Rebate Under Rule 18 CER Cannot Be Denied Without Examining Duty On Exported Goods: Bombay High Court Remands Yamaha's Claim

The Bombay High Court has held that a rebate under Rule 18 Central Excise Rules, 2002, cannot be denied without determining the tax liability on exported goods, and has remanded Yamaha's rebate claim to the principal commissioner for fresh consideration. Justices M.S. Sonak and Advait M. Sethna were examining whether the India Yamaha Motor P. Limited was entitled to a rebate under Rule 18 CER 2002 read with Notification No. 19/2004-CE(NT) dated 6 September 2024 in respect of the finished products upon which BED and NCCD was paid by the Yamaha (initially by utilising CENVAT credit, and later in cash), in so far as such payments concern the export of the finished products outside the India. The assessee/petitioner (India Yamaha Motor) manufactures motorcycles and scooters falling under Chapter 87 (“final products”). These attract a levy of Basic Excise Duty (“BED”) under Section 3 of the Central Excise Act, 1944 and the National Calamity Contingent Duty (“NCCD”) under Section 136 of the Finance Act, 2001. The assessee's case is that, in terms of Rule 1 of the Cenvat Credit Rules, 2004 (“CCR, 2004”), BED and NCCD paid on the inputs are admissible as CENVAT credit. Accordingly, the assessee availed such CENVAT credit paid on such inputs. Further, up to 29 February 2016, in terms of Rule 3(4)(a) of CCR, 2004, CENVAT credit was allowed to be utilised for payment of any duty of excise, including NCCD, on any final product. The department issued a show cause notice to Yamaha, alleging a breach of the 5th proviso to Rule 3(4) of the CCR, 2004, during the period March 2016 to June 2017, and proposing to recover an amount of Rs. 22,31,16,229/- from Yamaha. Yamaha, under protest and without prejudice, paid the entire demanded amount in June 2018. Claiming the Yamaha had paid the demanded amount under protest and without prejudice, the department adjudicated the show cause notice and, vide order, confirmed the demand with interest and penalty. Yamaha's Application under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), and the proposal contained therein were accepted, and a discharge certificate in Form SVLDRS-4 was issued. Yamaha's case is that, once the cash payment of Rs. 22,31,16,229/- was made in June 2018, they were entitled to the restoration of the CENVAT credit, which was utilised to make payments towards BED and NCCD during the relevant period. Therefore, Yamaha applied for a refund of the amount of Rs. 22,31,16,229/- with the department, which was rejected. The Commissioner (Appeals) upheld the rejection of the rebate claim in respect of the NCCD amounts paid by the Petitioner by utilising the CENVAT credit of BED. Yamaha filed a revision application before the Principal Commissioner, RA & Ex-Officio Additional Secretary (2nd respondent), which was rejected by the impugned order. The department argued that Yamaha's rebate claim was rejected because they paid the entire demanded amount of Rs. 22,31,16,229/- “under protest”, thereby forcing the department to adjudicate the show cause notices and pass the orders thereon. The bench opined that the Principal Commissioner, RA, has failed to examine whether Yamaha was required to pay tax on the exported final products. None of the provisions referred to by the department provides for any correlation between the payment of interest and issue of rebate on the ground that the finished products exported did not attract any BED or NCCD, added the bench. The bench opined that the issue of nexus between non-payment of interest on the alleged delayed payment of NCCD and rebate under Rule 18 of CER, 2002, read with Notification dated 06 September 2022, was the crucial issue before the Principal Commissioner, RA, and this issue has not been addressed in the impugned order. In any event, even if it is assumed that the assessee's payment of this amount under protest was one of the reasons, the Principal Commissioner, RA, has not explained why a payment under protest disqualifies the party from claiming a rebate, if such a rebate is legally otherwise admissible. No opportunity was also provided to Yamaha to address these aspects, if they were intended to form the basis for denying the rebate claim, noted the bench. In view of the above, the bench set aside the impugned order and remanded the matter to the Principal Commissioner, RA & Ex-Officio Additional Secretary for a fresh reconsideration of the assessee's revision application. Case Title: India Yamaha Motor P. Limited v. The Union of India | WRIT PETITION NO. 3587 OF 2022 Case Number: ORIGINAL CIVIL JURISDICTION Counsel for Petitioner/Assessee: V. Sridharan Counsel for Respondent/Department: Karan Adik Click Here To Read/Download The Order

Rebate Under Rule 18 CER Cannot Be Denied Without Examining Duty On Exported Goods: Bombay High Court Remands Yamaha's Claim

Mehak Dhiman

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