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2005 DIGILAW 300 (RAJ)

Rajasthan Syntex Ltd. v. Union of India

2005-02-02

JITENDRA RAY GOYAL

body2005
Judgment Rajesh Balia, J.-Heard learned Counsel for the parties. 2. On 26th June, 2001 three notifications were issued under Central Excise (No. 2) Rules, 2001 in relation to granting concession/exemption in the matter of payment of Excise Duty on export of excisable goods. 3. Notification No. 40/2001 (Annexure 8) issued under Rule 18 envisaged that rebate shall be granted subject to condition and limitation specified in the notification of whole of the duty paid on all excisable goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), on their exportation to any country except Nepal and Bhutan; and rebate of whole of the duty paid on the excisable goods to the His Majestys Government on their exportation to Nepal except that the rebate shall not, in each case, exceed the aggregate of the duty of Customs and additional duty of Customs levied by His Magestys Government of Nepal on such goods when they are imported into Nepal from any country other than India; and rebate of whole of the duty paid on mineral oil products falling under Chapter 27 of the Schedule to the Central Excise Tariff Act exported as stores for consumption on board on aircraft on foreign run except that in respect of the excisable goods mentioned in Column (2) of the Table appended to the notification, the amount of the rebate shall be reduced by the amount indicated in the corresponding entry in Column (3) of the said table. 4. Apparently, the notification No. 40 applied to export of excisable goods on which duty has already been paid when goods were removed from factory premises or other specific place of storage and it was for the exporter to claim rebate later when such excisable goods were exported. 5. Notification No. 42/2001 issued under Rule 19 (Annexure 9) on the other hand envisaged that on conditions and procedure laid down in notification for removal of all excisable goods, except to Nepal and Bhutan without payment of duty from the factory of the production or the manufacture or wherehouse or any other premises as may be approved by the Commissioner of Central Excise on exporter furnishing a bond in the specified form. 6. Apparently, the distinction in notification Nos. 40 and 42 was apparent. 6. Apparently, the distinction in notification Nos. 40 and 42 was apparent. While under notification No. 40/2001, the export envisaged was of the excisable goods which have already suffered duty and the exporter became eligible to rebate on such excise duty later on export, whereas under the notification No. 42/2001, the exporter on furnishing a general bond in the specified form became entitled to export of excisable goods from his factory premises or the place of manufacture or wherehouse or other approved premises as has been notified without payment of duty. In other words removal of excisable goods was permitted without payment of duty. 7. The third notification of the even date No. 43/2001 was also issued under Rule 19 which is Annexure7 to the writ petition. It notified the terms and conditions and safeguards and procedure for procurement of excisable goods without payment of duty for the purpose of use in manufacture or processing of export goods and exportation out of India except to Nepal and Bhutan. In other words, Notification No. 43/2001 Annexure 7 provides for procurement of excisable inputs by the manufacturer without payment of excise duty, for using in manufacturing or processing goods for export and their export out of India. 8. Inputs are procured by both type of manufacture, who availed benefit of rebate under Notification No. 40/2001 on export of Duty paid excisable goods as well as those who avail the benefit of removing goods from factory premises or other specified premises without payment of Duty, when such goods are directly exported. 9. Thus, notification No. 40/2001 and 42/2001 operate independently of each other for availing benefit of remission of Duty paid or exemption from payment of duty on goods exported by them. However, Notification No. 43/2001 operates in ancillary field only viz. allowing procurement of excisable raw material or inputs to be used in manufacture of excisable goods to be exported out of India. It did not at all apply to remission or exemption that could be availed under either of the Notification No. 40/2001 or 42/2001 when such excisable goods were exported. 10. allowing procurement of excisable raw material or inputs to be used in manufacture of excisable goods to be exported out of India. It did not at all apply to remission or exemption that could be availed under either of the Notification No. 40/2001 or 42/2001 when such excisable goods were exported. 10. Notification No. 43/2001 as it stood before its amendment vide Notification No. 10/2004 dated 03.06.2004, extended the benefit of procuring excisable inputs used in manufacturing or processing of export goods whether benefit of such export of excisable goods is availed by way of rebate under Notification No. 40/2001 by exporting the goods after paying duty on their removal or by way of claiming exemption for payment of duty altogether at the time of removal of goods on furnishing a general bond in specified form. 10.11. The petitioner in this case has availed the benefit of rebate on duty paid on excisable goods in terms of notification No. 40/2001 on goods exported by him. 12. For the present purpose, we may notice the Clause (vi) of the Central Excise Notification No. 43/2001dated 26th June, 2001 before it was amended vide Notification No. 10/2004 dated 03.06.2004 :-"(vi) 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." 13. In pursuance of these three notifications from 26th June, 2001, the assessee procured the inputs to be used by him for manufacture or processing of export goods without payment of Duty and exported said goods so manufactured. On excisable goods, he paid duty on removal and availed the benefit of rebate of excise duty paid on the excisable goods exported in terms of notification No. 40/2001 without furnishing the bond in terms of notification No.42/2001. The revenue in first instance allowed such rebate. .14. Vide notification No. 10/2004 dated 03.06.2004, notification No. 43/2001 was also amended. On excisable goods, he paid duty on removal and availed the benefit of rebate of excise duty paid on the excisable goods exported in terms of notification No. 40/2001 without furnishing the bond in terms of notification No.42/2001. The revenue in first instance allowed such rebate. .14. Vide notification No. 10/2004 dated 03.06.2004, notification No. 43/2001 was also amended. By the notification No. 10/2004, the aforesaid para (vi) of the notification No. 43/2001 was substituted which reads as under:- ."(vi) The goods shall be exported on the application in Form ARE-2 specified in the Annexure and the Procedure specified in the Ministry of Finance (Department of Revenue) notification No. 42/2001-CE (NT) dated 26.2001 shall be followed." The Explanation was also inserted. Explanation II reads as under:-"Explanation II.-For the removal of doubt, it is clarified that the goods manufactured or processed using the excisable goods so procured without payment of duty under this notification shall be exported in term of Sub-rule (1) of Rule 19 of the Central Excise Rules, 2002." 15. Along with this notification, a circular was also issued by Central Board of Excise and Customs on 2nd June, 2004 (Annexure-5) which has been challenged in this writ petition. 16. This circular was couched in the language to remove the doubts that has been raised for field formation that whether the goods manufactured using material without payment of duty for use of manufacture of export goods under notification No. 43/2001 dated 02.06.2001 as amended under claim of rebate of duty under Rule 18 of the Central Excise Rules or the goods should be exported under payment duty under the Excise Duty, 2002. .17. While referring to the controversy and the meaning of the two notifications in the main body of the circular, care has been taken to refer meaning of notification No. 43/2001 dated 26th June, 2001 as amended, in the culminating paragraph the circular reads as under:- ."In order to make the position explicit, a clarificatory amendment has been issued vide notification No. 10/2004-C.E. (N.T.) dated 2nd June, 2004 by adding an explanation to notification No. 43/2001-C.E. (N.T.) dated 26th June, 2001 clarifying that goods manufactured or processed using materials procured under notification No. 43/2001 -C.E. (N.T.) can only be exported in terms of Sub-rule (1) of Rule 19 of Central Excise Rules, 2002, read with notification No. 42/2001-C.E. (N.T.) dated 26th June, 2001, as amended. This amendment is clarificatory in nature." 18. Apparently there is no indication in the notification No. 10/2004 dated 03.06.2004 that it takes away any benefit which flow from the provison as it existed immediately before amendment. The language of unamended Notification No. 43/2001 was clear enough to permit the manufacturer or processor of the goods, who has availed the benefit of procuring excisable inputs without payment of duty under it, could avail the benefit of tax concession on export of such goods manufactured or processed, either under Notification No. 40/2001 by removing the goods on payment of Duty and then claim rebate or furnishing general bond in specified form and remove the goods to be exported without, payment of duty. On amendment, for those who procured the inputs without payment of duty, were permitted such benefits only if goods manufactured by use of such inputs, only if they are being exported in terms of Notification No. 42/2001 by furnishing bond and remove the goods without payment of duty. However, after the amendment, if the goods in which input without payment of duty are procured and end produce is exported in terms of notification No. 40/2001, whether it will entail liability to pay duty on such inputs as have been procured without payment of duty under Notification No. 43/2001 as it results in breach of condition of said notification or he forfeits his right flowing from Notification No.40/2001 remains a gray area. But the obvious effect is that it takes effect prospectively or cannot affect the rights which have accrued and vests in an assessee before amendment. 19. This led to issuance of show-cause notice by the Assistant Commissioner of Central Excise dated 19.06.2004 (Annexure 1) for withdrawing the rebate of duty allowed to the petitioner inter alia on the ground that since Notification No. 10/2004 is only clarificatory in nature as stated in Annexure 5, the rule was always the same. Since the petitioner has procured inputs without payment of Duty as per Notification No.43/2001 but has not exported the goods as per Notification No. 42/2001 but has exported duty paid goods, he is not entitled to rebate under the Notification No. 40/2001 and to recover the amount refunded to him in terms of circular No. 792/25/2004-CX dated 3rd June, 2004 (Annexure 5). 20. 20. Since filing of the writ petition, another circular has been issued by the Central Board of direct Taxes being C.B.E. & C. Circular No. 805/2/2005-CX , dated 11.2005 stating that the notification No. 10/2004 dated 3rd June, 2004 amending the notification No. 43/2004 is prospective and not retrospective and to that extent the aforesaid circular stands modified. The relevant part of the circular dated 11.2005 reads as under:- "I am directed to say that Notification No. 43/2001-C.E. (N.T.) dated 26th June, 2001 was amended vide Notification No. 10/2004 C.E. (N.T.) dated 3rd June, 2004. The said amendment added an Explanation to Notification No. 43/2001 C.E. (N.T.) clarifying the goods manufactured or processed using materials procured under Notification No. 43/2001 C.E. (N.T.) can only be exported in terms of Sub-rule (1) of Rule 19 of Central Excise Rules, 2002. 2. Board had also issued Circular No. 792/25/2004-CX, dated 3rd June, 2004[2004(168) E.L.T.T 12]stating that the amendment carried out vide Notification No. 10/2004-C.E. (N.T.), dated 3rd June, 2004 is clarificatory in nature and goods manufactured or processed using materials procured under Notification No. 43/2001 C.E. (N.T.) can only be exported under Bond i.e. in terms of Sub-rule (1) of Rule 19 of Central Excise Rules, 2002 read with Notification No. 42/2001-C.E. (N.T.), dated 26th June, 2001. 3. Consequent to above, references have been received from trade and industry as to whether the provisions of amending Notification No. 10/2004 -C.E. (N.T.), dated 3rd June, 2004 would be applicable retrospectively. The matter has been examined by Board. It is hereby, clarified that the Notification No. 10/2004-C.E. (N.T.), dated 3rd June, 2004 would be applicable prospectively from the date of issue of the notification i.e. 3rd June, 2004 and not to exports effected already, Circular No. 792/25/2004-CX., dated 3rd June, 2004 stands modified to the above extent. Pending claims if any, may be decided accordingly. 4. Trade and field formations may please be informed suitably. 5. Receipt of the Circular may be acknowledged. 6. Hindi version will follow. [Source: C.B.E. & C. Circular No. 805/2/2005-CX., dated 11.01.2005]" 21. Apparently, in view of the aforesaid circular which modifies the impugned notification No. 792/25/2004-CX , dated 3rd June, 2004 declaring that the notification No. 10/2004 dated 3rd June, 2004 would be applicable prospective with effect from the date of issue of notification, it takes away the basic foundation of the issuance of the show-cause notice. 22. Apparently, in view of the aforesaid circular which modifies the impugned notification No. 792/25/2004-CX , dated 3rd June, 2004 declaring that the notification No. 10/2004 dated 3rd June, 2004 would be applicable prospective with effect from the date of issue of notification, it takes away the basic foundation of the issuance of the show-cause notice. 22. In view thereof , the show-cause notice cannot survive as the circular dated 11.01.2005 is binding on the Assessing Authorities. Consequently, the petition is allowed and the respondents are directed to drop the show-cause notice in terms of notification dated 11.01.2005.