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2026 Supreme(Mad) 1852
IN THE HIGH COURT OF JUDICATURE AT MADRAS
MOHAMMED SHAFFIQ, J.
M/s. L.G.Balakrishnan & Bros. Limited, Represented by its Chief Financial Officer - Petitioner
Versus
Commisioner of GST & Central Excise, Coimbatore Division – Respondent
W.P.No.33773 of 2018
Decided On : 23-03-2026
For the Petitioner: Mr.R.Parthasarathy
For the Respondents: Mr.K.S.Ramasamy Central Government Standing Counsel
Important Points
Subject
Taxation Law - Central Excise
Act Referred
Headnote
Facts of the case:
The petitioner, an entity operating as an export-oriented unit, sought to withdraw from the official scheme. Following an in-principle approval for exit, the petitioner cleared goods for export under a claim for rebate. The revenue authorities denied the rebate, contending that the notification providing duty exemption to such units was absolute, thereby mandating that no duty be paid, which precluded the petitioner from paying duty to claim a rebate. The appellate authorities upheld the denial of the rebate on the grounds that the unit remained under the export scheme until a final exit order was issued.
Findings of Court:
The exemption notification in question is not absolute but conditional, as it relies on the specific status of the manufacturer as an export-oriented entity. Because the exemption is conditional, the statutory provision preventing the payment of duty does not apply. Consequently, the manufacturer is eligible to opt-out of the exemption, pay the requisite duty, and claim the benefit of a rebate.
Issues: Whether the tax exemption granted under the notification for goods manufactured in an export-oriented unit is absolute or conditional, and whether this determination attracts the statutory restriction against paying duty.
Ratio Decidendi: An exemption is considered absolute only if it is provided without conditions, restrictions, or qualifications, and relates to the nature of the goods rather than the status of the manufacturer. Since the subject notification ties the exemption to the status of being an export-oriented unit, it is inherently conditional. Therefore, the restrictive provision under the statute does not preclude the manufacturer from choosing to pay duty and claiming a subsequent rebate.
Result: Writ petition allowed; orders concerning the denial of rebate set aside.
| Table of Content |
|---|
| 1. procedural timeline of eou de-bonding and the disputed excise duty rebate claim. (Para 1 , 2 , 3) |
| 2. legal interpretation of section 5a(1a) regarding absolute vs. conditional duty exemptions. (Para 4 , 5 , 6 , 7 , 8) |
| 3. analysis of notification no.24/2003 categorizing eou-based exemption as conditional. (Para 9 , 10 , 11) |
| 4. conditional exemptions allow manufacturers to opt out of the benefit to claim rebate. (Para 12 , 13) |
ORDER :
MOHAMMED SHAFFIQ, J.
The present writ petition has been filed challenging impugned Revision Order No.202/2018-CX(SZ)/ASRA/MUMBAI dated 24.07.2018 passed by second respondent.
2. The question that arises for consideration in this writ petition is as to whether exemption granted vide Notification No.24 of 2003-CE dated 31.03.2003 is conditional or absolute for the purposes of Section 5A(1A) of the Central Excise Act.
3. Brief facts:
3.1. Petitioner was 100% Export Oriented Unit, (hereinafter referred to as EOU), manufacturing parts of motor vehicles classified under Tariff sub-heading number 8708. Petitioner was granted Letter of Permission (LoP) to operate as an EOU vide Development Commissioner’s letter dated 12.04.2006 subject to terms and conditions, which inter alia includes:
a) The unit shall export its entire production for a period of 5 years from the date of commencement of production. The unit would have the option to renew its EOU status or opt out of the scheme as per the Industrial Policy in force (Clause i);
b) The unit shall achieve positive Net Foreign Exchange Earning as prescribed in the EOU scheme for a period of 5 years (Clause ii);
c) The LoP shall be valid for 3 years from its date of issue within which the petitioner shall implement the project. The LoP shall automatically lapse if application for extension of validity is not made before the end of the said period (Clause vi).
3.2. At the end of 5 year period i.e. 11.04.2011, petitioner opted to withdraw from EOU Scheme and submitted a letter dated 12.04.2011 to Development Commissioner requesting de-bonding of EOU. An “in-principle” approval for de- bonding was granted by Development Commissioner vide letter dated 21.07.2011. Petitioner paid an amount of Rs.33,27,725/- on 31.05.2011 towards excise duty pertaining to goods lying in stock as on 31.05.2011 and received no due certificate from Excise Department on 23.11.2011. A Final Exit Order dated 16.12.2011 came to be issued by Assistant Development Commissioner of MEPZ.
3.3. It is submitted by petitioner that in the meanwhile on 03.06.2011, petitioner intimated Assistant Commissioner of Central Excise, Coimbatore that excise duty on goods manufactured for export will henceforth be cleared on payment of excise duty under claim for rebate. Exports were then made on payment of duty under claim of rebate by utilizing Cenvat credit. After final exit order, petitioner filed their claim for rebate sometime in April 2012. Show cause notice came to be issued proposing to deny rebate claim filed by petitioner inter alia on the following grounds.
a) Final exit order, effecting de-bonding was only issued on 16.12.2011, till which date petitioner would continue to be 100% EOU, despite the fact that an in-principle approval was granted sometime in July 2011.
b) Importantly, in terms of Notification No.24/2003-CE dated 31.03.2003, all excisable goods manufactured in a 100% EOU are exempt from the whole of excise duty. The exemption in terms of the above notification is absolute thus in terms of Section 5A(1A) of the Central Excise Act, 1944, manufacturer of such excisable goods shall not pay duty on such goods and option is not available to such manufacturers to remit the duty and claim the benefit of rebate/refund.
3.4. Petitioner submitted its reply on various dates including 31.08.2012, 18.01.2013 and 08.03.2013 inter alia submitting that 100% EOU license expired on 11.04.2011 and petitioner ceased to be a 100% EOU since 11.04.2011, thus exemption vide Notification No.24/2003-CE dated
