Custom, Excise & Service Tax Tribunal
M/S. Exel Rubber Limited vs The Commissioner Of Central Excise on 29 February, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
COURT - I
Appeal No: E/267 & 890/2006
(Arising out of (i) Order-in-/Appeal No: 137/2005 (H-I) CE dated 23.12.2005 & (ii) Order-in-/Appeal No: 13/2006 (H-I) CE dated 10.4.2006 passed by the Commissioner of Customs & Central Excise (Appeals-I), Hyderabad.)
Date of Hearing: 14.09.2011
Date of decision: 29.2.2012
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Exel Rubber Limited
Appellant
Vs.
The Commissioner of Central Excise
Hyderabad-I Commissionerate
Hyderabad.
Respondent
Appearance For the appellants : Ms. Mona. R, Advocate For the respondents : Shri Ganesh Havannur, Additional Commissioner (AR) CORAM SHRI P. G. CHACKO, HONBLE MEMBER (JUDICIAL) SHRI M. VEERAIYAN, HONBLE MEMBER (TECHNICAL) FINAL ORDER No._______________________2012 [Order per: P. G. Chacko]. The facts of this case are as follows:
M/s. Exel Rubber Ltd. (assessee) were engaged in the manufacture of inner tubes of rubber for tyres of various sizes and designs, on job work basis, for M/s. CEAT Ltd. during the material period. The goods were manufactured on conversion basis and then dispatched to CEAT. The assessable value of the goods for the purpose of payment of duty was determined as per the Honble Supreme Courts judgment in the case of Ujjagar Prints Ltd. as applicable to excisable goods manufactured on job work basis. These assessments were made provisionally by the assessee after obtaining the necessary permission from the jurisdictional Assistant Commissioner and executing the required bond and furnishing the required bank guarantee. Accordingly, during the financial year 2003-04, the goods were assessed provisionally and cleared to CEAT on payment of duty. At the end of the financial year, the assessee collected the certificate of cost of production issued by the Cost Accountant of CEAT and, on the basis thereof, estimated the final assessable value of the goods. Statements showing the manner of calculation of such assessable value and the particulars of the differential duty payable by, or refundable to, them were submitted by the assessee to the assessing authority. On the basis of such statements, the assessee by letters dated 15.12.2004 and 23.12.2004 claimed refund of duty of Rs.2,33,923/- after adjusting short payments against excess payments. The Assistant Commissioner, on scrutiny of the statements furnished by the assessee, found that an amount of Rs.2,02,859/- had been short-paid during the period from September 2003 to March 2004 and an amount of Rs.3,56,761/- had been paid in excess. He issued a show-cause notice dated 7.1.2005 to the assessee seeking to recover the short-paid duty of Rs.2,02,859/- with interest thereon under Rule 7 of the Central Excise Rules, 2002 for the year 2003-04 and also to credit the excess paid duty of Rs.3,56,761/- to the Consumer Welfare Fund in the absence of evidence of the incidence of duty having been borne by the assessee. Both the proposals were contested by the assessee in a reply dated 9.2.2005 to the show-cause notice. They submitted that they had already recovered excise duty from CEAT from time to time and therefore the claim for refund of the excess duty paid by them was not hit by unjust enrichment. Further, it was urged that the excess payment of duty be adjusted against short-payment of duty. Furthermore, it was requested that, if upon finalisation of the provisional assessments they were held to be not entitled to refund on the ground of unjust enrichment, the refund be granted to CEAT on an application to be filed by them. In adjudication of the dispute, the Assistant Commissioner by order-in-original No.12/2005 dated 31.3.2005 (a) demanded differential duty of Rs.2,02,859/- from the assessee upon finalisation of provisional assessment for the year 2003-04 under sub-rule (3) of Rule 7 of the Central Excise Rules, 2002, (b) demanded interest thereon under sub-rule (4) of Rule 7, (c) rejected the claim for adjustment of the excess payment of duty (Rs.3,56,961/-) against the short-payment of duty (Rs.2,02,859/-) for the said period and for refund of the net excess duty of Rs.1,36,102/- and (d) sanctioned refund of Rs.3,56,961/- but directed this amount to be credited to the Consumer Welfare Fund. The Assistant Commissioners order came to be upheld by the Commissioner (Appeals) vide order-in-appeal No.137/2005 23.12.2005 in an appeal filed by the assessee. The present appeal No. E/267/2006 of the assessee is directed against the said order-in-appeal.
2. For the financial year 2004-05 also, the assessee resorted to provisional assessment of the job-worked goods after obtaining the necessary permission from the Assistant Commissioner. The goods (inner tubes of rubber for tyres of various sizes and designs) were cleared to CEAT on payment of duty on provisional basis. At the end of the financial year, they submitted to the assessing authority statements showing their own calculation of the duty payable by, or refundable to, them. This calculation was made on the basis of a certificate of cost of production issued by the Cost Accountant of CEAT. On a scrutiny of the statements furnished by the assessee, the Assistant Commissioner found excess payment of duty of Rs.1,21,805/- by the assessee in respect of tubes of certain dimensions and short-payment of duty of Rs.5,70,971/- by them in respect of other tubes cleared to CEAT in 2004-05. The Assistant Commissioner further noted that the assessee had, in their letter dated 17.10.2005, adjusted the excess payment against short-payment and had indicated the net short-payment of duty for 2004-05. The assessing authority thus finalized the provisional assessments and by order No.28/2005 dated 31.10.2005 (a) demanded differential duty of Rs.5,70,971/- for 2004-05 with interest thereon under Rule 7 ibid, (b) rejected the claim for adjustment of excess payment against short-payment for the said period and (c) ordered that the refundable amount of Rs.1,21,805/- be credited to Consumer Welfare Fund. In an appeal filed by the assessee, the Commissioner (Appeals) vide order-in-appeal No.13/2006 dated 10.4.2006 upheld the above order of the Assistant Commissioner. Hence the present appeal No. E/890/2006 of the assessee.
3. Both the appeals were heard by this Bench on 8.12.2009 when two earlier conflicting decisions of the Bench on the issue of adjustment of excess payment of duty against short-payment of duty were noted by the Bench and the issue was referred to a larger Bench vide Misc. Order No.675/2009 dated 8.12.2009. The larger Bench vide Excel Rubber Ltd. vs. Commissioner of Central Excise, Hyderabad: 2011 (268) E.L.T. 419 (Tri.-LB) answered the reference and directed the appeals to be placed before this Bench for final disposal. Accordingly, we have heard both sides in the appeals.
4. The conclusions reached by the larger Bench on the referred issue are contained in para 50 of its judgment, which reads as follows:
50. The fallout of the above discussion? is that once the authority on finalization of assessment finds any amount of money having been paid in excess of the duty liability ascertained in the final assessment, the excess amount so ascertained would become refundable to the assessee. Such excess amount can certainly be adjusted towards any other duty liability of such assessee under the Excise Act, 1944 and Rules made thereunder, however, such adjustments are subject to the applicability of the principle of unjust enrichment. Therefore, before grant of adjustment, the authority will have to ascertain whether such excess amount is to be actually refunded to the assessee or is liable either wholly or partly to be credited to the account of consumer benefit fund and only thereafter make an order of adjustment to the extent the amount is found to be actually refundable and not liable to be credited to the account of consumer benefit fund. Needless to say, that the burden of proof in this regard would lie upon the assessee. The point for consideration is therefore answered accordingly.
5. With reference to the above decision of the larger Bench, the learned counsel for the appellant submitted before us that the impugned orders rejecting the assessees claim for adjustment of excess payment of duty against short-payment of duty were liable to be set aside. It was further submitted that the claim for refund of the duty paid in excess was not barred by unjust enrichment as the duty burden was borne by the assessee. It was claimed that, as per the agreement between the assessee and CEAT, the latter was liable to pay to the former only the appropriate amount of duty and accordingly any excess duty had to be adjusted through debit and credit notes from time to time. It was further claimed that such adjustments were made between the assessee and CEAT and therefore the assessee should be held to have borne the incidence of duty paid in excess. In this context, the learned counsel relied on two High Court judgments viz. Union of India vs. A.K. Spintex Ltd.: 2009 (234) ELT 41 (Raj.) and CCE, Bangalore-I vs. Om Pharmaceuticals Ltd.: 2011 (268) E.L.T. 79 (Kar.). According to the counsel, the assessees claim for refund of the excess duty paid by them was not hit by the bar of unjust enrichment in view of the cited judgments. Therefore, the learned counsel claimed the benefit of the larger Bench decision. It was urged that the claim for adjustment of excess payment of duty against short-payment of duty be allowed. It was also pointed out that, in a similar case of the appellants sister concern, the Commissioner (Appeals) vide Order-in-Appeal No.149/2004 (H-IV) dated 29.11.2004 allowed such adjustment.
6. The learned SDR objected to such adjustment being allowed in one go for the entire financial year. He contended that an excess payment of duty for a period covered by one return could not be adjusted against a short-payment of duty for the period covered by another return. These submissions were made, of course, without prejudice to the Revenues case that the assessees claim for refund of the duty paid in excess was hit by unjust enrichment in the absence of evidence of the incidence of such duty having been borne by them and consequently the adjustment as claimed by the assessee was not admissible in terms of the larger Bench decision.
7. We have given careful consideration to the submissions. In this case, the larger Bench has held that an amount of duty which is found, upon finalisation of provisional assessment, to have been paid in excess could be adjusted towards duty liability arising out of short-payment of duty found in such finalisation of provisional assessment. The Bench has also made clear that such adjustment of excess duty (claimed as refund) is subject to the bar of unjust enrichment. This decision has been accepted by both sides. However, both sides have invited our attention to the difficulty arising out of the fact that no answer is forthcoming from the judgment of the larger Bench vis-`-vis the question whether the above adjustment, subject to unjust enrichment, could be allowed in one go for the entire financial year.
8. In the present case, for 2003-04, the assessee has claimed adjustment of excess duty of Rs.3,56,961/- against short-paid duty of Rs.2,02,859/-. They have claimed refund of the net excess duty of Rs.1,54,102/- for the said financial year. For 2004-05, what is claimed is adjustment of excess duty of Rs.1,21,805/- against short-paid duty of Rs.5,70,971/-. Obviously, the assessee is willing to pay the difference between these amounts towards the demand of duty confirmed against them for 2004-05. According to the learned SDR, such total adjustment of the sum of excess payments against the sum of short-payments in any given financial year is not contemplated under Rule 7 of the Central Excise Rules, 2002. His argument is that the adjustment is permissible only within the period covered by a return.
9. After examining the scope of Rule 7 (assessment), Rule 8 (manner of payment) and Rule 12 (filing of return) of the Central Excise Rules, 2002, we have found a valid point in the submissions of the learned SDR. Rule 7, which provides for the procedure of provisional assessment of duty by the assessee and its finalisation by the proper officer of Central Excise, says that any amount payable to the Central Government consequent to the final assessment shall be paid with interest at the prescribed rate. The interest is required to be paid from the first day of the month succeeding the month for which such amount of duty is determined, till the date of payment of duty. Rule 7 also provides for refund of excess duty to the assessee consequent to final assessment, with interest thereon at the prescribed rate from the first day of the month succeeding the month for which such refund is determined, till the date of refund. These provisions contained in sub-rules (4) and (5) of Rule 7 clearly indicate that the final assessments are required to be made monthwise. Rule 8 which deals with the manner of payment of duty provides that the duty on the goods removed from the factory/warehouse during a month shall be paid by the fifth day of the following month. Rule 12 requires every assessee to submit a monthly return of production and removal of goods. From these provisions, it is eloquently clear that an assessee has to file return and pay duty monthwise and the assessing authority is also required to finalize the assessees provisional assessment monthwise. In a given calendar month, the assessee may have cleared several consignments of excisable goods on payment of duty. In respect of some of these, the assessing authority may find excess payment of duty upon finalisation of provisional assessments. In respect of other transactions of the same month, short-payment of duty may be found upon finalisation of provisional assessments of the monthly return. Adjustment of the excess payment of duty against the short-payment of duty for the period covered by the same return is what is impliedly permitted (subject, of course, to unjust enrichment) by the larger Bench.
We were not shown a copy of order-in-appeal No.149/2004 (H-IV) relied on by the appellant. However, it appears from the records that the order had allowed adjustment of excess payment of duty against short-payment of duty subject to condition related to unjust enrichment vis-`-vis the excess duty claimed as refund. There is no indication of the said order having been challenged by the department. The said order is apparently supported by the view taken by the larger Bench of this Tribunal.
10. The Assistant Commissioner might have given permission to the assessee for provisional assessment of RT-12 returns for an indefinite period from a specified date. For instance, in the present case, the Assistant Commissioner vide provisional assessment order No.1/2001-2002 dated 6.9.2001 ordered thus: I order Provisional Assessments of the RT-12s submitted by the assessee from time to time for the period from 1.7.2001 onwards under Rule 7 of Central Excise Rules, 2001. It was under this permission of the Assistant Commissioner that the assessee resorted to provisional assessment in 2003-04. By similar order dated 4.8.2004, the Assistant Commissioner permitted the assessee to assess their returns (ER-1s) provisionally for the period from April 2004 onwards under Rule 7. Such permission given by the Assistant Commissioner for provisional assessment of monthly returns for a financial year or longer period cannot be any basis for claiming adjustment of excess payments against short-payments upon finalisation of the provisional assessments. In our view, where the law provides for filing of monthly returns, payment of duty on monthly basis and finalisation of provisional assessments on the same basis, any adjustment of excess payment of duty against short-payment of duty cannot be claimed otherwise than on monthly basis.
11. In the impugned orders, the learned Commissioner (Appeals) noted inter alia thus: In any case, the provisional assessment has to be finalized in respect of each RT-12 return filed in a particular month (vide para 11 of each of the impugned orders). This finding of the appellate authority, which is in accord with the provisions of Rule 7 ibid, has not been challenged by the appellant. Therefore the appellant is precluded from claiming total adjustment in one go for the entire financial year. They can claim adjustment only within the period covered by each return. We must hasten to add that even such adjustment cannot be allowed unless the assessee succeeds in surmounting the bar of unjust enrichment.
12. The exercise of adjusting excess duty against shortage of duty has necessarily to be undertaken by the original authority. Needless to say that, before that authority, the assessee has to discharge the burden cast on them by Section 12B of the Central Excise Act. Though, in the present appeals, the assessee has referred to debit and credit notes, they have not produced even specimen copies of any debit/credit notes. Again, though the assessee has spoken of agreement between them and CEAT governing adjustments between them in respect of amounts of duty paid in excess, no copy of such agreement has been brought on record. Suffice it to say that, before this Tribunal, the bar of unjust enrichment has not been dispelled. The assessee may make an attempt before the original authority to rebut the adverse presumption embodied in Section 12B, by adducing evidence against unjust enrichment. We make it clear that we have not expressed any view on the question whether the assessees claim for refund of duty paid in excess is barred by unjust enrichment or not. This issue is open to de novo adjudication.
13. For the reasons already recorded by us, we set aside the impugned orders and allow these appeals by way of remand to the original authority which is directed to consider afresh the claim of the assessee for adjustment of excess payment of duty against short-payment of duty upon finalisation of provisional assessments. Such claim shall be considered on monthly basis. In other words, the amount of duty paid in excess for a month covered by a return may be adjusted against the amount of duty short-paid (if any) for the same month. The adjudicating authority shall also determine whether, for the period covered by each return, the incidence of duty paid in excess was borne by the assessee. Needless to say that the assessee should be given reasonable opportunities of adducing evidence and of being heard.
14. Both the appeals get disposed of in the above terms.
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