Ratifying rebate given to goods manufactured under area-based exemption in Budget 2008 - job half done? The other half to be rectified soon?
We carried an article on 1.3.2008, immediately after the Budget with the above caption.
The issue was discussed as hereunder.
THERE is an important lacuna in the budget proposal with regard to rebate of duty paid on goods manufactured under various area based exemption notifications.
Clause 83 of the Finance bill seeks to amend rule 18 of CER 2002 with retrospective effect so as to allow rebate of duty paid on excisable goods cleared from factories under area based exemption for the period till 7th Dec 2006.
It may be noted that vide Nfn No. 37/2007- CE (NT) dt 17.9.07 the rebate has been disallowed w.e.f from 17.9.07 for the goods cleared from factories under area based exemption.
Prior to the issue of the above notification, Board has issued letter F.No.209 /11/2005- CX -6 dated 08.12.06 denying rebate for the goods cleared from area based exemption based on the clarification given by the Law Ministry as under:
Rule 18 of the Central Excise Rules, 2002, provides for grant of rebate of duty paid on exported goods. In terms of the Notifications mentioned above issued under Section 5 A (1) of the Central Excise Act, 1944, exemption from excise duty is available only to the extent, it is in excess of the amount paid out of CENVAT credit. However, the said exemption has been operationalised by way of paying the full amount of duty first and therafter granting of refund of duty paid in cash. A doubt has arisen as to whether the said payment of duty at first stage, which is subsequently refunded, can be considered, as “Duty Paid” in terms of Rule 18 or not. The matter was referred to the Law Ministry who have opined that the term “Duty Paid” used in Rule 18 does not include that portion of duty, which is subsequently refunded to the manufacturer. They have further opined that the amount so refunded to the manufacturer is to be treated as an exemption and rebate of the said amount cannot be paid.
In view of the above statutory position it is hereby directed that all pending Show Cause Notices may be decided accordingly. Even, pending rebate claims should be decided as per said interpretation. Show Cause Notices may be issued in respect of sanctioned claims which are within the statutory time limit of one year.
However, the relevant date for extending the benefit of rebate retrospectively in the Finance Bill was taken as upto 7.12.2006, may be because the Circular was issued on 8.12.2006. However, Notification No. 37/2007- CE(NT) was issued only on 17.9.07 and from this date only the rebate can be legally disallowed notwithstanding the Board's Circular which is not binding on the assessees. It would have been a noble gesture if the retrospective benefit is made applicable upto 16.9.2007 as the period from 8.12.06 to 17.9.07 will anyway end up in dispute.
Now Board seems to be contemplating to extend the period and has asked the field for particulars of the rebate claims pending.
The Good Board does react; it only takes time!
CBEC's F. No. 209/11/2005- C X -6 , Dated May 2, 2008