.No.
Export Goods
Inputs
Output
Export goods Manufactured out of S.S. Sheets/Coils
1.
S.S. Utensils/
Kitchenware
1.30
1.00
Export goods Manufactured out of S.S. Flats
2.
S.S. Utensils/
Kitchenware
1.882
1.00
Export Goods Manufactured out of S.S. INGOTS
3.
S.S. Utensils/
Kitchenware
1.901
1.00
10. There is no gainsaying that the fixation of input output norms is
done to enable the manufacturer exporters to seek rebate for the inputs
used in the export of the manufactured product. Admittedly, the goods
had been duly exported presumably meeting with all the relevant
regulatory norms between the period September, 2003 to January,
2004. It is pertinent to indicate that two rebate claims were filed on 07
January 2004 and third one on 01 March 2004, whereas, the rest of the
three were filed after the aforesaid communication dated 18 March
2004. However, the petitioner has not placed on the record a copy of
its letter dated 08 January 2004 and it is not clear if the said letter
pertained to any request about fixation of input-output norms with
regards to export obligations already undertaken or to be taken in
future. The issues are further confounded since it is also not clear as
from which date the norms specified vide aforesaid communique had
been made applicable. Be that as it may, ordinarily the input output
ratio fixed vide aforesaid communique dated 18 March 2004 could not
have been applied retrospectively. We find that the Adjudicating
Authority failed to render any findings on such issues.
11. This brings us to the last issue of applicability of central excise
duty on removal of waste/scraps generated during the course of the
manufacture of S.S. Utensils etc. At this juncture, it would be relevant
to reproduce Rule 18 of the CER which provides as under:
“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 such 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.”
12. The notification No. 41/2001-CE(NT) dated 26 June 2001 has
been issued under the aforesaid Rule, which provides as under:
“Inputs used in manufacture/processing of export goods –
Rebate of whole of duty when goods exported-Conditions and
procedure
In exercise of the powers conferred by of Rule 18 of the Central
Excise (No. 2) Rules 2001, the Central Government hereby directs
that rebate of whole of the duty paid on excisable goods
(hereinafter referred to as ‘materials”) used in the manufacture or
processing of export goods shall, on their exportation out of India,
to any country except Nepal and Bhutan, be paid subject to the
conditions and the procedure specified hereinafter:-
(1) Filing of declaration.- The manufacturer or processor shall
file a declaration with the Assistant Commissioner of Central
Excise or the Deputy Commissioner of Central Excise having
jurisdiction over the factory of manufacture describing the
finished goods proposed to be manufactured or proceeded
along with their rate of duty leviable and
manufacturing/processing formula with particular reference
to quantity or proportion in which the materials are actually
used as well as the quality. The declaration shall also contain
the tariff classification, rate of duty paid or payable on the
materials so used, both in words and figures, in relation to the
finished goods to be exported;
(2) Verification of Input-output ratio – The Assistant
Commissioner of Central Excise or the Deputy
Commissioner of Central Excise shall verify the correctness
of the ratio of input and output mentioned in the declaration
filed before commencement of export of such goods, if
necessary, by calling for samples of finished goods or by
inspecting such goods in the factory of manufacture or
process. If, after such verification, the Assistant
Commissioner of Central Excise or the Deputy
Commissioner of Central Excise is also satisfied that there is
no likelihood of evasion of duty, he may grant permission to
the applicant for manufacture or processing and export of
finished goods.
(3) Procurement of material: – The manufacturer or processor
shall obtain the materials to be utilized in the manufacture of
the finished goods intended for export directly from the
registered factory in which such goods are produced,
accompanied by an invoice under Rule 11 of the Central
Excise (No2) Rules, 2001:
Provided that the manufacturer or processor may procure
materials from dealers registered for the purposes of
CENVAT Credit Rules, 2001 under invoices issued by such
dealers.
(4) Removal of materials or partially processed material for
processing.- The Assistant Commissioner of Central Excise
or the Deputy Commissioner of Central Excise may permit a
manufacturer to remove the materials as such or after the said
materials have been partially processed during the course of
manufacture or processing of finished goods to a place
outside the factory:-
(a) for the purposes of test, repairs, refining, reconditioning
or carrying out any other operation necessary for the
manufacture of the finished goods and return the same
to his factory without payment of duty for further use in
the manufacture of finished goods or remove the same
without payment of duty in bond for export, provided
that the waste, if any, arising in the course of such
operation is also returned to the said factory of the
manufacture or process; or
(b) for the purpose of manufacture intermediate products
necessary for the manufacture or processing of finished
goods and return the said intermediate products to his
factory for further use in the manufacture or process of
finished goods without payment of duty or remove the
same, without payment of duty for export, provided that
the waste, if any, arising in the course of such operation
is also returned to the factory of manufacturer or
processor;
(c) any waste arising from the processing of materials may
be removed on payment of duty as if such waste is
manufactured or processed in the factory of the
manufacturer or processor;
(5) Procedure for export.- The goods shall be exported on the
application in Form A.R.E. 2 specified in the Annexure and
the procedures specified in Ministry of Finance (Department
of Revenue) notification No. 40/2001 – Central Excise (N.T.),
dated 26th June, 2001 or in notification No. 42/2001 Central
Excise – dated 26th June, 2001 shall be followed.
(6) Presentation of claim of rebate – The claim for rebate of
duty paid on materials used in the manufacture or processing
of goods shall be lodged only with the Assistant
Commissioner of Central Excise or Deputy Commissioner of
Central Excise having jurisdiction of the place approved for
manufacture or processing of such export goods.”
13. A careful perusal of the notification No. 41/2001 dated 26 June
2001 would show that the exporter has to furnish a declaration that
CENVAT credit has not been availed and the notification clearly
spells out that any waste arising during the manufacture of export
goods may be removed on payment of duty as if such waste has been
manufactured in the factory of the manufacture. There is a merit in the
plea advanced by the learned counsel for the petitioner that Para 4 (c)
of the notification 41/2001 dated 26 June 2001 also specifies that even
in the case of waste from manufacturing process outside the factory of
the applicant seeking rebate, the removal of such waste or sale thereof
is neither prohibited nor it debars a claim for rebate under the said rule
or notification. Undoubtedly, the form and declaration have to be
examined, but what is significant is the interpretation of the words
not availed of facility of CENVAT Credit” in the form/declaration.
Therefore, what follows is that removal of waste, or sale thereof in
home or domestic market, does not prohibit or bar a claim for rebate
under the said Rule or notification. Paragraph 4(c) does refer to
payment of duty but the said clause applies when there is removal of
material or the same is partially processed at a location different from
or outside the factory of the applicant.
14. Further, it is also pertinent to mention that in terms of
notification No. 10/2003-Central Excise dated 01 March 20035,
brought out in exercise of power under Sub-section (1) of Section 5A
of the Central Excise Act, 1944, certain items have been exempted
5 Notification New Delhi, dated the 1st March, 2003
No. 10/2003-Central Excise 10 Phalguna, 1924 (Saka)
G.S.R. (E).-In exercise of the powers conferred by sub-section (1) of section 5A of the Central
Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in
the public interest so to do, hereby exempts excisable goods of the description specified in
column (3) of the Table below and falling within the Chapter, heading No, or sub-heading No.
of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred
to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the
said Table (hereinafter referred to as the said goods), from so much of the duty of excise
leviable thereon under the First Schedule to the Central Excise Tariff Act, as is in excess of
the amount calculated at the rate specified in the corresponding entry in column (4) of the
said Table.
Explanation I.- For the removal of doubts, it is clarified that a manufacturer who has availed
of full exemption under notification No. 8/2002-Central Excise, dated the 1st March, 2002,
published in the Gazette of India vide number G.S.R. 129 (E), dated the 1st March, 2002 or
notification No. 8/2003-Central Excise, dated the 1st March, 2003, as the case may be, in any
financial year, is permitted to avail this exemption in the same financial year.
Explanation II.- xxx omitted not relevant
Explanation III.- For the purposes of this notification, the rates specified in column (4) of the
said Table are ad valorem rates, unless otherwise specified.
from payment of duty. As per Schedule annexed to the notification,
vide item No. 51, it is provided that waste and scrap arising during the
course of manufacture of the goods specified against S. No. 9 to 50 of
the aforesaid notification dated 01 March 2003 shall be exempted
from payment of duty. As we will indicate hereinafter that the
petitioner in question is in the business of manufacture of S.S.
Utensils, which is covered under item No. 28 of the aforesaid
notification and the same is also exemplified from clarification letter
bearing No. IV(16)309-CE/TECH/D-I/04/3598, dated 26 July 2005,
issued by the Office of Commissioner of Central Excise, New Delhi
and addressed to all the Assistant Commissioner, Central Excise
Division-I/II/III/IV, New Delhi, which reiterated the formula for
assessment of rebate claims as was applicable during the relevant time
in terms of an earlier circular bearing No. 129/40/90-CX, dated 29
May 1995.
15. Much mileage is sought to be taken by the respondents from the
fact that the petitioner had not submitted Form No. A.R.E. 2. A
Constitution Bench of the Supreme Court in the case of
Commissioner of Central Excise, New Delhi v. Hari Chand Shri
Gopal and Ors.6, had an occasion to examine a question of law as to
interpretation of exemption or concession provision and whether it is
to be strictly construed or not. After referring to earlier judgments in
Novopan India Ltd. v. CCE and Customs7, Hansraj Gordhandas
6 (2011) 1 SCC 236
7 1994 Supp(3)SCC 606;
v. CCE and Customs8 and TISCO Ltd. v. State of Jharkhand9, it
was held as follows:
8 (1969) 2 SCR 253
9 (2005) 4 SCC 272
“29. The law is well settled that a person who claims exemption or
concession has to establish that he is entitled to that exemption or
concession. A provision providing for an exemption, concession or
exception, as the case may be, has to be construed strictly with
certain exceptions depending upon the settings on which the
provision has been placed in the Statute and the object and purpose
to be achieved. If exemption is available on complying with certain
conditions, the conditions have to be complied with. The
mandatory requirements of those conditions must be obeyed or
fulfilled exactly, though at times, some latitude can be shown, if
there is a failure to comply with some requirements which are
directory in nature, the non-compliance of which would not affect
the essence or substance of the notification granting exemption.”
16. Reverting to the instant matter, since presumably the export
obligations had been met, the Revisionary Authority took a hyper
technical view of the matter. It is evident that in terms of the
notification No. 10/2003 dated 01 March 2003, the description of the
goods in question was covered vide item No. 28 viz. HSM 7323.90,
which is code for S.S. Utensils, read with item No. 51, where the rate
of duty is spelt out to be NIL”. Meaning thereby that no duty was
payable on such waste and scrap arising during the course of
manufacture of the same goods. This is exemplified from the
clarification letter issued by the Office of Commissioner of Central
Excise, Delhi dated 26 July 2005 placed on the record, and therefore,
the impugned order dated 27 September 2019 holding that pre-
conditions provided by the Notification No. 41/2001 dated 26 June
2001 were not met by the petitioner, is perverse and cannot be
sustained in law.
17. In view of the foregoing discussion, the impugned order dated
27 September 2019 is hereby set aside and the matter is remanded
back to the Adjudicating Authority to decide the rebate claims of the
petitioner after affording a fresh opportunity for hearing in accordance
with law.
18. The Writ Petition stands disposed of accordingly.
YASHWANT VARMA, J.
DHARMESH SHARMA, J.
October 13, 2023
sds/sadique