Custom, Excise & Service Tax Tribunal
Sunstar Overseas Ltd vs Chennai-Iii on 24 March, 2025
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
COURT HALL - III
Excise Appeal No.41629 of 2016
(Arising out of Order in Appeal No. 149/2014 (M-III) dated 7.7.2014 passed by the
Commissioner of Central Excise (Appeals), Chennai)
Sunstar Overseas Ltd. Appellant
No. 3/11, NH-II, Singaravelar Street
Maraimalai Nagar - 603 209.
Vs.
Commissioner of GST & Central Excise Respondent
Chennai Outer Commissionerate Newry Towers, 12th Main Road Anna Nagar, Chennai - 600 040.
APPEARANCE:
Shri S. Venkatachalam, Advocate for the Appellant Shri Sanjay Kakkar, Authorized Representative for the Respondent CORAM HON'BLE SHRI M. AJIT KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 40382/2025 Date of Hearing : 17.02.2025 Date of Decision: 24.03.2025 This appeal is filed by the appellant against Order in Appeal No. 149/2014 (M-III) dated 7.7.2014 passed by the Commissioner of Central Excise (Appeals), Chennai (impugned order).
2. Brief facts of the case are that the appellant are manufacturers of plastic items falling under Chapter Heading 39 and 63 of the Central Excise Tariff Act, 1985 (CETA) meant for home consumption. They are not an Export Oriented Unit (EOU) and do not have any export clearance. The appellant filed a refund claim on 13.6.2011 claiming refund of Rs.31,63,478/- being the unutilized balance lying in the CENVAT account due to closure of their factory. From the documents 2 enclosed with their claim the credit was accumulated during the period up to March 2011. A Show Cause Notice was issued to the appellant proposing to reject the refund by stating that since there was no export clearance made by the appellant, the refund would not be eligible under Rule 5 of the CENVAT Credit Rules, 2004 (CCR). After due process of law, the Ld. Adjudicating Authority rejected the refund claim. In appeal, the Ld. Commissioner (Appeals) upheld the adjudication order. Hence this appeal.
3. Shri S. Venkatachalam, Ld. Advocate appeared for the appellant and Shri Sanjay Kakkar, Ld. Authorized Representative appeared for the respondent.
3.1 The Ld. Counsel submitted that;
a) Cash refund covers both PLA and CENVAT Credit balance and there is no prohibition for cash refund of CENVAT credit which is also duty as defined in the definition itself.
b) To hold that the benefit of refund of unutilized CENVAT credit is not available for the units engaged in the manufacture and clearance of goods for home consumption is contrary to Rule 5 of CCR and the interpretation given in the show cause notice itself.
c) Section 11B of the Central Excise Act 1944 (CEA), itself covers the refund and hence there is no necessity to invoke Rule 5 of
d) The refund claim is filed in time and the appellants have filed all the documents required and there is no unjust enrichment as the appellants have not collected the duty from any person as the same is available as balance in the books of account.
e) Further there is no one to one correlation in the Cenvat Credit scheme. There is no necessity to maintain input stock corresponding 3 to the credit available as unutilized balance. The appellants rely on the following decisions in this regard.
f) There is no prohibition in Central Excise scheme of things to deny cash refund of CENVAT Credit amount available in balance on closure of the unit.
g) The appellants are entitled for interest also for the refund claim filed by them.
The Ld. Counsel referred to a large number of judgments, LISTED BELOW, in their favour and stated that the findings recorded in the order-in-original/impugned order are not sustainable in law and is liable to be set aside.
i. SLOVAK INDIA TRADING CO. PVT. LTD. v CCE -2006 (205) E.L.T. 956 (Tri. Bang.) ii. UOI V SLOVAK INDIA TRADING CO. PVT. LTD. -2006 (201) E.L.T. 559 (Kar.) iii. The above decision was maintained by Hon'ble Apex Court in [Union of India v. Slovak India Trading Co. Pvt. Ltd. 2008 (223) E.L.T. A170 (S.C.)] iv. Final Order No.765/09 dt. 19.6.2009 in the case of CCE, TRICHY V SOWBAGYALAKSHMI SILICATE v. CCE&C v KORES (INDIA) LTD. -2011 (22) S.T.R. 361 (Tri. -
Bang.) vi. CCE v S.K. SACKS PVT. LTD. -2010 (261) E.L.T. 560 (Tri. - Del.) vii. JAIN VANGUARD POLYBUTYLENE LTD. v CCE 2009 (247) E.LT.
658 (Tri Mumbai) viii. CCE V JAIN VANGUARD POLYBUTLENE LTD. -2010 (200) E.LT.
523 (Bom) ix. The above decision was maintained by Hon'ble Apex Court in Commissioner v. Jain Vanguard Polybullene Ltd. 2015 (326) E.L.T. A86 (8.0)) x. DOABA ALCO CHEMICALS V CCE 2010 (250) E.LT. 81 (Tri. - Del.) xi. CEE V MANISH SPINNING MILLS (P) LTD-2000 (238) E.L.T. 808 (Tri. Del) 4 xii. DCM FABRICS VOCE 2009 (230) E.L.T. 139 (Tri. Del.) xiii. CCE Vs. TALFORGE PVT. LTD. - 2000 (239) E.L.T. 172 (Tri. - Del.) xiv. CCE & ST. v JAI GANPATI METALS 2015 (322) Ε.Ε.Τ. 730 (Tri.
Del.) xv. WELCURE DRUGS & PHARMACEUTICALS LTD. vs CC.EX., 2018 (18) 8.T.L. 257 (Raj.) xvi. J.U. PESTICIDES & CHEMICALS PVT. LTD. vs CC.EX., 2021 (378) E.LT. 444 (Tri-Chennai) xvii. CENTURY RAYON - TWISTING UNIT vs CC.EX., 2015 (325) E.L.T. 205 (Tri, Mumbai) xviii. BANGALORE CABLES P. LTD. vs CC.EX., - 2017 (347) E.L.T. 100 (Tri. -Bang.) xix. USV PVT. LTD. vs CCE & ST-(2023) 5 Centax 7 (Tri.-Ahmd) 3.2 The Ld. AR stated on behalf of revenue took us through the impugned order. He stated that perusal of rule 5 of the CCR read with Notification No 05/2006-CE(N.T.), dated 14/03/2006 which provides the procedure for the claim, indicates that refund of CENVAT credit in terms of the said rule is permissible only when there is a clearance of a final product of a manufacturer or of an intermediate product for export without payment of duty under a bond or letter of undertaking. Rule 5 has been substituted with effect from 1st April 2012. Prior to such substitution there was nothing in Rule 5 permitting refund of un- utilised credit. He referred to the judgment of the Hon'ble Bombay High Court in M/S. GAURI PLASTICULTURE P. LTD. Vs THE COMMISSIONER OF CENTRAL EXCISE, INDORE [2019 (30) G. S. T. L. 224 (Bom.)] and Tecumseh Products India (P. ) Ltd. Vs Commissioner of Central Tax, Hyderabad [2023 (4) TMI 6 - CESTAT HYDERABAD]. He prayed that the appeal may be rejected. 5
4. I have gone through the appeal memorandum and connected papers and have heard the rival parties. The issue involved is whether rule 5 of CCR read with Notification No 05/2006-CE(N.T.), as it then stood, i.e. prior to 01.04.2011, permits the refund of credit on account of the export of goods only. If not, whether Section 11B of CEA, itself covers the refund claimed and hence there is no necessity to invoke Rule 5 of CCR.
5. I find that it is not disputed that the appellant is not an Export Oriented Unit (EOU) and does not have any export clearance. Notification No. 05/2006-Central Excise (N.T.) states that the Central Government directs that refund of CENVAT credit shall be allowed in respect of :
(a) input or input service used in the manufacture of final product which is cleared for export under bond or letter of undertaking;
(b) input or input service used in providing output service which has been exported without payment of service tax, subject to safeguards, conditions and limitations, set out in the Appendix to this notification.
It further goes on to state that;
4. The refund is allowed only in those circumstances where a manufacturer or provider of output service is not in a position to utilize the input credit or input service credit allowed under rule 3 of the said rules against goods exported during the quarter or month to which the claim relates (hereinafter referred to as 'the given period').
5. The refund of unutilised input service credit will be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates.
(emphasis added) It is seen that since the appellant does not export the goods refund of CENVAT credit shall be allowed as he does not fullfill the conditions above. Further due to the absence of exports 'the ratio of export turnover to the total turnover' cannot be determined. 5.1 The Honorable Supreme Court UNION OF INDIA & ORS. 6 VERSUS VKC FOOTSTEPS INDIA PVT LTD. [2021 (9) TMI 626 - SUPREME COURT]. held that, refund is not a constitutional right but a statutory right and therefore, the legislature, in its wisdom, and through statute, can decide how the refund is to be granted. In its judgment M/S. Mall Of Joy Pvt Limited & Ors Vs Union Of India [WP(C) NO. 37039 OF 2023, Dated: 04/06/2024], the Hon'ble Kerala High Court held as under;
71. The Input Tax Credit is in the nature of a benefit or concession extended to the dealer under the statutory scheme. Even if it is held to be an entitlement, this entitlement is subject to the restrictions as provided under the Scheme or the Statute. The claim to Input Tax Credit is not an absolute right, but it can be said that it is an entitlement subject to the conditions and restrictions as envisaged in Sections 16(2) to 16(4), Section 43, and Rules made thereunder.
72. In the case of Godrej & Boyce Manufacturing Company Pvt. Ltd & others v. Commissioner of Sales Tax & others [(1992) 3 SCC 624], the Supreme Court, while dealing with Rules 41 and 41A of the Bombay Sales Tax Rules 1959, held that the rule-making authority would be empowered to provide for abridgement or curtailment while extending a concession.
(emphasis added) I hence find that an eligibility criterion to get refund calls for a strict construction.
6. I find that the issue raised in this appeal and those cited in the judgments relied upon by the appellant, was examined by a 3 Judge Bench of the Hon'ble Bombay High Court in M/S. GAURI PLASTICULTURE P. LTD. Vs THE COMMISSIONER OF CENTRAL EXCISE, INDORE [2019 (30) G. S. T. L. 224 (Bom.)], had examined the following questions:-
"(a) Whether cash refund is permissible in terms of clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 where an assessee is unable to utilize credit on inputs?
(b) Whether by exercising power under Section 11B of the said Act of 1944, a refund of un-utilised amount of Cenvat Credit on account of the closure of manufacturing activities can be granted?7
(c) Whether what is observed in the order dated 25th January 2007 passed by the Apex Court in Petition for Special Leave to Appeal (Civil) No. CC 467 of 2007 (Union of India vs Slovak India Trading Company Pvt Ltd.) can be read as a declaration of law under Article 141 of the Constitution of India?"
The relevant portion of the judgment ius reproduced below;
"10. Our attention is invited to the judgment of the CESTAT, Bengaluru in the case of Slovak India Trading Private Limited vs. Commissioner of Central Excise (Bengaluru) 2006 (205) ELT 956 to urge that the appellant in that case claimed refund on un-utilised Cenvat Credit in their account as on the date of the closure of their factory. The Commissioner (Appeals) took a view that there is no provision under Rule 5 of the Cenvat Credit Rules to grant cash refund. The argument was that this order was not legal and proper for the reasons set out by the tribunal. The South Zonal Bench of the CESTAT referred to the view taken by the CESTAT, Delhi and Mumbai to hold that refund claimed is eligible to the assessee and refund has to be made in cash when the assessee goes out of the erstwhile Modvat Scheme or their unit is closed. The view is taken because of the consistent approach of the tribunal. The consistent approach was that such refund claims are logical and a refund has to be made in cash when the assessee goes out of the Modvat Scheme or the company is closed. Thus, appeal of Slovak was allowed.
***** ***** *****
28. It is evident from a reading of the transitional provision that any amount of credit earned by a manufacturer under the Cenvat Credit Rules, 2002, as they existed prior to the 10th September, 2004 or by a provider of output service under the Service Tax Credit Rules, 2002 as they existed prior to 10th September, 2004 and remaining un- utilised on that day shall be allowed as Cenvat Credit to such manufacturer or provider of output service under these rules, and be allowed to be utilised in accordance with these rules. This is how the transitional provision enables carrying forward of the un-utilised Cenvat Credit. That is a distinct contingency altogether. That transitional provision does not enable us to hold that the amount of un-utilised Cenvat Credit can be refunded in cash.
29. We do not think that by taking assistance of this provision, we will be able to hold as contended by Mr.Patil that the Cenvat Credit can be refunded even in relation to those inputs which have not been used in the manufacture of the final product or the exported goods. We are called upon to read something in the substantive rule and which is totally absent therein. When Rule 5 follows Rule 4, which is titled as "Conditions for Allowing Cenvat Credit", then, we must understand the scheme in such manner as would make the law workable and consistent. Refund of Cenvat Credit in terms of Rule 5 8 is permissible only when there is a clearance of a final product of a manufacturer or of an intermediate product for export without payment of duty under a bond or letter of undertaking of a service provider, who provides an output service which is exported without payment of tax and by applying the format which is carved out with effect from 1st April, 2012 by the substituted Rule 5.
30. Prior to such substitution, we have not seen anything in Rule 5 permitting refund of un-utilised credit. We are not dealing with a situation or case of a manufacturer or producer of final products seeks to claim Cenvat Credit of the duty paid on inputs lying in stock or in process when the manufactured or produced goods cease to be exempted goods or any goods become excisable (see Rule 3(2) of the Cenvat Credit Rules, 2004). Thus, refund of Cenvat Credit is permissible where any input is used for the final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export. In the scheme of the rules, therefore, what is sought by the assessee is not permissible. Thus, the attempt by the assessee to claim refund of un-utilised Cenvat Credit cannot be upheld. Merely because the inputs were lying un-utilised or were capable of being utilised, but the manufacturing activities came to a stand still on account of closure of the factory would not enable the assessee to claim refund of Cenvat Credit. That such credit can be availed of provided the inputs are used and not otherwise is clear from the scheme of the rules to which we have made a detailed reference in the foregoing paragraphs.
31. The sheet anchor of Mr.Patil's arguments is the judgment of the earlier Division Bench of this court and that is based on the view taken by the High Court of Karnataka. The High Court of Karnataka has not discussed the scheme of Cenvat Credit in details. The South Zonal Bench of the CESTAT in Slovak India (supra) considered the case of refund of un-utilised Cenvat Credit on account of closure of the factory of the said Slovak India. The Commissioner (Appeals) took the view that there is no provision in Rule 5 of the Cenvat Credit Rules to grant cash refund. After being approached, what the CESTAT observed is that there is a consistent view taken by the tribunal that such claim is eligible and the assessee can seek refund when it goes out of the Modvat scheme (predecessor of Cenvat) or the unit is closed. This is the reasoning in the tribunal's order and though the appeal of the Revenue before the High Court of Karnataka at Bengaluru raised several grounds and pleas, the High Court referred to the arguments and in para 4 of its order, reproduced Rule 5 of the Cenvat Credit Rules, 2002. In para 5, the reasoning of the High Court of Karnataka reads thus:-
"5. There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the Company.9
Therefore, Rule 5 is not available for the purpose of rejection as rightly rules by the Tribunal. The Tribunal has noticed that various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. In these circumstances, we answer all the three questions as framed in para 17 against the Revenue and in favour of the assessee."
32. Thus, the High Court of Karnataka took the view that there is no express prohibition in terms of Rule 5 and that rule refers to a manufacturer. Thus, even if there is no manufacture in the light of the closure of the factory, the assessee being a manufacturer is construed as one coming out of the Modvat scheme but still eligible for cash refund. The factory is closed and the inputs were not used in the manufacture of a final product is, thus, overlooked. So long as the assessee is a manufacturer even if his factory is closed, the input credit was available, is thus the view.. Hence, the refund was held to be permissible.
33. When the matter was carried to the Hon'ble Supreme Court by the Revenue, the Hon'ble Supreme Court noted the concession of the learned Additional Solicitor General. That concession is that the views of the tribunals to the aforesaid effect have not been appealed against by the Revenue/Union of India. Pertinently, there is no concession by the Additional Solicitor General of India on the point of law. Hence, going by this concession on fact, the Special Leave Petition of the Revenue was dismissed. This, by no stretch of imagination, is a confirmation or approval of the view taken by the South Zonal Bench of the Tribunal at Bengaluru or the High Court of Karnataka.
34. Pertinently, when the matter was brought before this court in the case of Jain Venguard (supra), this court, relying upon the judgment in the case of Slovak India (supra) and the order in the Special Leave Petition, dismissed the Revenue's appeal. The aggrieved Revenue, carried the matter to the Hon'ble Supreme Court and the order passed on that Special Leave Petition reads as under:-
"Delay condoned.
We find no reason to interfere with the impugned order in exercise of our discretion under Article 136 of the Constitution. The Special Leave Petition is, accordingly, dismissed leaving the question of law open."
35. The Special Leave Petition was dismissed, but the question of law was expressly kept open. It is in these circumstances that we are not in agreement with Mr.Patil that the issue or the controversy 10 before us stands concluded against the Revenue. The question of law was still open to be raised and equally examined by us. There is no question of judicial discipline in such matters. The counsel relied upon this principle of judicial discipline by inviting our attention to the judgment of the Hon'ble Rajasthan High Court in the case of Welcure Drugs and Pharmaceuticals Ltd. vs. Commissioner of Central Excise, Jaipur reported in 2018 (15) GST Law Times Page 257. There, the Hon'ble Rajasthan High Court concluded that the Revenue cannot seek to urge before that High Court that the view taken by four different High Courts approving the order of CESTAT has lost its persuasive value, particularly when the Special Leave Petitions against the view taken by four different High Courts were either not filed or filed but not entertained. Thus, the tribunals have taken a consistent view and the Revenue could not succeed in having that set aside. It is in these circumstances, the Rajasthan High Court negatived the contention of the Revenue that the tribunal under the jurisdiction of that High Court could have distinguished the orders and judgments of its Benches. That was found to be contrary to the judicial discipline. It is in these circumstances so also when there was a larger Bench view of the tribunal having a binding effect, that the principle of judicial discipline was pressed into service.
36. After the view taken in Steel Strips Ltd. (supra) and which was also fairly brought to our notice, it is evident that this principle has no application to the facts and circumstances before us.
37. Finally, we do not find any merit in the arguments of Mr.Patil to the effect that if the earlier judgment is not appealed against, an appeal against the subsequent order or judgment passed relying upon the earlier judgment cannot be sustained. He pressed into service the judgment of the Hon'ble Supreme Court in the case of Birla Corporation Ltd. vs. Commissioner of Central Excise 2005 (186) ELT 266 (SC). There, the issue was entirely different. The issue was whether the duty paid on spares of rope way used for the purpose of transporting the crushed limestone from the mines located 4.2 kilometer away to the factory is entitled to Modvat Credit. That was disallowed on the ground that rope way transports raw material from the mines to the factory premises and is not a material handling equipment within the factory premises. It was not disputed that the crushed limestone is brought from the mines to the factory premises where it is deposited utilising the rope way as a means of transportation.
38. An identical issue came up for consideration in the case of J.K.Udaipur Udyog Limited vs. Commissioner of Central Excise 2001 (130) ELT 996. In that case, the tribunal followed the principles laid down in its prior decision and held that the Modvat Credit was admissible. A civil appeal was preferred to the Hon'ble Supreme Court, but that was dismissed as not pressed. That is because the judgment relied upon by the tribunal in the case of J.K.Udaipur Udyog 11 Limited (supra) and the Commissioner of Central Excise, Chennai vs. Pepsico India Holdings Limited 2001(130) ELT 193 (Tri.) was accepted by the Chief Commissioner of Central Excise, Chennai. In these circumstances, the Special Leave Petition by Birla Corporation Limited came to be allowed. The Hon'ble Supreme Court held that when same question arises for consideration, the facts are almost identical, then, the Revenue cannot be permitted to take a different stand. More so, when the earlier appeal involving identical issue was not pressed and therefore, dismissed. Hence, a contrary stand cannot be taken and that will confuse everybody. This judgment, therefore, has no application to the issue before us.
39. The referring order has already discussed in detail as to how the principle of merger cannot be invoked in this case. In the order passed in the case of Jain Venguard (supra), the question of law was expressly kept open. Hence, the earlier view of the tribunal does not merge with dismissal of the Special Leave Petition in the case of Slovak India (supra). Hence, this principle has also no application.
40. As a result of the above discussion, we answer the questions of law framed above as (a) and (b) in the negative. They have to be answered against the assessee and in favour of the Revenue. Questions (a) and (b) having been answered accordingly, needless to state that the order of the Hon'ble Supreme Court in the case of Slovak India (supra) cannot be read as a declaration of law under Article 141 of the Constitution of India.
(emphasis added)
7. The judgment of the Hon'ble Bombay High court in GAURI PLASTICULTURE (supra), discusses the legal issues and the judgments cited by the appellant, comprehensively. It thus merits to be followed. Thus, it is concluded that rule 5 of CCR read with Notification No 05/2006-CE(N.T.), as it then stood, i.e. prior to 01.04.2011, does not permit the refund of credit which is not on account of the export of goods. Section 11B(2)(c) of CEA is to be read with the rules or notification issued under the Act, and would hence necessarily involve Rule 5 of CCR and Notification No 05/2006- CE(N.T.). The refund claim of the appellant has thus been correctly rejected in the impugned order.
12
8. It must be stated that the appellant has cited a large number of judgments. Citing multiple decisions on a particular legal point may not be effective, as courts can reach different conclusions based on the facts of each case. It is more useful to reference leading decisions from the highest of courts, with the most judges on the Bench, addressing the relevant legal issue at hand. The matter has been examined by the Hon'ble Supreme Court in Rashmi Metaliks Ltd. Vs Kolkata Metropolitan Development Authority, [(2013) 10 SCC 95], wherein it was held that;
"6. . . The sheer plethora of precedents makes it essential that this Court should abjure from discussing each and every decision which has dealt with a similar question of law. Failure to follow this discipline and regimen inexorably leads to prolixity in judgments which invariably is a consequence of lengthy arguments.
7. It is a capital exhaustion of Court time, lack of which has become critical. . ."
9. For the reasons discussed, I do not find any merits in the averments of the appellant and the appeal merits to be dismissed and is so ordered. The appeal is disposed of accordingly.
(Order pronounced in open court on 24.03.2025) Sd/-
(M. AJIT KUMAR) Member (Technical) Rex