Excise Duty | Goods Exported Without Retail Sale Price in Rupees Are Not Eligible for Exemption Under Notification No. 3/2006: Bombay High Court

Bombay High Court held that exported goods without retail price not eligible for exemption; rebate on duty paid can be claimed. On October 21, 2024, the Bombay High Court delivered a significant ruling in the case of M/s. Parle Products Ltd. v. Union of India & Ors. The Court quashed the revisional authority’s order that had reversed the petitioner’s rebate claim on excise duty paid for exported goods. The judgment clarifies that goods exported without a retail sale price in rupees are not eligible for exemption under Notification No. 3/2006, and therefore, the petitioner was justified in paying duty and claiming a rebate under Rule 18 of the Central Excise Rules, 2002.

M/s. Parle Products Ltd., a biscuit manufacturer, paid excise duty on biscuits exported out of India and sought a rebate under Rule 18 of the Central Excise Rules, 2002. The petitioner argued that since the exported goods did not bear a retail sale price in rupees, they were not covered by the exemption notification (No. 3/2006-CE). The Assistant Commissioner of Central Excise initially denied the rebate claim, contending that the biscuits were exempt from duty under the notification, which applied to goods with a retail sale price below Rs. 100 per kg.

The petitioner’s appeal to the Commissioner (Appeals) was successful, but the revenue challenged the appellate order in a revision application under Section 35EE of the Central Excise Act, 1944. The Revisional Authority reversed the appellate decision, stating that the petitioner was not required to pay duty on the exempted goods and therefore could not claim a rebate.

The primary legal issue in the case was whether goods exported without a retail sale price in rupees fell within the scope of Notification No. 3/2006, which grants excise duty exemption for biscuits with a retail price not exceeding Rs. 100 per kg. The petitioner contended that the exemption was inapplicable to exported goods, as the requirement of a retail price in rupees did not apply to such goods under the Standards of Weights and Measures Act, 1976, and related rules.

Another key issue was whether the revenue’s retention of duty paid by the petitioner, even if the goods were exempt, violated Article 265 of the Constitution, which prohibits the collection of taxes without the authority of law.

The Court observed that the exemption under Notification No. 3/2006 applied only to biscuits sold in packaged form with a retail sale price in rupees not exceeding Rs. 100 per kg. Since the exported biscuits did not bear a retail sale price in rupees, they were not eligible for the exemption.

"There is no dispute that the biscuits exported by the Petitioner did not have the retail sale price in rupees embossed on the package... Therefore, the goods under consideration exported out of India would not fall within the description mentioned in the exemption notification." [Para 13]

The Court further rejected the revenue’s argument that since the petitioner was exempt from paying duty, they were not entitled to claim a rebate. The Court emphasized that retaining the duty paid without legal authority would violate Article 265 of the Constitution:

"Assuming, the contention of revenue that the goods exported are exempted under notification No.03/2006 is accepted... retention would be contrary to Article 265 of the Constitution of India which provides that no tax shall be levied or collected except by authority of law." [Para 15]

The Court also noted that the revenue had previously accepted similar rebate claims from the petitioner on identical facts, both at the appellate level and before the Tribunal. The Court found that the revenue could not now take a contrary position:

"We fail to understand how, today, the revenue, after accepting the orders of the appellate authorities in the Petitioner’s own case, can contend the contrary. Therefore, the Petitioner’s rebate claim must be allowed even on this count." [Para 18]

The Court quashed the revisional authority’s order and directed the revenue to grant the petitioner’s rebate claims. It held that the goods exported did not meet the criteria for exemption under Notification No. 3/2006 and that the petitioner was justified in paying excise duty based on the transaction value under Section 4 of the Central Excise Act, 1944.

The Bombay High Court allowed M/s. Parle Products Ltd.’s claim for a rebate of excise duty paid on exported biscuits, reiterating that goods without a retail sale price in rupees do not qualify for exemption under Notification No. 3/2006. The judgment sets a precedent affirming the right of exporters to claim a rebate even if the goods were incorrectly classified as exempt by the revenue, thereby ensuring that duties paid without legal obligation cannot be unjustly retained.

Date of Decision: October 21, 2024

M/s. Parle Products Ltd. v. Union of India & Ors.