Central Excise Rebate Restricted to Quantity in Shipping Bills: Gujarat HC Rules Against Moisture Loss Claim in Metallurgical Coke Export

Background and Overview

The Gujarat High Court recently adjudicated a batch of writ petitions involving a common legal question concerning the entitlement to rebate of central excise duty under Rule 18 of the Central Excise Rules, 2002. The dispute arose between a manufacturer-exporter of metallurgical coke and the Union of India, with the central issue being whether rebate could be claimed on the quantity of goods cleared from the factory or whether it should be restricted to the quantity actually exported as evidenced by the shipping bills.

The lead petition was Special Civil Application No. 15459 of 2016, with three other connected matters raising identical legal questions, differing only in the quantum of goods and the corresponding rebate amounts in dispute.

Facts of the Case

The Petitioner's Business and Export Transaction

Mahashakti Coke, the petitioner, is engaged in the manufacture and export of metallurgical coke — an excisable commodity. Pursuant to an order received from Noble Resources PTE Ltd., Singapore, for approximately 50,000 MT of coke, the petitioner made arrangements to ship the goods from its facility to Mundra Port.

The petitioner cleared approximately 51,294.800 MT of coke from its factory/warehouse for transportation to Mundra Port for onward export. A surveyor was engaged to oversee the transportation process, who monitored the moisture levels in quantities loaded onto each truck and prepared daily truck receiving reports at the port.

Discrepancy Between Factory Clearance and Export Quantity

Upon arrival at Mundra Port, the total weight of goods measured was 51,177.110 MT, reflecting an initial handling loss of approximately 117.690 MT. Thereafter, when the goods were finally loaded onto the vessel MV C Journey, the quantity reflected in the shipping bill dated 10.05.2011 was 49,499.997 MT — significantly lower than the 51,294.800 MT cleared from the factory.

The petitioner had prepared ARE-1 forms for removal of excisable goods and raised a commercial invoice dated 17.05.2011 in favour of the Singapore buyer. The Customs authorities, after processing the shipping bill and reviewing the surveyor's report, determined the duty amount at Rs. 4,79,65,750/-, which the petitioner paid in full along with the applicable educational cess.

Rebate Claim and Departmental Proceedings

After export was completed, the petitioner filed a rebate application dated 20.06.2011 before the Deputy Commissioner, claiming rebate of Rs. 4,94,04,741/- under Rule 18 of the Central Excise Rules, 2002. The claim was made on the entire quantity cleared from the factory — i.e., the full 51,294.800 MT on which duty had been discharged.

The department issued a show cause notice dated 12.09.2011 questioning why the rebate claim on 51,294.800 MT should not be restricted to the quantity of goods actually exported, i.e., 49,499.997 MT, as declared in the shipping bills.

The respondent authorities ultimately sanctioned rebate only on the exported quantity of 49,499.994 MT, declining to extend the benefit to the balance 1,794.806 MT attributed by the petitioner to moisture loss during transit.

Aggrieved, the petitioner filed an appeal under Section 35 of the Central Excise Act, 1944 before the first appellate authority, which dismissed the appeal on 02.03.2012. A subsequent revision application was also rejected on 12.05.2016, prompting the petitioner to approach the Gujarat High Court through the present writ petitions.

Extent of Disputed Weight Differences Across All Petitions

The High Court compiled the factual data across all four writ petitions, revealing the following pattern of weight discrepancies: