Monday, August 02, 2010

DEEMED EXPORTS VALUE NOT TO BE CLUBBED FOR SSI BENEFIT?


 

by


 

K. VIJAY KUAMR

MA,BL,MBA,B.Ed.

Superintendent of Central Excise, Hyderabad.


 

Recently the eastern Bench of the CEGAT delivered a shocking judgement. I fervently hope and pray that proper action has been filed to get the order stayed as it has wide ramifications.


 

The Hon'ble Tribunal in Oxide (India) Pvt Ltd v CCE, Bolpur – 2001(128) ELT. 490( Tri. – Cal.) held that the
value of Deemed exports was not required to be added while computing the value of the clearances under Notification No. 1/93 ( Now Notification No. 8/2001- CE dated 1.3.2001)


 

The case was; the assessee had not included the value of goods cleared under Deemed Export Scheme, while computing the value of clearances. The department passed an order that goods cleared under Deemed Export have to be treated as clearances for home consumption. The party pleaded before CEGAT that as per the notification, only the quantity cleared for home consumption and also the quantity exported to Nepal and Bhutan have to be taken for computation of the value for home consumption. In a rather strong and reasoned defence, the department argued that


 

  1. The goods cleared under Deemed Export are not actually exported, in as much as they do not leave the country.
  2. Deemed Export has not been defined any where under the Central Excise Act.
  3. The Notification does not specifically provide any consideration with reference to the deemed exports
  4. It is not permissible to equate deemed exports with that of export for the purpose of computing the aggregate value of clearance
  5. Chapter X of the Exim Policy is not applicable, while interpreting the provisions of the notification in view of the non existence of any such provision in the CE rules read with the notification.


 

The Tribunal after considering both sides came to the conclusion that:-


 

  1. In as much as deemed exports have not been defined anywhere under the Central Excise Law, the definition given in Chapter X of the Exim Policy has to be referred to.
  2. Deemed exports have been given the status of exports by a deeming provision of law.
  3. There is no reference to the deemed Exports in the Notification No. 1/93, though it specifically excludes exports made to Nepal and Bhutan for the purpose of computation of aggregate value.
  4. Admittedly deemed exports are not clearances for home consumption
  5. They have not been specifically included as in the case of exports to Nepal and Bhutan for computing aggregate value.
  6. Non mention of the same in the notification goes in favour of the assessee rather than in favour of the revenue.
  7. As such we conclude that the value of deemed exports need not be included while computing the aggregate value.


 

A look at the relevant provisions in the notification may be worthwhile. As per the notification, goods cleared for home consumption up to a certain value ( now) 1 Crore is exempted provided, among other things, the clearances for home consumption in the previous year did not exceed Rs.3 Crores.


 

For the purpose of determining the aggregate value of clearances for home consumption, the following clearances shall not be taken into account, namely:-

  1. clearances, which are exempt from the whole of the excise duty leviable thereon (other than an exemption based on quantity or value of clearances) under any other notification or on which no excise duty is payable for any other reason
  2. xxxxx


 

"clearances for home consumption", wherever referred to in this notification shall include clearances for export to Bhutan and Nepal.


 

As can be seen, the notification nowhere specifies deemed exports. The mischief of the Tribunal's order is based on the inclusion of exports to Nepal and Bhutan. It is a little far fetched to imagine that the explanation given to restrict the scope of benefit to exports to Nepal will imply a benefit to deemed exports which is a concept unknown to Central Excise Law. Because the phrase 'deemed export' is not defined under the Central Excise Law, the Hon'ble Tribunal travelled all the way to the Exim Policy to find a definition. But why find a definition at all? You have to look for a definition of a word that is mentioned in the statute but not defined. When ' deemed export' does not find a place either in the notification or the CE Rules or the CE Act, where is the need for going around looking for definitions?


 

The hon'ble Tribunal came to the conclusion, "Admittedly deemed exports are not clearances for home consumption" Who admitted? As far as Central Excise is concerned, they are clearances for home consumption. Let us look at this problem from another angle. Instead of a small scale unit, if it was a duty paying unit clearing goods as 'deemed exports', can he clear the goods under bond as for export? , Will he be allowed to clear the goods without payment of duty? If so under what documents? Who will give him proof of export? Rule 13 permits export of goods without payment of duty and not deemed export of goods. If we go by the logic of the Tribunal's decision, now goods cleared as deemed exports can be cleared with out payment of duty.


 

As a Central Excise Officer I do not know what is deemed export and I am not expected to know. Unless the exemption notification or the rule or the Act requires me to follow the definition given somewhere else, I am not required to follow that definition, especially when the word does not find a place in my Act or rules.


 

The government in its considered wisdom, has chosen not to extend the benefit of deemed export to Central Excise matters as it will be difficult to manage. Further even the Exim Policy, to which the Tribunal went to get the definition of deemed exports, gives the benefit only for certain purposes, mainly requiring fulfillment of certain obligations. The importer who is under an obligation to export will be considered to have fulfilled his obligation, even for deemed exports. Further the Government had a scheme to refund Terminal Excise Duty to the manufacturers who have ' deemed exported' their goods. This is because they are not entitled to Excise benefits.


 

So what the Government did not allow and what even the policy ( Exim policy) did not propose, the CEGAT chooses to allow by citing the same Exim Policy.


 

As suggested earlier, this decision can cause irreparable damage if remedial action is not taken immediately.


 

EXCISE LAW TIMES – 15.08. 2001 – A 17

No comments:

On getting a new pair of spectacles

I was wearing spectacles from the age of 20. I was a teacher then and I had a belief that you look scholarly with spectacles. Though I was a...