The Bombay High court has allowed the rebate as no cenvat credit availed on inputs used in exported goods.
The bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla has observed that no Cenvat credit should be availed in relation to the inputs used in the manufacture of the very exported goods for which rebate has been claimed. Since the Petitioner has not availed of Cenvat credit in relation to the inputs used in the manufacture of the very exported goods for payment of duty, it would be entitled to rebate as per the terms of Rule 18 of the Central Excise Rules, 2002.
The Petitioner/assessee is in the business of manufacturing of Draw Texturised Yarn (DTY) falling under Chapter Heading 5406 & Polyester Staple Fibre (PSF) falling under Chapter Heading 5506. The Petitioner is undertaking the manufacturing activity in its factory premises situated at A- 31, MIDC Industrial Area, DTY Division, Butibori, Nagpur.
During the period January 2008 to April 2008, the Petitioner cleared its final products within India on payment of excise duty. During this period, the Petitioner also cleared a part of its production for export on payment of excise duty.
The Petitioner submitted that, at the time of receipt of inputs within the Petitioner’ factory premises, it was not possible to know as to whether the inputs would be used in the manufacture of final products cleared within India or exported by the Petitioner. Hence, the Petitioner had taken Cenvat credit of the duty paid on all the eligible inputs at the time of receipt in their factory.
However, at the time of clearance of goods for export, the Petitioner reversed the Cenvat credit on inputs used in the finished goods exported. In other words, the Petitioner did not avail Cenvat credit of the duty paid on inputs used in finished goods that were exported.
In respect of inputs contained in the goods exported during the period January 2008 to April 2008, the Petitioner claimed drawback at the All Industry Rate on inputs under Customs Central Excise Duties and Service Tax Drawback Rules, 1995. (Drawback Rules of 1995). The Petitioner claimed drawback at the rate then prevailing, i.e., 16% which was the rate applicable when Cenvat credit has not been claimed. This was claimed since credit of duty paid on inputs used in finished goods was reversed / surrendered at the time of clearance of finished goods for export.
The Petitioner cleared consignments of the final products on payment of central excise duty for export under the claim of rebate under Rule 18 of Central Excise Rules, 2002. The Petitioner paid excise duty on the goods exported through accumulated Cenvat credit balance lying in the Cenvat account of the Petitioner.
The Petitioner contended that this credit did not pertain to the inputs purchased and used in the manufacture of exported goods. This credit arises out of completely unrelated transactions such as the purchase of inputs for the manufacture of goods sold domestically in India.
The Petitioner filed rebate claims in respect of the excise duty paid on the exported goods, in terms of Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-CE(NT) dated 6.9.2004.
The department examined the rebate claims and the documents filed by the Petitioner as well as the verification report submitted by the Superintendent Central Excise, Range Butibori and by Orders sanctioned the rebate claims of the Petitioner.
The Petitioner was issued show cause notices for recovery of Rs.10,89,69,730 sanctioned as rebate to the Petitioner in respect of duty paid on the goods exported during the period January 2008 to April 2008.
As per the department, the petitioner has claimed drawback on inputs as well as rebate of duty paid on the goods exported and hence, the Petitioner has contravened the provisions of Rule 18 of the Central Excise Rules, 2002, read with Notification No.19/2004. Therefore, the Petitioner was not entitled to rebate of duty paid on goods exported and hence the same was recoverable from the Petitioner.
The court held that the finding in the Order, if carried to its logical end, would result in absurdity. As per the impugned Order, if the Petitioner has ever availed Cenvat credit at any point of time, whether for the particular export to which rebate relates or for any other unrelated transaction, the Petitioner cannot claim that no Cenvat facility has been availed by it, and, hence, is disentitled on account of Condition No.12(ii) of Notification No.68/2007. Such an interpretation runs totally contrary to the export scheme as well as the law laid down by the Supreme Court in Spentex Industries Ltd.
Case Details
Case Title: Indorama Synthetics (I) Ltd Versus The Union of India & Ors.
Case No.: Writ Petition No.5120 Of 2022
Date: 25/04/2025
Counsel For Petitioner: Mr.Sriram Sridharan a/w Mr.Shanmuga Dev a/w Ms.Aditi Jain
Counsel For Respondent: Mr.Jitendra Mishra, Mr.Abhishek Mishra, Mr.Rupesh Dubey
