The Madras High Court has held that the exporter can’t claim export incentives merely on the basis of inaction of the customs department in taking punitive action.
The court observed that if the Corporate facade is lifted, it is clear that the same M.Ramesh, who is the Managing Director of the petitioner, is the proprietor of Manickam Minerals. Therefore, the export incentives are not to be given for proceeds of crime. Grant of exports incentives which are out of the illegal activity would not be keeping in tune with the public purpose for which exemption Notification issued under Section 93A of the Finance Act, 1994 was issued.
The court stated that the export incentives under the Central Excise Act particularly Rules 18 and 19 of the Central Excise Rules, 2002 read with relevant Notifications and Rule 5 of the CESTAT Credit Rules, 2002 as also under Notification issued under Notification No.41/12-ST, issued under Section 93A of the Finance Act, 1994 are intended to incentivise legitimate exports. The idea of incentivising such exports is to encourage such exporters, who compete in the international market and bring precious foreign exchange for the country, which enhances the foreign exchange reserves of the country and stabilizes the Government’s position quay balance of payments.
The bench viewed that the petitioner was not entitled to export incentive out of the export of goods made out of the illegally mined sea sand.
“Unless the exports are legitimate, the question of incentivising such exports would not and could not subserve public purpose. The public purpose in Section 93A of the Act would mean those exports which are legitimate and are within the four-corners of the law. Proceeds of crime and proceeds of illegal exports would not enure in favour of the petitioner in the form of rebate/albit refund of service tax borne on services used in the export of goods in violation of G.O(Ms)No.156, Industries (MMD) Department”, the court added.
The court held that merely because the Custom Department has not taken any punitive action against the petitioner ipso facto would not mean that the petitioner would be entitled to export incentives under Notification No.41/12-ST, issued under Section 93A of the Finance Act, 1994 Therefore, the Writ Petition is devoid of merits.
Facts
The petitioner had exported consignment of garnets extracted out of illegally mined sea sand contrary to the restrictions of the Government of Tamil Nadu in G.O(Ms)No.156, Industries (MMD) Department.
The rebate claims for refund of service tax borne by the petitioner in the course of export of garnets extracted out of illegally mined sea sand were rejected by the Rebate Sanctioning Authority. Further appeals were also rejected by the second respondent.
Submissions
Counsel for the petitioner submitted that although the decision of the Tribunal is not binding on the Court, nevertheless it has a pursuasive value and therefore submitted that the export incentives granted to an exporter, like the appellant should be granted to the petitioner.
It was submitted that irrespective of the fact that the sand, which were excavated illegally by Manickam Minerals represented by its Proprietor, M.Ramesh, which sold the same to the petitioner Company of which the said Proprietar was the Director, ipso facto would not Come under legitimate grant of rebate in the form of export incentive in Notification No.41/12-ST.
Senior Standing Counsel submitted that instead of filing a statutory appeal under Section 86 of the Finance Act, 1994, the petitioner approached the first respondent as Revisional Authority under Section 35(EE), which applies only to rebate claims under the provisions of the Central Excise Rules, 2002, read with relevant Notification issued thereunder.
Conclusion
The court held that the petitioner has approached the wrong forum under Section 86 of the Finance Act, 1994 before the Revisional Authority. The petitioner should have approached the CESTAT.
Case Details
Case Name: M/S.Indian Ocean Garnet Sands Company P Ltd V/S Principal Commissioner, and ors.
Citation: W.P.(MD) Nos.17429 to 17433 of 2022
Court: Madras High Court
Judge: Justice C.Saravanan
Decision Date: 21/06/2024
