By TIOL News Service

MUMBAI, DEC 30, 2015: IN the present appeals filed against an o-in-a,the issue involved is rebate of duty paid on the goods supplied to Special Economic Zone.

The appeals were listed for maintainability, in view of the following exclusion clause under Section 35B (1) proviso to clause (b), under CEA, 1944.

"Provided that no appeal shall lie to the Appellate Tribunal and the Appellate Tribunal shall not have jurisdiction to decide any appeal in respect of any order referred to in clause (b) if such order relates to,-

(b) A rebate of duty of excise on goods exported to any country or territory outside India or on excisable materials used in the manufacture of goods which are exported to any country or territory outside India."

The appellant submitted that since in the present case the goods on which duty was paid and refund thereof was sought were not exported to any country or territory which is "outside" India in the sense that the goods have been exported to Special Economic Zone which is located within country and territory of India, therefore, their case does not fall in the exclusion category. Inasmuch as the appeals are maintainable before the Tribunal, averred the appellant.

It is also submitted that, in the following cases, the Bench had entertained the appeals and disposed the same on merits.

+ Ultratech Cement Ltd. -  2014-TIOL-1506-CESTAT-MUM

+ Tata Consultancy Services Ltd. -  2012-TIOL-1034-CESTAT-MUM

The AR submitted that supply made to SEZ is treated as export and, therefore,it squarely falls under clause (b) of proviso to Section 35B(1)and resultantly the Appellate Tribunal has no jurisdiction to entertain the appeals; that the right forum is the Joint Secretary - Revisionary Authority to Government of India.

Some decisions of Tribunal and those passed by the Revisionary authority were also cited in support. The Chattisgarh High Court decision in Union of India Vs. Steel Authority of India Ltd. - 2013-TIOL-384-HC-CHATTISGARH-CX  was also relied upon.

Noting that there were clearly divergent views among Benches of the Tribunal as well as the Joint Secretary (Revisionary Authority) to Government of India, the Bench found it prudent to refer the matter to the Larger Bench.

We reported this order as 2015-TIOL-878-CESTAT-MUM.

The matter was heard by the Larger Bench in August and an order was passed recently.

After considering the elaborate submissions made by both sides, the Larger Bench observed -

++ The whole purpose and effect of the statutory provisions of grant of rebate is to authorize the Joint Secretary RA to hear appeals against orders in the domain of export. It is true that proviso (b) to section 35B(1) of the Central Excise Act specifically speaks only of exports out of India and seemingly ousts the jurisdiction of the Appellate Tribunal to decide appeals in cases of rebate on goods sent from DTA to SEZ.

++ It is a historical fact that the SEZ Act 2005 came into existence much later than the Central Excise Act. In this context it could hardly have been the intention of Government to segregate rebate matters into two categories for appeal purposes - one category in respect of exports to a place outside India and another category in respect of so called deemed exports from DTA to SEZ.

++ It appears that a suitable amendment to the proviso to section 35B was overlooked in 2005 to bring supplies to SEZ under its ambit. Nevertheless, the question arises whether the said legal provision can be ignored to reach a conclusion that the second category of cases will also get covered under the proviso to Section 35B. In our view an interpretation holding such inclusion as valid will not lead to ousting of jurisdiction without reason. It will not lead to an impermissible illegality; it will only rationalize and streamline the procedural law as it was intended to be. It will not render anything redundant or unworkable. The conclusion that, even supplies to a SEZ will get covered by the proviso to section 35B will only result in an ancillary or natural consequence of reading the words "deemed export" into the word "export" in the proviso to section 35B.

++ In our view a harmonious construction of the various provisions of law would lead to the conclusion that the appeals in cases of rebate on goods supplied to a SEZ will not lie to the Tribunal. [Industrial Supplies Pvt. Ltd. (1980)4 SCC 341 refers]

++ We find that reading proviso (b) to section 35B to mean that it includes cases relating to goods supplied from DTA to SEZ is only an inevitable corollary to holding that such supplies may be treated as export. While doing so the legal fiction is not being extended beyond the purpose for which it was created. We hold so because there does not appear to be any intent to treat such deemed exports differently for the purpose of proviso (b) to section 35B(1) of the Act. [Mancheri Puthusseri Ahmed and Ors. (1996)6SCC185 refers]

++ The only statutory provision for grant of rebate lies in Section 11B read with Rule 18 of Central Excise Rules which is for goods exported out of the country. If the supplies to SEZ is not treated as such export, there being no other statutory provisions for grant of rebate under rule 18, the indisputable consequence and conclusion would be that rebate cannot be sanctioned at all in case of supplies to SEZ from DTA units. Certainly such conclusion would result in a chaotic situation and render all Circulars and Rules under SEZ Act ineffective and without jurisdiction as far as grant of rebate on goods supplied to SEZ is concerned.

++ The contra argument is that Section 51 of the SEZ Act would have overriding effect and the rebate can be sanctioned in terms of the provisions of Section 26 of the SEZ Act. We note that section 26 only provides for exemption of excise duties of goods brought from DTA to SEZ. It does not provide for rebate of duty on goods exported out of the country. Therefore there is no conflict or inconsistency between the provisions of the SEZ Act and Central Excise Act so as to invoke the provisions of section 51 of the SEZ Act. [Essar Steel Ltd. 2009-TIOL-674-HC-AHM-CUS relied upon]

Conclusion:

In respect of rebate on goods supplied from DTA to SEZ within India, the appeals would not lie to the Appellate Tribunal under clause (b) of proviso to Section 35B (1) of the Central Excise Act.

The reference was answered accordingly.

Service tax in passing:  Also see  DDT 2555  &  2015-TIOL-577-HC-MUM-ST

(See 2015-TIOL-2823-CESTAT-MUM-LB)