Custom, Excise & Service Tax Tribunal
M/S Garuda Cotex Shades Limited vs C.C.E. & S.T. Surat-Ii on 28 November, 2017
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.E/627/2010-SM [Arising out of OIA No. KS/324/SRT-II/2009 dated 11.01.2009 passed by the Commissioner (Appeals) Central Excise and Customs (Surat-II)] M/s Garuda Cotex Shades Limited Appellant Vs C.C.E. & S.T. Surat-II Respondent
Represented by:
For Appellant: Mr. V. Kansara (Advocate) For Respondent: Mrs. Nitina Nagori (A.R.) CORAM:
HONBLE DR. D.M. MISRA, MEMBER (JUDICIAL) Date of Hearing:07.11.2017 Date of decision: 28.11.2017 Final Order No.A/ 13705 /2017 Per: Dr. D.M. Misra Heard both the sides.
2. This is an appeal filed against order in appeal No. KS/324/SRT-II/2009passed by the Commissioner of Central Excise (Appeals) Surat-II.
3. Briefly stated facts of the case are that the appellant had filed two refund claims amounting to Rs. 28,33,555/- and Rs. 8,06,732/- of cenvat credit reversed earlier on the insistence of the Department, later as the issue was decided in their favour, accordingly, they filed the refund claims. The refund claimswere rejected by the adjudicating authority and aggrieved by the said order they filed appeal before the Ld. Commissioner (Appeals), who in turn, rejected their Appeal. Hence the present appeal.
4. Ld. Advocate Sh. Kansara for the appellant submits that the entire amount should have been directed to be paid in cash by the Ld. Commissioner (Appeals) since the credit now allowed as refund, cannot be utilized as their factory had been closed. It is his contention that in the event the cenvat credit cannot be utilized, there is no point in allowing the refund of cenvat credit through crediting their CENVAT account. In support he has referred to the judgment of this Tribunal in the case of CCE vs Birla Textiles Ltd. 2010 (257) ELT 146 (Tri. Del.) and CCE vs Ashok Arc 2006 (193) ELT 399 (Jhar). Further he has submitted that this Tribunal in Shalu Synthetics Pvt. Ltd. vs CCE Vapi 2017 (346) ELT 413 (Tri. Amd.) following the judgment of Honble Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. 2006 (201) ELT 559 (Kar.) held that cash refund would be admissible, on account of closure of unit.
5. Per contra, Ld. AR for the Revenue, on the other hand, submitted that it has been held in similar circumstances by the Larger Bench of this Tribunal in the case of Steep Strips vs CCE Ludhiana 2011 (269) ELT 257 (Tri. L. B.) that cash refund cannot be allowed in absence of express provision in the statute for allowing such refund. Further, he has submitted that the Division of this Tribunal in the case of Scan Synthetics Ltd. vs CCE, Jaipur-I 2016-TIOL-1915-CESTAT-DEL, similar circumstances, relating to eligibility of refund of credit availedunder Notification No. 29/2004-CE and later switching over to exemption Notification No.30/2004-CE, following the principle laid down in Steel Strips case held that refund in cash cannot be admissible.
6. The short question involved in the present case for determination is: whether the appellant are entitled to refund of Cenvat Credit amount in cash when the credit was reversed on the insistence of the DGCI Officers as their factory has now been closed. I find that to resolve the conflicting opinions on the subject a reference was made to the Larger Bench in Steel Strips Case (supra). The Larger Bench formulated the reference/question as follows:
whether in cases where either on account of coercion by the Department or otherwise, the assessee pays the duty through PLA account, in spite of having sufficient balance in the modvat/cenvat credit, on the factory or unit becoming inoperative and there being no likelihood of restarting the production, can such assessee be entitled for refund of the credit amount under the provisions of law in force. [Ref : Para 30 of the referral order].
1.1?The referring bench was of the opinion that law does not permit cash refund of unutilized Modvat Credit during the material period for which they were unable to subscribe to the view expressed by the earlier Larger Bench in Gauri Plasticulture (P) Ltd. v. CCE, Indore - 2006 (202) E.L.T. 199 (T.-LB.). Judicial discipline therefore required, to refer the matter in that regard to the Larger Bench to decide the issue on the touch stone of law. The referring Bench while hearing the matter also noticed that the assessee had made allegation that it was required to make huge deposit in its PLA under coercion and required to pay duty out of such account being allowed to utilize its credit remaining in the Modvat Account. But such allegation did not get appreciation for lack of evidence. For the same reasons, there was also a similar denial by the learned first Appellate Authority.
1.2?Without citing the statutory provisions in the Act permitting re-fund of unutilized Modvat credit in cash, mere plea was raised by the assessee that Modvat credit having been remained unutilized at the time when the unit became inoperative and there was no possibility of restarting process in the factory, refund thereof was permissible relying on the decision of Honble High Court of Karnataka in the case of UOI v. Slovak India Trading Co. (P) Ltd. - 2006 (201) E.L.T. 559 (Kar.) = 2008 (10) S.T.R. 101 (Kar.). According to the Assessee, Rule 5 of the Central Excise Rules, 2002 was invokable on the ground that the decision of Honble High Court of Karnataka was confirmed by the Apex Court. But the Referring Bench observed that substantive provision of the statute in respect of refund was not subject matter of scrutiny in the said judgment and appeal preferred by Revenue was dismissed on the concession of learned Additional Solicitor General on the ground that the decisions in Eicher Tractors v. CCE, Allahabad, reported in 2002 (147) E.L.T. 457, Shree Prakash Textiles (Guj.) Ltd. v. CCE, Ahmedabad, reported in 2004 (169) E.L.T. 162; CCE, Ahmedabad v. Babu Textile Industries, reported in 2003 (158) E.L.T. 215; and CCE, Ahmedabad v. Arcoy Industries, reported in 2004 (170) E.L.T. 507, which were relied upon by the Tribunal while deciding the matter, were not appealed against by Revenue.
1.3?The Referring Bench noticed that the decision of the Larger Bench in Gauri Plasticulture (P) Ltd. v. CCE, Indore - 2006 (202) E.L.T. 199 (T.-LB.) permitting refund of unutilized credit, in cash was without examination of the law relating to Modvat and object of Modvat credit procedure. Therefore, according to referring Bench, in absence of provision under the Act for cash refund of the unutilized amount in Modvat credit, that is not permissible (Para 28 of Referral order).
1.4?The Referring Bench also, noted in para 32 of the order that the Honble High Court of Calcutta in the case of Rasoi Ltd. v. Union of India - 2004 (176) E.L.T. 101 (Cal.) has held that in the claim of scheme of provision of law there is no provision for refund by cash in relation to money credit scheme. The Bench was, therefore, of the view that the principle of law laid down by the Honble Calcutta High Court denies refund.
2.?On the aforesaid background, the Referring Bench was of the honest belief that the decision of the Larger Bench in Gauri Plasticulture (P) Ltd. (supra) was an impediment to arrive at a conclusion contrary to the decision made in that case. Thus, this reference arose for answer by the Larger Bench on the question depicted at the outset.
7. Thereafter analyzing the issue and the principle of law laid down in this regard including the judgment of the Honble Karnataka High Court in Slovak India, it has been observed as follows:
5.16?Modvat law has codified procedure for adjustment of duty liability against Modvat Account. That is required to be carried out In accordance with law and unadjusted amount is not expressly permitted to be refunded. In absence of express provision to grant refund, that is difficult to entertain except in the case of export. There cannot be presumption that in the absence of debarment to make refund in other cases that is permissible. Refund results in outflow from treasury, which needs sanction of law and an order of refund for such purpose is sine qua non. Law has only recognized the event of export of goods for refund of Modvat credit as has been rightly pleaded by Revenue and present reference is neither the case of otherwise due of the refund nor the case of exported goods. Similarly absence of express grant in statute does not imply ipso facto entitlement to refund. So also absence of express grant is an implied bar for refund. When right to refund does not accrue under law, claim thereof is inconceivable. Therefore, present reference is to be answered negatively and in favour of Revenue since refund of unutilized credit is only permissible in case of export of goods and for no other reason whatsoever that may be. As has been stated earlier that equity, justice and good conscience are the guiding factors for Civil Courts, no fiscal Courts are governed by these concepts, the present reference is bound to be answered in favour of Revenue and it is answered accordingly.
8. The aforesaid judgment in a recent casehas been followed by the Division Bench of this Tribunal observing as follows:
7. While there can be no dispute that the decision of the Hon'ble High Court would prevail, in case of dispute with the Tribunal's decision but we find that Larger Bench decision of the Tribunal, which has resolved the disputed issue in favour of the Revenue, was duly aware of the Hon'ble Karnataka High Court decision, as confirmed by the Hon'ble Supreme Court. As such, the Larger Bench decision stands given by considering the Hon'ble Karnataka High Court, and subsequent confirmation of the same by the Hon'ble Supreme Court. Further, Tribunal being a creature of the Statute cannot go beyond the provisions of the Act and can't exercise power which are not available to it like writ jurisdiction powers. Judicial discipline requires us to follow the law declared by the Larger Bench's of the Tribunal. We also note that the insistence of the learned Advocate on the fact that appeal filed by the Revenue before Hon'ble Supreme Court in the case of Union of India vs. Slovak India Trading Co. Pvt. Ltd. (supra) stands dismissed by the Hon'ble Supreme Court and as such it is the declaration of law by the Hon'ble Supreme Court which should be followed, is not appropriate. Apart from the fact that the dismissal of the appeal by the Hon'ble Supreme Court already stands taken note of by the Larger Bench, we also note that dismissal of appeal by the Hon'ble Supreme Court was in view of the concession made by the learned ASG appearing for the Union of India. As such, it cannot be said that the Hon'ble Supreme Court interpreted and declared the law in favour of the assessee.
9. In view of the above settled principle of law, I do not find any reason to interfere with the order passed by the Ld. Commissioner (Appeals). In the result, the impugned order is upheld and the appeal is dismissed.
(Pronounced in the open court on _28.11.2017_) (Dr. D.M. Misra) Member (Judicial) Neha 5 | Page E/627/2010-SM