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Sobha Developers Ltd. v. Commissioner of Central Excise, LTU, Bangalore - (Customs, Excise and Service Tax Appellate Tribunal) (15 May 2017)

Refund claim cannot be converted into rebate claim without following prescribed procedure



In facts of present case, Appellants are engaged in manufacture of excisable goods falling under Chapter Heading 7308 90 90 of Central Excise Tariff Act, 1985. Appellants have filed an application for refund of Rs. 10,48,313/- being duty paid on goods cleared to Infosys Technologies Ltd., Chandigarh. Infosys Technologies Ltd., Chandigarh was declared as a Special Economic Zone (SEZ) unit by Development Commissioner, Noida, Special Economic Zone, Ministry of Commerce and Industries vide letter No. 5/5/2006-Chg.SEZ/8797 dated 16th June, 2006. Appellant cleared goods on payment of duty even after receipt of approval by M/s. Infosys Technologies Ltd. as SEZ. Duty thus, paid for supplies made from 17th June, 2006 to 16th November, 2006 to Infosys Technologies in absence of Domestic Procurement Certificate/ARE-1 is claimed as refund before lower authority. Refund claim of Assessee was rejected by Deputy Commissioner on ground that, Appellant had not followed prescribed provisions of SEZ Rules which came into force from 10th February, 2006 and has not cleared goods to SEZ Unit of Infosys Technologies under cover of Duty Procurement Certificate/ARE-1. Aggrieved by said order, Appellant filed appeal before Commissioner (A) and Commissioner (A) vide impugned order has upheld the order.

Appellants have made supplies to Infosys Technologies Ltd. which was a SEZ unit during relevant time and said supplies were made on payments of duty and later filed refund claim for same on ground that, any supplies made to SEZ unit is not taxable. But, Appellants have failed to follow procedure which is prescribed in SEZ Act for claiming exemption. Further, Appellant has also not followed procedure as prescribed in Notification No. 58/2003 which was in force at that point of time. Commissioner has considered all grounds which were raised by Appellant and has rightly come to conclusion that, Appellant have not followed prescribed procedure.

Appellant has cleared goods during period from 17th June, 2006 to 16th November, 2006 on payment of duty and later filed claim for refund. However, SEZ Rules, 2006 were already in vogue, as it was notified on 10th February, 2006 and same have not been followed by appellant for clearance. Lower authority has rejected refund claim on grounds that, they are not eligible for refund as there was no exemption available for such clearance excepting claiming of rebate which is not admissible since, Appellant has not followed prescribed procedure for clearance of goods to SEZ unit. Here, unlike clearance to 100% EOU, no exemption is available for clearance made to SEZ's. Only option is to pay, duty and claim rebate. Export under bond or under claim for rebate of duty cannot be equated with an exemption from payment of duty granted under a notification issued under Section 5A of Central Excise Act, 1944. Therefore, goods at time of their clearance from place of manufacture were rightly chargeable to duty as per Central Excise Act, 1944 and same has been discharged by Appellant.

However, Appellant failed to follow procedure set out to SEZ's. Even though Section 11B of Act, provides for claiming of refund of duty paid within one year from relevant date, a refund is admissible provided goods are exempt from payment of duty leviable under statute. There is no exemption notification granting waiver from payment of duty leviable. Clearances to SEZ under bend or under claim for rebate of duty is subject to observance of various conditions. Neither before lower authority nor during present appeal proceedings, Appellant have demonstrated that, barring procedural formalities they; satisfy other conditions covering clearance to SEZ. Since, goods were paid on payment of duty, they should have followed correct procedure even to claim rebate, if not refund. Refund claim cannot be converted into rebate claim in absence of following prescribed procedure. Therefore, lower authority was right in rejecting refund claim. Therefore, Appellants are not entitled to refund of duty paid as they have not followed procedure prescribed under law.


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