Gujarat High Court
M/S Vineet Synthetics Pvt. Ltd vs Union Of India on 18 December, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 4006 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
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Approved for Reporting Yes No
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M/S VINEET SYNTHETICS PVT. LTD. & ANR.
Versus
UNION OF INDIA & ORS.
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Appearance:
ANANDODAYA S MISHRA(8038) for the Petitioner(s) No. 1,2
DEEPAK N KHANCHANDANI(7781) for the Respondent(s) No. 2
NOTICE SERVED for the Respondent(s) No. 1,3
NOTICE UNSERVED for the Respondent(s) No. 4
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 18/12/2024
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE D.N.RAY)
1. Heard learned advocate Mr.Anandodya Mishra for the petitioners and learned advocate Mr.Deepak Khanchandani for the respondent No.2
2. Rule returnable forthwith. Learned advocate Mr. Deepak Khanchandani waives service of notice of rule on behalf of the respondent No.2. With the consent of learned advocates for the Page 1 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined respective parties, the matter is taken up for final hearing.
3. This petition is filed under Article 226 of the Constitution of India with a prayer to quash and set aside the impugned order dated 14.12.2020 passed by the respondent No.4 . Accordingly, the following prayers have been made :-
"A) Your Lordships be pleased to issue an appropriate writ, order or direction, including a writ in the nature of Certiorari and or any other appropriate writ order or direction, quashing and setting aside the impugned order dtd 14-12-2020 passed by the Respondent no 4 and consequentially all orders confirmed thereunder, with directions to the concerned respondents to immediately sanction and pay the rebate claims (4) with interest @ 18 from the date they were due, till final payment.
B) Any other reliefs deemed fit proper & incidental in the facts of the present case may kindly be granted."
4. The brief facts of the case are as under:-
4.1 The Petitioner No. 1 is registered with the Central Excise Department vide Registration No. AAACV8091PXM001 dated 03/12/2003 and has been duly filing monthly returns ER-1 at the relevant time. The Petitioner No. 1 started its production activities in the Financial Year 2003-04. Till 08.03.2006, the Petitioner was clearing the final product i.e. Texturized yarn under exemption Notification No. 29/2004-CE and was paying central excise duty at the rate of 8% on clearance of the same.
4.2. For the period under consideration, there was no such Page 2 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined condition in Notification No. 29/2004 that CENVAT credit cannot be availed by the petitioners for paying central excise duty under the said notification. Therefore, the petitioners cleared the final product by paying central excise duty at the rate of 8% and simultaneously availed Cenvat credit on the raw material used as inputs. The effective rate of Central Excise Duty on the raw material was 16% vide Central Excise Tariff Act, 1994.
4.3. Thereafter the Petitioners on 19/12/2009 availed CENVAT credit on the inputs and cleared the final product by paying the amount of duty under Notification No.29/2004. Also, the Petitioners were simultaneously clearing final product under Notification No.30/2004 for which separate records were maintained.
4.4. The Petitioners in pursuance of the aforesaid letter submitted that the balance of CENVAT credit lying in the CENVAT credit accounts is a result of 16% duty on raw materials i.e. POY and 8% Central Excise Duty on their final products i.e. Texturised Polyester Yarn, which ot accumulated over the period of time.
4.5. On being confronted with the application of Rule 11(3)(ii) of CENVAT Credit Rules, 2004 in the present case, the petitioners stated that they have adopted Notification No. 30/2004 in F.Y.2007- 08 & 2008-09; but the said rule was introduced under Notification No.10/2007 dated 01.03.2007; and thus the question of lapse of Page 3 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined Cenvat Credit lying in Cenvat Account does not arise. However, the Adjudicating Authority without considering the submission of the Petitioners rejected the refund claims under the common order in original No.41 to 44/AC-RFA/2014 Rebate dated 25-2-2014.
4.6. The learned Commissioner (Appeals) considered the contention of the petitioners and allowed the rebate claim under his Order in appeal No. SUR-Excus-002-App-049-14-15 dated 27.06.2014 against which the Department filed a revision application.
4.7. The petitioners contested the revision application by filing detailed replied and written submissions and producing their entire record in this regards showing their clear eligibility to these rebate claims.
4.8 The Petitioners submitted that in spite of the above however, under his impugned order No. 664/2020-CX/(WZ)/ASRA/Mumbai dtd 14-12-2020 issued on 5-1-2021, the Additional Secretary to the Government of India as the Revision authority, allowed the Department's revision application and set aside the order in appeal passed by the Commissioner (A) and rejected the rebate claims of the Petitioners.
5. Being aggrieved and dis-satisfied with the said order passed by the Revision authority, the present petition is preferred.Page 4 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025
NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined
6. Learned advocate Mr. Anandodaya S.Mishra for the petitioners submitted that the impugned order and findings of the Revision authority are per se illegal, without application of mind and without considering the issue in its proper and correct perspective. The very fact that the duty for goods exported was paid from the Cenvat credit availed by the Petitioners while operating under Notification 29/2004 which would not lapse, since even when petitioners were operating simultaneously also under Notification 30/2004, which is clearly permissible to them, the Cenvat credit of duty paid under Notification 29/2004 would clearly be available for paying any duty on goods exported under Rebate and eligible to them and not lapse as being wrongly suggested by the Department.
6.1. He has further submitted that the impugned findings of the Revision authority, that the Notification 30/2004 contemplate an absolute exemption and therefore, the entire Cenvat Credit would lapse under Rule 11(3) of the Central Excise Rules is per se incorrect, since admittedly there is no absolute exemption contemplated in Notification No. 30/2004 in the first place, but the exemption is conditional with the condition not to avail credit on inputs and also available to be simultaneously availed with notification 29/2004, which notification clearly permitted availment of credit at the same time, which credit therefore would not lapse.
Page 5 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined 6.2. He has further submitted that since both notifications could be availed simultaneously, the question of lapsing of credit availed under Notification 29/2004, would never arise and more so when no Cenvat credit was availed while operating under Notification 30/2004, at all. Hence, such findings and objections of the revision authority cannot stand and admittedly the duty paid from the Cenvat Credit availed under Notification 29/2004 would never lapse and would be available to pay duties on exported goods.
6.3 He has further submitted that the Commissioner (Appeals) has under its order clearly and correct appreciated the fact that excisable goods are exported after payment of duty. The appellants have submitted all the required documents to satisfy him. Therefore, there is no reason to reject the rebate when the goods have been exported and duty has been debited/paid.
7. Mr. Dipak Khanchandani, learned advocate appearing for the respondent No.2 has submitted that once the petitioner-assessee has opted for exemption under Section 5A of the Central Excise Act than, the Cenvat credit has to be reversed as per Rule 11(3) of the Rules of 2004. He further submitted that the adjudicating authorities below have rightly rejected the rebate claims amounting to Rs.26,10,905/- and reiterated the findings of the Revisional Authority.
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8. DISCUSSION & FINDINGS :
8.1 Having given our anxious consideration to competing averments, the conclusive factual position can be culled out as under:-
8.2 The petitioner No.1 is registered with the Central Excise Department and has been duly filing monthly returns in Form ER/1. The petitioner No.1 had started production activity for the Financial Year 2003-04 and were clearing the final product i.e. Texturized Yarn upto 8.3.2006 under exemption Notification No. 29/2004-CE by paying excise duty @ 8% 8.3 From 09.03.2006, the petitioners started availing the benefits of exemption Notification Nos.29/2004 and 30/2004. As on the said date i.e. 09.03.2006 the petitioners had accumulated cenral excise duty of Rs.92,31,864/- and Education Cess of Rs.2,76, 009/-, which were duly reflected in their monthly returns i.e. ER-1 . Pursuant to Central Excise Audit in December, 2006, the petitioners reversed the Cenvat credit in the following manner :-
"In the closing stock of inputs lying as on 8.03.2006 at the rate of 16%, In the closing stock of finish product lying as on 8.03.2006 at the rate of 8%, In the closing stock of Yarn waste lying as on 8.03.2006 at the rate of 8%."
8.4 Further, the petitioners availed Cenvat credit on inputs purchased from 01.03.2006 to 08.03.2006. Thus, the closing balance Page 7 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined in the month of December, 2006 which was carried forward by the petitioners till November 2009 was an amount of Rs.93,66, 762/-. Even in the subsequent Central Excise Audit for the period from 01.10.2007 to 09.10.2012, the Department did not raise any issue regarding in admisibbility of Cenvat credit lying with the since 01.04.2007.
8.5 For the first time in January 2013, the Jurisdictional Range Officer, while scrutinizing ER-1 returns clarified that a sum of Rs.73,00, 855/- is lying as balance in the petitioners' Cenvat credit account as on February, 2012. Inspite of the best efforts of the petitioners to convenience the said authority to the contrary, a show cause notice dated 21.08.2013 was issued by the respondent- authority demanding an amount of Rs.26, 29,304/- utilized by the petitioners for payment of duty on the final product exported by them. In all, four show cause notices were issued to the petitioners as under:-
Sr. No. SCN No. Rebate
1. F.No.V(CH54) 18-586/2013-Rebate dated Rs.8,68,087/-
7/10/2013
2. F.No.V(Ch54) 18-587/2013-Rebate dated Rs.2,96,006/-
7/10/2013
3. F.No.V(Ch54)18-588/2013-Rebate dated Rs.11,57,450/
7/10/2013 -
4. F.No.V(Ch54)18-593/2013-Rebate dated Rs. 2,89,362/-
7/10/2013
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NEUTRAL CITATION
C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024
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8.6 Eventually, the Adjudicating Authority rejected the refund
claims under the common Order-In-Original. Being aggrieved by the said Order-In-Original, the petitioners filed appeal where the learned Commissioner (Appeals) allowed the rebate claim of the petitioners by order dated 27.06.2014. However, the Additional Secretary to the Government of India allowed the Department's Revision Application and rejected the rebate claim of the petitioeners, by Order dated 14.12.2020 (impugned) holding that no duty could have been paid from the unutlized Cenvat credit wrongly carry forward while operating under Notification No.30/2004-CE, as the same had lapsed and therefore, was not available to the petitioners for paying any duties.
8.7 In the case of Eicher Motors Ltd. [1999 (106) ELT 3(SC)], it has been held by the Hon'ble Supreme Court as under :-
"5. Rule 57-F(4-A) was introduced into the Rules pursuant to the Budget for 1995-96 providing for lapsing of credit lying unutilised on 16-3-1995 with a manufacturer of tractors falling under Heading No. 87.01 or motor vehicles falling under Heading Nos. 87.02 and 87.04 or chassis of such motor vehicles under Heading No. 87.06. However, credit taken on inputs which were lying in the factory on 16- 3-1995 either as parts or contained in finished products lying in stock on 16-3-1995 was allowed. Prior to the 1995- 96 Budget, the Central excise/additional duty of customs paid on inputs was allowed as credit for payment of excise duty on the final products, in the manufacture of which such inputs were used. The condition required for the same was that the credit of duty paid on inputs could have been used for discharge of duty/liability only in respect of those final Page 9 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined products in the manufacture of which such inputs were used. Thus it was claimed that there was a nexus between the inputs and the final products. In the 1995-96 Budget, the MODVAT Scheme was liberalised/simplified and the credit earned on any input was allowed to be utilised for payment of duty on any final product manufactured within the same factory irrespective of whether such inputs were used in its manufacture or not. The experience showed that credit accrued on inputs is less than the duty liable to be paid on the final products and thus the credit of duty earned on inputs gets fully utilised and some amount has to be paid by the manufactured by way of cash. Prior to the 1995-96 Budget, the excise duty on inputs used in the manufacture of tractors and commercial vehicles varied from 15% to 25%, whereas the final products attracted excise duty of 10% or 15% only. The value addition was also not of such a magnitude that the excise duty required to be paid on final products could have exceeded the total input credit allowed. Since the excess credit could not have been utilised for payment of the excise duty on any other product, the unutilised credit was getting accumulated. The stand of the assessees is that they have utilised the facility of paying excise duty on the inputs and carried the credit towards excise duty payable on the finished products. For the purpose of utilisation of the credit, all vestitive (sic) facts or necessary incidents thereto have taken place prior to 16-3- 1995 or utilisation of the finished products prior 16-3-1995. Thus the assessees became entitled to take the credit of the input instantaneously once the input is received in the factory on the basis of the existing Scheme. Now by application of Rule 57- F(4-A), the credit attributable to inputs already used in the manufacture of the final products and the final products which have already been cleared from the factory alone is sought to be lapsed, that is, the amount that is sought to be lapsed relates to the inputs already used in the manufacture of the final products but the final products have already been cleared from the factory before 16-3-1995. Thus the right to the credit has become absolute at any rate when the input is used in the manufacture of the final product. The basic postulate that the Scheme is merely being altered and, therefore, does not have any retrospective Page 10 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined or retroactive effect, submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assesses concerned. Therefore, the Scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier Scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the basis of the earlier Scheme necessarily that the taxes have to be adjusted and payment made complete. Any manner or mode of application of the said Rule would result in affecting the rights of the assessees
6. We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these goods gets adjusted which are finished subsequently. Thus a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16-3- 1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods.Page 11 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025
NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined 8.8 In the case of Collector Vs. Dai Ichi Karkaria Ltd. [1999 (112) ELT 353 (SC)], the Hon'ble Apex Court has recorded categorical findings as under:-
"Rule 57G provides that the manufacturer intending to take credit of duty paid on inputs must file a declaration with the concerned excise officer indicating what the final products are that are manufactured in its factory and the inputs intended to be used therein and obtain an acknowledgement thereof. The manufacturer, having filed the declaration and obtained the acknowledgement, can take credit for the duty on the inputs received by him. Rule 57I provides for the recovery of credit wrongly availed of or utilised in an irregular manner. The manufacturer is then required to show cause why he should not be disallowed such credit, or, if it has utilised it, why its value should not be recovered from him. After considering the reply, the concerned excise officer is empowered to make the appropriate order in such terms.
It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw Page 12 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available.
It is, therefore, that in the case of Eicher Motors Ltd. vs. Union of India [1999(106) ELT 3] this Court said that a credit under the MODVAT scheme was as good as tax paid 8.9 In the the case of Indsur global Vs. Union of India reported in 2014(310) ELT 833 (Guj.), this Court has held as under :-
"34. By no stretch of imagination, the restriction imposed under sub-rule (3A) of rule 8 to the extend it requires a defaulter irrespective of its extent, nature and reason for the default to pay the excise duty without availing cenvat credit to his account can be stated to be a reasonable restriction. It leads to a situation so harsh and a position so unenviable that it would be virtually impossible for an assessee who is trapped in the whirlpool to get out of his financial difficulties. This is quite apart from being wholly reasonable, being irrational and arbitrary and therefore, violative of Article 14 of the Constitution. It prevents him from availing credit of duty already paid by him. It also is a serious affront to his right to carry on his trade or business guaranteed under Article 19(1)(g) of the Constitution. On both the counts, therefore, that portion of sub-rule (3A) of rule must fail.
35. The situation can be looked at slightly different angle. With or without the provisions of sub-rule (3A), liability to pay interest for the default period as per sub-rule (3) of rule 8 continues. Sub-rule (3A) is basically a mechanism for stringent recovery and does not create a new liability unless this mechanism itself is breached. In C/SCA/3344/2014 JUDGMENT such a mechanism to provide for withdrawal of CENVAT credit facility for paying the duty borders to creating a penalty. Insisting on an assessee in default to Page 13 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined clear all consignments on payment of duty would be a perfectly legitimate measure. However, to insist that he must pay such duty without utilising CENVAT credit which is nothing but the duty on various inputs already paid by him would be a restriction so harsh and out of proportion to the aim sought to be achieved, the same must be held to be wholly arbitrary and unreasonable. We may recall, the delegated legislature in its wisdom now dismantled this entire mechanism and instead has provided for penalty at the rate of 1% per month on delayed payment of duty.
36. In the result, the condition contained in sub-rule (3A) of rule 8 for payment of duty without utilizing the cenvat credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion "without utilizing the cenvat credit" of sub-rule (3A) of rule 8 of the Central Excise Rules, 2002, shall be rendered invalid.
8.10 The law is well settled that legally availed credit lying unutilized with the manufacturer does not lapse and such credit can be utilized for payment of any kind of duty on any excisizable goods. In Commissioner of Central Excise-II V/s. Omkar Textile Mills Pvt. Ltd (2010)(262) ELT 115 (Guj.), this Court relying upon the decision of the Hon'ble Supreme Court in the case of Eicher Motors Ltd. Vs. Union of India reported in (1999) (106)ELT 3 (SC) "when on the strength of the rules available certain act has been done by the parties concerned incident following thereto must take place in accordance with the scheme under which the duty has been paid on the manufactured product if uch situation is sought to be altered, necessarily it follows that right which had accrued to a party such as availability of a scheme is affected and, in particular it looses sight of the fact that the provision for facility of credit is as good as Page 14 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined tax paid till tax is adjusted in furture goods on the basis of the several committments which would have been made by the assessee concerned.
8.11 The decision of this Court rendered in the case of Commissioner, Central Excise, Ahmedabad -II Vs. Omkar Textile Mills Pvt. Ltd. passed in Tax Appeal No. 9 of 2008 with Tax Appeal No. 11 of 2008, holds as under:-
"9. Having heard Mr.Ravani, learned Standing Counsel appearing for the Revenue and having perused the order of the authorities below including the order passed by the Tribunal in the case of S.V.Business Pvt. Ltd.,(Supra) and judgment of this Court as well as Hon'ble Supreme Court we are of the view that the issue is squarely covered by the earlier decision. This Court in the case of Dipak Vegetable Oil Industries Ltd. Vs. Union of India (Supra) had clearly held that a right, which is acquired as a result of a statutory provision cannot be taken away retrospectively unless the statutory provision so provides or by necessary implication it has the same effect. Even with regard to the proviso to Rule 3 support can be derived from the observations made by the Hon'ble Supreme Court in the case of Eicher Motors Ltd., Vs. Union of India, 1999 (106) ELT 3 (SC), the scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier scheme was applied under which the assessees had availed of the credit facility for payment of taxes. Any manner or mode of application of the said rule would result in affecting the rights of the assessees. The Hon'ble Supreme Court further observed that Section 37 of the Act does not enable the authorities concerned to make a rule which cannot be said to be applied to the goods manufactured prior to 16.3.1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods. The Court further observed that when on the strength of the rules available certain acts have been done by the parties Page 15 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined concerned, incidents following thereto must take place in accordance with the scheme under which the duty had been paid on the manufacture products and if such a situation is sought to be altered, necessarily it follows that right, which had accrued to a party such as availability of a scheme, is affected and, in particular it loses sight of the fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned."
8.12 For a better understanding of the issue at hand, the following provisions are referred to hereinbelow :-
"Notification No. 30/2004-Central Excise dated the 9 July, 2004 G.S.R. (E). In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 07/2003 Central Excise dated the 1st March 2003, published in the Gazette of India vide number G.S.R. 137 (E), dated 1st March 2003, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the excisable goods of the description specified in column (3) of the Table below and falling within the Chapter, heading No. or sub-hending No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table, from whole of the duty of excise leviable thereon under the saisi Central Excise Act: Provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the CENVAT Credit Rules, 2002"
Rule 18: Rebate of Duty: Where any goods are exported, the Central Government may, by Notification, grant rebate of duty paid on such excisable goods and duty paid on materials used in the manufacture or processing of such goods and the rebate shall Page 16 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification.
As per para 8 of Chapter 8 of Excise Manual the following procedure is to be followed :-
"8. Sanction of claim for rebate by Central Excise 8.1 The rebate claim can be sanctioned by any of the following officers of Central Excise: Deputy/Assistant Commissioner of Central Excise having jurisdiction over the factory of production of export goods or the warehouse, or Maritime Commissioner.
8.2 It shall be essential for the exporter to indicate on the A.RE. I at the time of removal of export goods the office and its complete address with which they intend to file claim of rebate.
8.3 The following documents shall be required for filing claim of rebate:
A request on the letterhead of the exporter containing claim of rebate, A.R.E. 1 numbers and dates, corresponding invoice numbers and dates amount of rebate on each A.R.E. 1 and its calculations, original copy of the A.R.E.1, invoice issued under rule 11, self attested copy of shipping Bill, self attested copy of Bill of Lading, disclaimer certificate (in case where claimant in other than exporter) 8.4 After satisfying himself that the goods cleared for export under the relevant A.R.E. 1 applications mentioned in the claim were actually exported, as evident by the original and duplicate copies of A.R.E.1 duly certified by Customs, and that the goods are of 'duty paid' character as certified on the triplicate copy of A.R.E. 1 received from the jurisdictional Superintendent of Central Excise (Range Office), the rebate sanctioning authority will sanction the rebate, in part or full. In case of any reduction or rejection of the claim, an opportunity shall be provided to the exporter to explain the case and reasoned order shall be issued.
8.5 Where the individual rebate claim exceeds 5 lakh rupees, they shall be pre-audited before these are disbursed." "Page 17 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025
NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined Para 3(b)(ii) of Notification 19/2004, "The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise of Central Excise having jurisdiction over the factory of manufacture or warehouse or, as the case may be, Maritime Commissioner of Central Excise shall compare the duplicate copy of application received from the officer of customs with the original copy received from the exporter and with the triplicate copy received from the Central Excise Officer and if satisfied that the claim is in order, he shall sanction the rebate either in whole or in part."
8.13 Rule 11(3)(ii) of the Cenvat Credit Rules, 2004 reads as under:-
11. Transitional provision (1) Any amount of credit earned by a manufacturer under the CENVAT Credit Rules, 2002, as they existed prior to the 10th day of September, 2004 or by a provider of output service under the Service Tax Credit Rules, 2002, as they existed prior to the 10th day of September, 2004, and remaining unutilized 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 utilized in accordance with these rules.
(2) A manufacturer who opts for exemption from the whole of the duty of excise leviable on goods manufactured by him under a notification based on the value or quantity of clearances in a financial year, and who has been taking CENVAT credit on inputs or input services before such option is exercised, shall be required to pay an amount equivalent to the CENVAT credit, if any, allowed to him in respect of inputs lying in stock or in process or contained in final products lying in stock on the date when such option is exercised and after deducting the said amount from the balance, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export.
Page 18 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined [(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if 11(3) (i)....
11(3)(ii) the said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported.
8.14 This Court, in the case of the Commissioner, CGST and Central Excise Vs. M/s. Welspun India Ltd. Reported in Tax Appeal No.775 of 2019 has held as under:-
"10. Further, once the Tribunal has come to the conclusion that refund which was granted to the respondent assessee has become final in view of Rule 6(6) of the Rules 2004, lapsing of cenvat credit provided under Rule 11(3) related to goods already exported would not be applicable. Therefore, invocation of Rule 11(3) of the Rules 2004 is rightly held to be not applicable in the facts of the case."
10. A conjoint interpretation of the aforesaid provisions of law makes it clear that Rule 11(3)(ii) of the Cenvat Credit Rules, 2004 is attracted only if there is an absolute exemption Notification No.30/2004 is clearly a conditional exemptional notification and thus, a harmonious reading of the aforesaid provision and Page 19 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined Notification No. 30/2004 will make it clear that the said Notification No.30/2004 does not attract the provisions of Rule 11(3)
(ii) Cenvat Credit Rules, 2004. The respondents authorities have placed unnecessary reliance on Rule 11(3)(ii) of Cenvat Credit Rule, 2004 which was introduced vide Notification No. 10/2007 dated 1.3.2007 which could be said to be applicable only in cases of absolute exemption granted by a Notification under Section 5A of the Central Excise Act, 1944 . The said Rule 11(3)(ii)) can not be said to be applicable to Notification Nos. 29/2004-CE and 30/2004- CE. This is clear from the plain use of the words "exempted absolutely" in the said sub-rule.
11. In the light of the above discussion and in the facts of the present case, it is seen that the accumulated credit was due to the fact that the petitioners had cleared their final product by paying central excise duty @ 8% and had simultaneously availed Cenvat credit on the raw materials used as inputs @ 16% under Notification No.29/2004 . For the first time, as on 8.3.2006, the petitioners had reversed the Cenvat credit involved in the closing stock of inputs, finish product and yarn westage and balance amount of Cenvat credit was carrried forward. Thus, the petitioners had rightly carried forward its Cenvat credit balance. Further, since Rule 11(3)(ii) of Cenvat Credit Rules, 2004 was introduced vide Notification No.10/2007 dated 1.3.2007, and Notification No. 30/2004 does not provide that unutilized credit is prohibited from being carried Page 20 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025 NEUTRAL CITATION C/SCA/4006/2021 JUDGMENT DATED: 18/12/2024 undefined forward, there could be no question of lapse of credit lying as balance in the Cenvat credit account of the petitioners in the month of April, 2007.
12 In that view of the matter, the petition succeeds and the impugned order dated 14.12.2020 passed by the respondent No.4 is hereby quashed and set aside. Consequently the respondents are directed to sanction and pay the rebate claims noted in para 8.5 hereinabove @ 12% per annum from 10.7.2013 (date of filing the rebate claims) till the date of actual payment. The said amount shall be paid within a period of twelve weeks from the date of receipt of copy of this order. Rule is made absolute. No order as to costs.
(BHARGAV D. KARIA, J) (D.N.RAY,J) BINA SHAH Page 21 of 21 Uploaded by BINA SHAH(HC00353) on Wed Jan 01 2025 Downloaded on : Fri Jan 03 22:19:41 IST 2025