Rebate Under Rule 18 Of Central Excise Rules Cannot Be Denied Without Determining Export Duty Liability: Bombay High Court Remands Yamaha’s Excise Rebate Claim For Fresh Consideration
Sanchayita Lahkar
The High Court of Judicature at Bombay Division Bench of Justice M.S. Sonak and Justice Advait M. Sethna held that a rebate under Rule 18 of the Central Excise Rules, 2002 cannot be refused unless the authority first determines whether duty was legally payable on the exported goods, and therefore directed the principal commissioner to reassess the manufacturer’s rebate claim through a fresh, reasoned order. The dispute concerned the petitioner’s request for rebate of a specific levy paid on exported final products, which had been rejected on grounds unrelated to the core question of duty liability on exports. The Court found that these crucial issues were not examined and remanded the matter for proper consideration.
India Yamaha Motor Pvt. Ltd., a manufacturer of motorcycles and scooters, was liable to Basic Excise Duty and National Calamity Contingent Duty on its final products. The company availed CENVAT credit on inputs, and until February 2016 such credit could be used toward both duties. After a regulatory change effective 1 March 2016, credit of Basic Excise Duty could no longer be utilised for payment of the calamity-related levy. India Yamaha Motor continued to utilise credit contrary to the amended rule until June 2017 and subsequently deposited the corresponding amount in cash under protest.
The departmental authorities issued a show-cause notice alleging violation of the amended rule, which was later confirmed by order. India Yamaha Motor thereafter applied under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and a discharge certificate was issued. Separately, the company had earlier filed 63 rebate claims relating to exported goods under Rule 18 of the Central Excise Rules, 2002. The authorities granted rebate of Basic Excise Duty but rejected the portion relating to the National Calamity Contingent Duty.
Appeals before the Commissioner (Appeals) and revision proceedings before the Principal Commissioner sustained the rejection on grounds including non-payment of interest, applicability of transitional provisions under the GST regime, and the effect of settlement under the dispute-resolution scheme. India Yamaha Motor contended that these reasons were unrelated to the rebate mechanism for exported goods and that the claims pertained specifically to duty amounts paid on exports.
The Court recorded that the revisional authority had failed to examine the core issue, noting that “from a perusal of the impugned common order … these precise issues have not been considered in light of Rule 18 and the Notification”. It stated that “the liability in law to pay such tax on the final products exported in the given factual complexion … is required to be addressed, which is amiss”.
On the petitioner’s contention regarding parity between export under bond and export under rebate, the Court stated that the issue “does not appear to have been considered or dealt with in the impugned common order” and that examining such parity required factual evaluation.
Regarding interest on NCCD, the Court observed that although interest appeared payable in view of existing precedent, “Mr. Adik was unable to satisfactorily explain whether the non-payment of interest … could be a ground to deny the Petitioner a rebate”. It further recorded that the revisional authority “does not explain, let alone specify, why no rebate could be allowed on the ground of non-payment of interest”.
On the issue of payment under protest, the Court stated that although the impugned order recorded the payment as under protest, “there is nothing … which suggests the payment … was one of the grounds for rejecting the Petitioner’s rebate claim”. Any such ground could not be supplied through submissions, as “statutory orders … must stand or fall based upon the reasons set out therein”.
On the application of Section 142(4) CGST Act, Section 136 Finance Act, 2001 and Section 130 Finance Act, 2019, the Court stated that these provisions were only “cursorily referred” to and “most of the shades of the rival contentions … are not even considered”.
The Court also addressed the overlap and unjust-enrichment arguments, holding that such grounds “cannot, at least prima facie, be accepted … mainly because they are not reflected in the impugned common order”. Further, the Court noted that the subsequent CESTAT order was unavailable to the authority at the relevant time.
It concluded that “the most crucial issues … have not been adverted to nor adequately considered by the 2nd Respondent” and that a remand was necessary since “there are factual issues that must be examined in this matter”.
The Court stated: “Accordingly, we set aside the impugned common order dated 17 January 2022 made by the 2nd Respondent and remand the matter to the 2nd Respondent for deciding the Petitioner’s Revision Application afresh in accordance with law and on its own merits. The 2nd Respondent, upon remand, must address all the issues, including issues referred to by us in this judgment and order and pass a fresh reasoned order after hearing both parties.”
“The 2nd Respondent must endeavour to dispose of the Revision Application as expeditiously as possible and in any event within six months of the parties placing an authenticated copy of this order before it.”
“We, however, clarify that the observations in this order are not meant to reflect on the merits of the rival contentions. Any such observations are only prima facie and made in the context of justifying remand. The Rule in this Petition is made absolute in the above terms without any orders for costs.”
Advocates Representing The Parties
For the Petitioner: Mr. V. Sridharan, Senior Advocate, with Ms. Payal Nahar and Mr. Shanmuga Dev, instructed by Mr. Sriram Sridharan.
For the Respondents: Mr. Karan Adik with Mr. Ram Ochani.
Case Title: India Yamaha Motor Pvt. Ltd. v. Union of India & Ors.
Neutral Citation: 2025: BHC-OS:20437-DB
Case Number: Writ Petition No. 3587 of 2022
Bench: Justice M.S. Sonak and Justice Advait M. Sethna
