Tax Insights

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Tax Insights

3 December 2022

Supreme Court holds that claim for rebate of duty of excise on excisable goods exported out of India is subject to the period of limitation prescribed under the Act

In brief

The Supreme Court has held¹ that while making claim of rebate of duty of excise on excisable goods filed as per rule 18 of the Central Excise Rules, 2002 (Rules), the statutory period of limitation of one year as prescribed under section 11B of the Central Excise Act, 1944 (Act) should be applied.

In detail

Facts and issue

• The taxpayer, being a manufacturer of excisable goods, exported goods on payment of excise duty and f iled claim for rebate of duty paid on export of goods under rule 18 of the Rules.

• The adjudicating authority rejected the said refund claims being time barred, as they had been filed beyond the time limit prescribed under section 11B of the Act. Moreover, the High Court also rejected the writ petition and writ appeal filed by the taxpayer.

• The issue before the Supreme Court was whether the period of limitation prescribed under section 11B of the Act is applicable to a claim of rebate of duty under rule 18 of the Rules.

Taxpayer’s contentions

• The grant of rebate of duty paid on excisable goods or duty paid as provided under rule 18 of the Rules is dif ferent than that of refund of duty entitled under section 11B of the Act.

• Neither rule 18 of the Rules nor the Notification specifically provide for the applicability of section 11B of the Act. Rule 18 of the Rules and the Notification were enacted after taking a conscious stand, and the period of limitation was specifically excluded.

• The period prescribed under section 11B of the Act will not be applicable for the period between 2000 to 2016.

• Rule 18 of the Rules, being a special provision for rebate, cannot be equated with the provision of section

1 Civil Appeal No. 8717/ 2022

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11B of the Act; in this regard, the taxpayer also placed reliance in the case of Raghuvar (India) Limited². Revenue’s key contentions

• The rule and Notification are to be read harmoniously with the parent statute.

• In section 11B of the Act, there is a specific reference to rebate of duty. Thus, the claim of rebate has t o be made before the expiry of the imitation prescribed therein.

Supreme Court’s decision and observations

The Supreme Court held that the period of limitation prescribed under section 11B of the Act would apply to the claim of rebate of duty under rule 18 of the Rules after observing as follows:

• As per Explanation (A) to section 11B of the Act, ‘refund’ includes ‘rebate of duty of excise’. Section 11B of the Act has been made specifically applicable with respect to claim of rebate of duty.

• Section 11B of the Act further states that application will be made as per the prescribed rules and in the prescribed manner. Accordingly, the application for rebate has to be made as per rule 18 of the Rules and the Notif ication.

• Merely because there is no reference to section 11B of the Act in rule 18 of the Rules or the Notification, it cannot be said that the parent statue will not be applicable, which otherwise stands applicable.

• Section 11B of the Act is a substantive provision in the parent statue, whereas the Rules and the Notif ication are subordinate legislations. Accordingly, the subordinate legislation cannot override or

dispense with the requirement of the Act. Reliance in support of this observation was placed in the case of Maf atlal Industries³ and Uttam Steel Industries⁴.

• If the claim that the period of limitation is not applicable is accepted, the substantive provision (section 11B of the Act) would become otiose, redundant and/ or nugatory.

• The court dismissed the reliance placed in the case of Raghuvar India Limited² by the taxpayer as the same dealt with the recovery of wrongly availed Modvat credit.

• Moreover, the court agreed with the decision in the case of Everest Flavours Limited⁵, wherein it was held that since statutory provision for ref und in section 11B of the Act ibid brings within its purview a rebate of excise duty, rule 18 of the Rules cannot be read independent of the requirement of limitation prescribed in section 11B of the Act.

The takeaways

The Supreme Court has categorically stated that the limitation period prescribed under the Act for claim of ref und (which includes rebate of duty paid on export of goods) would apply even if the Rules or Notification do not specifically refer to such limitation under the Act. The court has reiterated the principle that a subordinate legislation cannot override or dispense with the requirement of the Act. This decision also emphasises the need to read the Act, the Rules and the Notification harmoniously.

2 Collector of Central Excise, Jaipur v. Raghuvar (India) Limited [2000-VIL-07-SC-CE]

3 Mafatlal Industries Limited v. Union of India [1997] 5 SCC 536

4 Union of India v. Uttam Steel Limited [2015-VIL-53-SC-CE]

5 Everest Flavours Limited v. Union of India [2012] (282) ELT 481 (Bo mbay)

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In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.

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