Writ Petition No.2706 of 2006

10th August, 2010

Petitioner Counsel: Mr. ANIL BALANI
Respondent Counsel: Mr. P. S. JETLY

Cases Cited:
Indian Aluminium Company Limited Vs. Thane Municipal Corporation, 1991(55) E.L.T. 454 (S.C.) [Para 7,16,19,23]
Kedarnath Jute Manufacturing Company Vs. Commercial Tax Officer, (1965)3 SCR 626 [Para 7]
Cotfab Exports, 2006(205) ELT 1027 [Para 15]
Barot Exports, 2006(203) ELT 321 [Para 15]
The Commissioner of Central Excise, Bhopal, 2006(205) ELT 1093 [Para 15]
Mangalore Chemicals and Fertilizers Ltd. Vs. Deputy Commissioner, 1991(55) ELT 437 [Para 16,23]
Formica India Vs. Collector of Central Excise, 1995(77) ELT 511 [Para 16,23]

JUDGMENT

S. J. KATHAWALLA, J. :- By this Petition, the Petitioners have prayed for setting aside the Order dated 29th May, 2006 passed by the Respondent No.2 in Revision under Section 35-EE of the Central Excise Act, 1944. The said Revision was preferred against the Order allowing the Appeal filed by the Deputy Commissioner of Central Excise and Customs (Respondent No.3) and consequently, rejecting the Petitioners' rebate claim for Rs.9,87,777/-

FACTS:-

2. The Petitioner No.1 is a partnership firm of which the Petitioner No.2 is the partner. The Petitioners (dealer) are engaged in the business of trading in ferrous/non-ferrous metals. The Petitioners had purchased SS Sheets in Coil Form (Hot Rolled) (200) SC-1 Grade, of various thickness (the said goods) involving 162.405 MTs under 11 invoices (Exhibits-B-1 to B-11 of the Petition) from M/s. Shah Alloys Limited (the manufacturer). The Petitioners thereafter under 7 invoices (Exhibits-C-1 to C-7 of the Petition) sold 151.500 MTs of the said goods to M/s. H. M. Traders, Mumbai (the exporter). The exporter exported the said 151.500 MTs of the said goods under 3 ARE-1s issued by the Petitioners (Exhibits-D-1 to D-3 of the Petition). The Petitioners also obtained the No Objection Certificate from the exporter for the purpose of claiming the rebate of central excise duty directly from the Central Excise Authorities.

3. The exporter exported the goods to M/s. Classico Trading at Sharjah UAE under the cover of shipping bill Nos.897232 to 897234 all dated 29th March, 2003 after due examination by the Central Excise and Customs Authorities. The exporter also realized the foreign exchange in full through the authorized dealer, who issued the bank realization Certificate No.500 dated 12th June, 2003.

4. The Petitioners filed three rebate claims totally amounting to Rs.9,87,777/- under Rule 18 of the Central Excise Rules, 2002 on export of 151.500 MTs of Stainless Steel Sheets in Coils (Hot Rolled).

5. The Respondent No.3 vide his Order dated 20th August, 2004 rejected the Petitioners rebate claims on the ground that the procedure required under the Board's Circular, has not been followed by the exporter and the goods originally procured by the Petitioners from M/s. Shah Alloys Limited, have not been exported.

6. Being aggrieved by the Order of the Respondent No.3, the Petitioners filed an Appeal before the Commissioner of Central Excise (Appeals), Mumbai-III. While allowing the Appeal of the Petitioners, the Commissioner of Central Excise (Appeals), vide his Order in Appeal dated 22nd December, 2004 held as under:

"i. The goods in question have been duly exported after physical examination by the Central Excise and Customs which is supported by the endorsements of the Central Excise and Customs Officials on the relevant export documents, viz. shipping bills, ARE-1s, etc,;

ii. The duty on the exported goods have been paid; and

iii. Sale proceeds of the exported goods from the overseas buyer have been duly received through banking channel.

The lapse mentioned in the impugned order was condonable. The directives by the Government of India while deciding various appeals under Section 35-EE of the Central Excise Act, 1944 and also by the Board in this context directing that, the rebate claim should not be rejected merely on the procedural and/or technical ground have to be followed. Therefore, the appellants are entitled for the rebate claims under Rule 18 ibid."

7. However, the Revisional Authority (Respondent No.2) vide its impugned order dated 29th May, 2006, set aside the Order dated 22nd December, 2004 of the Commissioner of Central Excise (Appeals). As a result, the rebate claims stood rejected. The Revisional Authority after comparing the contents of the invoices of M/s. Shah Alloys Limited (manufacturer) with two of the 7 invoices of the Petitioners has held that the description and the quantity of the goods cleared from the manufacturing place is different from the description and the quantity of the goods given in the dealer's invoice. There is no identification mark/numbers on the goods which can prove that the Respondents have exported the same goods which were cleared from the manufacturer's place on payment of central excise duty. It was also held that the Respondents have not exported goods after payment of central excise duty directly from the place of the manufacturer. It was held that the Respondents have, therefore, not complied with the conditions for claiming rebate as contained in Rule 18 of the Central Excise Rules, 2002 and the notifications issued thereunder. The Revisional Authority also relied on the observation of the Hon'ble Supreme Court in the case of the Indian Aluminium Company Limited Vs. Thane Municipal Corporation, 1991(55) E.L.T. 454 (S.C.), wherein the Hon'ble Supreme Court has affirmed its earlier view in Kedarnath Jute Manufacturing Company Vs. Commercial Tax Officer, (1965)3 SCR 626, to the effect that a liberal construction of the requirement to furnish a declaration form by a dealer under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, is likely to facilitate the commission of fraud and introduce administrative inconveniences. Therefore, the same cannot be condoned. The Respondent No.2, therefore, allowed the Revision Application. Consequently, the claim of the Petitioners was rejected.

8. Being aggrieved by the said Order of the Respondent No.2 dated 22nd December 2004, the present Petition is filed by the Petitioners.

SUBMISSIONS:-

9. It is submitted on behalf of the Petitioners that in paragraph 8.2 of the impugned Order, the following is recorded:

"Govt., notes manufacturer's invoice No. or other details have not been mentioned."

The finding is factually incorrect. Column 5 of the invoice nos.23 and 24 reveals the name and address of the manufacturer as well as the invoice number and date. It also reveals the description, classification and quantity of the goods.

10. It is submitted that reliance on CBEC Circulars by the Respondent No.2 is not well-founded since the goods are clearly identifiable and their duty paid character was verified in the following manner:

(a) The goods manufactured and the goods exported are Stainless Steel Hot Rolled Coils;

(b) The quantity exported is covered by the larger quantity which was manufactured;

(c) The date of export is immediately subsequent to the date of manufacture;

(d) Transport documents were produced to prove the shifting of the goods.

11. It is submitted that the proforma of the manufacturer's invoice provides a large space for setting out the description of the goods. In case of the Petitioners' (dealer) invoice, however, a similar space is not provided. Hence, it was not possible to copy the full description given in the manufacturer's invoice.

12. It is submitted that the finding given by the Respondent No.2 in paragraph 8.5 of the impugned Order that the Respondents have not produced documents such as LR, etc. is incorrect. The same is also belied in view of the findings of the Original Authority in paragraph 5(b) of the Order that the Petitioners vide their letter dated 8th July, 2004 enclosed transporters documents showing the evidence of transfer of the goods.

13. It is submitted that the proforma of the ARE 1 does not provide for name of the registered dealer. Hence, in column 1 of the ARE 1 the name of the registered dealer (the Petitioners) is indicated.

14. It is submitted that the Respondent No.2 failed to appreciate that the Petitioners have successfully established the exact corelation between the goods which were manufactured and cleared on payment of central excise duty and the goods which were exported. The Respondents failed to appreciate that the core aspect or fundamental requirement for rebate is manufacture and subsequent export of the goods. As long as this requirement is met, other procedural deviations can be condoned. The procedure has been prescribed to facilitate verification of substantive requirements. As per the law laid down by the Hon'ble Supreme Court, substantive benefit cannot be denied for procedural lapses. Procedural infractions are to be condoned if exports have actually taken place.

15. It is submitted that the impugned order of the Respondent No.2 in the instant case, is discriminatory in nature and contrary to its own earlier orders and the law laid down by the Hon'ble Apex Court in the case of Cotfab Exports, 2006(205) ELT 1027; Barot Exports, 2006(203) ELT 321 and the Commissioner of Central Excise, Bhopal, 2006(205) ELT 1093.

16. It is submitted that reliance on the Supreme Court judgment in the case of Indian Aluminium Company Limited (supra) is also not well-founded. The facts of the said case are distinguishable. Refund of octroi was claimed after lapse of a long time. Further, admittedly declaration in Form-14 was not filed. In the circumstances, there was no scope for verification. Further, the Hon'ble Supreme Court held that the burden of octroi would have been passed on to the consumers. Therefore, the Hon'ble Apex Court refused to exercise its discretion and dismissed the SLP. On the other hand, in the case of Mangalore Chemicals and Fertilizers Ltd. Vs. Deputy Commissioner, reported in 1991(55) ELT 437, the Hon'ble Supreme Court has held that technicalities attendant upon a statutory procedure should be cut down where these are not necessary for the fulfillment of legislative purpose. In its judgment, in the case of Formica India Vs. Collector of Central Excise, reported in 1995(77) ELT 511, the Hon'ble Supreme Court held that benefit should not be denied on technical grounds.

17. It is, therefore, submitted that the Petition be allowed and the impugned Order dated 29th May, 2006 be set aside.

PER CONTRA:-

18. It is submitted on behalf of the Respondents that though the manufacturer's invoices show complete details of the products sold to the Petitioners, viz. 'S.S. Sheets in coil form (200) SC-I Grade Hot Rolled produce of various thickness ranging from 2.6 mm to 2.9 mm', in the export documents, such as, ARE 1s, Invoices, Shipping Bills, under which the Petitioners sold and exported the products, the thickness and the complete description of goods exported are not shown, but show only as 'Stainless Steel Coils (H.R.)'. As such, the products purchased from the manufacturer and the products sold and exported by M/s. H.M. Traders cannot be identified.

19. Referring to ARE 1 No.5 dated 28th March, 2003, it is submitted that the product exported are not the goods originally cleared from the factory of the manufacturer. Since there is no identifiable marking/dimension appearing in the export documents, no corelation could be made with the goods exported. It is submitted that the Petitioners have misdeclared themselves as manufacturer on the body of the subject ARE 1. The Petitioners had also not followed the procedure prescribed under CBEC Circular No.18/92CX6, dated 18th December, 1992 read with Circular No.294/10/1997CX, dated 30th January, 1997. It is submitted that the decision of the Hon'ble Supreme Court in Indian Aluminium Company Limited (supra), is squarely applicable to the present case. It is, therefore, submitted that rule be discharged and the Petition be dismissed.

CONCLUSION:

20. We have considered the submissions advanced on behalf of the Petitioners as well as the Respondents. We have perused the impugned Order passed by the Respondent No.2. We have also perused the case law cited by the Petitioners as well as the Respondents.

21. The Petitioners have purchased 11 consignments of Stainless Steel Sheets and Coils (Hot Rolled) totaling to 162.405 MTs from M/s. Shah Alloys Limited (manufacturer). According to the Petitioners, after procuring the said export goods from the manufacturer under 11 invoices, the Petitioners sold 151.500 MTs of Stainless Steel Sheets in Coils (Hot Rolled) under 7 invoices of the Petitioners to M/s. H.M. Traders (the exporter). It is an admitted fact that the goods which have been duly exported by the exporter are the goods sold by the Petitioners to the exporter under 7 invoices of the Petitioners. The said goods are exported after physical examination by the Central Excise and Customs Authorities which is supported by the endorsements of the Central Excise and Customs Officials on the relevant export documents, namely, shipping bills, ARE 1, etc. It is also not in dispute that the duty was paid on the exported goods and the sale proceeds of the exported goods have been duly received through the banking channel.

22. The only dispute raised, is that the Petitioners have failed to establish that the goods sold by the Petitioners to the Exporter under 7 invoices, form part of the goods purchased by the Petitioners from the manufacturer under the 11 invoices raised by the said manufacturer. The Respondent No.2 vide its impugned Order has reached the conclusion that the Petitioners have failed to establish from the documents that the goods purchased by the Petitioners from the manufacturer, are the goods which have been exported by the exporter. In view thereof, we have compared the invoices raised by the manufacturer at the time of sale of the said goods to the Petitioners and the 7 invoices raised by the Petitioners whilst selling the goods to the exporter M/s. H. M. Traders and also the AREs issued by the Petitioners. The invoices raised by the manufacturer shows that SS sheets in coil form (200) SCI Grade Hot Rolled of various thickness is sold by the manufacturer to the Petitioners. The description of the goods in the invoice raised by the Petitioners gives the description of the goods as SS/HR coils, that is, Stainless Steel Hot Rolled Coils. The seven invoices raised by the Petitioners shows that the space provided for description of the goods is not as large as the space provided for description of the goods in the invoice raised by the manufacturer. In view thereof, the Petitioners have in their invoice described the goods by using abbreviations "SS/HR Coils". However, the name of the manufacturer M/s. Shah Alloys Limited along with the invoice number under which M/s. Shah Alloys Limited sold the goods to the Petitioners and the description of the goods sold by them in the abbreviated form, is mentioned in all the 7 invoices raised by the Petitioners in favour of M/s. H. M. Traders (the exporter). Again in the AREs, the description of the goods is shown as 'Stainless Steel Coils' HR (i.e. Hot Rolled). The invoice numbers of the seven invoices raised by the Petitioners on the exporter giving all particulars of the manufacturer, are also set out in the AREs. In column no.1 pertaining to the particulars of the manufacturer of goods in the AREs, though the name of the Petitioner No.1 is shown, in column no.5 the Petitioner No.1 is shown as the dealer. The Central Excise Officer has also certified that the goods set out in Form-ARE 1 have been exported.

23. We, therefore, hold that the aforestated particulars set out in the documents produced by the Petitioners, establishes beyond any doubt that the goods purchased by the Petitioners from the manufacturer are the goods sold by the Petitioners to the exporter and the same have been exported by the said exporter. The Respondent No.2 has, therefore, erred in concluding that the Petitioners could not prove beyond doubt that the goods cleared on the payment of duty for home consumption, were subsequently exported through shipping bills mentioned in the Order in Appeal dated 22nd December, 2004. As held by the Hon'ble Supreme Court in its decision in the case of Mangalore Chemicals and Fertilizers Limited (supra), technicalities attendant upon a statutory procedure should be cut down especially, where such technicalities are not essential for the fulfillment of the legislative purpose. The Hon'ble Supreme Court has again held in the case of Formica India Vs. Collector of Central Excise (supra) that the benefit should not be denied on technical grounds. Reliance by the Respondents on the judgment of the Hon'ble Supreme Court in the case of Indian Aluminium Company Limited (supra), is not well-founded. In that case, refund of octroi was claimed after lapse of a long time. Further, admittedly, declaration in Form-14 was not filed. In the circumstances, there was no scope for verification. Therefore, the Hon'ble Apex Court refused to exercise its discretion and dismissed the SLP.

24. In view of what is aforestated, we hold that the Order dated 29th May, 2006 passed by the Respondent No.2, is erroneous and perverse and is hereby quashed and set aside. Rule issued is made absolute and the Respondents are directed to forthwith pay to the Petitioners the amount of Rs.9,87,777/- claimed by them by three rebate claims under Rule 18 of the Central Excise Rules, 2002 under three AREs all dated 28th March, 2003.

Writ Petition is accordingly, disposed of, with no order as to costs.

Petition allowed.