Government of India
Ministry of Finance
Department of Revenue,
Export under Bond - Whether additional duty of excise levied under
Additional Duty of Excise (Textile
& Textile Articles) Act, 1978 is payable - Regarding.
Representations have been received to the effect that additional duty of
excise under Additional Duty of Excise (Textile & Textile Articles)
Act, 1978 (hereinafter referred to as the "said Act") is being demanded
on goods exported under bond under rule 13 of Central Excise Rules, 1944
causing undue hardship to exporters and it has, therefore, been requested
to issue a suitable clarification.
2. In this
connection, it has been reported that-
term "duty" has not been defined under Rule 13 and therefore as per Rule
2(v) of the Central
Excise Rules, 1944, the term "duty" for the purpose of Rule 13, should
refer only duty
payable under Section 3 of the Central Excise Act, 1944.
3. The matter
has been examined by the Board.
is no specific exemption notification exempting additional duty of excise
for the purpose
Supreme Court in the case of Union of India v. Modi Rubber Ltd. [1986 (8)
ECR 723 (SC)]
has held that exemption under Rule 8(1) (now under Section 5A of Central
Excise Act) is
applicable to duty of excise leviable under Section 3 of the Central Excise
Act, 1944 and is
not applicable to the special excise duty leviable under the Finance
to Sub-Section 3 of Section 3 of the Additional Duty of Excise (Textile
& Textile articles) Act, 1978 the provisions of Central Excise Act,
1944 and the rules made thereunder including those relating to refunds
and exemption from duties are applicable in relation to the levy and collection
of the duties of excise leviable under said Act. By virtue of this provision,
therefore, Rule 13 of Central Excise Rules, 1944 will apply even to the
additional duty of excise leviable under the Additional Duty of Excise
(Textile & Textile Articles) Act, 1978.
the judgement quoted above, it is observed that clearances under bond are
not synonymous to clearances under exemption (copy of the opinion of Ministry
of Law is enclosed) and therefore the aforesaid judgement of Hon'ble
supreme Court is not relevant to the present case.
Notifications issued under Rule 12 specify duties to be rebated on goods
exported and includes additional duty leviable under Additional Duty of
Excise (Textile and Textiles Articles) Act, 1987. Intention of both Rules
viz. Rule 12 and Rule 13 is to make duty incidence nil in case of export
and as such on harmonious construction of the two rules, it may be construed
that additional duty is covered by the expression "duty, both for the purpose
of export under rebate and export under bond.
4. In view
of above, it is clarified that no additional excise duty levied
under the said Act is to be paid on goods exported under bond.
pending issues may be finalised in view of the above. The present practice
in the matter and the amount of additional excise duty involved in such
exports under : (i) rule 12 and (ii) under rule 13 separately (for the
period September '94 to March '95, April '95 - March '96 & April '96
to November '96) may please be reported within a month.
Copy of Ministry
of Law, Justice & Company Affairs, New Delhi
U.O. No. 24476/74-Advice
(B) dated 29.10.74.
"The question for consideration in the present case is whether, in
cases where goods manufactured under the provisions of rule 56-A are finally
exported in bond so that no duty is actually paid on their export, the
admissibility of proforma credit on account of duty paid on raw materials
or component parts, used in the manufacture of the finished excisable goods
so exported in bond, would be legally barred in view of the provisions
of clause (i) of the proviso to sub-rule (2) of the rule 56-A.
said clause (i) is to the effect that no credit of duty shall be allowed
in respect of any material or component parts used in the manufacture of
finished excisable goods produced by the manufacture are
Could it, therefore be said
that the finished excisable goods, when they are being finally exported
in bond, are to be taken as goods exempted from the duty pavable thereon,
or as goods chargeable to nil rate of duty.
3. It may
be mentioned, in this connection, that the present question was referred
to this Ministry on an earlier occasion, but in a different context, and
from a different angle. The reference was whether credit given for excise
duty paid on parts and component materials which has gone into the manufacture
of an excisable article which is cleared under a bond for export without
payment of excise duty can be utlised towards other clearances for home
consumption for which duty is chargeable.
4. It was
advised by this Ministry on that occasion, that, under the rules as they
stand, the answer is in the negative. The reason was that the words 'such
materials' occurring in rule 56-A could not mean 'like materials'.
In other words, as the rule a was then worded, it was legally permissible
to adjust the proforma credit in respect of duty paid on component parts
only against duty payable of finished excisable products manufactured out
of those very component parts. In the cases under consideration, the finished
excisable products having been exported under bond, the proforma credit
has invariably to be adjusted against similar goods manufactured by the
same manufacturer. This was held to be not legally in order. In pursuance
to this advice, clause (vi) of sub-rule (3) or rule 56A was amended so
as to make the adjustment possible even against duty payable on any finished
excisable products for the manufacturer of which such material or component
parts were permitted to be brought into the factory under sub-rule (2)
of rule 56-A. Correlation between particular raw materials or components
and particular finished products was thus no longer necessary.
5. It is
true that this Ministry was not at that stage specially required to go
into the question as to whether the proforma credit could at all be adjusted
against the duty payable on finished goods exported in bond, in view of
the provisions contained in clause (i) of the proviso to sub-rule (2) of
rule 56A. Nevertheless, in the referring notice of Member (Central Excise),
this Ministry's attention was drawn to the provision of the said clause
(see para 10 of Shri J.Banerjee's note). The clause was, therefore, apparently
in consideration of J.S. & L.A. when he expressed his opinion that
proforma credit could be adjusted provided the stipulation concerning 'such
materials' was suitable amended.
since a specific reference has now been made to us, the same is considered
in more details below.
(i) of the proviso to sub-rule (2) of rule 56-A, as referred
to above, refers to the inapplicability of proforma credit to finished
products which are either exempted from the whole of duty or are chargeable
to nil rate of duty.
term 'exemption', as far as central excise duty is concerned, has a definite
connotation in that such exemption will have to be attributable to a notification
by the Central Government, as contemplated in rule 8 of the Central Excise
Rules, 1944. Since the said rule empowers the authorisation of exemption
of duty, the term 'exemption' as used in other provisions contained in
the Rules will have to be taken to mean exemptions so granted by the Central
Government under rule 8.
enough, in the present case, the exports under bond are duty-free not by
virtue of any exemption notification issued under rule 8, and so the first
prohibition contained in clause (i) of the proviso to sub-rule (2) of rule
56-A does not come into play.
leaves us with the second part of the prohibition i.e., whether the non-payment
of duty in respect of goods exported under bond flows from the said goods
being chargeable to nil rate of duty. In this connection it would be relevant
to note that rule 13, as its title indicates, refers to export under bond
of goods on which duty has not been paid. If, in fact, the duty on the
goods exported is paid, then a claim for rebate would arise under rule
12. The manufacture could, if he chooses so to do, export it in bond, without
first paying duty and thereafter claiming rebate. In the circumstances,
it cannot be said that the goods are chargeable to nil of duty.
view of the above, the provision of clause (i) of proviso to sub-rule (2)
of rule 56-A would not apply to instances covered by the present reference,
namely, where finished excisable goods are exported under bond. Any other
interpretation of the provision would also lead to the anomalous position,
as pointed out by the Department, that if a manufacturer opts to export
finished excisable products, he can claim rebate of full amount of duty
including duty paid originally on the intermediary goods while, if he exports
under bond, he would not get the proforma credit on raw materials. Such
an interpretation has obviously to be avoided, more so when the intention
itself was not to effect such a discriminatory treatment.