The Delhi High Court has recently held that as per the provisions of Finance Act, 2003, area based refund is no longer available to manufacturers of cigarettes in the North East and this includes NETCL. Earlier, the manufactures in the North East including NETCL were entitled for area-based refund in case of manufacture of cigerattes as per Notification No. 32/99-CE dated 8.07.1999. The relevant facts and the decision are briefly stated below.
The Petitioner was purchasing cigarettes from M/s North East Tobacco Company Limited located in the State of Assam. NETCL was clearing the cigarettes after availing of the benefit of area-based exemption from payment of central excise duty under Notification Nos. 32/99-CE and 33/99-CE dated 8th July 1999. In terms of the said notifications, NETCL was required to first pay duty on the clearances upfront and thereafter could claim refund on such amount of the said duty as had been paid through the Personal Ledger Account.
Thereafter, the Petitioner invoked Rule 12(1)(a) of the Central Excise Rules, 1944 and filed a refund claim of Rs.15,12,000 in the office of the Deputy Commissioner, Central Excise by a letter dated 29th December 2000 on an export of 100 cartons of Chancellor Harward FTR Luxury Kings 10‟s cigarettes of 84 mm length to United Arab Emirates. The said goods were exported by a shipping bill dated 11th December 2000. The Petitioner also invoked Notification No. 41/94-CE (NT) dated 12th September 1994.
The Department maintained that the rebate scheme envisaged that proper duty on goods exported is ‘paid’. It was stated that the refund claim filed by the Petitioner for Rs.15,12,000 was liable to be rejected as the goods exported were fully exempted from payment of duty. On this basis, the Assessing Officer had rejected claim of refund vide its order.This was affirmed by the Commissioner (Appeals) by the order dated 29th November 2001 and by the Government of India by dismissing the Petitioner’s revision petition on 27th August 2002. The principal ground for rejection was that the duty paid by NETCL was refunded to NETCL under Notification Nos. 32/99-CE and 33/99-CE dated 8th July 1999 and, therefore, no duty was actually paid by NETCL which entitled the Petitioner to claim refund.
The bench comprising of Justices S Muralidhar and Najimi Waziri observed that the Notification No. 32/99-CE dated 8th July 1999 which granted the area-based refund to manufacturers of cigarettes located in the North-East stands withdrawn by Sections 154 (1) and 154(4) of the Finance Act. Post-amendment, as observed by the Court,the area based refund is no longer available to manufacturers of cigarettes in the North East and this includes NETCL as well. Under Section 154(4) of the Finance Act 2003, the Government is bound to recover all amounts of duty or interest which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, which would have not been refunded if Section 154 had been in force at all material times. The consequence is that the refund under Notification No. 32/99 is no longer available and with recovery proceedings having been initiated against NETCL, the cigarettes purchased by the Petitioner from NETCL will have to be considered as goods in respect of which duty was paid by NETCL. Thus the Petitioner cannot be denied the refund due to it in terms of Rule 12 (1)(a) of the CE Rules read with Notification No. 41/94-CE (NT) dated 12th September 1994.
Consequently, the Court set aside all the orders which are the very basis of the rejection of the Petitioner’s refund application.
Read the full text of the Judgment below.
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