The Bombay High Court recently ruled in favour of M/s Parle Products Ltd., entitling the company to a refund of excise duty voluntarily paid on goods-biscuits that qualified for duty exemption.
The Petitioner is a Company engaged in the manufacturing of Biscuits, Confectioneries, etc. This product biscuit is exigible to excise duty under Section 4A of the Central Excise Act based on its Maximum Retail Price (MRP). The products manufactured by the Petitioner are cleared for home consumption and export.
With respect to biscuits cleared for home consumption, Parle claimed exemption under notification No.3/2006-CE dated 1st March 2006 since the biscuits are cleared in packaged form with per kg. Retail Sale Price (RSP) not exceeding Rs.100/-.
However, the said biscuits, when exported, do not bear the retail sale price in rupees and as specified in notification No.3/2006. Therefore, the Petitioner paid duty on the export under Section 4 of the Central Excise Act, 1944 on clearance of goods for export based on the transaction value.
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The court determined that Parle’s exported biscuits, which do not display the maximum retail price (MRP) required for domestic exemptions, were eligible for rebate under Rule 18 of the Central Excise Rules, 2002.
The case arose from Parle’s claim for rebate on excise duty paid during the export of biscuits, which the Central Excise Department had denied. The department argued that Parle’s biscuits qualified for exemption under Notification No. 3/2006 due to their low MRP in the domestic market, despite Parle paying the duty for exported goods.
According to the department, the excise duty paid voluntarily could not be refunded, as the goods were exempt from duty.
However, Parle contended that the exemption notification applied only to biscuits priced below Rs. 100 per kg for domestic sale, where the MRP is displayed. The exemption criteria do not extend to exported goods, which are not required to display MRP per the Standards of Weights and Measures Act. Parle argued that since these biscuits were exported, they fell outside the exemption and were subject to duty, justifying their rebate claim under the applicable excise rules.
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The Commissioner (Appeals) had initially supported Parle’s claim, stating that the exemption criteria did not apply to exports without MRP. This decision was later reversed by the Revisional Authority, which restored the department’s stance, asserting that Parle’s goods were exempt and therefore ineligible for rebate, even if duty was paid voluntarily.
Upon review, the Bombay High Court reinstated the Appellate Authority’s decision, highlighting two main points.
First, the court found that the exemption under Notification No. 3/2006 could not apply to goods lacking MRP, as required for exemption eligibility. Consequently, Parle’s biscuits, without an MRP displayed for export, were ineligible for the domestic exemption and rightly attracted duty.
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Second, the bench of Justice M S Sonak and Jitendra Jain noted that even if the department’s exemption argument were accepted, retaining Parle’s payment without legal grounds would constitute a violation of Article 265 of the Indian Constitution, which forbids tax collection without statutory authority.
Ultimately, the court directed the revenue department to refund Parle’s excise duty, recognizing that retention of this payment would amount to unjust enrichment.
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