By Subhash Chand Jain (Advocate),
Managing Partner of RSA Legal Solutions
M: 9891086862
www.rsalegalsolutions.com
Email Id: scjain@rsalegalsolutions.com
SIMULTANEOUS BENEFIT OF ADVANCE AUTHORISATION VS.
REBATE OF EXCISE DUTY
1. Till last year, number of exporters were exporting the goods by availing the
exemption from duties on inputs under the Advance Authorisation Scheme
along with the rebate of excise duty paid on export goods in accordance with
Rule 18 of Central Excise Rules, 2002 without any problem from any excise or
customs office.
2. The Advance Authorisation Scheme permits an exporter to import the inputs
required for manufacture of the export goods without payment of customs duty.
The inputs may be imported without payment of custom duty either before
fulfilment of the export obligation or after the fulfilment of export obligation as
replenishment of the inputs already used in the manufacture of the export
goods.
3. Sometimes, an exporter has surplus CENVAT Credit for the reason that the
rate of the excise duty on the inputs is higher (inverted duty structure) as
compared to the excise duty payable on the finished goods or on account of
inputs service tax credit or credit on capital goods etc. The exporter in order to
utilize the CENVAT Credit used to clear the export goods on payment of excise
duty under claim of rebate in accordance with the provisions of the Rule 18 of
the Central Excise Rules read with the Notification No. 19/2004-CE (NT) dated
6.9.2004 issued thereunder. On submission of proof of exports these exporters
used to get the rebate of the excise duty so paid by way of cheque.
4. Thus, some exporters were availing the input stage exemption under the
advance authorization and simultaneously clearing their export goods on
payment of excise duty under claim of rebate in terms of Rule 18 of the Central
1
Excise Rules. The said practice of allowing the benefit of Advance Authorisation
and the rebate of excise duty was being allowed and followed throughout the
length and breadth of country without any problem.
5. However, since the last year (around April, 2013), at some places, the Excise
Commissionerates (particularly the Jaipur Commissionerate), a different stand
has been taken and the exporters are not being allowed the benefit of the rebate
under Rule 18 where the exporter has exported goods under the advanced
authorisation scheme. Wherever rebate claims were pending before the
jurisdictional Deputy Commissioner of Central Excise, the same have been
rejected compelling the exporter to pass through the endless agony of litigation.
Likewise where the rebate claims were sanctioned in the preceding one year,
demand notices have been issued for recovery thereof, on the ground that the
same have been erroneously sanctioned. In some cases even appeals have
been filed by the Commissionerates against the sanctioned rebate claims.
6. The said practice of denying the rebate claims has unsettled the well settled
legal position. The U-turn taken by this excise authority is in total contravention
of the case laws on the subject, instructions issued by the Central Board of
Excise & Customs (‘CBEC’) from time to time and contrary to the prevalent
practices throughout India. This is totally contrary to any valid reason and the
entire approach is based on the whimsical and flimsy considerations.
7. Given the above background, we will now analyse whether any legal provision
is violated in any manner for availing the simultaneous benefit of Advance
Authorisation and the rebate of excise duty. The said position is discussed in
the following paragraphs.
Rule 18 of Central Excise Rules:
8. Rule 18 of Central Excise Rules permits an exporter to get the rebate of the
excise duty paid on the export goods subject to such terms and conditions
specified by the CBEC in this behalf. CBEC has issued the Notification No
19/2004-CE (NT) dated 6.9.2004 whereby the various terms and conditions for
availing the rebate under Rule 18 have been specified.
9. From the perusal of Rule 18 of the Central Excise Rules and Notification No.
19/2004-CE (NT) dated 6.9.2004, it would be seen that there is not a single
2
word which prohibits the availment of the rebate claim in case an exporter has
availed the benefit of Advance Authorisation. In fact rebate claim of the excise
duty paid on the export product is permissible in all situations irrespective of the
facts whether the exporter has exported the goods under the Drawback
Scheme, Advance Authorisation Scheme, DFIA Scheme or any other export
promotion schemes. It is also immaterial for the purpose of claiming the rebate
on excise duty whether the duty was paid in cash or out of CENVAT Credit. It
goes without saying that payment of excise duty out of CENVAT Credit is also
considered as a payment of excise duty for all purposes.
10. In nutshell, no condition of Rule 18 or Notification No. 19/2004-CE (NT) dated
6.9.2004 is contravened in any manner in case an exporter has availed the
exemption on inputs under the Advance Authorisation Scheme governed by
Custom notification NO. 96/2009-Cus dated 11.9.2009.
Notification No. 96/2009-Cus dated 11.9.2009
11. Notification No. 96/2009-Cus dated 11.9.2009 allows import of inputs without
payment of Customs Duty imported under the Advance Authorisation Scheme
subject to various conditions specified therein. The Conditions No. (x) provides
that inputs stage benefit should not have been availed under Rule 18 or 19 (2)
of the Central Excise Rules. Thus even under the Advance Authorisation
Scheme the bar is on availment of input stage rebate of central excise duty but
there is no bar of the rebate that has been claimed on the export of finished
goods.
12. It is pertinent to note here that Rule 18 of the Central Excise Rules provides for
input stage rebate of the excise duty paid on the inputs and finished goods
stage rebate paid on the export goods. The bar under Notification No.
96/2009-Cus dated 11.9.2009 is on input stage rebate and not on the
finished goods stage.
13. In nutshell, even under Notification No. 96/200-Cus dated 11.9.2009 governing
the Advance Authorisation Scheme there is no ambiguity in claiming the rebate
of excise duty paid on the finished goods. Even otherwise if a person has
violated any condition of Customs Notification No. 96/200-Cus dated 11.9.2009
then he can be denied the benefit of exemption under Notification No. 96/2009-
3
Cus dated 11.9.2009 by the excise authority and by no stretch of imagination
he can be denied the rebate of the excise paid in terms of Rule 18 of the Central
Excise Rules.
CBEC Circular
14. CBEC vide Instruction No. 605/65/2006-DBK dated 22.1.2007 has clarified in
unambiguous terms that an exporter can claim the rebate of excise duty under
Rule 18 of the Central Excise Rules even if he has imported the inputs under
the Advance Authorisation Scheme. Thus even the CBEC is of the clear view
that both the benefits can be availed simultaneously as one benefit relates to
the duties on inputs and the other benefit relates to the excise duty payable on
finished goods.
Prevalent practice
15. Throughout the country the said benefits are being allowed barring a few
Commissionerates (particularly the Jaipur Commissionerate) without any
objection. This is for the simple and obvious reason that the said practice does
not result in contravention of Rule 18 of Notification No. 19/2004-CE (NT) dated
6.9.2004 or Notification No. 96/200-Cus dated 11.9.2009 in any manner.
Getting the twin benefits is quite logical
16. The under lying principle behind export promotion schemes is that the goods
should be exported and not taxes. Therefore, in order to neutralise the taxes on
inputs and outputs various schemes have been specified by the Government in
the Foreign Trade Policy, Customs and Central Excise. In order to grant the
neutralisation of taxes on inputs the schemes like Advance Authorisation, DFIA,
Duty Drawback etc., are used by the exporters as per their convenience
whereas to get the neutralisation of the excise duty payable on the finished
export goods the benefit of Rule 18 or 19 is availed as per the convenience of
the exporter.
17. An exporter normally clears the goods without payment of excise duty under
Rule 19 if it is not facing the problem of surplus CENVAT Credit. But in a
situation where an exporter is facing the problem of surplus credit due to
4
inverted duty structure or any other reason, then he chooses to pay the duty
out of the CENVAT Credit and then get its refund by way of rebate under Rule
18. There is absolutely nothing illogical in doing so. This is for the reason that
such person can get the refund of the unused credit under Rule 5 of the
CENVAT credit Rules in case he exports the goods without payment of excise
duty under bond in terms of Rule 19 of Central Excise Rules.
In nutshell
1. Claim of Excise Rebate under Rule 18 read with Notification No. 19/2004-CE
(N.T.) satisfies all the terms and conditions thereof even if the exporter has
availed the benefits of Advance Authorisation on the inputs.
2. There is no violation of Notification No.96/2009-Cus dated 11.09.2009
providing exemption from customs duty on the inputs imported under the
Advance Authorisation Scheme in case an exporter availed the rebate of the
excise duty paid on finished goods.
3. CBEC
vide
Instruction
No.
605/65/2006-DBK
dated
22.1.2007
has
unambiguously clarified that the benefit of the Advance Authorisation along with
the rebate of the excise duty under Rule 18 on the export goods can be claimed.
4. Various decisions by the tribunals from time to time also support the aforesaid
view.
5. Claiming of the twin benefits of rebate of excise duty on export goods and
exemption from duties on goods imported/procured under the advance
authorization does not result in double benefits by any stretch of imagination.
Rather they supplement each other. One grants the neutralization of excise
duty on the finished goods and the other allows the neutralization of duties on
inputs required for the manufacture of export goods.
6. Despite such a clear position the benefit is being disallowed to the exporters
and they are being compelled to fall in protracted litigation by some
5
Commissionerates of Central Excise. The said practice must be stopped
forthwith as it is affecting adversely the export of goods.
Article published in E.L.T in volume 309 Part 3.
6