IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 7291 of 2007 For Approval and Signature:
HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ========================================= = 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
Whether this case involves a substantial question of law as 4 to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================= = COMMISSIONER - Petitioner(s) Versus JAYANT OIL MILLS - Respondent(s) ========================================= Appearance :
MR YN RAVANI for Petitioner MR HASIT DILIP DAVE for Respondent ========================================= = CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 09/07/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)
1. This petition has been filed by the Commissioner, Central Excise & Customs, Vadodara II, challenging the legality and validity of order No.01-03/2004 dated 16.1.2004 made by Government of India in Revision Application filed by the respondent herein.
2. The respondent (hereinafter referred to as “the assessee”) is engaged in the manufacture of goods which are exported out of India. It is an accepted position that the goods so manufactured by the respondent are excisable goods. It is also an accepted position that in case of duty paid excisable goods where such goods are exported outside India, rebate of the duty paid is available, provided the Central Government issues a notification in this regard and the conditions laid down in the notification have been complied with. This is provided for in Rule 12 of the Central Excise Rules, 1944 (the Rules).
3. A sum of Rs.10,667/- was claimed as rebate by the assessee which was rejected by three Orders -in- Original dated 23.5.2002, 24.5.2002 and 24.5.2002 (Annexures “C”, “D” and “E” respectively). These orders were carried in appeal before the Commissioner (Appeals), who vide consolidated order dated 7.3.2003, upheld the orders made by the Adjudicating Authority. The reason which weighed with the Adjudicating Authority and the Appellate Authority is that the assessee made payment of duty on exempted goods, which is wrong and irregular, and the assessee cannot pay duty on his own volition in respect of exempted goods. According to the authorities, the product of the assessee is exempt from payment of the entire duty under Notification No.115/75-CE dated 30.4.1975, as amended by Notification No.7 of 1998 dated 2.6.1998. The Appellate Authority also relied on Circular No.2/91- CX-3 dated 4.1.1991 issued by the Central Board of Excise & Customs [CBEC], to state that an assessee has no option to pay duty on his own volition in case the goods are fully exempt from payment of duty.
4. The assessee challenged the order of Commissioner (Appeals) by way of Revision Application before the Government of India (hereinafter referred to as “the revisional authority”) and the Revision Application came to be allowed vide impugned order dated 16.1.2004. The reasons which have weighed with the revisional authority are –  An exemption by means of notification does not take away the levy or have the effect of erasing duty as held by the Apex Court in the case of Hico Products Ltd. v. CCE, 1994  ELT 339;  Where an assessee chooses not to avail of an exemption granted under the notification, it cannot be stated that the assessee is exercising an option;  That, in effect, by virtue of the duty levied as prescribed by the Tariff Act and the exemption granted by a notification, two rates of duty are prescribed and the exemption granted cannot be more than the duty prescribed in the statute and will be at the most 'Nil';  Various decisions of the Tribunal have been followed by referring to principles of judicial discipline;  In the event of conflict between CBEC Circulars and the Tribunal's decision, the binding effect of a CBEC Circular has to yield to the decision of a Tribunal.
5. Assailing the aforesaid order of revisional authority, the learned Additional Standing Counsel Shri Ravani contended that an exemption notification issued in accordance with the powers vested by the statute has statutory force and validity. Therefore, an assessee has no option to pay duty once the goods are fully exempted from payment of duty by a notification. That, in fact, no duty is leviable by law and any payment made would amount to a deposit and therefore, there is no question of granting any credit in respect of such duty paid by an assessee. In support of the submissions made, reliance has been placed on the decision of the Andhra Pradesh High Court in the case of Ganesh Metal Processing Industries v. Union of India, 1996  ELT 11 (A.P.).
6. On behalf of respondent - assessee, the learned advocate read extensively from the impugned order of the revisional authority and relied upon Apex Court's decisions in the cases of Commissioner of Central Excise, Pune v. Pudumjee Pulp & Paper Mills Ltd., 2006  ELT 330 (SC) and Commissioner of Central Excise & Customs (Appeals), Ahmedabad v. Narayan Polyplast, 2005  ELT 20 (SC).
7. The basic issue is, whether an assessee who has exported goods on which duty is leviable, can claim rebate of duty paid without availing of exemption granted under a notification. Rule 12 of the Rules prescribes the mode and manner in which rebate of duty can be claimed and granted. Sub-rules (3) and (4) of Rule 12 of the Rules provide for the grounds on which rebate of duty can be denied. Under sub-rule (3), rebate of duty in respect of excisable materials used in manufacture of goods exported outside India can be denied, provided the conditions therein are shown to be satisfied. Under sub-rule (4), similarly, a claim for rebate may be rejected, provided goods, export of which is prohibited under any law for the time-being in force, are duty paid and exported. No other provision is pointed out which would permit an authority to deny the claim of rebate.
8. In these circumstances, the ground on which the claim of rebate made by the assessee is denied by the Adjudicating Authority and upheld by the Commissioner (Appeals), has rightly been found to be untenable by the revisional authority. The entire controversy sought to be projected by petitioner – revenue of treating the duty paid as a deposit is not supported by any provision, much less Rule 12 of the Rules which relates to grant of rebate and, therefore, is a ground or a reason which is not germane to the basic issue, i.e. entitlement of the assessee to rebate. Once the assessee shows from the record that the conditions stipulated by the notification under which rebate is available qua the duty paid on goods exported outside India stand fulfilled, unless and until an over-riding provision appears on statute, the claim cannot be denied on a ground which is not in consonance with the provisions of the Act or the Rules.
9. It cannot be disputed that levy of duty is prescribed by provisions of the Central Excise Act, 1944 and the rate of duty is prescribed by the Tariff Act. Therefore, once the duty is validly levied in accordance with the provisions of the statute, the said levy does not disappear or cannot get obliterated merely because by virtue of a notification, partial or full exemption is granted. Therefore, there is no question of an assessee exercising any option as such. There are two rates of duty prescribed by the statute:  As per the Tariff Act, and  As per the exemption notification. An assessee may pay duty, in such circumstances, either at the prescribed rate or at the rate specified in the exemption notification. Revenue cannot insist, unless the statute provides for such a situation, that in such a factual matrix, an assessee is bound to claim exemption while manufacturing excisable goods. The fallacy in the stand of Revenue is exposed when one tests the proposition in a case where only partial exemption is granted under a notification.
10. The impugned order made by the revisional authority does not, in any manner, give rise to an issue of law so as to manifest an error in law calling for intervention by the High Court in exercise of powers and jurisdiction under Articles 226 and 227 of the Constitution of India.
11. Accordingly, the petition does not merit acceptance and is rejected. Notice discharged. There shall be no order as to costs.
[D.A.MEHTA, J.] [HARSHA DEVANI, J.] parmar*