Belated claim of exemption possible

Normally exemptions are to be claimed at the original stage, that is, at the point of importation or at the time of clearance of the goods from the factory of manufacture. But it is not as if it cannot be claimed at a later stage. In a recent judgement in the case of Eversmile Pre-Fab Pvt. Ltd. vs. Commissioner of C. Ex., Thane-II- 2010 (262) E.L.T. 801 (Tri. - Mumbai), the Tribunal has rightly pointed out that to deny the benefit of lower rate of duty on the ground of belated claim is also not justifiable inasmuch as the benefit of an exemption Notification can be claimed even at the appellate stage.

It is unfortunate that this principle had to be asserted once again because there are judgements already of Tribunal as well as of the Supreme Court to this effect.

Yet Revenue keeps on denying this benefit on the ground that the claim of exemption has not been made at the original stage.

In the case of BOC India Ltd. Vs. State of Jharkhand – 2009(237)ELT7(SC), the claim of exemption for Oxygen gas as a raw material for making steel was turned down on the ground that the claim was not made in the original stage. The Supreme Court ruled in this case that belated claim of exemption is admissible.

In the case of Share Medical Care v. Union of India -2007(209)ELT321SC, the Supreme Court held in the similar circumstances that if no time is fixed for the purpose of getting benefit under the exemption notification, it could be claimed at any time. If the notification applies, the benefit thereunder must be extended to the appellant.

The Court held that the authorities as well as the Tribunal were not right in holding that the appellant ought to have claimed the benefit of the notification at the time of filing of classification lists and not at a subsequent stage. The Court finally concluded after considering several decisions that “it is clear that even if an applicant does not claim benefit under a particular notification at the initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage”.

In another case of Commissioner of Customs, Mumbai vs. Tullow India Operations Ltd – 2005(189(ELT 401 (SC), the exemption was subject to the condition that the importer at the time of importation produces the required certificate from the Directorate General of Hydrocarbons. The exemption was rejected at all levels until it came to the Supreme Court, which finally granted the exemption on the ground that an exemption which is otherwise admissible cannot be denied just because the certificate has been produced later due to administrative delay. The Supreme Court ruled that the essentiality certificate having been produced even though at a later date, the exemption couldn’t be denied because of administrative delay.

In another similar case of CCE vs. M.P.V. Egg. Industries – 2003 (153) ELT 485 (SC), the exemption for small scale was subject to the condition that the factory was registered with the Directorate of Industries. Due to the delay in granting the registration, Revenue granted the exemption only from the date of granting the registration.

This deprived the small-scale factory of the benefit of the exemption for a substantial period of time. The Supreme Court observed that in a case of this nature it is only reasonable to take the view that the benefit of exemption will accrue to a unit found to be a small-scale industrial unit from the date on which the application was made for the grant of registration certificate.

The conclusion is that an exemption can be rightfully claimed even if it is indicated in the exemption that the exemption has to be claimed at the original stage of importation or clearance.

Here, however, the delay has to be explained. If no time period is mentioned in the exemption notification for claiming the exemption, it can be claimed at a later stage also. A properly worded circular from the Central Board of Excise and Customs would be required to be issued so that litigations at different stages are not generated.

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