Custom, Excise & Service Tax Tribunal
Cce & St, Panchkula vs Sainsons Paper Industries Ltd on 12 November, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
SINGLE MEMBER BENCH
Court No.III
Appeal No. E/52862/2014-Ex-SM
with E/CO/54535/2014
(Arising out of OIA No.14/SVS/PKL/2014 dt.23.1.2014 passed by CCE(A), Delhi-III, Gurgoan)
Date of Hearing: 13.10.2015
Date of Order:12.11.2015
For approval & Signature:
Honble Smt.Sulekha Beevi C.S., Member (Judicial)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordships wish to see the fair copy of the order?
seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
CCE & ST, Panchkula Appellant
Vs.
Sainsons Paper Industries Ltd. Respondent
Appearance:
Present for the Appellant: Shri R.K.Mishra, AR Present for the Respondent: Shri Abhishek Jaju, Advocate Coram: Honble Smt.Sulekha Beevi C.S., Member (Judicial) Final Order No.53429/2015 Per: Sulekha Beevi C.S. Revenue has filed the above appeal challenging the order passed by the Commissioner (Appeals) which held that the respondents are not liable to pay interest alleged to have incurred on account of demand raised on having taken suo moto credit of Rs.10,91,728/- which was due to them by way of refund of pre-deposit. This case unravels the litigatory travel of an assessee to get refund of pre-deposit. For better understanding of the issue under consideration, it is necessary to narrate the events chronologically which is as under:
1.1 M/s.Sainsons Paper Industries Ltd., the respondents herein, are engaged in the manufacture of paper and paper board. On scrutiny of the records, it was observed by the department, that during the period March, 2000 to May, 2000, the respondents herein availed modvat/cenvat credit on the inputs which were also used in the manufacture/ clearance of fully exempted product without reversing an amount equivalent to 8% of the price charged by them for such exempted final products and short paid an amount of Rs.10,91,728/- and thus contravened the provisions of erstwhile Central Excise Rules 57CC and 57AD. Accordingly a show cause notice was issued to them. Ultimately the matter was challenged by the respondents herein before the Commissioner (Appeals) who vide order dated 22.6.2007 held the demand as unsustainable and allowed the appeal in favour of the respondents herein with consequential relief, if any. During the pendency of this appeal, the respondents herein had made pre-deposit of Rs.10,91,728/- under section 35F of Central Excise Act, 1944.
2. The appeal having been allowed in their favour with consequential relief, the respondents herein under the belief that they could take refund of pre-deposit by suo moto credit in their cenvat credit account took credit of Rs.10,91,728/- in June, 2007 and declared the same in their ER-1 returns of July, 2007. They also informed the department about the same, vide their letter dated 22.2.2008 to the Assistant Commissioner, Ambala. In this letter, they referred to the Boards Circular No.275/37/2000-Cx.8A dated 2.1.2002 regarding refund of pre-deposit and also requested the officer to pass a formal order of refund at the earliest. Thereupon a show cause notice dated 28.5.2008 was issued to the respondents herein alleging that they had wrongly taken credit of Rs.10,91,728/- being the amount of pre-deposit on the basis of the Order-in-Appeal dated 22.06.2007. That respondents could not take credit of the amount of pre-deposit of Rs.10,91,728/- without filing an application for refund. After adjudication of this show cause notice, Order-in-Original dated 2.4.2009 was passed confirming the disallowance of credit and ordered recovery of the same along with interest, besides imposing penalty.
3. Being aggrieved by the above order, the respondents herein filed appeal before the Commissioner (Appeals), who observed that though the Boards circular NO.275/37/2000-Cx-8A dated 2,1,2002 lays down that pre-deposit has to be refunded without an application, it does not give away the requirement of an order sanctioning refund passed by competent authority. The Commissioner (Appeals) vide Order-in-Appeal dated 3.11.2010 confirmed the demand but reduced the penalty to Rs.50,000/-.
4. The respondents herein, then submitted an application for refund of Rs.10,91,728/- dated 31.12.2010 which is said to be received by department on 11.1.2011. Thereupon a show cause notice dated 4.4.2011 was issued proposing to reject the refund claim on the ground that the application is time barred. After adjudication, the order-in-original dated 26.4.2011 was passed rejecting the refund claim for the reason that the application is time barred as per section 11B of the Central Excise Act, 1944. The said order was challenged by respondents herein by filing an appeal. In such appeal, besides raising their contentions on merits, the respondents had also contended that the order was passed without giving sufficient opportunity of personal hearing. Vide Order-in-Appeal dated 16.2.2012, the Commissioner (Appeals) without going into the merits of the refund claim, set aside the order rejecting the refund and allowed the appeal on the ground of non-observance of principles of natural justice.
5. Thereupon it is seen that a show cause notice dated 9.4.2012 was issued to the respondents proposing to consider afresh the very same refund application dated 11.01.2011. The grounds alleged in this show cause notice are twofold (i) That the application for refund is time barred as per section 11B of Central Excise Act, 1944 (ii) That the said amount of Rs.10,91,728/- was under demand vide order dated 2.4.2009 and as upheld by Order-in-Appeal dated 3.11.2010 which disallowed taking suo motto credit. After adjudication of the said notice, an order dated 29.6.2012 was passed sanctioning the refund of Rs.10,91,728/-. But the amount sanctioned was ordered to be adjusted to the demand of Rs.10,91,728/- which was ordered to be recovered as per order dated 2.4.2009 for wrongly availing credit. It was also ordered that the respondents herein are liable to pay interest on this amount of Rs.10,91,728/- from the date on which credit was wrongly availed till the date the same was regularized.
6. This order dated 29.6.2012 was challenged by the respondents herein by filing an appeal. The Commissioner (Appeals) vide order-in-appeal dated 23.1.2014 which is the order impugned in the present appeal before me, set aside the demand of interest and allowed the appeal filed by the respondents herein, on the ground that no demand for interest was raised in the show cause notice. The Revenue is in appeal now challenging the said order, which set aside the demand for interst.
7. The contention of the Revenue is that the respondents herein are liable to pay interest from the date of taking suo motto credit of Rs.10,91,728/- (i.e. June, 2007) till the order of sanctioning refund (i.e.29.6.2012). It is their contention that the Commissioner (Appeals) has erred in holding that there is no liability to pay interest as there is no such demand raised in the show cause notice. According to the learned DR, the interest liability accrues automatically and no separate notice is required to demand interest.
8. The respondents have filed cross objections and denied their liability to pay interest. The main argument raised by the counsel for the respondents is that the respondents had submitted a letter dated 22.2.2008 requesting to order sanction of refund. That as per Boards circular, no application is required to be submitted for refund of pre-deposit. That from the date of Order-in-Appeal dated 22.6.2007, when the appeal was allowed in their favour with consequential relief, they were entitled to the amount. That in any case, there was no recovery due and there is no liability to pay interest.
9. I have heard the rival submissions and perused the records. The issue before me is whether the respondents herein are liable to pay interest on account of taking credit in their cenvat account without an order sanctioning refund of the pre-deposit amount which was to be refunded to them.
10. The pre-deposit of Rs.10,91,728/- was deposited by respondents during pendency of their appeal by debit entry in their Cenvat Credit account in May 2006. The Order-in-Appeal dated 22.6.2007 allowed their appeal with consequential relief. Thus they became entitled to get refund of the pre-deposit amount. The respondents took refund of the amount by taking credit of the said amount in their Cenvat credit account in June, 2007. They declared the same in their ER-I returns of July, 2007. On 22.2.2008 they submitted a letter to Assistant Commissioner, Ambala requesting to issue formal orders sanctioning the refund and sought permission for utilization of the credit. Alongwith this letter they furnished copy of the order dated 22.6.2007. The relevant portion of letter dated 22.2.2008 is reproduced as under:
In the light of the said order regarding acceptance of our appeal, it is requested that consequential formal orders to allow us to utilize the modvat credit of Rs.1091728/- (Rs.Ten lac Ninety One Thousand Seven Hundred Twenty Eight Only) and for refund of the predeposit may kindly be passed at the earliest.
We may add that we had approached the Superintendent Central Excise of our range for the above and that he has advised us to make a request to you directly in the matter.
We may add that Central Excise Board had clarified vide their circular No.275/37/200-CC 8A dated 02.01.2002 that in such cases the pre deposits will be refunded without any application from the assessee.
11. It is seen that the department has then issued a show cause notice dated 28.5.2008 alleging wrong availment of credit. It is the case of Revenue that the respondent ought to have filed an application for refund and only after obtaining an order sanctioning refund, he would be able to get the refund. Therefore, the respondent is liable to pay interest for irregular credit taken.
12.1 At this juncture, it would be worthwhile to analyse the judicial dispositions, provisions and circular regarding the refund of pre-deposit. The Honble Apex Court in CCE, Hyderabad vs. I.T.C. Ltd. reported in 2005 (179) ELT 15 (SC) held that interest is payable to the party on delayed refund of pre-deposit @ 12% p.a. commencing from three months after final disposal of the dispute between the parties. The relevant portion of the order is reproduced as under:
The issue in this appeal and in several other appeals is whether the pre-deposit made as a pre-condition for the hearing of the appeal under the Central Excise Act, 1985 was, on the assessee being ultimately successful, refundable to the assessee with interest. The learned Solicitor General has taken instructions and has stated before this Court that the Central Board of Excise & Customs proposes to issue a circular in connection with the payment of interest on all such pre-deposits. A draft copy of the proposed circular has been handed over to this Court. Having regard to the contents of the draft circular we direct compliance with the final order impugned before us and payment of interest in terms of the draft circular. The draft circular shall be appended to and the contents form part of this order. The appeal is disposed of. In view of this order any judgment of any High Court holding to the contrary will no longer be good law.
12.2 The above judgement held that interest is payable on the pre-deposit commencing from three months after the final disposal of the dispute between the parties. This Tribunal after referring to the C.B.E. & C Instruction No.F.275/37/2k-Cx.8A dated 2.1.2002 and C.B.E. & C Circular No.802/35/2004-CX dated 8.12.2004 in the following judgements has observed that an application for refund is not required for refund of pre-deposit.
(i) Coco Cola India Pvt.Ltd. vs. CC, Pune-2014 (311) ELT 816 (Tri.-Mumbai)
(ii) Lorenzo Bestonso vs. Commissioner of Customs (Import), Nhava Sheva-2015 (315) ELT 478 (Tri.-Mumbai)
(iii) Commissioner, Pune vs. SMZS Chemicals Ltd.-2014 (310) ELT 396 (Tri.-Mum.) 12.3 A new section 35FF was inserted w.e.f.10.5.2008 with regard to interest on delayed refund of pre-deposit. The relevant section is reproduced as under:
Where an amount deposited by the appellant in pursuance of an order passed by the Commissioner (Appeals) or the Appellate Tribunal (hereinafter referred to as the appellate authority), under the first proviso to section 35F, is required to be refunded consequent upon the order of the appellate authority and such amount is not refunded within three months from the date of communication of such order to the adjudicating authority, unless the operation of the order of the appellate authority is stayed by a superior court or tribunal, there shall be paid to the appellant interest at the rate specified in section 11BB after the expiry of three months from the date of communication of the order of the appellate authority, till the date of refund of such amount..
13. To summarize, it can be said that prior to 10.5.2008, i.e. before introduction of section 35FF, the respondent was entitled to get refund of pre-deposit, as per Board circulars even without submitting an application, and was also entitled to interest for delayed refund as per the dictum laid in the case of ITC Ltd. (supra). After 10.5.2008, the new section 35FF provides that the pre-deposit, is required to be refunded consequent upon the order of the appellate authority, and such amount if not refunded within three months from the date of communication of such order to the adjudicating authority, the party is entitled to get interest. Section 35FF does not say that an application has to be filed to get refund. It simply says that the pre-deposit is required to be refunded and if not refunded within three months after communication of the appellate order, the assessee is entitled to interest.
14. The respondents herein have issued a letter to the Assistant Commissioner, Central Excise Division, Ambala on 22.2.2008. The letter is seen to have received in the office of the appellant on 26.2.2008. Along with this letter, the respondents have also furnished a copy of the appellate order dated 22.6.2007. Thus respondents herein have communicated the copy of the appellate order and therefore in any case they were entitled to refund of the pre-deposit amount without further application. In Lorenzo Bestonso case (supra), the Tribunal observed that a simple letter would suffice. Revenue does not dispute the quantum or the nature of the deposit. The only dispute is that the respondents ought not to have taken refund by taking credit of the amount in their cenvat account and thereby taking a suo motto refund of pre-deposit. As per the appellate order dated 22.6.2007 the pre-deposit amount has to be refunded to the respondent. The act of the respondents in taking refund of the amount by crediting the amount in their cenvat credit account, in my view, is only a procedural lapse. After taking credit, the respondents have declared the same in their ER-1 returns of July, 2007 itself. Moreover, they sent a letter dated 22.2.2008 along with copy of appellate order and requested for permission to utilize the credit, besides their request to issue formal order of sanctioning refund. All these establish that there was no suppression or pre-meditated act to evade payment of duty. The right of the party to get refund of pre-deposit cannot be denied on account of a procedural lapse. The Assistant Commissioner in any case ought to have considered the letter dated 22.2.2008 as an application for refund. As the amount is payable/refundable to the respondents w.e.f.22.6.2007, I do not find any ground to demand interest on the very same amount alleging that the respondents took credit irregularly. The impugned order calls for no interference.
15. In view of the discussions above, I find that the appeal filed by Revenue is devoid of any merits. The appeal is dismissed. The cross objections are disposed accordingly.
(pronounced in the open court on 12.11.2015) (Sulekha Beevi C.S.) Member (Judicial) mk 4