Customs, Excise and Gold Tribunal - Tamil Nadu
Tuticorin Alkali Chemicals And ... vs Commissioner Of Central Excise on 24 August, 2007
Equivalent citations: 2007(123)ECC165, 2007(149)ECR165(TRI.-CHENNAI)
ORDER P. Karthikeyan, Member (T)
1. M/s. Tuticorin Alkali Chemicals and Fertilisers Limited (hereinafter, also TAC) manufacture various products such as Ammonium Chloride, Ammonium Bicarbonate, Sodium Bicarbonate, Soda ash etc. They avail cenvat credit of duty paid on inputs ie, packing materials and export some quantity of Ammonium Chloride (fertilizer grade). They filed several refund claims for the accumulated cenvat credit on account of packing materials as their product, namely, fertilizers are exempt from payment of duty. Sanctioning five such claims made for the years 2003 and 2004, totalling Rs. 4,09,932/- was paid to TAC. During the year 2004, the said orders sanctioning refunds passed by the Assistant Commissioner of Central Excise, Tuticorin Division were reviewed by the Commissioner of Central Excise as per Section 35E of the Central Excise Act, 1944. Accordingly five appeals were filed with the Commissioner of Central Excise (Appeals), Tirunelveli.
2. After hearing the appellants, the Commissioner (Appeals) found that in terms of Rule 5 of Cenvat Credit Rules, 2002, credit accumulated on account of the export of final products under bond or letter of undertaking without payment of duty, the same could be refunded to the manufacturer if, for any reason, adjustment/utilization of such credit for payment of duty on final products or service tax was not possible. The Commissioner found that in addition to exempted Ammonium Chloride (fertilizer grade) TAC was clearing dutiable goods like Soda Ash, Sodium Bicarbonate and that it was possible for the appellants to utilize accumulated cenvat credit for payment of duty on final products. He observed that the appellants paid above Rs. One crore from PLA whereas only Rs. 20 lakhs was paid through cenvat credit. In the light of the above finding, he set aside the orders of the Assistant Commissioner sanctioning the five refund claims of a total amount of Rs. 4,09,932/-
3. The Ld. Counsel appearing for the appellants submits that the appellants had been paid the impugned amounts, sanctioning their refund claims in accordance with law by the competent authority. If the department felt that the amounts had been sanctioned erroneously, the appropriate course of action was to issue a show cause notice under Section 11A of the Central Excise Act and not just filing an appeal under Section 35E(2). As no show cause notice was issued, recovery of the refund amounts already sanctioned could not be ordered. Therefore, the impugned order was liable to be set aside. He also sought to seek support from the decision of the Tribunal in Panyam Cements Mineral Indus. Ltd. v. CCE, Hyderabad reported in 2004 (178) ELT 434 (Tri.-Bang.) and Circular No. 423/56/98-CX dated 22.9.1998 issued by the CBEC. In the circular issued by the Board, the Board had instructed that demands should invariably be issued under Section 11A of the Act and that recourse to review under Section 31E of the Act alone was not sufficient in cases of consequential refunds following orders not accepted. In the order of the Tribunal cited by the Ld. Counsel, the Tribunal had observed that to recover the amounts already paid to the appellants, the only course open to the department was to issue a show cause notice under Section 11A of the Act, for recovery of the erroneous refunds and simultaneously filing the appeal before the appellate authority, challenging the order of the Assistant Commissioner who sanctioned the refund claim.
4. The Ld. SDR furnished a copy of the Notification No. 11/02 CE (NT) dated 01.03.02, laying down the procedure for refund of cenvat credit under Rule 5 of Cenvat Credit Rule, 2002. The notification, interalia, laid down that "the refund is allowed only in those circumstances where a manufacturer is not in a position to utilize the credit of the duty on inputs allowed under Rule 3 of the said rules against goods exported during the quarter or month to which the claim relates". Therefore, the impugned order was passed in accordance with law and deserved to be sustained.
5. I have considered the rival submissions. The impugned order has been passed ordering recovery of the refund amounts already sanctioned to the appellants on the ground that the appellants had not fulfilled the conditions prescribed under Rule 5 of the CCR, 2002. The Commissioner (Appeals) had found that the appellants were paying about a crore every month from PLA and only about Rs. 20 lakhs from cenvat credit. Therefore, they were in a position to utilize cenvat account refund of which was allowed. I find that Rule 5 of the CCR, 2002 grants a substantive right to the assessee for obtaining refund of accumulated cenvat credit if the same cannot be adjusted "for any reason". As the rule approves sanction of refund where adjustment of the credit is not possible "for any reason", the refund cannot be denied if the same was lying unutilized in the cenvat account and the assessee claimed refund of the same.
6. I also find that in the instant case, no show cause notice was issued to recover the refund sanctioned by the Asst. Commissioner. In the Panyam Cements & Mineral Indus. Ltd. v. CCE, Hyderabad case (supra), the Bangalore Bench of this Tribunal had observed as follows:
To recover the amount already paid to the appellant, only course open to the Department was to issue a show cause notice under Section 11A of the Central Excise Act for recovery of the amount erroneously refunded to the appellant and simultaneously filing the appeal before the Appellate Authority, challenging the order of the Assistant Commissioner sanctioning the refund claim. Since the show cause notice for recovery of amount already paid to the appellant has not been issued within time under Section 11A, therefore, the department cannot recover the said amount even if they succeed on merit.
7. In view of the above legal position, the order of the Commissioner (Appeals) ordering recovery of the refund already paid to the appellants is not sustainable. Accordingly, the impugned order is set aside and the appeal filed by TAC is allowed.
(Dictated and pronounced in open court)