Gujarat High Court Restricts Excise Rebate In Coke Exports, Rejects Moisture Loss Claim

The Gujarat High Court on 19 June held that Rule 18 of the Central Excise Rules, 2002 allows rebate only on the quantity of goods actually exported and not on the higher quantity cleared from the factory on payment of excise duty.

A Division Bench of Justices A.S. Supehia and Vaibhavi D. Nanavati dismissed a batch of petitions filed by Mahashakti Coke, which challenged the denial of rebate on the differential quantity of metallurgical coke. The Court held:

“The expression 'duty paid on such excisable goods' is required to be construed with the goods which are actually exported out of India to a place outside India.”

Mahashakti Coke argued that it had paid excise duty on the entire quantity cleared from its factory and that the reduction in weight before export resulted solely from evaporation of naturally contained moisture in metallurgical coke. It therefore sought rebate on the full cleared quantity.

The Revenue restricted rebate to the quantity reflected in the shipping bills and maintained that only the goods actually exported outside India qualified for rebate. The authorities rejected the claim for rebate on the differential quantity between clearance and export.

The Court noted that the shipping bills reflected a lower quantity than the quantity cleared from the factory. It also recorded that Mahashakti Coke did not disclose the moisture content in the ARE-1 forms or invoices at the time of clearance, which prevented verification of the alleged natural loss. It observed:

“The petitioner was required to declare the moisture content in both the invoice and the ARE-1 at the time of clearance and duty payment. Had such a declaration been made at the time of removal from the factory, the Customs authorities could have verified the actual loss in quantity against the stated moisture content.”

Relying on the Supreme Court's decision in Union of India v. Rajindra Dyeing and Printing Mills Ltd., the Bench reiterated that rebate applies only to goods actually exported as reflected in the shipping bills.

Accordingly, the High Court upheld the orders of the departmental authorities and dismissed all the writ petitions.

For Petitioner: Ms. Sangeeta Pahwa for Thakkar and Pahwa Advocates

For Respondents: Ms. Hardika Vyas, Senior Standing Counsel