Supreme Court settles limitation for rebate claims under Central Excise Act: Sansera Engineering vs. Deputy Commissioner (29 November 2022)

Introduction

Date of the Judgment: 29 November 2022
Citation: (2022) INSC 1707
Judges: M.R. Shah, J. and M.M. Sundresh, J.

Can a claim for rebate of excise duty be filed at any time, or is it subject to a limitation period? The Supreme Court of India recently addressed this question, focusing on whether the time limit prescribed for refund claims under the Central Excise Act also applies to rebate claims. This case clarifies the relationship between the main statute and subordinate rules, impacting businesses claiming duty rebates. The judgment was delivered by a two-judge bench comprising Justice M.R. Shah and Justice M.M. Sundresh, with the majority opinion authored by Justice M.R. Shah.

Case Background

The appellant, Sansera Engineering Limited, is a manufacturer of excisable goods. Between August 2015 and October 2015, they exported goods on which excise duty had been paid. They filed claims for a rebate of the duty paid on these exported goods on 10 February 2017, amounting to ₹29,47,996 and ₹42,27,928. Subsequently, on 14 February 2017, they claimed a rebate of ₹1,47,27,766 for the period from October 2015 to March 2016.

The original authority rejected these rebate claims, stating they were filed after the time limit prescribed under Section 11B of the Central Excise Act, 1944. The appellant then filed writ petitions before a single judge of the High Court, who also dismissed the petitions, upholding the time bar. This decision was further upheld by a Division Bench of the High Court, leading to the present appeal before the Supreme Court.

Timeline:

Arguments

Appellant’s Arguments:

• ✓ The appellant argued that a rebate of duty on exported goods, as per Rule 18 of the Central Excise Rules, 2002, is different from a refund of duty under Section 11B of the Central Excise Act, 1944.
• ✓ They contended that the rebate is an incentive for exports, and upon submitting Form R within six months of export, the exporter is entitled to the rebate, as per Notification No. 19/2004 dated 6 September 2004.
• ✓ The appellant highlighted that neither Rule 18 nor the notification of 6 September 2004 explicitly mentioned the applicability of Section 11B of the Act for the period between 2000 and 2016.
• ✓ They pointed out that a notification dated 1 March 2016 amended the 6 September 2004 notification by adding the phrase “before the expiry of the period specified in Section 11B of the Act,” indicating a conscious decision not to apply Section 11B before 2016.
• ✓ The appellant submitted that without a specific provision in Rule 18 or the 6 September 2004 notification, the limitation period under Section 11B should not apply to rebate claims.
• ✓ They argued that the purpose of the rebate is to encourage exports and earn foreign exchange, and denying the rebate on technical grounds would undermine this objective.
• ✓ The appellant cited the Supreme Court’s decision in Collector of Central Excise, Jaipur v. Raghuvar (India) Limited, (2000) 5 SCC 299, to support their argument that Section 11B should not apply to rebate claims.
• ✓ They also relied on decisions from the High Courts of Madras, Allahabad, Punjab & Haryana, and Rajasthan, which held that rebate claims are distinct from refund claims and not subject to Section 11B’s limitation.

Revenue’s Arguments:

• ✓ The revenue argued that the issue is covered by the Supreme Court’s decision in Union of India v. Uttam Steel Limited, (2015) 13 SCC 209, which held that the limitation period under Section 11B applies to rebate claims.
• ✓ They submitted that Section 11B of the Act includes “rebate of duty” within the definition of “refund,” as per Explanation (A) to Section 11B.
• ✓ The revenue contended that Section 11B(1) requires an application for rebate to be made within one year from the “relevant date,” as defined in Explanation (B) to Section 11B.
• ✓ They argued that Section 11B is the parent statute, while Rule 18 and the 6 September 2004 notification are subordinate legislation and cannot override the parent statute.
• ✓ The revenue distinguished the Raghuvar (India) Limited case, stating it dealt with the recovery of wrongly availed Modvat credit under Section 11A, which is different from Section 11B.
• ✓ They cited decisions from the Madras High Court in Hyundai Motors India Limited v. Department of Revenue, 2017 (355) ELT 342 (Madras) and the Bombay High Court in Everest Flavours Ltd. v. Union of India, 2012 (282) ELT 481 (Bombay), which supported the application of Section 11B to rebate claims.
• ✓ The revenue argued that if the limitation period under Section 11B is not applied to rebate claims, there would be no time limit for filing such claims.

Submissions by Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

“Whether the claim for rebate of duty provided under Rule 18 of the Central Excise Rules, 2002, the period of limitation prescribed under Section 11B of the Central Excise Act, 1994 shall be applicable or not?”

Treatment of the Issue by the Court

Authorities

Cases:

Legal Provisions:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Supreme Court held that the decision in Collector of Central Excise, Jaipur v. Raghuvar (India) Limited, (2000) 5 SCC 299* was not applicable to the present case as that case dealt with the recovery of Modvat credit under Section 11A of the Central Excise Act, 1944, which is a general provision, and not with the rebate of duty under Section 11B. The court relied on the decision in Union of India v. Uttam Steel Limited, (2015) 13 SCC 209* which held that rebate claims are covered under Section 11B and are subject to its limitation period. The court also referred to Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536* which was considered in Uttam Steel Limited. The court overruled the decisions of the High Courts of Madras in Deputy Commissioner of Central Excise v. M/s Dorcas Market Makers Pvt. Ltd., 2015 SCC OnLine Mad 8492*, Allahabad in Camphor and Allied Products Ltd. v. Union of India, 2019 SCC OnLine All 4705*, Punjab & Haryana in JSL Lifestyle Ltd. v. Union of India, 2015 SCC OnLine P&H 13023* and Rajasthan in Gravita India Ltd. v. Union of India, 2016 (334) ELT 321* which had taken a contrary view relying on Raghuvar (India) Limited. The court followed the decisions of the Madras High Court in Hyundai Motors India Limited v. Department of Revenue, 2017 (355) ELT 342* and the Bombay High Court in Everest Flavours Ltd. v. Union of India, 2012 (282) ELT 481* which held that Section 11B applies to rebate claims.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following:

• ✓ The explicit inclusion of “rebate of duty” within the definition of “refund” in Explanation (A) to Section 11B of the Central Excise Act, 1944.
• ✓ The principle that a parent statute (Section 11B) cannot be overridden by subordinate legislation (Rule 18 and the notification of 6 September 2004).
• ✓ The need for a consistent and clear limitation period for all claims related to excise duty, as provided by Section 11B.
• ✓ The precedent set by the Supreme Court in Uttam Steel Limited, which directly addressed the applicability of Section 11B to rebate claims.
• ✓ The rejection of the argument that rebate claims should be treated differently from refund claims, as both are essentially claims for the return of excise duty.

Logical Reasoning:

The court considered the argument that the absence of a specific reference to Section 11B in Rule 18 and the notification of 6 September 2004 meant that the limitation period under Section 11B should not apply. However, the court rejected this argument, stating that a subordinate legislation cannot override the parent statute. The court also rejected the argument that the rebate is an incentive and should not be subject to a limitation period, stating that all claims for the return of excise duty are subject to the limitation period prescribed under Section 11B.

The court quoted the following from the judgment:

“On a fair reading of Section 11B of the Act, it can safely be said that Section 11B of the Act shall be applicable with respect to claim for rebate of duty also. As per Explanation (A) to Section 11B, “refund” includes “rebate of duty” of excise.”

“At this stage, it is to be noted that Section 11B of the Act is a substantive provision in the parent statute and Rule 18 of the 2002 Rules and notification dated 6.9.2004 can be said to be a subordinate legislation. The subordinate legislation cannot override the parent statute.”

“As such, the issue involved in the present appeal is squarely covered by the decision of this Court in the cases of Mafatlal Industries Ltd. (supra) and Uttam Steel Limited(supra). After taking into consideration Section 11B of the Act and the notification and procedure under Rule 12, it is specifically observed and held that rebate of duty of excise on excisable goods exported out of India would be covered under Section 11B of the Act.”

Key Takeaways

• ✓ Exporters claiming a rebate of excise duty must file their claims within one year from the relevant date as defined in Section 11B of the Central Excise Act, 1944.
• ✓ The limitation period under Section 11B applies to all rebate claims under Rule 18 of the Central Excise Rules, 2002, irrespective of whether Rule 18 or the relevant notification explicitly mentions Section 11B.
• ✓ Subordinate legislation, such as Rule 18 and notifications issued under it, cannot override the provisions of the parent statute, which is Section 11B of the Central Excise Act.
• ✓ Businesses should ensure they have all necessary documentation and file their rebate claims promptly to avoid rejection due to the time bar.

Directions

The Supreme Court did not give any specific directions, but dismissed the appeal.

Development of Law

The ratio decidendi of this case is that the limitation period prescribed under Section 11B of the Central Excise Act, 1944, is applicable to rebate claims made under Rule 18 of the Central Excise Rules, 2002. This judgment clarifies that the definition of “refund” in Section 11B includes “rebate of duty,” and that subordinate legislation cannot override the provisions of the parent statute. This decision overrules the earlier views of the Madras, Allahabad, Punjab & Haryana, and Rajasthan High Courts, and aligns with the views of the Bombay High Court and the later decisions of the Madras High Court. This settles the law on this point.

Conclusion

The Supreme Court held that the limitation period under Section 11B of the Central Excise Act, 1944, applies to rebate claims under Rule 18 of the Central Excise Rules, 2002. The court emphasized that the term “refund” in Section 11B includes “rebate of duty,” and that subordinate legislation cannot override the parent statute. This decision settles the legal position on this issue and requires exporters to file rebate claims within one year from the relevant date.