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File NO.APPL-COMMOCEX/408/2019-GST- APL-CHD

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Office of the Commissioner(Appeals)

Chl~~(>l~ ~ (~) .:> Central Goods and Services Tax Commissionerate, Chandigarh

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eN o. APP-COML'VlOCEX/40S/2019-GST-APPL-CHD

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Dated: .o:7.W19 118/11

Appeal No.03/A/CE/CHD/2018-19

ORDER-IN-APPEAL

Order- In-Appeal No: CHD-EXCUS-00I-APP-\t)l-:l9-20 Dated:J-'07.20l9

Name of the Appellant Mis Mahavir Spinning Mills- TD (A Unit ofVardhman Textiles Ltd.), Sai Road, Baddi Distt. Solan (HP)

Order-in-Original No. &318/ACIRIBaddi/2017 dated 28.02.2018 & Date Adjudicating Authority The Assistant Commissioner, Central GST Division,

Baddi. Amount of Rebate 1,97,0801-

Period of Dispute 17.09.2016

Mis Mahavir Spinning Mills-TD (-A Unit of Vardhman Textiles Ltd.), Sai Road, Baddi (for brevity 'the Appellants'), have filed the subject appeal against the Order-in-Original No. 1 318/ACIRJBaddi/2017 dated 28.02.2018 (for brevity 'the impugned order') passed by the Assistant Commissioner, Central GST Division, Baddi (for. brevity 'the adjudicating authority') which is being taken up for decision 1- nder thi order.

2. Briefly stated, the appellant were registered with the department vide Registration No.A BCl'v14692ESTOl4 for the manufacture of Yam falling under Chapter 52/55 of the Central Excise Tariff Act, 1985 (for brevity 'the CETA'). The appellant had filed rebate claim for Rs 1,97,0801- (as per details contained in the adjudication order) on 10.08.2017 in the office of the Assistant Commissioner, Central GST Division, Baddi under Section lIB of the Central Excise Act, 1944 (hereinafter referred to as the 'Act') read with Rule 18 of Central Excise Rules,

File NO.APPL-COMMOCEX/408/2019-GST- APL-CHD

2002 (hereinafter referred to as the 'Rules') in respect of the duty paid on goods which had been exported directly from the registered factory of the appellant. As the appellant, on these exported goods, had availed/claimed higher rate of duty drawback (of Customs duty as well as of Central Excise duty paid on inputs) at higher rate under category 'A' of the Drawback Schedule annexed to Notification No. 13112016-Cus (NT) dated 31.10.2016 (effective from 15.11.2016), therefore, it appeared that the appellant was not entitled for rebate in terms of Rule 18 of the Rules.

3. Accordingly, a letter/Notice was issued to the appellant to explain as to why their rebate claims should not be rejected in response to which the appellant vide their letter dated 27.11.2017 filed their written submissions. After due process, the Adjudicating Authority rejected the rebate claim amounting to Rs.l ,97,080/- on the ground that the appellant was not entitled to avail the benefits of both the duty Drawback as well as the rebate of duty in terms of the proviso to Rule 3 of the Central Excise Duties and Service Tax Drawback Rules1995 read with Section lIB of the Act & Rule 18 of the Rules and provisions of Section 142(3) ofCGST, Act, 2017 and would result in double benefit.

4. Being aggrieved against the impugned orders, the appellant filed the instant appeal on the grounds as detailed below:-

• That the impugned order is contrary to the factual and legal position. • That the appellant had not availed rebate of input stage duty. The company

was admittedly availing rebate of duty paid on final product granted under Notification No. 19/2004-CE (NT). The provisions relating to drawback did not bar availing of rebate on final products.

• That the appellant availed benefit of duty drawback of the duty/tax suffered on the materials used in the exported product. Simultaneously, they had also filed rebate claim on the final excise duty paid on the exported final goods. These benefits are mutually exclusive, which do not lead to double benefit and sought to compensate duty burden suffered by the exporter.

• That the rebate of duty paid on final product set' off the duty paid on the finished product. On the other hand, the duty drawback sets off the duty suffered at the input stage and it did not have any bearing on the final stage duty.

• That it is well settled and accepted policy of the Government that the goods exported were to be free from all kinds of taxes/duties, whether it was duty paid on inputs/inter-mediatory used in the manufacture of exported final products or the duty paid at the time of clearance of final product exported. The policy was with a view to encourage earning of precious foreign exchange for the country and to boost exports.

/

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• That the drawback was governed by the provisions of Customs, Central . Excise Duties and Service Tax Drawback Rules, 1995 and the condition was

only with regard to non-availment of Cenvat credit on inputs and the rules nowhere provides that rebate of duty on the final products should not be claimed. Further it also nowhere provides any restriction on availment or utilization of CENVAT Credit of duty paid on capital goods.

• That Even the CBEC had also clarified that the drawback and the rebate of final product stage can be claimed simultaneously. The Para 3 of Circular No. 238/72/96-CX dated 12-8-1996 and Para 4 of Circular No. 209/43/96- CX dated 9-5-1996 are referred.

• That the drawback did not set off the duty paid on the final product at the time of export. Therefore, drawback in no way restricts the rebate claim for the duty paid on final products exported (especially using credit of duty paid on capital goods). The duty drawback embargo/restricts only the Cenvat credit for duty paid on inputs and rebate claim under Rule 18 read with Notification No. 2112004-CE (NT) dated 06-09-2004 for the duty suffered on inputs whereas the present rebate claim was under Rule 18 read with Notification No. 19/2004-CE (NT) dated 06-09-2004 for duty paid on the export final product.

• In this regard, reference invited to Para 2 of Circular No. 792/2512004-CX dated 2.6.2004 issued by the CBEC which shows that where the goods were meant for exports, duty was not intended to be charged both on inputs as well as final products. That the rebate claim involved in the present case relates to the refund of duty paid on final product. The rebate had been claimed on final product under Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-CE (NT). Neither the Rule nor the Notification provided that the claiming of Drawback would restrict the rebate on final product.

• That the appellant had not filed any rebate claim as per Notification No. 2112004 dated 06.09.2004 for duty paid on excisable goods used in goods exported to any country. The present rebate claim had rightly been submitted and admissible to the Appellant under Rule 18 read with Notification No. 1912004 dated 06.09.2004.

• That the exporter manufacturer could either procure the inputs for the manufacture of export final product duty free or could claim the duty paid on such in] uts in th form of Rebate, Ccnvat Credit or Duty Drawback. The exporte could avail benefit of anyone of the said scheme to set off the duty suffered on inputs.

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. <.

• That the Ld. Adjudicating Authority had referred to the judgment of M/s Iscon Surgicals cited as 2012 (288) ELT 147 GOI to deny the output stage rebate claims, on the pretext that availing of input duty drawback of excise portion and output stage rebate was dual benefit, because drawback was nothing but rebate of duty chargeable on materials used in manufacturing of exported goods and sanctioning of rebate and drawback would amount to allowing both type of rebate of duty at input stage as well as finished goods stage.

• That the Revisionary authority while concluding the above mentioned findings, has relied on the Bombay High Court judgment namely Commissioner vs. Indorama Textiles Ltd. 2006 (200) ELT 3. The Bombay high court in the case of Indorama remanded the matter back to the competent Authority to decide the claim of the assessee for rebate of duty paid either on the exported final goods or rebate of duty paid on materials used in the manufacture or processing of such goods, as both the rebate claims were not permissible under the law.

• In this regard, it was submitted by the appellant that the law point followed by the revisionary authority in Iscon Surgiclas as held by Bombay High Court in the case of Indorama had been settled by the Hon 'ble Supreme Court in the case of Spentax Industries Ltd. vs, CCE cited as 2015 (324) ELT 686. The Hon'ble Apex court while deciding the issue had held that the exporters/appellants were entitled to both the rebates (Input Stage and Output stage) under Rule 18.

• Further the Ld. Adjudicating Authority had relied upon the judgments of Madras High Court in the case of Mis Kadri Mills (CBE) Ltd. and Mis Ragahv Industries Ltd. and contended that the Madras High Court while disallowing the rebate claims had discussed the judgment of Spentax of the Hon'ble Supreme Court. In this regard it may be noted that in Kadri Mills Hon'ble Madras HC had merely followed its earlier judgment in case ofM/s Raghav Industries. The Hon'ble Madras High court in the case of Raghav Industries in context of judgment of Spentax Industries simply said that Spentax Industries had dealt only Rule 18 of the Central Excise Rules, 2002, on the other hand claims in the Raghav Industries pertains to drawback under Section 75 of the Customs Act 1962 and Rule 18 of Central Excise Rules, 2002, thus the judgment of Spentax was not applicable to the facts of Raghav Industries.

• That it could be clearly seen from the facts of the said cases that the assessee was availing double benefit of input credit/input service credit and higher

File NO.APPL·COMMOCEX/408/2019·GST· APL·CHD

~. """ ,_.

. - rate of duty drawback. But in the present case, admittedly, that appellant had neither availed Cenvat credit of inputs nor on input services .

• That the Ld. Adjudicating Authority had not applied its own judicial mind on the submissions made by the Appellant but had merely observed that the judgment covers the case in hand, which was not legal and proper.

• Further, with regard to applicability of Section 75 of Customs Act, it was submitted that the Revisionary authority in the case of Iscon Surgicals referred by Adjudicating Authority, had simply held that drawback under Section 75 of the Customs Act and rebate under Rule 18 were same. Thus once it was settled that the rebate claims under Rule 18 of the Central Excise Rules, 2002 and Duty Drawback under Section 75 of the Customs Act, 1962 were similar, then the question of law is already answered by the Hon'ble Supreme Court in the case of Spentax Industries.

• Further, the adjudicating authority in Para 5.4 of the impugned order referred to the Proviso to Rule 3 of Duty Drawback Rules. The Para 5.4 of impugned order did not provide for the particular proviso to which it was referring. That the issue of input stage rebate/drawback and output stage rebate was already answered by the Apex court. Even if it was considered that now there are two conflicting views, one by Supreme Court and another by High Court, then also the law settled by Hon'ble Supreme Court was binding on all authorities. The Article 141 of the constitution reads as under:

141. Law declared by Supreme Court to be binding on all courts.~ The law declared by the supreme court shall be binding on all courts within the territory of India.

• That the Hon'ble Bombay High Court in the case of HINDALCO INDUSTRIES LIMITED Vs UNION OF INDIA cited as 2015 (315) E.L.T. 10 (Born.) had specifically held that non follow of the judicial precedent was violation of the article 141.

• Furthermore, in the case of SHANKER RAJU Vs. UNION OF INDIA 2011 (271) E.L.T. 492 (S.C.) the Hon'ble Supreme Court held that Rule of Precedent promotes certainty and consistency in judicial decisions and Pronouncement of law by Larger Bench of Apex Court is binding on its Division Bench, especially where particular determination not only disposes of the case, but also decides a principle of law. It was inappropriate to re­ agitate very issue or a particular provision, which Apex Court had already considered and upheld.

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• The Supreme Court of India in the case of Assistant Collector Of Central Excise, West Bengal Vs. Dunlop India Ltd., and others cited as 1985 (19) E.L.T. 22 (S.C.) had held in regard of Hierarchical System of Courts that Supreme Court decisions, must be followed by the lower courts including the High Court as per Articles 141 of the constitution of India.

• Without prejudice to the submissions made above, it was submitted that the Adjudicating Authority had denied the rebate claim and at the same time had also not allowed the re-credit of the amount of duty paid by the Appellant. It was submitted that the Appellant, in any case, was entitled to re-credit of the said amount.

5. The personal hearing in the case was held on 20.05.2019. Sh.N.K Thaman, Advocate; Sh. Rajesh Chopra Sr. V.P Commercial; Sh. Raman Marwaha Sr. Vice President Commercial & Accounts and Sh. N. D. Mathur Sr. Manager attended the personal hearing and reiterated the submissions made in the appeal. Additional written submissions dated 20.05.2019 in the subject case were also made by the appellant in support of their contentions and requested to decide the case in the light of these.

6. I have carefully gone through the facts of the case; impugned orders; appeals filed; the grounds of appeal and the submissions made by the appellant at the time of personal haring. The issue to be decided in the present appeals is whether rebate of duty paid on the exported goods claimed by the appellant under Rule 18 of the Rules read with Section lIB of the Act is allowable or not, keeping in view the higher rate of drawback claimed by them on the same.

7. The appellant are engaged in the manufacture and export of Yam falling under chapter 52/55 of the Central Excise Tariff Act, 1985. The appellant had declared that they have not taken any Cenvat Credit on inputs and input services used for manufacture of the exported goods: However, they claimed to have availed the facility of Cenvat Credit in respect of Capital Goods used in the manufacture of exported goods. The appellant had exported goods viz., yam on payment of duty. For paying the excise duty on the goods exported, they had utilized the credit of duty paid on the Capital Goods. The appellant had also claimed drawback at higher rate on the exported goods and had also filed rebate claims under Section lIB of the Act read with Rule 18 of the Rules in respect of the duty paid on such exported goods. But their rebate claims were rejected by the Adjudicating Authority vide the impugned orders on the ground that the appellant is not entitled to avail the benefits of both the Drawback as well as the rebate of duty in terms of the proviso to Rule 3 of the Central Excise Duties and Service Tax Drawback Rules1995.

File NO.APPL-COMMOCEX/408/2019-GST - APL-CHD

"

8. The appellant on the other hand contended that rebate of duty is allowed under Rule 18 of the Rules, which not only provides for rebate of duty paid on the exported goods, but also provides for rebate of duty paid on the materials used, in the manufacture of exported goods. The final product duty rebate is allowed under notification No. 19/2004CE (NT) dated 06.09.2004 whereas input duty rebate is allowed under separate notification No.21/2004-CE(NT) dated 06.09.2004. Both the rebates are independent rebates and can be availed simultaneously by the assessee. According to the appellant, they did not claim any rebate of excise duty paid on the raw material used in the manufacture of the exported goods. However, they admitted to have claimed drawback on the same. The duty drawback scheme does not cover the duties which are paid on the finished exported goods, which in fact can only be claimed by way of rebate under Rule 18 of the Rules and the notification issued thereunder. The appellant contended that since they were not availing CENV A T credit in respect of any of the inputs or input services used in the manufacture of final export products, therefore duty drawback at higher rate (All Industry rate) had been correctly claimed by them. According to the appellant, there was no competition/overlapping between duty drawback and finished goods rebate of duty and hence no double benefit was claimed by them. The appellant have also cited Board Circulars No.238172/96-CX dated 12.08.1996; 209/43/96- CX dated 09.05.1996 and No. 792/25/2004-CX dated 02.06.2004 as well as the decision of the Hon'ble Supreme Court in the case of Spentex Industries Ltd. Vs. Commissioner of Central Excise 2015 (324) ELT 686 (S.C) in support of their contention.

9. I observe that Rule 3 of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 provides as under:-

"RULE 3 Drawback - (J) Subject to the provisions of- (a) the Customs Act, J 962 (52 of 1962) and the rules made thereunder, (b) the Central Excises and Salt Act, 1944 (1 of 1944) and the rules made thereunder, (bb) the Finance Act, 1994( 32 of 1994), and the rules made thereunder;

and

(c) these rules,

a drawback may be allowed on the export of goods at such amount, or at such rates, IS may be determined by the Central Government: Provided that where any goods are produced or manufactured from imported materials or excisable materials or by using any taxable services as input services, on some of which only the duty or tax chargeable thereon

File NO.APPL-COMMOCEX/408/2019-GST- APL-CHD

has been paid and not on the rest, or only a part of the duty or tax chargeable has been paid,' or the duty or tax paid has been rebated or refunded in whole or in part or given as credit, under any of the provisions of the Customs Act, 1962 (52 of 1962) and the rules made thereunder, or of the Central Excise Act, 1944 ( 1 of 1944) and the rules made thereunder, or of the Finance Act, 1994 ( 32 of 1994) and the rules made thereunder, the drawback admissible on the said goods shall be reduced taking into account the lesser duty or tax paid or the rebate, refund or credit obtained: ... "

The above proviso specifically provides that the drawback amount admissible on the exported goods shall be reduced by taking into account the rebate/refund amount claimed/obtained by the exporter on such exported goods. Therefore, I find that the appellant is not entitled to avail the benefits of both the Drawback as well as the rebate of duty in terms of the above proviso of law.

10. I observe that the Adjudicating Authority while rejecting the rebate claims of the appellant, had also relied upon the Judgments of the Hon'ble High Court of Madras in the case of Raghav Industries Ltd. Versus Union of India 2016 (334) E.L.T. 584 (Mad.) and Kadri Mills (CBE) Ltd. Versus Union of India 2016 (334) E.L.T. 642 (Mad.). In the Raghav Industries case, it was held that when the exporter had availed duty drawback of Customs, Central Excise and Service Tax on the exported goods, they are not entitled for the rebate under Rule 18 of the Central Excise Rules, 2002 by way of cash payment as it would result in double benefit. The relevant portion of the Judgment is as under:-

"12. After clearing the goods on payment of duty under claim for rebate, the petitioners should not have claimed drawback for the central excise and service tax portions, before claiming rebate of duty paid and they should have paid back the drawback amount availed before claiming rebate. When this was not done, availing both the benefits would certainly result in double benefit.

13. While sanctioning rebate, the export goods, being one and the same, the benefits availed by the petitioners on the said goods, under different scheme, are required to be taken into accountfor ensuring that the sanction does not result in undue benefit to the claimant. The 'rebate' of duty paid on excisable goods exported and 'duty drawback' on export goods are governed by Rule 18 of Central Excise Rules, 2002 and Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. Both the rules are intended to give relief to the exporters by offsetting the duty paid. When the

. petitioners had availed duty drawback of Customs, Central Excise and Service Tax on the exported goods, they are not entitled for the rebate under

File NO.APPL-COMMOCEXl408/2019-GST - APL-CHD - . . .

Rule 18 of the Central Excise Rules, 2002 by way of cash payment as it would result in double benefit. "

Similarly, in the case of Kadri Mills (CBE) Ltd, Hon'ble High Court of Madras by relying on its Judgment rendered in Raghav Industries case again held that when the exporter had availed duty drawback of Customs, Central Excise and Service Tax on the exported goods, they are not entitled for the rebate under Rule 18 of the Central Excise Rules, 2002 by way of cash payment as it would result in double benefit.

11. I observe that the issue involved in the present appeals is covered by the decisions made by the Hon'ble High Court of Madras in the case of Raghav Industries Ltd. and Kadri Mills (CBE) Ltd. As the appellant had claimed drawback at higher rate on the exported goods, therefore they are not entitled to avail/claim rebate of duty in terms of the proviso to Rule 3 of the Central Excise Duties and Service Tax Drawback Rulesl995. Thus, I find that the adjudicating authority was correct in rejecting the rebate claims filed by the appellant under Rule 18 of the Rules as the sanction of the same would have resulted in double benefit to the appellant.

12. I observe that the appellant has relied upon the decision of the Hon'ble . Supreme Court rendered in the case of Spentex Industries Ltd. V s. Commissioner of Central Excise 2015 (324) ELT 686 (S.C) in support of their contention that they are entitled both for rebate under .Rule 18 of the Rules as well as drawback at the higher rate. The Hon'ble Supreme Court in the said case had held that the exporters are entitled to both the rebates under Rule 18 and not one kind of rebate. I further observe that said case of the Supreme Court was also relied in the case of Raghav Industries Ltd. Versus Union of India 2016 (334) E.L.T. 584 (Mad.) but the same was distinguished on facts by the Hon'ble High Court of Madras. The relevant portion of the Judgment of Raghav Industries is reproduced as under:-

(( 15. In the judgment relied upon the learned counsel for the petitioner, the Hon 'ble Supreme Court has held that the benefits of rebate on the input on one hand as well on the finished goods exported on the other hand shall fall within the provisions of Rule 18 of Central Excise Rules, 2002 and the exporters are entitled to both the rebates under the said Rule.

16. In the ca e on hand, the benefits claimed by the petitioners are covered under two different statutes - one under Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 under Section 75 of the Customs Act, 1962 and the other under Rule 18 of the Central Excise Rules, 2002. Since the issue, involved in the present writ petition, is covered under

File No.APPL-COMMOCEX/408/2019-GST- APL-CHD

two different statutes, the judgment relied upon by the learned counsel for the petitioner is not applicable to the facts of the present case.

17. As per the proviso to Rule 3 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, the petitioner is not entitled to claim both the rebates.

18. In these circumstances, the respondents have rightly rejected the claim made by the petitioners. I do not find any error in the order passed by the respondents and the writ petition is liable to be dismissed. Accordingly, the same is dismissed. No costs. "

In the present appeals, the benefits claimed by the appellant are also covered under two different statutes i.e. for drawback under Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 and for the rebate under Rule 18 of the Rules. As the issue involved in the present appeals is same as in Raghav Industries case, therefore the judgment relied upon by the appellant is not applicable to the facts involved in the present appeals.

13. The appellant have also cited Board Circulars No.238172/96-CX dated 12.08.l996; 209/43/96-CX dated 09.05.1996 and No. 792125/2004-CX dated 02.06.2004 in support of their contention. I find that these Circulars have specifically been issued for the specific products and it nowhere supports the contention of the appellant vis-a-vis that the exporter is entitled to avail the benefits of both the Drawback as well as the rebate of duty in terms of the proviso to Rule 3 of the Central Excise Duties and Service Tax Drawback Rulesl995. Thus, I find that said Circulars as relied upon the appellant are not applicable to the present appeals.

14. In the identical matter in the case of Mis Vardhman Spinning Mills (Unit of Vardhman textiles Ltd) Additional Secretary to Government of India vide Order No 588-609-CX dated 12.11.2018 issued under F. No. 195/106-126/2018-RA dated 13.11.2018 has also rej ected the appeal of the party and upheld the orders passed by the Commissioner (Appeals) Chandigarh observing that "Even earlier the Government its Order No 123712011-CX dated 21.09.2011 in case of Sabre International Limited Vs CCE Noida reported as 2012(280)ELT 575 (GOl) has held that allowing drawback on both Customs & Central Excise portion and rebate of duty on final product will amount to double benefit". The Government has also held the same view recently in its Order No 4394-97118-CX dated 13.07.2018 in the case of Mis Anshupati Textiles and its Order No 1951795/2010 dated 04.09.2018 in the case of Mis RSWM. They have further observed that the Madras High Court has clearly held that the above two benefits cannot be availed

•• .. File No.APPL-COMMOCEXJ408/2019-GST- APL-CHD

.• , simultaneously and these decisions have not been apparently reversed by any Order of Supreme Court till Now . •

15. In view of the above, I find that the appellant is not entitled to claim benefits of both the Drawback as well as the rebate of duty in terms of the proviso to Rule 3 of the Central Excise Duties and Service Tax Drawback Rules 1995. The adjudicating authority has rightly rejected the rebate claims of the appellant. Thus, I do not find any infirmity in the impugned orders and the appeals filed by the appellant are liable to be rejected.

16. As such, the appeals of the appellant are rejected and the impugned orders are upheld. The appeals are disposed of, accordingly.

Digitally signed by SUMAN BALA Date:Mon JU'2917:1liT ~19 Reason:Approved ~<1

(Dr. S~ ~hala) COMMISSIONER (AP EALS)

REGD. A.D.

Mis Mahavir Spinning Mills- TD (A Unit ofVardhman Textiles Ltd.), Sai Road, Baddi Distt. Solan (HP)

Copy to:-

1. The Chief Commissioner (CZ), Central Goods and Services Tax, Chandigarh. The Commissioner, Central Goods and Services Tax Commissionerate, Shimla. The Assistant Commissioner, Central Goods and Services Tax, Divisir - Baddi Sh. N.K Thaman, Advocate, lll-F & 112-F, Rishi Nagar, Ludhiana. Guard file.

2.

3.

4.

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~~~)~ Superintendent (kppealS)

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