Custom, Excise & Service Tax Tribunal
M/S. Sree S.V. M. Textile Mills vs Cce, Coimbatore on 14 August, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/88/2008
(Arising out of Order-in-Appeal No. 96/2007 dated 30.11.07 passed by the Commissioner of Central Excise (Appeals), Coimbatore).
For approval and signature
Honble Shri MATHEW JOHN, Technical Member
__________________________________________________________
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M/s. Sree S.V. M. Textile Mills : Appellants
Vs.
CCE, Coimbatore : Respondent
Appearance Shri S. Jaikumar, Adv., for the appellants Shri P. Arul, Supdt. (AR), for the respondents CORAM Honble Shri MATHEW JOHN, Technical Member Date of Hearing : 14.08.2013 Date of Decision: 14.08.2013 ORDER No._______________ The appellant is in second round of litigation.
2. The proceedings involved five show cause notices issued for rejecting refund claims filed by the appellant, during Dec 2004, as per the provisions of Rule 5 of the Cenvat Credit Rules, 2002. The appellant was both a manufacturer and a dealer in textile products for export. The present appeal is for grant of refund of Rs. 5,21,485/-.
3. They exported goods under three methods viz.:
a) Direct exports after clearance from the factory of the appellant, through merchant exporters where ARE-1 is countersigned by both the appellant and the merchant exporter.
b) Clearance without payment of duty under procurement certificates as per Removal of Goods under Concessional Rate of Duty Rules, 2001 to merchant exporter who consolidated goods from other manufacturers also and exports the goods under ARE-1 filed by them.
c) Clearance without payment of duty under procurement certificates as per Removal of Goods under Concessional Rate of Duty Rules, 2001 to the manufacturers who do further manufacturing process on the goods and export the goods under ARE-1.
4. The appellant had filed the refund claims for Cenvat credit accumulated by them on account of Cenvat credit on inputs used in the manufacture of goods exported under the three methods as above. Five show cause notices were issued on the following grounds:
(i) that the appellants had not proved that they had not availed draw-back claim or rebate of duty on the exports.
(ii) that the appellant had not furnished any proof of export documents such as shipping bills, Bill of export etc. as evidence.
(iii) that the Appellant had not shown that the credit could not be utilized for payment of duty on goods cleared to DTA;
(iv) that the Appellant had not filed the calculation formula for the inputs consumed in the goods exported for arriving at the quantum of refund.
5. On adjudication, refund claims were rejected by five different adjudication orders. The reason stated in the adjudication orders was only that the refund claims were not fully co-related to the proof of export submitted by the assesse that is to say the adjudicating officer was not satisfied with the extent of co-relation established between proof of export and refund claims. There was no mention of any other ground raised in the SCN in the findings given in the adjudication orders. Aggrieved by the orders, the appellant filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) held that the goods exported by removing the goods directly for export from the factory of appellant were to be allowed but he denied refund in the cases of other type of exports. Operative part of the order of the Commissioner (Appeal) is reproduced below:.
7.5 However, I find from the records of the case relating to appeal A.No. 43/2004 and order in Original C.No. V/84/18/75A/04 Rebate that in certain cases the appellants have produced copies of ARE1s endorsed by Customs authorities for shipment for the goods removed from the appellants unit and these ARE1s had been signed by both the appellants and exporter namely M/s. Kesma Impex Ltd. From the ARE1s it is seen that the goods had been removed from appellants premises only, against CT1s. Hence, applying the ratio of the judgement cited above the appellants are eligible for refund in respect of cases in which the gods manufactured by the appellants have been removed under such ARE1s signed by the appellants and merchant exporters and removed from the factory of the appellants. In respect of other removals made against CT1s wherein the merchant exporters had not exported the goods from appellants premises or removals against Annexure I they are not eligible for refund as claimed by them due to the reasons given in the forgoing paras.
7.6. The appellants have alleged that the lower authority had observed that the quantity and value of goods cleared from the factory of manufacture to the merchant exporter and the quantity mentioned in the export documents of the merchant exporter did not match. But, I find from the impugned order that the conclusion of the lower authority is that the proof of export documents produced by the appellants have not proved beyond doubt that the goods cleared by the appellants in their ARE3s have been duty exported.
7.7. Regarding the contention of the appellants that the lower authority ought to have verified the fact of actual exports and then should have proceeded to deny the refund claim if there was misrepresentation of facts, I am of the opinion that the lower authority (who is also the jurisdictional officer of the appellants) is not required to do such verification because refund claims are received from different assessees and Annexure I forms are also received from different formations across the country and every time checking the export details with every formation is not warranted and also it is not practical to verify the export details of each merchant exporter spread over the country before sanction of refund claim. Moreover, no such verification procedure is prescribed under Central Excise Law because the Governments intention is not to consider such cases for refund under rule 5 of the CENVAT Credit Rules, 2002. Hence, the lower authority had no option other than to deny refund in such cases and he had to confine his action on the refund claim filed by the appellants according to the procedure, requirements envisaged in the rule 5 of the Central Excise Rules, 2002.
8. I therefore direct the lower authority to consider the appellants claim in respect of cases where the removals for export under ARE1 have been made by the merchant exporter from the factory of the manufacturer i.e. the factory of the appellants or by the appellants themselves but subject to verification of the facts as per law. I hold that the refund claim cannot be allowed in respect of the remaining cases.
6. Aggrieved by the order of the Commissioner (Appeals), the appellant filed appeal before the Tribunal. The Tribunal vide Final Order No. 91-95/2006 dated 13.02.2006, relying upon the decision of the Tribunal in the case of CCE Vs. UIC Wires Ltd. 2003 (158) ELT 723 (Tri.-Kol.) and other decisions held that refund claims were not deniable to the appellants on the ground that the export goods were not removed from their factory. The appeal filed by the appellant was allowed. The operative portion of the Tribunals order is reproduced below:-
The refund claim considered by the Tribunal in the case of UIC Wires Limited (supra) was one filed under sub-rule 7 of Rule 57 AC of the Central Excise Rules, 1944. The refund claims in question in the present case were filed under Rule 5 of the Cenvat Credit Rules, 2002. This Rule was also cited before the Tribunal in the case of UIC Wires Limited (supra) and the Tribunal found it to be pari materia with Rule 57 AC (7) ibid. In the circumstances, as rightly submitted by the Ld. Counsel, there must be no difficulty in applying the ratio of the above decision of the facts of the instant case. In the result, it will be held that the refund claims are not deniable to the appellants on the ground that the export goods were not removed from their factory. It appears from the impugned order that, irrespective of whether the refund claim relates to export goods cleared under ARE-1s or under ARE-2s, the view taken by the lower appellate authority is that such goods must be removed from the appellants premises so as to claim the benefit of refund under Rule 5 of the Cenvat Credit Rules, 2002. This view is apparently contradictory to UIC Wires Ltd (supra). No binding rival decision has been cited before me by the Revenue.
5. In the result, the impugned order gets set aside and the appeals are allowed.
7. In pursuance of the above decision of the Tribunal, the adjudicating authority took up the refund claims for further process and the refund claims were processed afresh. The adjudication order in file No. V/52/18/94/2007-Refunds 17.04.2007 has been passed in such a proceeding. In this order, an amount of Rs.3,39,672/- was sanctioned and an amount of Rs. 5,21,485/- was rejected. The amount was restricted by calculating the amount of inputs going into the goods exported and also for the reason that the appellant was following up the refund amount for lower amounts. It appears that the appellant has been able to utilize part of the Cenvat credit on clearance of goods in between. Aggrieved by the order, the appellant filed appeal before the Commissioner (A). The Commissioner (A) rejected the appeal on a fresh ground that the appellant has claimed refund on excise duty paid in the capacity as a dealer and not as a manufacturer. It is held by the Commissioner (A) that Rule 5 of Cenvat Credit Rules, 2002 was not applicable to the manufacturer and hence the appellant was not eligible for refund. Aggrieved by the order, the appellant has filed this appeal before the Tribunal.
8. The Ld. Advocate for the appellants submits that the ground given for rejecting the refund claim was not mentioned in the show cause notices originally issued. Secondly, he submits that he invites attention to the Notification no. 34/03-CE dated 10.04.03, under which dealers dealing exclusively in goods falling under Chapter 50 to 63 of the first schedule to the CETA was given an option to pay excise duty on their option and if they were to opt for such procedure the provisions of Central Excise Rules, 2002 and Cenvat Credit Rules, 2002 were made applicable to such dealers. At the time of issuing the said notification, a clarification was also issued by the Ministry under reference F.No. B.3/4/TRU -2003 (Pt.I), dated 10.04.2003, which reads as under:-
The registered dealers of textiles and textile articles falling under Chapters 50 to 63, at his option, can take credit on his purchases and utilise the same to pay duty at the sale price of the said goods after pacing etc. treating the clearance of such gods from his premises, as if they were manufactured by him
9. He submits that Rule 4A (b) specifically allows such persons to take Cenvat credit of dues on inputs and the appellant had taken such Cenvat credit and claimed refund of such credit taken. His submission is that when the central excise Rules provides that when the assessee is deemed as a manufacturer for the purpose of payment of duty, for the purpose of refund under Rule 5 of Cenvat Credit Rules also he is to be treated as a manufacturer and refund should be allowed.
10. Opposing the prayer, the Ld. AR of the Revenue submits that Rule 4A (a) introduced by Notification No. 34/03-CE(NT) envisages payment of an amount equal to the duty of excise. He submits that therefore this amount cannot be treated as excise duty. Further it is submitted that it clearly shows that the dealer is not exactly at the same footing as the manufacturer. Since, Rule 5 specifically mentions only manufacturers and not dealers, the appellant is not eligible for refund of Cenvat credit taken in the capacity as a dealer. He submits that the only such credit is denied and the rest of the credit has been refunded and therefore the appeal is not sustainable. He argues that a deeming ficion created for payment of duty cannot be applied for claiming refund. He relies on the decision of Gujarat High Court in the case of Essar Steel Ltd Vs. UOI-2010(249) ELT 3 Guj.
11. Considered the submissions on both sides. I find that in the first round of litigation, the Commissioner (A) had allowed refund claims for all goods cleared from the factory of the appellant for export and rejected the refund claims only in respect of the goods which were cleared from the premises of the merchant exporters or other manufacturers. Against this, the appellant came in appeal before the Tribunal and that appeal was allowed without any qualification which would imply that the entire refund which was originally asked for got sanctioned consequent to the order of the Commissioner (A) and further orders of the Tribunal. So a second round of examination of eligibility for refunds was prima facie unwarranted. Further, it is seen that in the second round of proceedings of refund claims, the adjudicating authority as well as the first appellate authority have relied on new grounds for rejecting the refund claims without even putting the appellant on notice. Therefore, on the basis of principles of natural justice also, the orders in the second round of litigation are not maintainable. Further, it is seen that even on merits, the Revenue is not having a case because, Central Excise Rules, 2002 and Cenvat Credit Rules, 2002 as amended by the Notification No. 34/03-CE (supra) gave an option to the dealer of textile goods to pay excise duty as if he was a manufacturer and to comply with all the rules and regulations. When such an option is given, it is to be understood that the option is in respect of all matters related to payment of duty as well as claims of refund consequent to exports and the arguments made by the Revenue that only for payment of duty, a dealer of textile goods will be considered as a manufacturer and not for refund of Cenvat credit is not consistent and not in conformity with the policy of the Government to allow export of goods without incidence of taxes just has the Gujarat High Court observed in the case of Essar Steel Ltd hat it collecting export duty on goods supplied to SEZ is not consistent with the policy of making goods available to SEZs in the country without duty incidence. Further in that case there was a direct conflict between the provisions of Customs Act and SEZ Act as to what will constitute export. There is no such issue in this case.
12. Because of these reasons, I find that the appeal filed by the appellant is to be allowed and it is ordered accordingly with consequential benefit subject of course to the condition that the impugned Cenvat credit of Rs. 5,21,485/- has not been utilized by the appellant for payment of duty during the period from date of filing of the claims to the date of sanction of the refund.
(Operative part of the Order pronounced in the open court on 14-08-13) Mathew John Technical Member BB 2