Rajasthan HC Denies Excise Duty Exemption, Holds that Benefits Cannot be claimed when Goods are Sold and Not Actually Exported [Read Order]

The Rajasthan High Court has upheld an order of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), ruling that a manufacturer cannot claim excise duty exemption on the ground of export when the goods in fact were only sold to another company and not directly exported.

While dismissing the appeal filed by M/s Natural Lights Pvt. Ltd and upholding CESTAT order, the Division Bench held that the Tribunal’s findings were purely factual and called for no interference as no substantial question of law arose.

The appellant contended that the goods manufactured by it were handed over to M/s Central Electronics Ltd. (CEL), which allegedly exported them, and therefore the appellant should be treated as having effected export through the supply chain.

Further, the appellant submitted that CEL was acting under an export contract awarded to M/s Angelique International Ltd., and that the evidence placed on record, including documents purportedly showing export by CEL, ought to have been given due weight by the Tribunal.

However, the High Court noted that the Tribunal had minutely examined the documents and concluded that the appellant did not export the goods removed under ARE-1, but instead sold the goods to CEL, which thereafter dealt with them independently.

On this basis, the Tribunal had denied the duty exemption, holding that the appellant failed to establish a direct export of the goods as required under the excise act.

Justices Sanjeev Prakash Sharma and Baljinder Singh Sandhu agreed with the Tribunal’s reasoning, observing that the findings were “purely the findings of fact” and that the appellant could not demonstrate any legal infirmity or perversity warranting appellate interference.

Since the appeal did not raise any question of law, the High Court dismissed it, stating that excise duty exemption tied to export benefits cannot be claimed merely on the basis of onward sale to another entity in the supply chain unless the manufacturer proves that it directly exported the goods in accordance with law.

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