Gujarat High Court
M/S Dewas Soya Limited vs Union Of India on 29 August, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9090 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA Sd/-
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA Sd/-
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1 Whether Reporters of Local Papers may be allowed No
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
M/S DEWAS SOYA LIMITED
Versus
UNION OF INDIA & ORS.
==========================================================
Appearance:
MR HARDIK P MODH(5344) for the Petitioner(s) No. 1
MR VAIBHAV N SHETH(5337) for the Petitioner(s) No. 1
ADVOCATE NAME DELETED for the Respondent(s) No. 1
MR CB GUPTA(1685) for the Respondent(s) No. 3
NOTICE SERVED for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 29/08/2024
ORAL JUDGMENT
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NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr.Hardik Modh for the petitioner and learned advocate Mr.C.B.Gupta appearing for the respondents.
2. Rule returnable forthwith. Learned advocate Mr.C.B.Gupta waives service of notice of rule on behalf of respondents.
3. Having regard to the controversy in narrow compass, with the consent of learned advocates appearing for the respective parties, the matter is taken up for hearing.
4. By this petition under Article 226 of the constitution of India, the petitioner has prayed for the following reliefs:
"(a) That this Hon'ble Court be Page 2 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari or any other appropriate writ, calling for the records of Order No. 185- 189/2020-
CUS(WZ)/ASRA/MUMBAI dated 11.09.2020 along with corrigendum dated 17.11.2020 (Annexure I) and after looking into the same and the legality thereof, this Hon'ble Court be pleased to quash and set aside Order No. 185-189/2020- CUS(WZ)/ASRA/MUMBAI dated 11.09.2020 along with corrigendum dated 17.11.2020 (Annexure I).
(b) That this Hon'ble Court be pleased to issue a Writ of Prohibition, or a Writ in the nature of Prohibition, or any other appropriate Writ, Order or prohibition, prohibiting the Respondents by themselves, their servants and their agents from giving effect to and/or implementing the impugned Order No. 185-189/2020-CUS(WZ)/ASRA/ MUMBAI dated 11.09.2020 along with corrigendum dated 17.11.2020 (Annexure I);
(c) that pending the hearing and final disposal of the present Page 3 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined Petition, this Hon'ble Court be pleased to direct the Respondents, their servants, agents, officers and subordinate, restricts them from acting on or in consequence of the Impugned the Impugned Order No.185-189/2020-CUS(WZ)/ASRA/MUMBAI dated 11.09.2020 along with corrigendum dated 17.11.2020 (Annexure I);
(d) for ad-interim relief in terms of prayer (c) above;
(e) for costs of the
petition/application and orders
thereon; and;
(f) for such further and other reliefs, as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case."
5. The brief facts of the case are as under:
5.1. The petitioner is engaged in the manufacturing of Edible and Cotton Oil, De-oiled Cake (for short "the DOC"). The Page 4 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined DOC manufactured by the petitioner was exported directly through merchant exporter. The petitioner procured "Hexane"
without payment of excise duty in terms of Notification no.43/2001 dated 26.06.2001 issued in term of Rules 19(2) and 19(3) of the Central Excise Rules, 2002 (for short "the Rules"), which provides conditions/safeguards and procedure for procurement of excisable goods without payment of duty for the purpose of use in the manufacture or processing of export goods and their exportation out of India. 5.2. The petitioner accordingly cleared DOC manufactured by it from the factory, which was exported through merchant exporter.
5.3. It is the case of the petitioner that Page 5 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined the petitioner did not issue ARE-2 as the DOC was taxed at Nil Rate and the ARE-2 was to be issued only for removal of dutiable exisable goods. The petitioner relied upon the following entries in the Central Excise Tariff Act, 1985:
2304 Oil Cake and other solid residues whether or not ground or in the form of pellets, resulting from the extraction of soyabean oil 230400 Oil-cake and other solid residues whether or not ground or in the form of pellets, resulting from the extraction of soyabean oil 2340 00 Oil-cake of soyabean, 20 solvent extracted 9defeated) variety.....NIL 5.4.It is the case of the petitioner that the export of the DOC was made by the merchant exporter under a claim of All Page 6 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined Industry rate of drawback (for short "AIR") at the rate of 1% and the benefit of AIR of 1% was claimed in terms of the serial no.2304 of the drawback schedule under the Notification No.68/200 dated 16.07.2007 which was superseded by Notification No.103/2008 dated 29.08.2008. 5.5. It is the case of the petitioner that an Intelligence was gathered by the Officers of the Directorate General of Central Excise and Intelligence, Indore (for short "DGCEI"), wherein it was alleged that the merchant exporter exported Soya Meal and Soya De-oiled Cake falling under Tariff Item No.23040020 and 23040030 of the First Schedule to the Customs Tariff Act, 1975 from Kandla Port by availing benefit of Duty Drawback and Page 7 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined the said DOC was purchased from the petitioner who manufactured by availing the benefit under Rule 19(2) of the Rules by procuring Hexane without following the procedure prescribed under Rule 19(2) of Rules and Notification issued thereunder from time to time.
5.6. It was alleged by the DGCEI that the petitioner procured Hexane without payment of Central Excise duty and the same were used in the manufacturing of DOC which was exported by claiming drawback at the rate of 1% of FOB value as per AIR drawback prescribed by Notification No.81 of 2006-
Customs dated 13.07.2006 read with Notification No.68/2007-Custom dated 16.07.2007 which was superseded by Notification No.103/2008 dated 29.08.2008. Page 8 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024
NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined 5.7. On completion of the investigation, show-cause notice dated 04.10.2010 was issued by the DGCEI Indore, wherein the merchant exporter was called upon to Show Cause as to why duty drawback amounting to Rs.9,26,138/- should not be demanded and recovered under Rule 16 of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (for short"the Drawback Rules, 1995") read with Section 75 and proviso to Section 28(1) of the Customs Act, 1962 as well as to levy the penalty upon the petitioner under Section 114(iii) of the Customs Act, 1962. 5.8. The Petitioner by reply dated 30.10.2010 contended that the petitioner used both Central Excise duty free Hexane and Central Excise duty paid Hexane to Page 9 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined manufacture DOC which were not stored separately and accordingly, it was physically not possible to record the production and clearance separately. 5.9. It was also further contended that the Petitioner was having common pool of Hexane and finished DOC documents and the same were prepared on the basis of ratio of production using Hexane and there was no connivance with the merchant exporter. It was therefore submitted that there was no requirement to issue ARE-2 to the merchant exporter in case where the duty paid Hexane is used to manufacture DOC. 5.10. The Adjudicating Authority passed the Order-In-Original dated 04.04.2013 whereby the duty drawback to the exporter Page 10 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined was disallowed confirming the allegations made in the Show-Cause Notice and levied the penalty of Rs.3,00,000/- (Rupees Three Lakhs Only) upon the Petitioner under Section 114(iii) of the Customs Act. 5.11. Being aggrieved, the Petitioner preferred an Appeal before the Commissioner(Appeals) of Customs, Ahmedabad who by order dated 03.09.2013 decided the Appeal in favor of the petitioner setting aside the Order-in- Original dated 04.04.2013 on the ground that the drawback can be availed even if the raw material i.e. Hexane is procured without payment of Central Excise duty as the rate of drawback at the rate of 1% was for the custom components and not for the Central Excise component. It was also Page 11 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined held by the Commissioner (Appeal) that the Adjudicating Authority has not placed any conclusive evidence as to how non-issuance of ARE-2 by the petitioner would tantamount to intentional involvement in abetment of alleged erroneous claim of duty drawback by the merchant exporter which only relates to "Customs" portion of drawback and when the exporter or manufacturer is not unduly getting double benefit.
5.12. Being aggrieved and dissatisfied with the Order-in-Appeal dated 03.09.2013, the respondent no.3-Commissioner of Customs preferred the Revision Application before the Revisional Authority, Department of Revenue, Government of India. The Revisional Authority after Page 12 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined adjudicating the order-in-original and order-in-appeal called upon the petitioner to show cause as to why the revision application should not be allowed. 5.13. The petitioner by letter dated 29.04.2014 filed the reply to the show- cause notice issued by the Revisional Authority submitting the fact that the Order-in-Appeal dated 03.09.2013 has rightly been passed after considering the submissions and the legal positions as canvassed by the Petitioner. 5.14 The Revisional Authority however, by the impugned order dated 11.09.2020 allowed the Revision Application filed by the respondent no.3 and restored the Order-in-Original dated 04.04.2013 Page 13 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined confirming the penalty of Rs.3,00,000/- imposed upon the petitioner.
6. Learned advocate Mr.Hardik Modh appearing for the petitioner submitted that the Appellate Authority while considering the issue of allowing the duty drawback at the rate of 1% to the merchant exporter has rightly held that the duty drawback at the rate of 1% is relatable to the "Custom Component" and not to the "Central Excise Component". Reliance was also placed on the Drawback Rules 1995, wherein Rule 2A of the said rules defines the drawback. Learned advocate Mr.Hardik Modh also referred to the Notification No. 81 of 2006 dated 13.07.2006 as well as Notification No.103 of 2008 dated 29.08.2008 to submit that the Commissioner Page 14 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined Appeals while considering the issue of allowability of the duty drawback to the merchant exporter has rightly held that the duty drawback claimed by the merchant exporter was on the basis of the rate of 1%, which is relatable to the Custom Components and therefore, there was no need for the petitioner to issue ARE-2 for the purpose of clearing the goods which were manufactured by using "Hexane" without payment of Central Excise. 6.1. It was further submitted that the Circular No.35 of 2010 dated 17.09.2010 and Notification no.84 of 2010 relied upon by the Commissioner (Appeals) clearly shows the conditions which exists in the earlier notification and therefore there was no ambiguity in the policy of the Page 15 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined Government that where the duty drawback rate as indicated is the same in both for the Custom Component and the Excise Component then only Custom Component is available irrespective of whether the manufacturer or exporter has availed the CENVAT or not.
6.2. It was therefore submitted that the Revisional Authority has committed an error by not referring to the reasoning given by the Appellate Authority and has only considered the aspect of not issuing the ARE-2 for removal of the DOC as the similarly situated other manufacturers have also adopted the similar practice of not issuing the ARE-2 while removing the DOC and have only issued the export invoice. It was submitted that the Page 16 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined Revisional Authority has thus adopted pedantic approach of applying the Rules.
7. On the other hand, learned advocate Mr.C.B.Gupta for the respondent submitted that the period involved in the present case is prior to 2010 and the Commissioner (Appeals) has considered the Notification No.84 of 2010 which is applicable from 17.09.2010 and therefore the petitioner is not entitled to the benefit of the said notification. It is further submitted that it is not in dispute that the petitioner has not issued the Form ARE-2 for removing the DOC and therefore there is a clear breach of a Notification no.103/2008 and prior Notification Nos. 81 of 2006 and 68 of 2007 wherein it is provided that the petitioner could not have failed to issue Page 17 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined the Form ARE-2 while removing the DOC as the petitioner has availed the facility of Rule 19(2) of the Rules. It was contended that as per the condition no.7(f) of the aforesaid notification, there is clear denial of drawback of the entire schedule of the Rules, if the said condition is not fulfilled. It was therefore submitted that the Revisional Authority has rightly held the petitioner responsible for not issuing the ARE-2 while confirming the penalty imposed in the order-in-original. 7.1. Learned advocate Mr.C.B.Gupta also referred to and relied upon the detailed reasons assigned by the Revisional Authority in the impugned order.
8. Having heard learned advocates for the respective parties and considering the Page 18 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined facts of the case, it is not in dispute that the petitioner did not issue the ARE- 2 while removing the DOC manufactured by using the Hexane without payment of Central Excise duty. However, as held by the Commissioner (Appeals) such non- issuance of the ARE-2 would not be for removal of the DOC manufactured out of the duty free procured Hexane by availing the benefit under Rule-19(2) of the Rules would not make any difference as there is no intention established by the Adjudicating Authority and the only allegation levelled against the petitioner stand on pre-condition that the petitioner exporter had knowingly or intentionally claimed the duty drawback erroneously. However, the Commissioner (Appeals) has categorically held that the legality of Page 19 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined claiming custom portion of the drawback by the merchant exporter, the allegation made by the Adjudicating Authority was devoid of any merit and there was no finding or discussion by the Adjudicating Authority whereby any conclusive evidence as how non-issuance of ARE-2 by the petitioner would tantamount to the intentional involvement in abetement of erroneous claim of the drawback by the exporter which purely relates to the custom portion of the drawback when the exporter manufacturer is not unduly getting the double benefit. This aspect of the entire issue of removal of the goods without issuing ARE-2 is missed out by the Revisional Authority and the Revisional Authority has placed reliance only on the non-issuance of the ARE-2 and the Page 20 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined likelihood of the exporter getting double benefit of duty drawback in case when the percentage of the duty drawback also includes the Central Excise portion. We are of the opinion that the Revisional Authority while Considering the aspect in the facts of the case of the petitioner has not taken into consideration the fact that the rate of duty drawback is 1% in the facts of the case which relates to the custom portion only and not the Central Excise portion and therefore, the exporter did not get any double benefit in the facts of the case. In such circumstances, it cannot be said that the petitioner has committed any breach of the Rules by issuing the DOC without issuing ARE-2. In such circumstances, the impugned order passed by the Revisional Authority is not Page 21 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024 NEUTRAL CITATION C/SCA/9090/2021 JUDGMENT DATED: 29/08/2024 undefined sustainable and is accordingly, quashed and set aside so far as the petitioner is concerned with regard to the levy of penalty which is deleted by the Commissioner of Customs (Appeals).
9. The petition therefore succeeds and is accordingly allowed. The impugned order passed by the Revisional Authority levying the penalty upon the petitioner is quashed and set aside to the extent it confirms the levy of penalty upon the petitioner and the order of Commissioner (Appeals) to that extent is restored. Rule is made absolute to the aforesaid extent. No order as to costs.
Sd/-
(BHARGAV D. KARIA, J) Sd/-
(NIRAL R. MEHTA,J) URIL RANA Page 22 of 22 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:47:44 IST 2024