Customs, Excise and Gold Tribunal - Mumbai
Wns Global Services (P) Ltd. vs Commissioner Of Central Excise on 18 January, 2008
Equivalent citations: [2008]13STJ156(CESTAT-MUMBAI), 2008[10]S.T.R.273
ORDER K.K. Agarwal, Member (T)
1. These are three appeals against order of Commissioner (Appeals). Since the issue involved in all the three appeals is one and the same they are being decided in a common order. The appellants are engaged in providing business auxiliary services and the export of the said services. They were availing benefit of Cenvat credit under Cenvat Credit Rules 2004 in respect of input services used by them in the export of auxiliary services. Since the appellants were unable to utilise the Cenvat credit in respect of the input services availed by them they filed refund claim in respect of un-utilized credit for the period April 2005 to June 2005 July 2005 to September 2005 and October 2005 to December 2005 respectively as per provisions of Notification No. 4/2006 dated 14.3.2006 by which Rule 5 of the Cenvat Credit Rules, 2004 was substituted. Since Rule 5 prior to its substitution by Notification No. 4/2006 dated 14.3.2006 did not provide for refund of un-utilized credit to the producer of output services, the claim was rejected by the Assistant Commissioner and his order was upheld by the Commissioner (Appeals) vide his impugned order. Commissioner (Appeals) did not agree with the plea of the appellant that the Rule 5 substituted by Notification No. 4/2006 dated 14.3.2006 was of a clarificatory nature and that they had substantative right to claim refund under those provisions, once all the conditions prescribed under Notification were fulfilled and therefore refund cannot be denied. The Commissioner (Appeals) in his order held that since the refund claim pertains to the period prior to 14.3.2006, Rule 5 under which the refund claims have been submitted during the relevant period empowered only a manufacturer of goods to claim refund and not the provider of output services. It was only with effect from 14.3.2006 vide Notification No. 5/06 that refund was made admissible to provider of output services also. He relied upon the decision of the Supreme Court in the case of Steel Rolling Mills of Bengal Ltd. v. Union of India wherein it was held that excise refund under Rule 12 was confined to duty paid only on such goods as were specified by the Notification and not to others.
2. Heard both sides.
3. We have considered the submissions. We find that the issue involved in the present case is regarding interpretation of Rule 5 of the Cenvat Credit Rules, 2004 as it existed during the period April 2005 to March 2006 and the present provisions as substituted by Notification No. 4/06. For this purpose it would be relevant to reproduce the Rule 5 as it existed during the tow periods:
April 2005 to March 2006:
5. Refund of CENVAT credit - Where any input or input service is used in the final products 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, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,
(i) duty of excise on any final products cleared for home consumption or for export on payment of duty; or
(ii) service tax on output service, and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification:
Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty;
Provided further that no credit of the additional duty leviable under Sub-section (5) of Section 3 of the Customs Tariff Act, shall be utilised for payment of service tax on any output service.
Explanation: For the purposes of this rule, the words "output service which is exported" means the output taxable service exported in accordance with the Export of Services Rules, 2005.
After March 2006:
5. Refund of CENVAT credit - Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,
(i) duty of excise on any final product cleared for home consumption or for export on payment of duty; or
(ii) service tax on output service, and where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification:
Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Export of Service Rules 2005 in respect of such tax.
Provided further that no credit of the additional duty leviable under Sub-section (5) of Section 3 of the Customs Tariff Act shall be utilised for payment of service tax on any output service.
Explanation: For the purposes of this rule, the words 'output service which is exported' means the output service exported in accordance with the Export of Services Rules, 2005.
It is noticed from the comparison of the two provisions that while under substituted Rule 5, both manufacturer of goods or provider of output services were allowed to utilize Cenvat credit in respect of the inputs services used by them in the manufacture of exported goods or exported output services for payment of duty of excise on any final product cleared for home consumption or for export on payment of duty or for payment of Service Tax on the output services but where such adjustment was not possible, under pre-substituted Rule 5 the manufacturer alone was allowed refund of unutilized cenvat credit subject to such safeguards, conditions and limitations as may be specified by the Government of India by Notification and not the service provider as is the case under substituted Rule 5. It has been argued on behalf of the appellant that the intention of the government has all along been not to charge duty in respect of the services exported by them and even during the relevant period a provider of output services was entitled to rebate of input services tax paid by it and it was on account of a drafting error that the refund of unutilized Cenvat credit was confined to manufacture only and not to the provider of output services. In support thereof, it was submitted that five words "or provider of output services" appearing in the first proviso to Rule 5 are meaningless, superfluous and not required in that proviso in as much as this proviso places the condition, that the provider of output services should not have availed draw back under Customs and Central Excise Duties Drawback Rules, 1995. Whereas the fact is that the Customs and Central Excise Duties Drawback Rules, 1995 as it stood prior to 14.3.2006 provide for drawback only in respect of the goods exported and did not provide drawback in respect of services exported. It was only with effect from 13.7.2006 that the drawback rules provide for drawback of service tax paid on input services also used in the manufacture of goods exported. Therefore, there is no question of provider of output services availing drawback. There is also no question of even a manufacturer of goods exported availing drawback of service tax paid on input services prior to 13.7.2006.
4. The proviso also bars claiming of rebate of duty under Central Excise Rules, 2002 in respect of such duty. The only provision for rebate in Central Excise Rules, 2002 is contained in Rule 18. That rule even today contemplates rebate of excise duty paid on finished products exported or rebate of excise duty paid on inputs used in the manufacture of products exported. There is no question of, therefore, a provider of out put service claiming a rebate of duty under Central Excise Rules, 2002.
5. In view of the above, it was submitted that the five words appearing in the first proviso are clearly surplus and wrongly placed. These words should have appeared after the words "the manufacturer" appearing in the last leg of main Rule 5. To support this plea it was submitted that the last leg of Rule 5 refers to "....Where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount...". "Such" adjustment contemplated in Rule 5 are utilization of credit on inputs or input services towards payment of duty of excise on finished product or service tax on output services. The first adjustment is for the manufacturer and the second adjustment is for the output service provider. Such adjustment covers both the above adjustments. If these words "or provider of output services" is not added after the word manufacturer, the last leg of Rule 5 would be incomplete, in so far as it relates to the adjustment by service provider. The amendment made on 14.3.2006 correctly removes these typing errors. These five words have now been added after the word "manufacturer" in the last leg of the main rule. The proviso has also been amended and additional words "claim of rebate of service tax under Export Service Rules, 2005 in respect of such tax" has been added. It is to be noted that rebate of service tax under Export Rules is available only to service provider.
6. In view of the above, it was submitted that under such circumstances, the court has a duty to correct obvious drafting errors and transpose the words in the correct portion of the rule. Reference in this regard was invited to the Supreme Court decision in the case of Ramesh Mehta v. Sanwall Singh wherein at page 29 it has been observed as under:
Examples are galore when with a view to make a statute workable the court has corrected obvious drafting errors. The court in suitable cases may add or substitute words.
Attention was also invited to Craies on Statute Law, Seventh Edition wherein at page 521 relating to obvious misprints it has been stated as under:
But if there is an obvious misprint in an Act of Parliament, the courts will not be bound by the letter of the Act, but will take care that its plain meaning is carried out. "It is our duty," said Tindal C.J. in Everett v. Wells, "neither to add to nor to take away from a statute, unless we see good grounds for thinking that the legislature intended something which it has failed precisely to express.
The expression "where such adjustment is not possible", itself is indicative that certain consequences are herein after provided by rule itself, when adjustment is not possible. If it is interpreted that consequences are provided only for a manufacturer, then sentence is incomplete particularly when adjustment is contemplated or provided both for a manufacturer as also for output service provider. It was accordingly submitted that the five words "or provider of output services" should be taken out from the proviso to Rule 5 as it stood prior to 14.3.2006 and should be substituted after the words "the manufacturer" in the last leg of main Rule 5.
7. The second plea made was that in any view amendment made on 14.3.2006 is merely clarificatory and therefore, retrospective and applies for the past period also. Reference in this regard was invited to the Supreme Court decision in the case of Indian Tobacco Association wherein para 27 it has been specifically stated that "Where a statute is passed for the purpose of supplying an obvious omission in a former statute, the subsequent statute relates back to the time when the prior Act was passed." Reference was also invited to the Supreme Court decision in the case of Zile Singh v. State of Haryana wherein it was held that "presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed as retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended...". In view of these decisions it was submitted, that the amendment brought by Notification No. 4/2006 dated 14.3.2006 was clarificatory to bring out the intention which the government always had all along of allowing refund of unutilized credit to provider of exported output services also.
8. We are not convinced by the above pleas. The Supreme Court decisions and other commentaries relied upon clearly state that the drafting/printing error or omissions can be carried out by the courts or that the clarificatory amendment have retrospective effect only in those cases where the drafting/printing error is obvious and without which the object and purpose of the Act cannot be carried out. From a plain reading of the pre substituted Rule 5 it is very clear that the intention has never been to allow refund of unutilized service tax credit to the provider of output services. Rule 5 provided that refunds will be subject to such safeguards, conditions and limitations as may be specified by the Central Government. During the relevant period, neither any conditions, safeguards and limitations were provided in respect of provider of output services nor any procedure was prescribed for claiming refund of unutilized Cenvat credit availed on input services used in export of output services. Such procedure has been prescribed for the first time vide Notification No. 5/06-CE(NT) dated 14.3.2006 wherein the extent of refund has also been prescribed, which was not there under the earlier Notification No. 11/02-CE(NT) dated 1.3.02 which held the field during the relevant period. When amendment was carried out in 2006 allowing refund to the provider of output services also, an additional safeguard was introduced in Rule 5 by addition to the proviso that the provider of output services should not claim rebate of service tax under the Export of Services Rules, 2005 in respect of such taxes. If it would have been a simple omission, then the legislature must have prescribed some procedure for claiming refund and the extent to which refund can be claimed and imposed certain safeguards as has been done only now. In view of this the alleged omission cannot be considered as an obvious mistake in printing/drafting, nor can the amended provisions be considered to be clarificatory in nature and cannot therefore have retrospective effect.
9. We are however in agreement with the last plea taken by the appellants that the refund claim filed by their on 26.4.2006 onwards will be governed by the rules as it stood on those dates. The substituted Rule 5, nowhere suggests or says, that it will apply for exports made after 14.3.2006. Hence any claim filed on or after 14.3.2006 which satisfies other requirements of the rules and notification issued there under cannot be turned down on a ground which is not a condition or requirement of the rule or notification. A statute cannot be treated retrospective merely because it relates to the past action. A statute which takes away or impairs vested rights acquired under existing laws, or creates a new obligation or imposes a new duty, or attaches a new disability in respect of transaction already past alone is called a retrospective legislation. The position that a prospective benefit under a statutory provision is measured by or depends on antecedent facts does not make the provision retrospective. As pointed by the ld. counsel for the appellant, this has also been stated in the Principle of Statutory Interpretation by G.P. Singh at Page 462-468 of the 9th Edition that statutes, conferring prospective benefit on antecedent facts does not necessarily make the provisions retrospective. Reference in this regard has been made to the Supreme Court decision in the case of Boucher Pierre Andre v. Superintendent, Central Jail, Tihar, New Delhi wherein Para 2 the Supreme Court held that benefit to set off pre-conviction detention period against the term of imprisonment conferred by Section 428 of the Criminal Procedure Code, 1974 'where an accused person, has, on conviction been sentenced to imprisonment for a term' is also available where the sentence was imposed before the commencement of the Code to reduce the unserved portion of the sentence and that in so construing the section it was not given any retrospective effect for it did not affect the sentence already undergone but affected only that part of the sentence which remained to be served in future.
10. Reference was also invited to the Supreme Court decision in the case of Mysore Rolling where prior to 6.8.1977, Rule 9 which corresponds to Section 11 of Central Excise and Salt Act, providing for a period of one year for raising demands but when the rules were amended, from 6.8.1977 and the period of five years was substituted for the period of one year, it was held that after the amendment demands can be raised for the five years period even if that five years pertains to the period prior to 6.8.77, and therefore, amendment was not held to be prospective in the circumstances of the case when demand was raised within the amended section on the basis of the past antecedents. We, therefore, hold that in the present circumstances, where the refund claims were filed after the amendment, and satisfies every requirement of Rule 5 and the notification issued there under, the refunds cannot be rejected as there was no condition in the notification or rules that such refund would apply only in respect of the exports made after 14.3.2006. Once the refunds are under the amended rules and the notification issued there under, as already held, the same cannot be denied merely because they relate to the exports made prior to the date of amendment.
11. In view of the above we allow the appeals and set aside the orders of the Commissioner (Appeals).
(Pronounced on 18.1.08)