Custom, Excise & Service Tax Tribunal
Atv Projects India Limited vs Commissioner Of Central Excise And ... on 6 September, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH
Excise Appeal No. 87084 of 2019
(Arising out of Order-in-Appeal No. MKK/28/RGD APP/2019-20 dated 26.04.2019
passed by Commissioner of Central Tax, Central Excise & Service Tax (Appeals),
Raigarh.)
M/s. ATV Projects India Ltd. ........Appellant
1201, 12th Floor, Windfall Building,
Sahar Plaza Complex, Next to Kohinoor Hotel,
Andheri Kurla Road, Andheri (East),
Mumbai - 400 059
VERSUS
Commissioner of Central Excise & ........Respondent
Service Tax, Raigad
4th Floor, Kendriya Utpad Shulk Bhawan,
Plot - 01, Sector - 17, Khandeshwar,
Raigad, Maharashtra - 410 206
APPERANCE:
Shri Ganesh Kumar, Chartered Accountant for the Appellant
Shri Sanjay Hasija, Superintendent, Authorised Representative for the
Respondent
CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
FINAL ORDER NO. A/86340/2023
INTERIM ORDER NO. 10/2021
Date of Hearing: 13.07.2021
Date of Decision: 28.09.2021
PER: DR. SUVENDU KUMAR PATI
Issue to be decided by us relates to refund of unutilised
CENVAT credit on closer of factory in the form of cash, for which no
provision exist in the CENVAT Credit Rules vis a vis Section 11 of the
Central Excise Act, but divergent judicial decisions are available in all
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hierarchy of Courts where tax disputes are decided including that of
the Apex Court. The primary consideration before us, therefore,
would be the applicability of binding judicial precedent that would
govern the field than the statutory enactments.
2. Factual backdrop that has brought the dispute to this Appellate
Tribunal stage relates to a refund application filed by the present
appellant for refund of accumulated CENVAT credit to the tune of
Rs.1,80,26,559/- at the time of closer of their factory in 2017 as
utilisation of the same was otherwise impossible consequent upon
such closer of its factory. The said application was filed before the
Assistant Commissioner of Central Excise, Division-IV, Range-I, New
Panvel who after following the required procedural formalities had
refused the same on 24.01.2018 in his newly designated capacity of
the Assistant Commissioner, CGST & CX, Division-IV, Raigad. Appeal
filed before the learned Commissioner of Central Tax (Appeals),
Raigad by the present appellant yielded no fruitful result as he was
unable to form an opinion concerning admissibility of such refund
since the issue of refund of unutilised credit in case of closer of
factory had not attained finality then in view of divergent findings of
the Bombay High Court that led to the formation of a Larger Bench
before whom the issue was pending for a final verdict. Appellant is
before us challenging the legality of such order of the Commissioner
of Central Tax (Appeals) who followed the latter Division Bench Order
on the Hon'ble Bombay High Court passed in Gauri Plasticulture Pvt.
Ltd. Vs. Commissioner of Central Excise reported in 2018 (360) ELT
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967 (Bom.) and not the previous one namely Jain Vanguard
Polybutylene Ltd. [2009 (247) ELT 658 (Tri-Mumbai)] judgement of
the same High Court that was passed following the judgment of the
Hon'ble Supreme Court passed in Slovak India Trading Co. Pvt. Ltd.
reported in 2008 (223) ELT A170 (SC).
3. During the course of argument both sides argued on point of
law as well as on the principle governing binding precedent including
stare decisis and res judicata which could be surmised below.
3.1 Learned Counsel for the appellant Shri Ganesh Kumar,
Chartered Accountant argued and placed on record through his
written submissions that appellant had discontinued the production
but it has been filling statutory returns till the end of June, 2017
which has established the fact that it had accumulated CENVAT credit
of Rs.1,80,26,559/- in its CENVAT credit account against which it
sought refund placing reliance on the decisions of the Slovak India
Trading Co. Pvt. Ltd. - [2006 (201) ELT 559 (Kar.)], Jain Vanguard
Polybutylene Ltd. Vs. Commissioner of CCEx, Nashik reported in
[2009 (247) ELT 658 (Tri-Mumbai)], DCM Fabrics Vs. CCEx reported
in [2009 (239) ELT 139 (Tri.-Del)], relevant portion of which were
also annexed to the refund application. However, placing reliance on
Purvi Fabrics and Texturise reported in [2015 (319) ELT 551 (SC.)]
the adjudicating authority had rejected the refund claim while placing
reliance on Gauri Plasticulture Pvt. Ltd. reported in [2018 (360) ELT
967 (Bom.)] (hereinafter to be referred as Gauri-I). Learned
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Commissioner (Appeals) had also rejected the refund claim, though
going by the rule of precedent they should have allowed the same in
obedience to the judgment of the Hon'ble Supreme Court delivered in
the case of Commissioner Vs. Slovak India Trading Co. Pvt. Ltd.
reported in [2008 (223) ELT A170 (SC)], that all Courts and
Tribunals are bound to follow. He also submitted that it was clearly
referred by the Hon'ble Karnataka High Court in the appeal on point
of law preferred by Slovak India Trading Co. Pvt. Ltd. that there was
no express prohibition in terms of Rule 5 of the CENVAT Credit Rules
2004 to refuse refund and even otherwise also, Rule 5 relates to a
manufacturer, which tag appellant had lost after closer of the
company, for which Rule 5 cannot be invoked for the purpose of
rejection of refund as rightly ruled by CESTAT and therefore refund is
fully justified in the case of closer of factory in the light of assessee
switching over from MODVAT to CENVAT scheme, which facts also
bears resemblance to the appellant, for which he sought intervention
of this Tribunal to set aside the order of the Commissioner (Appeals)
by allowing refund to the appellant.
3.2 In response to such submissions, learned Authorised
Representative for the Respondent-Department Shri Sanjay Hasija,
with reference to the judgment of Gauri Plasticulture Pvt. Ltd. Vs.
Commissioner of Central Excise reported in [2018 (360) ELT 967
(Bom.)] para 26 and Larger Bench of CESTAT judgment in the case
of M/s Steel Strips reported in [2012 (26) STR 70 (Tri.-LB)] para
5.16 argued that SLP agasint Slovak India Trading Co. Pvt. Ltd. was
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dismissed only on the basis of concession made by the Revenue that
decisions relied upon by the Hon'ble Karnataka High Court had not
been appealed against. He also submitted that refund results in
outflow from treasury, which needs sanction of law for which order
for refund cannot be passed in the absence of express provision to
grant such refund and therefore when the issue had not attained
finality, the decision of the Hon'ble Mumbai High Court in the case of
Gauri Plasticulture Pvt. Ltd. Vs. Commissioner of Central Excise
reported in [2018 (360) ELT 967 (Bom.)] needs to be followed that
would sustain the order passed by the Commissioner (Appeals).
4. We have carefully gone through the issue in detail. At the
outset, we would like to place it on record that there are at least 11
judgements post 2006 brought to our knowledge so far, in which it
was held that refund of unutilised CENVAT credit was not admissible
in the similar circumstances. They are
Cellular Operators Association of India [2018 (14) G.S.T.L. 522
(Del.)], M/s. Steel Strips reported in [2011-TIOL-656-CESTSAT-Del-
LB], Gauri Plasticulture Pvt. Ltd. [2019-TIOL-1248-HC-MUM-CX-LB],
M/s. Idol Textile Ltd. [2019-TIOL-2675-CESTAT-MUM], M/s. Maxheal
Pharmaceuticals (India) [2017-TIOL-2937-CESTAT-MUM], M/s.
Zenith Silk Mills Pvt. Ltd. [2017-TIOL-2375-CESTAT-MUM], M/s.
Phoenix Industries Pvt. Ltd. [2014-TIOL-1981-CESTAT-MUM], M/s.
Sutherland Global Services Pvt. Ltd. [2020-TIOL-192- HC-MAD-GST],
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M/s. Bhel [2020-TIOL-255-CESTAT-HYD], D. J. Malpani [2019 (366)
ELT 385 (S.C.)], Manoj Narula Vs. UOI [Writ Petition (Civil) No. 289
of 2005]
Likewise there are at least 8 judgements including that of the Hon'ble
Supreme Court available with us in which CENVAT credit refund in
cash after closer of factory is held to be admissible. They are
Union of India Vs. Slovak India Trading Co. Pvt. Ltd. - [2006
(201) ELT 559 (Kar.)], Union of India Vs. Slovak India Trading Co.
Pvt. Ltd. - [2008 (223) ELT A170 (S.C.)], Slovak India Trading Co.
Pvt. Ltd. Vs. CCE, Bangalore - [2006 (205) ELT 956 (Tri.-Bang.)],
Welcure Drugs & Pharmaceuticals Ltd. Vs. CCE, Jaipur [2018 (15)
GSTL 257 (Raj.)], Shalu Synthetics Pvt. Ltd. Vs. CCE, Vapi - [2017
(346) ELT 413 (Tri.-Ahmd.)], Commissioner Vs. Shree Krishna Paper
Mills and Industries Ltd. - [MANU/PH/3052/2019], Nichiplast India
Limited Vs. Principal Commissioner, CGST [Excise Appeal No. 50790
of 2019 decided on 23.07.2021], Castrol India Limited Vs. The
Commissioner of GST and C. Ex. [Appeal No. E/40711/2013] of
CESTAT Chennai date of judgment 13.03.2019.
4.1 We are not here to count the number and declare the rule of
majority. Rather we consider it as our onerous duty to attempt a
ruling on the judicial precedent that would govern the field and hold
good for us so as to be guided by the conclusion arrived at, that
would atleast remove the myth from the judicial circle that 'certainty
of law is a legal myth'.
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5. 'March of law' on this issue is manifest through various judicial
pronouncements and to top the list, reference to the judgment of
Slovak India Trading Co. Pvt. Ltd. (supra) passed by the Hon'ble
Karnataka High Court is worthmentioning where the following points
of law were answered in the affirmative. They are ...
"(a) Whether under the facts and circumstances of the
case the Tribunal is right in ordering for refund even if
there is no provision in Rule 5 of Cenvat Credit Rules
2002, to refund the unutilized Credit?
(b) Whether under the facts and circumstances of the
ease the Tribunal is right in ordering for refund even if
there is no production and there is no clearance of
finished goods?
(c) Whether under the facts and circumstances of the
case the Tribunal is right in holding that respondent is
entitled for refund even if it goes out of Modvat Scheme
or Company is closed?"
5.1 The Division Bench referred to Rule 5 of the Cenvat Credit
Rules, 2002 by quoting the same. The Division Bench observed that
though there may not be a specific provision in the said Rule 5 to
grant refund when the manufacturing is stopped as a result of the
closure of the factory, there is no prohibition in terms of Rule 5.
Paragraph 5 of the said decision reads thus :-
"5. There is no express prohibition in terms of
Rule 5. Even otherwise, it refers to a
manufacturer as we see from Rule 5 itself.
Admittedly, in the case on hand, there is no
manufacture in the light of closure of the
Company. Therefore, Rule 5 is not available for
the purpose of rejection as rightly ruled by the
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Tribunal. The Tribunal has noticed that various
case laws in which similar claims were allowed.
The Tribunal, in our view, is fully justified in
ordering refund particularly in the light of the
closure of the factory and in the light of the
assessee coming out of the Modvat Scheme. In
these circumstances, we answer all the three
questions as framed in para 17 against the
Revenue and in favour of the assessee."
5.2 The Union of India preferred Special Leave Petition (C) No.
CC476 of 2007 [2008 (223) E.L.T. A170 (S.C.)] against the aforesaid
decision of the Karnataka High Court which was dismissed by passing
the following order:-
"Delay condoned.
The Tribunal while allowing the appeal
filed by the respondent assessee has relied
upon the following decisions :
1. Eicher Tractors v. CCE, Hyderabad, 2002
(147) E.L.T. 457 (Tri.-Del.);
2. Shree Prakash Textiles (Guj.) Ltd. v.
CCE, Ahmedabad, 2004 (169) E.L.T. 162 (Tri.-
Mumbai);
3. CCE, Ahmedabad v. Babu Textile
Industries, 2003 (158) E.L.T. 215 (Tri.-
Mumbai); and
4. CCE, Ahmedabad v. Arcoy Industries,
2004 (170) E.L.T. 507 (Tri.-Mumbai).
of the Tribunal in which it has been held
that the assessee is entitled to refund of the
amount deposited if the assessee has gone out
of the Modvat Scheme or their unit is closed.
Aggrieved against the order of the Tribunal,
revenue filed C.E.A. No. 5/2006 in the High
Court of Karnataka at Bangalore. The High
Court by its impugned order has affirmed the
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order of the tribunal and dismissed C.E.A. No.
5/2006 filed by the revenue.
Learned ASG appearing for the Union of
India fairly concedes that those decisions of the
Tribunal, which were relied upon by the
Tribunal, have not been appealed against.
In view of the concession made by the
Learned ASC, this special leave petition is
dismissed."
5.3 In the case of Jain Vanguard Polybutylene Ltd. (supra), the
same question arose before the Appellate Tribunal as to whether a
refund under Rule 5 of the Cenvat Credit Rules, 2004 of the un-
utilized Cenvat credit availed by the assessee can be allowed on the
ground of the closure of the factory. The Tribunal relied upon the
decision of the Karnataka High Court in the case of Slovak India
Trading Company and noted that the said decision has been
confirmed by the Apex Court and therefore, allowed the Appeal of the
assessee. This order was carried by the Revenue to the Hon'ble
Bombay Court. The Appeal was dismissed in-limine by a Division
Bench of Court."
(para 5.1 onwards is borrowed from M/s. Gauri Plasticulture Pvt. Ltd.
referral judgment)
5.4 Among the observations made by the Division Bench of the
Hon'ble Bombay High Court, it is worth-reproducing the most
relevant portion noted in para 3 of the said judgment which reads:
"3 ... Notwithstanding this concession, it is not possible
to say that the S.L.P. was dismissed in view of the
concession given by the Additional Solicitor General. No
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concession was given with regard to the correctness of
the judgment of Karnataka High Court. This judgment
was confirmed by the Apex Court on its own merits for
the reasons stated therein. The Tribunal was wrong in
observing that the S.L.P was dismissed because the
Learned Additional Solicitor General had conceded the
correctness of the High Court's judgment. What was
conceded by the Learned Additional Solicitor General
was that the various judgments relied upon by the Court
were not appealed against and not the correctness of the
judgment of Karnataka High Court. The Apex Court in
Birla Corporation Ltd. v. Commissioner of Central Excise
- 2015 (186) E.L.T. 266 (S.C.) held that when question
arising for consideration on facts almost identical to
previous case, Revenue cannot be allowed to take
different view. Following this principle, we cannot take
any other view other than the one approved by the Apex
Court, which came before it from the Karnataka High
Court."
6. Having regard to the findings of the Hon'ble Supreme Court of
India and that of the Hon'ble Bombay High Court, the issue could
have been said to have set at rest had there not been a finding of
the Apex Court in Jain Vanguard Polybutylene Ltd. (supra) judgment,
where SLP was dismissed against the decision of the same Hon'ble
Bombay High Court while keeping the question of law open. The
operating portion of the order reads:
"24. There is one more important aspect of the matter.
We may note here that while dismissing the Special Leave
Petition filed against the aforesaid decision of the Division
Bench of this Court in the case of Jain Vanguard (supra),
the Apex Court passed the following Order:
"Delay condoned. We find no reason to interfere
with the impugned order in exercise of our
discretion under Article 226 of the Constitution.
The Special Leave Petition is, accordingly,
dismissed leaving the question of law open.""
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7. The above observation coupled with the noting of the Hon'ble
Supreme Court made in the SLP filed against the Hon'ble Karnataka
High Court judgment in Slovak India Trading Co. Pvt. Ltd. (supra)
had apparently led the Division Bench of the Bombay High Court to
conclude for setting up of a Larger Bench in the appeal of M/s. Gauri
Plasticulture Pvt. Ltd. on 23rd April 2018 primarily for the reason that
dismissal of SLP would not help the Doctrine of Merger enforceable
as a binding precedent, in view of the categorical pronouncement of
the Hon'ble Supreme Court in the case of Kunhayammed and Others
Vs. State of Kerala and Another. In paragraph 44 of the said order
the findings of the Hon'ble Apex Court had been crystallised and it is
imperative to reproduce sub para V of the said order
"(V) If the order refusing leave to appeal is a speaking
order, i.e.it gives reasons for refusing the grant of
leave, then the order has two implications. Firstly, the
statement of law contained in the order is a declaration
of law by the Supreme Court within the meaning of
Article 141 of the Constitution. Secondly, other than the
declaration of law, whatever is stated in the order
are the findings recorded by the Supreme Court
which would bind the parties thereto and also the
court, tribunal or authority in any proceedings
subsequent thereto by way of judicial discipline,
the Supreme Court being the Apex Court of the
country. But, this does not amount to saying that the
order of the court, tribunal or authority below has stood
merged in the order of the Supreme Court rejecting
special leave petition or that the order of the Supreme
Court is the only order binding as res judicata in
subsequent proceedings between the parties."
(emphasis Supplied)
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8. Now it is to be seen if the order passed by the Hon'ble
Supreme Court in Slovak India Trading Co. Pvt. Ltd. (supra), as
reproduced in the preceding para, is a speaking order that gives
reason for refusing grant of leave or not? The Division Bench of The
Hon'ble Bombay High Court in Jain Vanguard Polybutylene Ltd. case
stated that it was a speaking order since the judgment was
confirmed by the Apex Court on its own merit for the reasons stated
therein. It added that the dismissal was because of the fact that
learned Additional Solicitor General had conceded the
correctness of the High Court judgment and admitted that
various judgements relied upon by the court were not
appealed against. On the other hand, the subsequent Division
Bench of the Hon'ble Bombay High Court in Gauri Plasticulture Pvt.
Ltd. (Gauri-I) had formed a view that SLP against Slovak India
Trading Co. Pvt. Ltd. was not dismissed by recording reasons and
merit but was dismissed only on the basis of a concession
made by the learned Additional Solicitor General and that in
Jain Vanguard Polybutylene Ltd. appeal, question of law was
kept open, for which the Hon'ble Chief Justice of Hon'ble Bombay
High Court was requested by the Bench to form a Larger Bench and
refer the following questions to Larger Bench. They are
"(a) Whether cash refund is permissible in terms
of clause (c) to the proviso to section 11B(2) of the
Central Excise Act, 1944 where an assessee is unable to
utilize credit on inputs?
(b) Whether by exercising power under Section 11B of
the said Act of 1944, a refund of un-utilized amount of
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Cenvat Credit on account of the closure of
manufacturing activities can be granted.?
(c) Whether what is observed in the order dated 25th
January 2007 passed by the Apex Court in Petition for
Special Leave to Appeal (Civil) No. CC 476 of 2007
(Union of India v. Slovak India Trading Company Pvt.
Ltd.) can be read as a declaration of law under Article
141 of the Constitution of India?"
8.1 The appeal of Gauri Plasticulture Pvt. Ltd. and above referred
points were heard and disposed by the Hon'ble High Court of Bombay
on 14.06.2019, reported in [2019 (6) TMI 820 (Bombay - H.C.)]
(hereinafter to be referred as Gauri-2). All the three questions of law
frame as above were answered in the negative. Hon'ble Bombay
High Court had dealt with both point of law on the issue of
admissibility of credit and on judicial precedent including Doctrine of
Merger and arrived at the conclusion.
9. Now the issue before us is whether to follow the order as
passed the Hon'ble Bombay High Court, which is also the
jurisdictional High Court as the correct precedent or to follow the
principle as set in Slovak India Trading Co. Pvt. Ltd. case by the
Hon'ble Supreme Court, since, there is a district finding in the order
of Gauri Plasticulture Pvt. Ltd. (Gauri-2) that order dated 25.01.2007
of the Apex Court is not a declaration of law under Article 141 of the
Constitution of India. This Tribunal is not competent to scrutinise
either of the judgments but is bound by the rule of precedent as well
as guided by its own Larger Bench decisions in this connection. It is
pertinent to refer a paragraph of the decision of Hon'ble Supreme
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Court passed in the case of Assistant Commissioner of Central
Excise, West Bengal Vs. Dunlop India and Others [(1985) 1 SCC 260]
where they reproduced the famous quote from the case of Cassel
and Co. Ltd. Vs. Broome [(1972) A.C. 1027] it reads:
"...we hope it will never be necessary for us to say so
again that 'in the hierarchical system of Courts'
which exists in our country, 'it is necessary for
each lower tier', including the High Court, to
accept loyally the decisions of the higher tiers'. "It
is inevitable in a hierarchical system of Courts that
there are decisions of the Supreme appellate
Tribunal which do not attract the unanimous
approval of all members of the judiciary...... But the
judicial system only works if someone is
allowed to have the last word and that last
word, once spoken, is loyally accepted". The
better wisdom of the Court below must yield to
the higher wisdom of the Court above. That is
the strength of the hierarchical judicial system."
(emphasis Supplied)
This would fortify the findings of the Hon'ble Bombay High Court
in Commissioner of Customs(Import) case [2010 TIOL-498-HC-
Mum-Cus para 13]on binding precedent that the question of law
directly arising in the case should not be dealt with apologetic
approaches.
A Constitution Bench of Supreme Court in Raghubir Singh's
case [(1989) 2 SCC 754] also reaffirmed the doctrine of
binding precedents in the following words:
"8. Taking note of the hierarchical character of the
judicial system in India, it is of paramount
importance that law declared by this Court should
be certain, clear and consistent. It is commonly
known that most decisions of the courts are of
significance not merely because they constitute
an adjudication on the rights of the parties and
resolve the dispute between them, but also
because in doing so they embody a
declaration of law operating as a binding
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principle in future cases. In this latter aspect
lies their particular value in developing the
jurisprudence of the law."
(emphasis Supplied)
10. Though Larger Bench of this Tribunal had answered the
admissibility of refund claim in the negative in M/s Steel Strips
reported in [2011 (269) ELT 257 (Tri.-LB)] by referring to all its
previous judgements that was also followed in Purvi Fabrics and
Texturise (supra), in Mira Silk Mills Vs. Commissioner of Central
Excise Mumbai, the Larger Bench of this Tribunal way back in [2003
(153) ELT 686 (Tri.-LB)] had laid down the norm to the effect that
if there is conflict between law laid down by the Hon'ble High
Court and ratio of the decision of the Tribunal, whether it is a
Larger Bench or not, Hon'ble High Court decisions will prevail
over Tribunals decisions unless the same is inflict with a
decisions of the Apex Court. In another decision of a five member
Bench of this tribunal way back in 1987 [RLT-LB-CEGAT-87], it was
also held that in case of conflicting decisions of different High Courts
including that of the particular High Court where the assessee or the
Jurisdictional Officer is residing, Tribunal while dealing with Central
Acts, will have the independence to analyse the issue objectively and
arrive at a finding. The relevant para 70 of the said Larger Bench
Judgment reads:
"We also feel that as a Tribunal, working on all-India
basis, we have the freedom to consider judgments
holding conflicting views given by different High Courts,
and then see for ourselves as to which authority,
applied more fully and aptly to the facts of a given case,
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before us. For, in view of the scheme of the Act, under
which we are functioning, as brought into focus in paras
59 and 61 above, we are constrained to repel the
argument, that we are circumscribed by the view of a
particular High Court where the assessee or a particular
Collectorate is, because that would inevitably land the
Tribunal in a mess, propounding conflicting and
contradictory views, vitiating its very existence, and
cutting down the wholesome principles, desirability
whereof has been highlighted in para 60 above. We,
therefore, feel duty-bound to determine ourselves, this
issue; namely, continuation of proceedings pending at
the time of the respective amendments, and adopting
the view of Madhya Pradesh High Court as enunciated in
Gwalior Rayon case (supra), we hold that these
proceedings can continue, which view a Bench of this
Tribunal already expressed, without much controversy
having been raised in the case of Carew & Co. Ltd. v.
Collector of Central Excise, Allahabad (1983 E.L.T.
1186) (CEGAT) ---"
10.1 Therefore, taking into consideration the above decisions that
would guide the binding precedent to govern the Tribunal, it is
crystal clear that decision of the Hon'ble Supreme Court shall have to
be followed by this Tribunal in all circumstances. Which is also the
mandate of the Constitution in view of clear language of the Article
141 of the Constitution of India.
11. The confusion in the present scenario that would burden the
mind of the Bench is the finding of the full Bench decision in Gauri
Plasticulture Pvt. Ltd. [2019 (6) TMI 820 BHC] that rejection of SLP
without assigning any reason would not be treated as a binding
precedent under Article 141 of the Constitution of India. In this
connection reference was also made to the leading case
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Kunhayammed and Others (supra) of the Hon'ble Supreme Court on
the Doctrine of Merger, more particularly, to sub-para V of para 44
[already reproduced in the preceding para]. However, this para 44
reiterates the sum and substance of Kunhayammed and Others
judgement in the form of its conclusion but the real meaning of sub-
para V can better be inferred from para 40 of the said Kunhayammed
and Others judgment which is required to be reproduced here for a
better clarity:
"40. A petition seeking grant of special leave to appeal
may be rejected for several reasons. For example, it may
be rejected (i) as barred by time, or (ii) being a defective
presentation, (iii) the petitioner having no locus standi to
file the petition, (iv) the conduct of the petitioner
disentitling him to any indulgence by the Court, (iv) the
conduct of the petitioner having no disentitling him to any
indulgence by the Court, (iv) the question raised by the
petitioner for consideration by this Court being not fit for
consideration or deserving being dealt with by the Apex
Court of the country and so on. The expression often
employed by this Court while disposing of such
petitions are - "heard and dismissed", "dismissed",
"dismissed as barred by time" and so on. May be that
at the admission stage itself the opposite party appears on
caveat or on notice and offers contest to the
maintainability of the petition. The Court may apply its
mind to the meritworthiness of the petitioner's prayer
seeking leave to file an appeal and having formed an
opinion may say "dismissed on merits". Such an order may
be passed even ex-parte, that is, in the absence of the
opposite party. In any case, the dismissal would remain a
dismissal by a non-speaking order where no reasons have
been assigned and no law has been declared by the
Supreme Court. The dismissal is not of the appeal but of
the special leave petition. Even if the merits have been
gone into, they are the merits of the special lave petition
only. In our opinion neither doctrine of merger no Article
141 of the Constitution is attracted to such an order.
Grounds entitling exercise of review jurisdiction conferred
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by Order 47 Rule 1 of the C.P.C. or any other statutory
provision or allowing review of an order passed in exercise
of writ or supervisory jurisdiction of the High Court (where
also the principles underlying or emerging from Order 47
Rule 1 of the C.P.C. act as guidelines) are not necessarily
the same on which this court exercises discretion to grant
or not to grant special leave to appeal while disposing of a
petition for the purpose. Mere rejection of special leave
petition does not take away the jurisdiction of the
court, tribunal or forum whose order forms the subject
matter of petition for special leave to review its own
order if grounds for exercise of review jurisdiction are
shown to exist. Where the order rejecting an SLP is a
speaking order, that is, where reasons have been assigned
by this Court for rejecting the petition for special leave and
are stated in the order still the order remains the one
rejecting prayer for the grant of leave to appeal. The
petitioner has been turned away at the threshold without
having been allowed to enter in the appellate jurisdiction of
this Court. Here also the doctrine of merger would not
apply. But the law stated or declared by this Court in
its order shall attract applicability of Article 141 of
the constitution. The reasons assigned by this Court
in its order expressing its adjudication (expressly or
by necessary implication) on point of fact or law
shall take away the jurisdiction of any other court,
tribunal or authority to express any opinion in
conflict with or in departure from the view taken by
this Court because permitting to do so would be
subversive of judicial discipline and an affront to the
order of this Court. However this would be so not by
reference to the doctrine of merger."
(emphasis Supplied)
12. A conjoint reading of both sub-para V of para 44 vis-a-vis para
40 of Kunhayammed and Others judgment would reveal promptly
three things. First, the grounds of rejection of SLP which are not on
merit. Second, the fact of rejection of SLP with reason that can be
considered as merit of the Special Leave Petition only and not to be
19
E/87084/2019
equated with Doctrine of Merger but it is still a binding precedent as
per Article 141 of the Constitution of India and third, which would
govern the rule in the field, is the effect of the order refusing leave to
appeal with reason (speaking order), then the implication of that
order is that it takes away the jurisdiction any other court on point of
fact or law.
12.1 Hon'ble Supreme Court further clarified that implication of that
order is a declaration of law within the meaning of Article 141 of the
Constitution of India and that it would bind the parties as well as any
other Court, Tribunal and Authorities in any proceeding subsequent
there to by operation of judicial precedent.
13. The issue before the Larger Bench of Hon'ble High Court of
Bombay in Gauri Plasticulture Pvt. Ltd. (Gauri-2) was that whether
what has been stated by the learned ASG that 'no appeal was
preferred against in all those four judgements of the Tribunal
referred by the Hon'ble Karnataka High Court' was a concession as
held by a later Bench or was an order with reason, as held by the
previous Division Bench in Jain Vanguard Polybutylene Ltd. in which
the question of law was kept open by the Hon'ble Supreme Court
while dismissing the SLP. It is the observation of Larger Bench in
Gauri Plasticulture Pvt. Ltd. (Gauri-2) itself at para 12 that learned
ASG appeared on behalf of the UOI fairly conceded to the position
that those decisions of Tribunal have not been appeal against.
This is also found reflected in the order passed by the Hon'ble
20
E/87084/2019
Supreme Court in Slovak India Trading Co. Pvt. Ltd. In our
considered view the above observation of the Hon'ble Supreme Court
can only indicate and establish the fact that law on the subject had
attained finality through series of Tribunal decisions and has been set
at rest in view of it remaining unchallenged in the appellate forum.
Likewise in Jain Vanguard Polybutylene Ltd. (supra) the SLP was
dismissed keeping the question of law open would not necessarily
mean that the question of law concerning admissibility of such cash
refund was kept open as it was settled by the Tribunal in the appeal
by Slovak India Trading Co. Pvt. Ltd. and concurred by the
judgement of the Hon'ble Karnataka High Court that attained finality
in rejection of the SLP by Hon'ble Supreme Court with admission of
learned ASG that the Union of India had not appealed against any of
those judgments of the Tribunal basing on which Hon'ble Karnataka
High Court had confirmed the Tribunal's order. It could otherwise
mean that the rule of binding precedent or res-judicata or the law on
the doctrine of merger have put a shell to cover the objectivity of the
findings that had received the seal of approval of the Apex Court of
our country. Since, in Jain Vanguard Polybutylene Ltd. it was
discussed in the order of the Hon'ble Bombay High Court that
reasoning was available for extending cash refund and it was
observed that SLP in Slovak India Trading Co. Pvt. Ltd. was
discussed including doctrine of merger and not about the legality of
cash refund on closer of factory or transfer from MODVAT to CENVAT
scheme, with great respect to the order in Gauri Plasticulture Pvt.
Ltd. , we would also like to place it on record that there was a clear
21
E/87084/2019
finding of the Hon'ble Supreme Court on the issue of doctrine of
merger as in Gangadhara Palo Vs. Revenue Divisional Officer
[2012 (25) STR 273 (SC)] it has been distinctly mentioned that
SLP if dismissed with reasons, however meagre (even one
sentence) there is merger or orders. Unfortunately, this
judgment of Hon'ble Supreme Court in Gangadhara Palo (Supra),
wherein the decision of Kunhayammed and Others Vs. State of Kerla
was further referred and clarified, was not brought to the knowledge
of the Hon'ble Bombay High Court. Be that as it may, as has been
held by Kunhayammed and Others (supra) whether the order passed
by the Hon'ble Supreme Court merges with itself the order passed by
the Court/Tribunal bellow it or not, its decisions with a reason (may
be one sentence in view of Gangadhar Pala, Supra) will have binding
effect on all Courts, Tribunal etc. in view of the mandate in Article
141 of the Constitution of India.
14. In obedience to the judicial precedent set by the highest Court
of the land, we allow the appeal with consequential relief. Hence the
order.
ORDER
15. The appeal is allowed and the order passed by the Commissioner of Central Tax, Central Excise & Service Tax (Appeals), Raigarh in Order-in-Appeal No. MKK/28/RGD APP/2019-20 dated 26.04.2019 is here by set aside. The appellant is entitled to get cash refund of CENVAT credit of Rs.1,80,26,559/- available with it at the time of closer of factory with applicable interest as per 22 E/87084/2019 provision of Section 11BB of the Central Excise Act. The respondent-
department is directed to pay the same within 3 months of receipt of this order.
(Pronounced in court on .2021)
(Dr. Suvendu Kumar Pati)
Member (Judicial)
(Sanjiv Srivastava)
Member (Technical)
Prasad
23
E/87084/2019
PER: SANJIV SRIVASTAVA
16. I have carefully gone through the order prepared by the learned brother. However even after constant persuasion I am unable to agree with the same.
17. Learned brother has in the order relied upon the decision rendered by the Hon'ble High Court of Karnataka in the case of Slovak India Trading Co (Pvt) Ltd., to adjudge the matter in favour of the Appellants contrary to the law laid down by the Hon'ble Bombay High Court in case of Gauri Plasticulture, after considering the said decision of High Karnataka High Court. Hon'ble Bombay High Court has considered the fact that SLP filed by the revenue against the decision of Hon'ble Karnataka High Court has been dismissed by the Hon'ble Supreme Court.
18.1 Before I proceed further into the issue, it would be relevant for us to have a look at the decision of the tribunal in case of Slovak India Trading Co (Pvt) Ltd. [2006 (205) ELT 956 (T)] "The appellant is challenging the Commissioner's (Appeals) order No. 58/2004-C.E., dated 28-5-2004 rejecting the refund claim of Rs. 4,15,057/- with regard to the unutilized Cenvat credit in their account as on the date of closure of their factory. The Commissioner (Appeals) has taken a view that there is no provision under Rule 5 of the Cenvat Rules to grant cash refund. The learned Counsel submits that the order is not legal and proper for the reason that the grounds of rejection taken by the Commissioner (Appeals) were not communicated in the show cause notice. He submits that the Tribunal in the cases of Eicher Tractors v. The Commissioner of Central Excise, Hyderabad [2002 (147) E.L.T. 457 (Tri.-Del.)]; Shree Prakash Textiles (Guj.) Ltd. v. Commissioner of C. Excise, Ahmedabad [2004 (169) E.L.T. 162 (Tri.-Mumbai); The Commissioner of C. Ex., Ahmedabad v. Babu Textile Industries [2003 (158) E.L.T. 215 (Tri.-Mumbai) and Commissioner of Central Excise, Ahmedabad-I v. Arcoy Industries [2004 (170) E.L.T. 507 (Tri.-
24E/87084/2019 Mumbai) have held that the refund claim is eligible to the assessee and refund has to be made in cash, when the assessee goes out of the Modvat scheme or their unit is closed.
2. The learned DR opposes the prayer and submits that there has to be provision of law for grant of refund in such cases. Therefore the order is correct in law.
3. On a careful consideration the submissions made by both the sides, I find that the Tribunal has consistently held that the refund claim is eligible and refund has to be made in cash when the assessee goes out of the Modvat scheme or when the company is closed. In view of these judgments, the impugned order is set aside and the appeal is allowed with consequential relief if any."
18.2 Tribunal as is apparent from the above has not stated the facts of the case that was before it in this case but have relied upon certain decisions referred to by the Counsel for appellant for granting the relief. Thus the decision of learned Single Member, even without referring to the facts of the case in hand and by just granting relief on the basis of certain decisions is sub-silento and could not have been binding precedent.
18.3 The decision in the case of Sri Prakash Textiles (Guj) Ltd [2004 (169) ELT 162 (T)], does not decide the issue but expresses opinion to the effect that grounds raised in the appeal are forceful, and remand the matter back to original authority. In my view, such an opinion expressed by the Single Member without finally deciding the issue cannot be binding precedent. The relevant para of the decision are reproduced below:
"3. The main ground of this appeal is that the refund claims were liable to be sanctioned in terms of the proviso to sub-section (2) of Section 11B. The appellants have, in this connection, relied on Tribunal's decision in the case of M/s. National Organic Chemicals Industries Ltd. v. CCE, Bombay-II reported in 1994 (70) E.L.T. 722 25 E/87084/2019 (T). Ld. DR however, submits that the fundamental requirement for allowing a refund claim is that the duty should have been paid by the claimant, His submission is to the effect that as the duty on the inputs was not paid by the appellants, refund thereof is not admissible to them. I am unable to accept this argument. Had the law makers so intended, the proviso to sub-section (2) of Section 11B would not have provided for refund of duty equivalent to Modvat credit. According to clause 'C' of the said proviso, the proper officer of the Central Excise is liable to allow cash refund of credit of duty paid on excisable goods used as input in accordance with the rules made or any notification issued under the Act. Evidently this provision enables a manufacturer of final product to claim refund of the duty paid on his inputs. The provision of law is quite explicit. The decision cited by the appellants also seems to be apposite to the issue on hand. In that case the assessee, by virtue of the provisions of a notification, was entitled to set-off of duty paid on certain inputs.
The relevant notification happened to be rescinded and consequently it was not possible for the assessee to avail the set-off. The Tribunal held that, in such a factual situation, the assessee was entitled to claim cash refund of the duty paid on the inputs. I think it is this principle which has been embodied in the proviso to Section 11B(2) of the Act. The ground raised in the appeal is forceful. Both the authorities have apparently overlooked the relevant provision of law. In the circumstances, the matter will be sent back to the original authority to enable that authority to examine the case afresh in the light of the applicable provision of law. It is up to that authority to verify the duty-paid nature of the inputs and to ascertain whether the inputs had actually been utilised in or in relation to the manufacture of final products prior to 16-12-1998."
18.4 In case of Eicher Tractors, Babu Textile Industries and Arcoy Industries referred in the decision, the issue was in respect of the amount debited from the MODVAT Credit Account towards payment of Central Excise duty as is evident from the following:
26E/87084/2019 i. Eicher Tractors [2002 (147) ELT 457 (T)] "2. The appellants had filed a refund claim dt. 11-4-2000 for Rs.
3,84,129.70 being excess Central Excise duty paid by way of debit in RG 23A Part II during November, 1995 to April, 1996. The jurisdictional Deputy Commissioner rejected the claim on the ground of unjust enrichment. The aggrieved party preferred appeal to the Commissioner (Appeals). The lower appellate authority held that the claim was not hit by unjust enrichment, but rejected the claim on another ground viz. that duty paid through Modvat account could not be refunded in cash. The present appeal is against the order of the Commissioner (Appeals)."
ii. Babu Textiles Industries [2003 (158) ELT 215 (T)] "3. The Respondents had claimed refund of Central Excise duty pursuant to Order-in-Appeal No. 1063/99, dated 30-6-1999 by which the appeal filed by them was allowed by the Commissioner (Appeals). The Assistant Commissioner has sanctioned the refund of Rs. 5,395/- but directed the Respondents to take the credit in their RG 23 A - Part-II as the duty was initially paid by them by debiting the Modvat Credit Account. On appeal the Commissioner (Appeals) found that the Appellants are out of Central Excise Control, being a S.S.I. unit. He has, therefore, remanded the matter to the Adjudicating Authority "to verify the contention of the appellants as above, and, if the same is found correct, the refund may be allowed in cash forthwith."
4. The learned S.D.R. has submitted that as the payment of duty initially was paid out of Modvat Credit Account, any refund has to be given by allowing credit entry into RG23A Part-II Account only; that there is no provision for sanction of such amount in cash.
5. I have considered the submissions of the learned S.D.R. and perused the records. It is not disputed by the Revenue that the Respondents are now not paying duty as they are availing exemption 27 E/87084/2019 from payment of duty, being a S.S.I. Unit. In such circumstances, they may not be maintaining any RG 23A - Part-II Register in which credit of refund amount can be made. The Commissioner (Appeals) has remanded the matter to verify the factual position. I, therefore, find no infirmity in the impugned order and accordingly reject the appeal."
iii. Arcoy Industries [2004 (170) ELT 507 (T)] "2. The said amount was originally paid by the respondents by debiting RG 23 Pt. II. However, when the dispute was finally settled, they claimed the refund in PLA inasmuch as by that time they had moved out of the Modvat credit scheme and were availing the benefit of small scale exemption notification. Commissioner (Appeals) observed that if it is so the refund should be given to the respondents in cash.
3. I find no infirmity in the above view of the Commissioner (Appeals). If the respondents is not able to utilise the credit, the very basis of the refund is defeated, in which case the amount is to be given to him in cash."
18.5 Thus the issue under consideration before the tribunal in these cases was refund of the duty paid by making the debit form the MOVAT Credit account. It was not the case for the refund of the amount available as balance in the MODVAT Credit Account. Undoubtedly the refund of the excess duty paid, is governed by the Section 11B of the Central excise Act, 1944. Once the person making such a claim is eligible for refund of such excess payment of duty, the same needs to be refunded to him. The dispute was whether this amount was to be refunded by way of credit in the MODVAT Account or in cash. Since the time when the matter was decided in their favour they for the reasons stated in the respective applications for refund were not in position to utilize the amount sought to be credited in their MODVAT Credit Account. In case the amount was refunded by way of credit in RG 23A part II, the refund would be 28 E/87084/2019 nullity for the inability of the unit to utilize the same, hence the refund of excess duty paid was ordered to be made by way of cash refund. The facts of the case in hand are not identical to that of this case. As this in the case before us the issue is not in respect of the amount debited from the MODVAT Credit Account maintained by the Appellant, but is in respect of the credit lying unutilized in their MODVAT Account since 1997.
18.6 Be that as it is, I would refer to the decision of the Hon'ble High Court of Karnataka, while upholding the decision in case of Slovak India Trading Co Pvt Ltd. The facts of the case have been clearly recorded by the Hon'ble High Court para 2 of its decision. Hon'ble High Court of Karnataka [2006 (201) ELT 559 (Kar)] in the case of Slovak India Trading Co Pvt Ltd has held as follows:
"1. The Union of India is before us raising the following questions of law in para 17 in the light of the order of the Tribunal dated 9.8.2005 passed in Excise Appeal No. 934/2004 on the file of the Customs, Excise and service Tax Appellate Tribunal, Bangalore.
a) Whether under the facts and circumstances of the case the Tribunal is right in ordering for refund even if there is no provision in Rule 5 of Cenvat Credit Rules 2002, to refund the unutilized Credit?
b) Whether under the facts and circumstances of the case the Tribunal is right in ordering for refund even if there is no production and there is no clearance of finished goods?
c) Whether under the facts and circumstances of the case the Tribunal is right in holding that respondent is entitle for refund even if it goes out of Modvat Scheme or Company is closed?
2. Respondent-company is engaged in manufacture of shoes for M/s. Bata India Ltd. They are registered under the Central Excise Registration. The respondent surrendered their registration. A refund application was made on 14.5.2003 claiming a refund of Rs. 4,15,057/-. During the Internal Audit, it was noticed 29 E/87084/2019 that the assessee has availed Cenvat Credit of the materials received by them during the past on the strength of the photocopies of the duplicate copy of invoices and the original copies of the invoices were never produced. The assessee had availed the credit to the tune of Rs. 3,09,390/-. On scrutiny, it was noticed that there was neither production nor clearance of finished goods. Cenvat Credit availed by the respondent is irregular. A show cause notice was issued in the matter with regard to irregular availment and also with regard to rejection of refund claim. Reply was submitted. Thereafter, an order was passed ordering allowance of Cenvat Credit of Rs. 3,72,405/- availed on the invoices mentioned in the show cause notice except invoice No. 62 dated 19.2.2002. Refund claim was also rejected in terms of Section 11B of the Act. It was stated that there is no provision in Rule 5 of Cenvat Credit Rules 2002 with regard to refund. An unsuccessful appeal was filed by the assessee. Thereafter, he moved the Tribunal and the Tribunal has chosen to allow the appeal in terms of the impugned order. It is in these circumstances, the Revenue is before us raising the above referred questions of law.
3. Heard the learned Counsel appearing for the appellant and perused the material placed on record.
4. Admitted facts would reveal of a claim of cash refund and admitted facts would reveal of rejection at the hands of the Assistant Commissioner and also the appellate authority. The Tribunal has chosen to allow the claim application on the ground that refund cannot be rejected when the assessee goes out of Modvat scheme or when the Company is closed. The argument is that there is no provision for refund in terms of Rule 5 of Cenvat Credit Rules 2002. Rule 5 reads as under?
Rule 5. Refund of CENVAT Credit: When any inputs are used in the final products which are cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate 30 E/87084/2019 products cleared for export, the CENVAT credit in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export on payment of duty 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 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.
5. There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for the purpose of rejection as rightly ruled by the Tribunal. The Tribunal has noticed various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. In these circumstances, we answer all the three questions as framed in para 1 against the Revenue and in favour of the assessee."
18.7 From the facts as recorded by the Hon'ble Karnataka High Court, it is quite evident that they were concerned with a case where the issue of admissibility of MODVAT Credit was determined in the favour of Slovak, after they had closed down the production. Since the credit was determined in their favour after closure of production, they were not in position to utilize the same towards the payment of the Central Excise duty at the time of clearance of the finished goods. The ratio of the decision Hon'ble Karnataka High Court, needs to be read in light of the facts recorded by the Hon'ble High Court while deciding the issue. Explaining this Salmond on Jurisprudence, 31 E/87084/2019 11th Edition., by Glanville Williams, LL.D. (Sweet & Maxwell Ltd., London, 1957 at page 221, states as follows:
"Although it is the duty of courts of justice to decide questions of fact on principle if they can, they must take care in this formulation of principles to limit themselves to the requirements of the case in hand. That is to say, they must not lay down principles which are not required for the due decision of the particular case, or which are wider than is necessary for this purpose. The only judicial principles which are authoritative are those which are thus relevant in their subject-matter and limited in their scope. All others, at the best, are of merely persuasive efficacy. They are not true rationes decidendi, and are distinguished from them under the name of dicta or obiter dicta, things said by the way. The prerogative of judges is not to make law by formulating and declaring it -- this pertains to the legislature -- but to make law by applying it. Judicial declaration, unaccompanied by judicial application, is of no authority."
18.8 Stating the same principle Hon'ble Supreme Court has in case of Synthetics And Chemicals Ltd. [1991 SCC (4) 139] "39. But the problem has arisen due to the conclusion in the case of Synthetic and Chemicals. The question was if the State legislature could levy vend fee or excise duty on industrial alcohol. The bench answered the question in the negative as industrial alcohol being unfit for human consumption the State legislation was incompetent to levy any duty of excise either under Entry 51 or Entry 8 of List II of the Seventh Schedule. While doing so the Bench recorded the conclusion extracted earlier. It was not preceded by any discussion. No reason or rationale could be found in the order. This gives rise to an important question if the conclusion is law declared under Article 141 of the Constitution or it is per-incurium and is liable to be ignored:
40. 'Incuria' literally means 'carelessness'. In practice per-incurium appears to mean per ignoratium.' English Courts have developed this 32 E/87084/2019 principle in relaxation of the rule of stare decisis. The 'quotable in law' is avoided and ignored if it is rendered, 'in ignoratium of a statute or other binding authority'. (1944 IKB 718 Young v. Bristol Aeroplane Ltd. Same has been accepted, approved and adopted by this Court while interpreting Article 141 of the Constitution which embodies the doctrine of precedents as a matter of law. In Jaisri Sahu v. Rajdewan Dubey, [1962] 2 SCR 558 this Court while pointing out the procedure to be followed when conflicting decisions are placed before a Bench extracted a passage from Halsbury Laws of England incorporating one of the exceptions when the decision of an Appellate Court is not binding. Does this principle extend and apply to a conclusion of law, which was neither raised nor preceded by any consideration. In other words can such conclusions be considered as declaration of law? Here again the English Courts and jurists have carved out an exception to the rule of precedents. It has been explained as rule of sub-silentio. A decision passed sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular' point of law involved in the decision is not perceived by the Court or present to its mind' (Salmond 12th Edition). In Lancaster Motor Company (London) Ltd. v. Bremith Ltd., [1941] IKB 675 the Court did not feel bound by earlier decision as it was rendered 'without any argument, without reference to the crucial words of the rule and without any citation of the authority'. It was approved by this Court in Municipal Corporation of Delhi v. Gumam Kaur, [1989] 1 SCC 101. The Bench held that, 'precedents sub-
silentio and without argument are of no moment'. The Courts thus have taken recourse to this principle for relieving from injustice perpetrated by unjust precedents. A decision which is not express and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141. Uniformity and consistency are core of judicial discipline. But that which escapes in the judgment without any occasion is not ratio decidendi. In Shama Rao v. State of Pondicherry, AIR 1967 SC 1680 it was ob- served, 'it is trite to say 33 E/87084/2019 that a decision is binding not because of its conclusions but in regard to its ratio and the principles laid down therein'. Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as a precedent. Restraint in dissenting or overruling is for sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law."
In case of Hyder Consulting (UK) Ltd [(2014) SCC OnLine SC 490], relying on the decision of Synthetics and Chemicals, a three member Bench of Hon'ble Apex Court stated as follows:
"13. Before I consider the correctness of the aforementioned decisions, it would be necessary to elaborate upon the concept of "per incuriam". The latin expression per incuriam literally means 'through inadvertence'. A decision can be said to be given per incuriam when the Court of record has acted in ignorance of any previous decision of its own, or a subordinate court has acted in ignorance of a decision of the Court of record. As regards the judgments of this Court rendered per incuriam, it cannot be said that this Court has "declared the law" on a given subject matter, if the relevant law was not duly considered by this Court in its decision. In this regard, I refer to the case of State of U.P. v. Synthetics and Chemicals Ltd., (1991) 4 SCC 139, wherein Justice R.M. Sahai, in his concurring opinion stated as follows:
"40. 'Incuria' literally means 'carelessness'. In practice per incuriam appears to mean per ignoratium. English courts have developed this principle in relaxation of the rule of stare decisis. The 'quotable in law' is avoided and ignored if it is rendered, 'in ignoratium of a statute or other binding authority'. ..."
14. Therefore, I am of the considered view that a prior decision of this Court on identical facts and law binds the Court on the same points of law in a later case. In exceptional circumstances, where owing to obvious inadvertence or oversight, a 34 E/87084/2019 judgment fails to notice a plain statutory provision or obligatory authority running counter to the reasoning and result reached, the principle of per incuriam may apply. The said principle was also noticed in the case of Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356."
18.9 Thus in my view the decision of the Hon'ble Karnataka High Court which is the sole basis for the finding recorded by learned brother is clearly distinguishable and is not applicable to the facts of the case in hand. Appellant has in the written submissions relied upon various decisions of the tribunal in their support wherein following the decision of the Hon'ble Karnataka High Court, refund has been allowed by the tribunal in case of the closure of the unit. In my view the said decisions are per incuriam as none of the decisions correlates the facts with the decision rendered in that case. The issue as I have observed earlier, in the case of the Slovak, was a refund arising on account of the disputed credit which could not have been utilized at the time when the unit was in operation.
19.1 The issue of refund of accumulated credit at the time of closure of the unit was considered by the larger bench of the tribunal in the case of Steel Strips [2012 (26) STR 270 (T-LB)]. Larger Bench observed as follows:
"Scheme of Modvat 5.1 Scheme of Modvat dealing with input credit was subject matter of analysis in Ichalkaranji Machine Centre Pvt. Ltd. v. Collector of Central Excise, Pune 2004 (174) E.L.T. 417 (S.C.). It has been held that Modvat is basically a duty-collecting procedure, which aims at allowing relief to a manufacturer on the duty element borne by him in respect of the inputs used by him. It was introduced w.e.f. 1-3- 1986. The said scheme was regulated under Rules 57A to 57J of Central Excise Rules, 1944. Rule 57A entitled a manufacturer to take instant credit of the central excise duty paid on the inputs used by him in the manufacture of the finished product, provided that the 35 E/87084/2019 input and the finished product were excisable commodities and fell under any of the specified chapters in the tariff schedule. Under Rule 57G, every manufacturer was required to file a declaration before the jurisdictional Assistant Collector, declaring his intention to take Modvat credit after paying duty on the inputs. The object behind Rule 57A read with Rule 57G and Rule 57-I was utilization of credit allowed towards payment of duty on any of the final products in relation to manufacture of which such inputs were intended to be used in accordance with the declaration under Rule 57G. Rule 57-I referred to consequences of taking credit wrongly.
Taxation Considerations Stem from Administrative Experience 5.2 Taxation consideration may stem from administrative experience and other factors of life and not artistic visulalisation or neat logic and so the literal, though pedestrian interpretation must prevail - Ref : Martand Dairy and Farm v. Union of India, AIR 1975 SC 1492, p. 1494: (1975) 4 SCC 313. Courts are not entitled to fill any lacuna in any Act much less in a Taxing Act, but the courts will also not stretch a point in favour of the tax-payer to enable him to get by his astuteness the benefit which other tax-payer do not obtain
- Ref : Yeshwantrao v. CWT, AIR 1967 SC 135, pp.140, 141.
Equitable Considerations are Entirely out of place while interpreting Tax Laws 5.3 Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity (Ref : State Bank of Travancore v. Commissioner of Income Tax (1986) 2 SCC 11, p.68. : AIR 1986 SC 757). It has also been said that if taxing provision is "so wanting in clarity that no meaning is reasonably clear, the court will be unable to regard it as of any effect." [Ref : IRC v. Ross and Coulter, (1948) 1 All ER616, p.625 (HL); referred to in Gursahai v. CIT, AIR 1963 SC 1062, p. 1064 : (1963) 3 SCR 893.]. It has also been held that in interpreting taxing statute, equitable considerations are entirely out of place nor 36 E/87084/2019 can taxing statutes be interpreted on any presumptions or assumptions. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency. [Ref : Sales Tax Commissioner v. Modi Sugar Mills, AIR 1961 SC 1047, p. 105, CIT v. M. G. Mills - AIR 1971 SC 2434, p. 2435].
Construction Preserving Workability and Efficacy should be preferred 5.4 In construing provisions designed to prevent tax evasion, if the Legislature uses words of comprehensive import, the courts cannot proceed on an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature - Ref :
C.A. Abraham v. ITO, Kottayam, AIR 1961 SC 609, p. 612. The principle behind this rule is that an enactment designed to prevent fraud upon the revenue "is more properly a statute against fraud rather than a taxing statute, and for this reason properly subject to liberal construction in the Government favour" - Ref : CRAWFORD, Statutory Construction, p. 508. So in interpreting a provision to plug leakage and prevent tax evasion a construction which would defeat its purpose should be eschewed and a construction which preserves its workability and efficacy should be preferred - Ref : Commissioner of Sales Tax, Delhi v. Sri Krushna Engg. Co., (2005) 2 SCC 695, p.
703.
Non-Filing of Appeal by Revenue is not a Bar for Scrutiny in another case 5.5 Doctrine of merger was pressed into service by the ld. Sr. Counsel Sri Anand appearing on behalf of the Assessee submitting that due to dismissal of Revenue's Civil Appeals, present reference was unwarranted. For appreciation of Doctrine of merger, it would be beneficial to reproduce Paras 40 - 44 of the judgment of the Hon'ble 37 E/87084/2019 Supreme Court laying down the law in the case of Kunhayammed v. State of Kerala - 2001 (129) E.L.T. 11 (S.C.) as under :
"40. A petition seeking grant of special leave to appeal may be rejected for several reasons. For example, it may be rejected (i) as barred by time, or (ii) being a defective presentation, (iii) the petitioner having no locus standi to file the petition, (iv) the conduct of the petitioner disentitling him to any indulgence by the Court, (iv) the conduct of the petitioner having no disentitling him to any indulgence by the Court, (iv) the question raised by the petitioner for consideration by this Court being not fit for consideration or deserving being dealt with by the Apex Court of the country and so on. The expression often employed by this Court while disposing of such petitions are - "heard and dismissed", ''dismissed", "dismissed as barred by time" and so on. May be that at the admission stage itself the opposite party appears on caveat or on notice and offers contest to the maintainability of the petition. The Court may apply its mind to the meritworthiness of the petitioner's prayer seeking leave to file an appeal and having formed an opinion may say "dismissed on merits". Such an order may be passed even ex-parte, that is, in the absence of the opposite party. In any case, the dismissal would remain a dismissal by a non-speaking order where no reasons have been assigned and no law has been declared by the Supreme Court. The dismissal is not of the appeal but of the special leave petition. Even if the merits have been gone into, they are the merits of the special leave petition only. In our opinion neither doctrine of merger nor Article 141 of the Constitution is attracted to such an order. Grounds entitling exercise of review Jurisdiction conferred by Order 47 Rule 1 of the C.P.C. or any other statutory provision or allowing review of an order passed in exercise of writ or supervisory Jurisdiction of the High Court (where also the principles underlying or emerging from Order 47 Rule 1 of the C.P.C. act as guidelines) are not necessarily the same on which this court exercises discretion to grant or not to grant special leave to appeal while disposing of a 38 E/87084/2019 petition for the purpose. Mere rejection of special leave petition does not take away the Jurisdiction of the court, tribunal or forum whose order forms the subject matter of petition for special leave to review its won order if grounds for exercise of review Jurisdiction are shown to exist. Where the order rejecting an SLP is a speaking order, that is, where reasons have been assigned by this Court for rejecting the petition for special leave and are stated in the order still the order remains the one rejecting prayer for the grant of leave to appeal. The petitioner has been turned away at the threshold without having been allowed to enter in the appellate Jurisdiction of this Court. Here also the doctrine of merger would not apply. But the law stated or declared by this Court in its order shall attract applicability of Article 141 of the constitution. The reasons assigned by this Court in its order expressing its adjudication (expressly or by necessary implication) on point of fact or law shall take away the jurisdiction of any other court, tribunal or authority to express any opinion in conflict with or in departure from the view taken by this Court because permitting to do so would be subversive of judicial discipline and an affront to the order of this Court. However this would be so not by reference to the doctrine of merger.
41. Once a special leave petition has been granted, the doors for the exercise of appellate Jurisdiction of this Court have been let open. The order impugned before the Supreme Court becomes an order appealed against. Any order passed thereafter would be an appellate order and would attract the applicability of doctrine of merger. It would not make a difference whether the order is one of reversal or of modification or of dismissal affirming the order appealed against. It would also not make any difference if the order is a speaking or non-speaking one. Whenever this Court has felt inclined to apply its mind to the merits of the order put in issue before it though it may be inclined to affirm the same, it is customary with this Court to grant leave to appeal and thereafter dismiss the appeal itself (and not merely the petition for special 39 E/87084/2019 leave) though at times the orders granting leave to appeal and dismissing the appeal are contained in the a same order and at times the orders are quite brief Nevertheless, the order shows the exercise of appellate Jurisdiction and therein the merits of the order impugned having been subjected to judicial scrutiny of this Court.
42. "To merge" means to sink or disappear in something else; to become absorbed or extinguished; to be combined or be swallowed up. Merger in law is defined as the absorption of a thing of lesser importance by a greater, whereby the lesser ceases to exist, but the greater is not increased; an absorption or swallowing up so as to involve a loss of identity and individuality. (See Corpus Juris Secundum, Vol. LVII, pp. 1067-1068).
43. We may look at the issue from another angle. The Supreme Court cannot and does not reverse or modify the decree or order appealed against while deciding a petition for special leave to appeal.
What is impugned before the Supreme Court can be reversed or modified only after granting leave to appeal and then assuming appellate Jurisdiction over it. If the order impugned before the Supreme Court be reversed or modified at the SLP stage obviously that order cannot also be affirmed at the SLP stage.
44. To sum up our conclusion are :
(i) Where an appeal or revision is provided against an order passed by a court. Tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law.
(ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. First stage Is up to the disposal of prayer for special leave to file an appeal. The second stage commences if 40 E/87084/2019 and when the leave to appeal is granted and special leave petition is converted into an appeal.
(iii) Doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter.
(iv) An order refusing special leave to appeal may be a non- speaking order or a speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed.
(v) If the order refusing leave to appeal is a speaking order, i.e. gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting special leave petition or that the 41 E/87084/2019 order of the Supreme Court is the only order binding as res Judicata in subsequent proceedings between the parties.
(vi) Once leave to appeal has been granted and appellate Jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation.
(vii) On an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before Supreme Court the jurisdiction of High Court to entertain a review petition is lost thereafter as provided by sub-rule (1) of Rule (1) of Order 47 of the C. P. C."
[Emphasis supplied].
5.6 No doubt there are cases where Hon'ble Supreme Court while dismissing Revenue's Civil Appeal did not go into merits of the issues but had dismissed the appeal only on the ground that there was no appeal by Revenue previously on similar cases. But it has been held by Apex Court in the case of CCE, Raipur v. Hira Cement, reported in 2006 (194) E.L.T. 257 (S.C.) = 2007 (8) S.T.R. 96 (S.C.) that non- filing of an appeal against an order in any event would not be a ground for refusing to consider the matter on its own merit. Merely because in some cases revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts as has been held in the case of C.K. Gangadharan v. CIT, Cochin, reported in 2008 (228) E.L.T. 497 (S.C.) = 2009 (16) S.T.R. 659 (S.C.). In Gauri Piasticulture (P) Ltd. (supra) except the claim being permitted under equitable considerations the controversy remained unanswered on the point of law while grant of refund of the nature claimed was not mandate of the Act or the 1994 Rules. The issue, therefore is rightly called for consideration in the present reference on the point of law.
42E/87084/2019 Policy of Refund of Input Credit is Regulated by Statutory Provisions 5.7 A distinction between provisions of statute which are of substantive character and are built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in their nature, on the other, must be kept clearly distinguished. An eligibility criteria to get refund calls for a strict construction, although construction of a condition thereof may be given a liberal meaning if the same is directory in nature. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can be reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed.
Refunds and Exemption are Governed by Rule of Strict Compliance 43 E/87084/2019 5.8 Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non- compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted.
Substance and Essence of Statute are Paramount Considerations
5.9 The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential. In the cases of refund substantial compliance to the law granting refund is sine qua non.
44E/87084/2019 Courts have to decide what the law is but not what it should be 5.10 In a plethora of cases, it has been stated by various judicial pronouncements that where, the language is clear, the intention of the legislature is to be gathered from the language used. It is not the duty of the court either to enlarge the scope of legislation or the intention of the legislature, when the language of the provision is plain. The court cannot rewrite the legislation for the reason that it had no power to legislate. The court cannot add words to a statute or read words into it which are not there. The court cannot, on an assumption that there is a defect or an omission in the words used by the legislature, correct or make up assumed deficiency, when the words are clear and unambiguous. Courts have to decide what the law is and not what it should be. The courts adopt a construction which will carry out the obvious intention of the legislature but cannot set at naught legislative judgment because such course would be subversive of constitutional harmony [See : Union of India & Anr. v. Deokinandan Aggarwal].
No person has vested right in any course of procedure 5.11 No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner laid down by law. He has no right than to proceed according to the mandate of the statute governing the subject. Claim of refund is not a matter of right unless vested by law. That would depend upon the object of the statute and eligibility. The purpose for which law has been made and its nature, the intention of the legislature in making the provision, the relation of the particular provision to other provisions dealing with the subject including the language of the provision are considerable factors in arriving at the conclusion whether a particular claim is in accordance with law. No injustice or hardship can be raised as plea to claim refund in absence of statutory mandate in 45 E/87084/2019 that behalf and no equity or good conscience influence fiscal courts without the same being embedded to the statutory provisions.
5.12 The question before the Larger Bench in Gauri Plasticulture (P) Ltd. - 2006 (202) E.L.T. 199 (Tri.-LB.) was whether duty debited in RG23A part II can be refunded in cash when the refund becomes otherwise due. The Larger Bench without recording the submissions of either side merely discussed outcome of various decisions beginning from Para 3 to 7 of the order and came to the conclusion in Para 10 of the reported order that if denial of credit has compelled an assessee to pay duty out of PLA, the refund of the same would be in cash to the extent of payment of duty in cash during that period. It was further held that if no cash payment towards duty were made through PLA and credit would have remained unutilized in the account books, such credit cannot be allowed by way of cash.
5.13 While arriving at the aforesaid conclusion, the Larger Bench in Para 11 of the order recorded the fact that in the case before them debit entry in credit account was made by the Appellants on 23-11- 2000 while central excise registration was surrendered by the assessee in September 2000 i.e., before making the debit entry in RG-23 account. Further observation of the Bench was even if the amounts towards duty would not have been debited by them in the said account, the same would have been remained unutilized. As such, on the success of their appeal before the Commissioner (Appeals), they cannot claim the refund of the same in cash, inasmuch as on account of such debit entry, they have not discharged any duty out of PLA. If the said refund is granted to the appellants by way of cash, the same would amount to enrich him unjustifiably. It is well settled principles of law that what cannot be done directly should not be allowed to be done indirectly. On surrendering of their licence, the appellants were not allowed to claim the refund of the unutilized credit in the Modvat account, and the same would have lapsed. As such, utilization of the same towards payment of disputed demand of duty, after surrendering of 46 E/87084/2019 their registration, has not led to a situation where the assessee was compelled not to use the credit for regular clearances and had to make payment from PLA. As such, in this case we find that the refund in cash is not to be allowed.
5.14 The Larger Bench also discussing various pronouncements in Para 3 to 7 of the order, viewed the matter in Para 8 as under :
"8. Detailed reading of the above Judgments, leads in to the fact that wherever the assessee was unable to utilize the credit on account of objection raised by the Department or actions taken by them by way of initiation of proceedings or paid duty out of modvat account at the Department's insistence, and for that reason, he had to pay duty in cash or out of the PLA, they would be entitled to refund of that credit in cash, on the dispute being ultimately settled in their favour. In the decisions holding that such refund in cash is not possible, it has been observed that there is no provision allowing refund of such credit in cash. However, we are not in agreement with the above proposition for the simple reason that there is also express no bar in the Modvat Rules to that extent We have to keep in mind that it is not the refund of unutilized credit, but the credit which has been used for payment of duty at the insistence of the revenue or has been reversed because the Department was of the view that the same is not available for utilization. This is a simple and basic principle of equity, justice and good conscience. Had the Department not prevented the assessee from utilizing the credit otherwise available to him, they would have been in a position to use the same towards payment of duty on their final product, which obligation they had to discharge from their PLA account. As such, on the success of their claim subsequently, if the assessee is maintaining Modvat credit and is in a position to use the same for future clearances, it should be normally be credited back in the same account from where it was debited i.e. RG-23A Part II account However, if an assessee is not able to use the credit on account of any reasons, whatsoever (which may be closure of his factory or final products being exempted, etc.) 47 E/87084/2019 the refund becomes admissible in cash or by way of credit entry in PLA to the extent duty paid in cash or out of PLA during the relevant period."
5.15 The decision made in Gauri Plasticulture (P) Ltd. was called for on the question before the Larger Bench as framed in Para 1 thereof. At the cost of repetition it may be stated that the question before Larger Bench in that case was "whether duty debited in RG-23 A Part II can be refunded in cash, when the refund becomes otherwise due"
[Emphasis supplied]. But the conclusion in that case as per Para 10 was that if denial of credit has compelled an assessee to pay duty out of PLA, the refund of the same would be admissible in cash to the extent of payment of duty in cash during that period. However, if no cash payments towards duty were made through PLA and the credit would have remained unutilized in the account books, such credit cannot be allowed by way of cash. Such decision does not appear to have flown from the question appearing in Para 1 of the Larger Bench decision as stated aforesaid. Therefore such a decision has no attributes of a precedence not laying down the law for which present reference was warranted. It may further be stated that in Gouri Plasticulture's case the question had presupposed that refund was "otherwise due". But how such due arose, that does not come out from any of the paragraphs of the order reported in 2006 (202) E.L.T. 199 (Tri.-LB.). The present reference is not on the premise of refund otherwise due for which that has rightly been made for answer by Larger Bench.
5.16 Modvat law has codified procedure for adjustment of duty liability against Modvat Account. That is required to be carried out In accordance with law and unadjusted amount is not expressly permitted to be refunded. In absence of express provision to grant refund, that is difficult to entertain except in the case of export. There cannot be presumption that in the absence of debarment to make refund in other cases that is permissible. Refund results in outflow from treasury, which needs sanction of law and an order of 48 E/87084/2019 refund for such purpose is sine qua non. Law has only recognized the event of export of goods for refund of Modvat credit as has been rightly pleaded by Revenue and present reference is neither the case of "otherwise due" of the refund nor the case of exported goods. Similarly absence of express grant in statute does not imply ipso facto entitlement to refund. So also absence of express grant is an implied bar for refund. When right to refund does not accrue under law, claim thereof is inconceivable. Therefore, present reference is to be answered negatively and in favour of Revenue since refund of unutilized credit is only permissible in case of export of goods and for no other reason whatsoever that may be. As has been stated earlier that equity, justice and good conscience are the guiding factors for Civil Courts, no fiscal Courts are governed by these concepts, the present reference is bound to be answered in favour of Revenue and it is answered accordingly."
20. The decision of larger bench of tribunal in case of Gauri Plasticulture [2006 (202) E.L.T. 199 (Tri.-LB.)] referred in the para 5.12 of the decision in case of Steel Strips, supra, was considered by a larger Bench of Hon'ble Bombay High Court [2019 (030) GSTL 0224 (Bom)] and Hon'ble High Court has held as follows:
"3. The facts are already set out succinctly in the referring order. A very brief reference is required to be made thereto in order to appreciate the challenge to the order passed by the said Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (for short "the CESTAT"). The appellant in Central Excise Appeal No.13 of 2007 was engaged in manufacturing of reisin PVC pipes and fittings. There was a dispute regarding availability of small scale industries exemption ("SSI" for short) under the Notification dated 28th February, 1993. A show cause notice was issued for recovery of dues on clearance of the pipes during the period of denial of this exemption. The order-in-original was passed confirming the demand and a penalty was also imposed. The exemption was denied on the ground that the appellant was manufacturing pipes bearing a 49 E/87084/2019 mark "Jain Pipe" and that was a brand name. An appeal was preferred to the Commissioner (Appeals) and he allowed the appeal holding that this cannot be considered as a brand name. In view of the order passed in appeal, an application for refund was made seeking refund, but a show cause notice was issued proposing to reject the refund claim of Rs.8,41,043/- out of the total amount claimed on the ground that on surrender of registration certificate on 8th September, 2000, the entire unutilised credit lapses and hence, subsequent reversal made was not permissible.
4. An order-in-original was passed rejecting this refund claim and an appeal was preferred against this order by the appellant. The Commissioner (Appeals) upheld the order-in-original on the ground that the appellant was not entitled to cash refund, but was entitled to credit in Cenvat Account after surrender of the registration certificate. An appeal was preferred by the appellant before the appellate tribunal and that appeal was referred to a Larger Bench. The Larger Bench rendered findings, which have been reproduced in para 5 of the referring order. After the Larger Bench answered the issues referred to it, the regular Bench of CESTAT dismissed the appeal by the order dated 30th March, 2007.
5. The challenge in Central Excise Appeal No. 13 of 2007 is to both orders, whereas, the other appeal was preferred by the Revenue and the backdrop in which that has been preferred is set out in paras 7 and 8 of the referring order. Central Excise Appeal Nos.257 of 2008 and 28 of 2008 were admitted on grounds which have been noted in para 10 of the order under reference.
6. Thereafter, the arguments are noted and the Division Bench was of the view that un-utilised amount of Cenvat Credit availed by the assessee, in the circumstances set out, can be allowed or not is the moot question. That question will have to be answered and that the view taken by the earlier Division Bench does not appear to be correct. That is how this reference has been made.50
E/87084/2019
7. Before we proceed, we must note certain provisions of the Central Excise Act, 1944, which is an Act to consolidate and amend the law relating to Central duties of excise. The levy and collection of duty is dealt with by Chapter II. By section 2A, which appears in Chapter I, it is stated that in this Act, save as other wise expressly provided and unless the context otherwise requires, references to the expressions "duty", "duties", "duty of excise" and "duties of excise" shall be construed to include a reference to "Central Value Added Tax (CENVAT)". There is a power to grant exemption from duty of excise and it is undisputed that there is a distinct provision (section 11B) enabling the claiming of refund. That section reads as under:-
"11B.Claim for refund of duty and interest, if any, paid on such duty- ........"
8. A bare perusal of this provision and particularly proviso to sub- section (2) would denote that instead of crediting the amount of refund to the fund, it can be paid to the applicant seeking refund, if such amount is relatable, inter alia, to refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made or any notification issued under this Act. The word "refund" is defined in the Explanation and it says that it includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India.
9. The argument of Mr.M.H.Patil learned advocate appearing on behalf of the appellant in Central Excise Appeal No. 13 of 2007 and respondents in Central Excise Appeal Nos. 257 of 2007 and 28 of 2008 is that if one peruses section 11B carefully, then, cash refund of accumulated credit lying un-utilised on account of closure of factory/ stopping of activity/ inability to use, is admissible. He invites our attention to Rule 5 of the Cenvat Credit Rules, 2004 to urge that this permits the un-utilised credit to be claimed and the language thereof is, therefore, construed accordingly. Our attention is also invited to sub-rule (2) of Rule 11 to urge that a refund claim can always be made in the event the conditions laid down therein are set 51 E/87084/2019 out. Thus, our attention is invited to Rule 5, Rule 11 and Rule 3 of the Cenvat Credit Rules, 2004 in this behalf. The counsel would submit that the Cenvat credit is allowed as set out in Rule 3 and we must, therefore, construe the language of these provisions accordingly. He also invites our attention to the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 in this behalf. Mr.Patil would urge that the consistent view of the tribunal and in number of cases further denotes that such a claim cannot be denied.
10. Our attention is invited to the judgment of the CESTAT, Bengaluru in the case of Slovak India Trading Private Limited vs. Commissioner of Central Excise (Bengaluru) 2006 (205) ELT 956 = 2005-TIOL-1698-CESTAT-BANG to urge that the appellant in that case claimed refund on un-utilised Cenvat Credit in their account as on the date of the closure of their factory. The Commissioner (Appeals) took a view that there is no provision under Rule 5 of the Cenvat Credit Rules to grant cash refund. The argument was that this order was not legal and proper for the reasons set out by the tribunal. The South Zonal Bench of the CESTAT referred to the view taken by the CESTAT, Delhi and Mumbai to hold that refund claimed is eligible to the assessee and refund has to be made in cash when the assessee goes out of the erstwhile Modvat Scheme or their unit is closed. The view is taken because of the consistent approach of the tribunal. The consistent approach was that such refund claims are logical and a refund has to be made in cash when the assessee goes out of the Modvat Scheme or the company is closed. Thus, appeal of Slovak was allowed.
11. The Union of India, aggrieved and dissatisfied with this view of the tribunal, preferred an appeal, namely, Central Excise Appeal No.5 of 2006 before the High Court of Karnataka at Bengaluru. In the judgment reported in 2006 (201) ELT 559 = 2006-TIOL-469-HC- KAR-CX, the Division Bench of the Karnataka High Court took a view that there is no express prohibition in Rule 5. Once there is a manufacture referred to in Rule 5 and in the case on hand, there is 52 E/87084/2019 no manufacture or closure in the light of closure of the company, then, Rule 5 is not available for the purpose of rejection of the claim. The claims have been allowed on the basis of closure of the factory and in the light of the assessee going out of Modvat scheme. With this conclusion, the appeals of the Revenue were dismissed.
12. Aggrieved and dissatisfied with this judgment and order of the High Court of Karnataka, the Revenue carried the matter to the Hon'ble Supreme Court and the Hon'ble Supreme Court came to the conclusion that the tribunal at Bengaluru relied upon the order of coordinate Benches of the tribunal and against which, no appeals were preferred by the Revenue. The learned Additional Solicitor General appeared on behalf of the Union of India and fairly conceded to the position that those decisions of the tribunal have not been appealed against. In view of this concession of the learned Additional Solicitor General, the Revenue's appeals were dismissed.
13. Mr.Patil would submit that in the case of Jain Vanguard Polybutylene Ltd. (supra), the tribunal at Mumbai followed the view taken in the case of Slovak India Trading Company Pvt Ltd. (supra) and concluded that the refund of un-utilised credit on account of closure of factory was permissible. It, therefore, allowed the appeal of Jain Vanguard/the assessee and reversed the view of the Commissioner (Appeals).
14. When the Revenue appealed against the order of the CESTAT, Bombay in the case of Jain Vanguard (supra) to a Division Bench of this court, the Division Bench came to the conclusion that there was a concession recorded by the Hon'ble Supreme Court and by none other than the learned Additional Solicitor General. It is held by the Division Bench that notwithstanding this concession, it is not possible to say that the Special Leave Petition was dismissed only because of the concession. The concession was not given with regard to the correctness of the judgment of the High Court of Karnataka. It is in these circumstances that the Division Bench held that when the question for consideration on facts is almost identical to the cases 53 E/87084/2019 before the various Benches of the tribunal, then, the Revenue cannot be allowed to take a different view. Following this principle, the Division Bench dismissed the Revenue's appeal. Mr.Patil would submit that the view taken in the case of Jain Vanguard (supra) was confirmed by the Hon'ble Supreme Court because the Hon'ble Supreme Court dismissed the appeal of the Union of India by observing that it finds no reason to interfere with the order of the Division Bench in exercise of the discretion under Article 136 of the Constitution of India. Mr.Patil submits that merely because in the next line the Hon'ble Supreme Court says that the Special Leave Petition is dismissed leaving the question of law open would not mean that the later Division Bench in this case was free to differ from the view taken by the earlier Division Bench in Jain Vanguard (supra). Mr.Patil, therefore, would submit that the referring order, with great respect, is uncalled for, as even thereafter, several orders have been passed by tribunals all over India taking the same view. Once such view is accepted by the Revenue, then, it cannot be selective in its approach. The Revenue does not appeal or rather accepts the view taken by the other Benches of the CESTAT in India. It cannot then request the Division Bench of this court deciding the present appeals to adopt a different approach. Thus, we should not disturb this trend and emerging from the judgments of the Division Benches of atleast two High Courts. It is argued that we must uphold the consistent views of the tribunal.
15. Mr.Patil also submits that the lack of consistency in the approach of the Revenue would disable it from questioning the correctness of the view taken by the tribunal. Mr.Patil has relied upon the Modvat Scheme and invited our attention to Rule 57H and 57AG of the Central Excise Rules, 1944, Rule 9 of the Cenvat Credit Rules, 2002 and Rule 11 of the Cenvat Credit Rules, 2004 as prevailing in 2017- 18 to urge that the scheme has remained the same throughout. There is absolutely no departure from it at all.
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16. Our attention has also been invited to the view taken by the North Zonal Bench of the CESTAT in the case of Purvi Fabrics & Texturise (P) Ltd. vs. Commissioner of Central Excise, Jaipur III to the effect that there is no legal provision existing for refund either by cash or cheque. The only exception carved out is that the refund in cash is granted as an incentive measure to the exporter. The provisions and particularly section 11B of the Central Excise Act provides for payment of amount of refund to the applicant only in situations specified in proviso to sub-section (2) of section 11B of the Central Excise Act, 1944. The argument before us is that when the Central Excise Rules permit the refund in cash on such duty only when the final goods are exported out of the country and the manufacturer is not in a position to utilise the credit towards the duty, the refund amount is to be given in RG 23A, Part II Account if the same is in operation. Mr.Patil submits that though the rejection of refund was upheld by the tribunal and the Hon'ble Supreme Court, still, the Hon'ble Supreme Court found that the tribunal has failed to consider one contention with regard to interest and that claim of the appellant having not been examined, the matter was remanded back to the tribunal.
17. Mr.Patil brought to our notice the judgment of the Hon'ble Supreme Court in the case of Collector of Central Excise, Pune vs. Dai Ichi Karkaria Ltd. 1999 (112) ELT 353 (SC) = 2002-TIOL-79-SC- CX-LB. Mr.Patil finally attempted to urge that a long standing decision adopting a particular view should be followed. In that regard, our attention has been invited to the judgment in the case of Shanker Raju vs. Union of India 2011 (271) ELT 492 = 2011-TIOL- 56-SC-MISC. Mr.Patil emphasises that the doctrine of binding precedent has a element of certainty and consistency. The pronouncement of law by the Larger Bench of the tribunal was binding on a Bench of two members and when an appeal against the judgment of both has been dismissed by the higher court, then, discipline requires that this consistent view must be followed. Mr.Patil also tried to emphasise before us that the doctrine of merger could 55 E/87084/2019 not have been deviated from. Today, the judgment in the case of Slovak India (supra) has merged with the view taken by the Hon'ble Supreme Court. Hence, we should not reopen the controversy.
18. On the other hand, Mr.Jetly appearing for the Revenue would submit that the referring order has rightly noted the controversy. In the referring order, this court has found that the attempt is to claim something which the law does not permit to be claimed at all. If the law does not permit something, no provision therein should construed to hold that it is also not prohibited. It not being prohibited, the provision has been erroneously construed as permitting the refund. This would amount to rewriting the provisions or reading into them something which they themselves do not provide. In these circumstances, according to Mr.Jetly, we must proceed to answer the questions referred accordingly. He submits that this court should hold that a refund of unutilised amount of Cenvat Credit on account of closure of manufacturing activities or inability to utilise input credit is not permitted. The order passed by the Hon'ble Supreme Court in Slovak India (supra) cannot be a declaration of law. It appears that the Revenue has brought to the notice of the Division Bench, the view of the larger Bench of the CESTAT in the case of Steel Strips Ltd. vs. Commissioner of Central Excise, Ludhiana 2011 (269) ELT 257 (Tri.). The Revenue relied upon this judgment while urging that the claim of refund is not a matter of right unless vested by law. The plea of injustice or hardship cannot be raised to claim refund in the absence of statutory mandate. No equity or good conscience influence fiscal courts without the same being embedded to statutory provisions. Thus, strict compliance with law in matters of refund is a pre-requisite. This larger Bench judgment in the case of Steel Strips (supra), according to the Revenue, expressly refers to all prior views of the tribunal and answers the questions, accordingly. It also decides the issue of merger, which was pressed into service. Hence, the attention of this court is invited to the view taken in this matter and though it is claimed that an appeal has been admitted against this larger Bench 56 E/87084/2019 order by the High Court of Punjab and Haryana, still, now there is at least a certainty. Now the tribunal's view is that refund of un-utilised Cenvat Credit on closure of unit was not admissible in the absence of express statutory mandate or provision of law.
19. Mr.Murtuza Nazmi learned advocate sought to render assistance to this court by bringing to our notice the views of the Hon'ble Supreme Court on interpretation of taxing statutes. It is contended that a refund is not axiomatic and nothing should be read in the provisions, enabling claiming of refund, which is expressly not there.
20. Thus, the narrow issue before us is whether cash refund is permissible when Cenvat Credit is un-utilised.
21. In this regard, a reference can usefully be made to the judgment of the Hon'ble Supreme Court setting out the fundamental legal principles. These are that in a fiscal statute, nothing can be read, into its provisions and rather should not be read, which is expressly not there. In other words, an implied meaning cannot be given. The Hon'ble Supreme Court in one of the decisions, in the case of Union of India and Ors. vs. Ind-Swift Laboratories Limited (2011) 4 SCC 635 summarised the legal position thus:-
"20. A taxing statute must be interpreted in the light of what is clearly expressed. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. In support of the same we may refer to the decision of this Court in CST v. Modi Sugar Mills Ltd. wherein this Court at AIR para 11 has observed as follows:
"11. .....In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency."57
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21. Therefore, the attempt of the High Court to read down the provision by way of substituting the word "or" by an "and" so as to give relief to the assessee is found to be erroneous. In that regard the submission of the counsel for the appellant is well founded that once the said credit is taken the beneficiary is at liberty to utilise the same, immediately thereafter, subject to the Credit Rules."
22. In the case at hand, we are considering a claim of refund of duty. Section 11B(1) clearly says that a person claiming refund has to make an application for refund of such duty before the expiry of the period prescribed and in such form and manner. The application has to be accompanied by such documentary or other evidence as the applicant may furnish to establish that the amount of duty of excise, in relation to which such refund is claimed, was collected from or paid by him and incidence of such duty had not been passed by him to any other person. The later provision enabling the claiming of refund is now worded differently. We have reproduced it and now it is only when the proviso is attracted that the amount of refund can be paid over to the applicant or else it has to be credited to the fund. Even earlier, the amount used to be credited to the fund, but the proviso says that instead of being credited to the fund, it can be paid to the applicant if such amount in this case is relatable to refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made. The crucial words are that "the refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made or any notification issued under this Act". If the excisable goods are not used as inputs in accordance with the rules made, to our mind, there is no question of any refund. Our view gets support and reinforcement from the language of the rules themselves. Mr.Patil relies upon Rule 5 of the Cenvat Credit Rules, 2004. That Rule reads as under:-
"RULE 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 58 E/87084/2019 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, as amended by clause 72 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill, under the Provisional Collection of Taxes Act, 1931, the force of law, shall be utilised for payment of service tax on any output service.
Explanation : For the purposes of this rule, the words 'output service which are exported' means any output service in respect of which payment is received in India in convertible foreign exchange and the same is not repatriated from, or sent outside, India.
Provided that the CENVAT credit or inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule."59
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23. Thus, a perusal of this rule indicates that where any input or input service is used in the final product, which is cleared for export etc. or used in the intermediate product cleared for export or used for providing output service which is exported, then, the Cenvat Credit in respect of the input or input service so used shall be allowed to be utilised by the manufacturer or provider of output service towards payment of duty of excise on any final product cleared for home consumption or for export on payment of duty or service tax on output service. Whether for any reason, such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitation as may be specified by the Central Government by a notification.
24. The word input is defined in Rule 2(k) of the Cenvat Credit Rules, 2004 to mean all goods used in the factory by the manufacturer of the final product or all goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products or all goods used for generation of electricity or steam for captive use or all goods used for providing any output service. We are not concerned with the excluded portion, but the consistent thread is that input means all goods used in the factory by the manufacturer of the final product. In the situation that is presented before us and particularly in the central excise appeals at hand, it is evident that the order-in-original has been passed by accepting the plea that the assessee was availing Cenvat Credit of duties paid on the inputs purchased and was utilising the same for payment of additional duties of excise on final products at the time of clearance of the same. According to the case of the assessee, by a notification dated 9th July, 2004, the Government of India had exempted all goods appearing within the Schedule of the said Act of 1978. The assessee utilised credit balance of additional duty of excise in their RG-23A Part II Register as on 6th September, 2004, which could not be utilised in future and had remained unutilised. The condition was that since none of the products are charged to additional duties of 60 E/87084/2019 excise, it would not be possible to utilise the said un-utilised credit and the assessee was liable for cash refund. This plea was not accepted in the order-in-original, but came to be accepted by the appellate authority. The Revenue approached the CESTAT against the appellate authority's view, but the CESTAT dismissed the Revenue's appeal. Now, if the cash refund was not permissible, then, it is evident that by reading into the provision something which is expressly not there, such a refund was sought.
25. In the case of Commissioner of Central Excise vs. Gujarat Narmada Fertilizers Company Limited (2009) 9 SCC 101 = 2009- TIOL-96-SC-CX, the Hon'ble Supreme Court construed the provisions and held as under:-
"15. As can be seen from the submissions, the contention of the assessee is that exclusion of fuel inputs from the purview of sub-rule (2) of Rule 6 would mean that such inputs are also automatically excluded from sub-rule (1) whereas according to the Department sub-rule (1) is a general rule which provides, that except for the circumstances mentioned in sub-rule (2), CENVAT Credit shall not be allowed on such quantity of inputs used in the manufacture of exempted goods and even though fuel inputs are excluded from sub-
rule (2), such inputs would still fall under sub-rule (1).
16. In our view, sub-rule (1) is plenary. It restates a principle, namely, the CENVAT credit for duty paid on inputs used in the manufacture of exempted final products is not allowable. This principle is inbuilt in the very structure of the CENVAT scheme. Sub- rule (1), therefore, merely highlights that principles. Sub-rule (1) covers all inputs, including fuel, whereas sub-rule (2) refers to non- fuel inputs. Sub-rule (2) covers a situation where common cenvatted inputs are used in or in relation to manufacture of dutiable final product and exempted final product but the fuel input is excluded from that sub-rule. However, exclusion of fuel input vis-a-vis non- fuel input would still fall in sub-rule (1). As stated above, sub-rule (1) is plenary, hence, it cannot be said that because sub-rule (2) is 61 E/87084/2019 inapplicable to fuel input(s), CENVAT credit is automatically available to such inputs even if they are used in the manufacture of exempted goods."
26. This view follows that taken in the case of Maruti Suzuki Limited vs. Commissioner of Central Excise, Delhi III (2009) 9 SCC 193 = 2009-TIOL-94-SC-CX. In this judgment, the Hon'ble Supreme Court held as under:-
"28. Coming to the statutory definition of the word "input" in Rule 2(g) in the CENVAT Credit Rules, 2002, it may be noted that the said definition of the word "input" can be divided into three parts, namely :
(i) specific part
(ii) inclusive part
(iii) place of use Coming to the specific part, one finds that the word "input" is defined to mean all goods, except light diesel oil, high speed diesel oil and petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not. The crucial requirement, therefore, is that all goods "used in or in relation to the manufacture" of final products qualify as "input". This presupposes that the element of "manufacture" must be present.
29. In J.K.Cotton Spg. & Wvg. Mills Co. Ltd. v. STO [AIR 1965 SC 1310:(1965) 16 STC 563] this Court held that the expression "in the manufacture of goods" should normally encompass the entire process carried on by the dealer of converting raw material into finished goods. It was further held that where any particular process (generation of electricity) is so integrally connected with the ultimate production of goods, that, but for such process, manufacture of goods would be inexpedient, then goods required in such process would fall within the expression "in the manufacture of goods".
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30. In Union Carbide India Ltd. v. CCE [(1996) 86 ELT 613 (Tri)] = 2002-TIOL-439-CESTAT-KOL-LB a larger Bench of CEGAT observed that a wide impact of the expression "used in relation to manufacture" must be allowed its natural play. Inputs (raw materials) used in the entire process of conversion into finished products or any other process (like electricity generation) which is integrally connected with the ultimate production of final product has to fall within the above expression. It was observed that the purpose was to widen the scope, ambit and content of "inputs". According to the Special Bench of CEGAT, the purpose behind the above expression is to widen the ambit of the definition so as to attract all goods, which do not enter directly or indirectly into the finished product, but are used in any activity concerned with or pertaining to the manufacture of the finished product.
34. In the past, there was a controversy as to what is the meaning of the word "input", conceptually. It was argued by the Department in a number of cases that if the identity of the input is not contained in the final product then such an item would not qualify as input. In order to get over this controversy in the above definition of "input", the legislature has clarified that even if an item is not contained in the final product still it would be classifiable as an "input" under the above definition. In other words, it has been clarified by the definition of "input" that the following considerations will not be relevant :
(a) use of input in the manufacturing process be it direct or indirect;
(b) even if the input is not contained in the final product, it would still be covered by the definition.
These considerations have been made irrelevant by the use of the expression "goods used in or in relation to the manufacture of final product" which, as stated above, is the crucial requirement of the definition of "input".
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38. In each case it has to be established that inputs mentioned in the inclusive part are "used in or in relation to the manufacture of final product". It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression "used in or in relation to the manufacture"
has many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product."
27. The attempt made to rely upon the transitional provision, particularly Rule 11 carries the case no further. Rule 11 of the Cenvat Credit Rules, 2004 reads as under:-
"Rule 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 of 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 64 E/87084/2019 allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export.
(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,-
(i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under section 5A of the Act; or
(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.
(4) A provider of output service shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for providing the said service and is lying in stock or is contained in the taxable service pending to be provided, when he opts for exemption from payment of whole of the service tax leviable on such taxable service under a notification issued under section 93 of the Finance Act, 1994 (32 of 1994) 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 excisable goods, whether cleared for home consumption or for export or for payment of service tax on any other output service, whether provided in India or exported."
28. It is evident from a reading of the transitional provision that any amount of credit earned by a manufacturer under the Cenvat Credit 65 E/87084/2019 Rules, 2002, as they existed prior to the 10th September, 2004 or by a provider of output service under the Service Tax Credit Rules, 2002 as they existed prior to 10th September, 2004 and remaining un- utilised 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 utilised in accordance with these rules. This is how the transitional provision enables carrying forward of the un-utilised Cenvat Credit. That is a distinct contingency altogether. That transitional provision does not enable us to hold that the amount of un-utilised Cenvat Credit can be refunded in cash.
29. We do not think that by taking assistance of this provision, we will be able to hold as contended by Mr.Patil that the Cenvat Credit can be refunded even in relation to those inputs which have not been used in the manufacture of the final product or the exported goods. We are called upon to read something in the substantive rule and which is totally absent therein. When Rule 5 follows Rule 4, which is titled as "Conditions for Allowing Cenvat Credit", then, we must understand the scheme in such manner as would make the law workable and consistent. Refund of Cenvat Credit in terms of Rule 5 is permissible only when there is a clearance of a final product of a manufacturer or of an intermediate product for export without payment of duty under a bond or letter of undertaking of a service provider, who provides an output service which is exported without payment of tax and by applying the format which is carved out with effect from 1st April, 2012 by the substituted Rule 5.
30. Prior to such substitution, we have not seen anything in Rule 5 permitting refund of un-utilised credit. We are not dealing with a situation or case of a manufacturer or producer of final products seeks to claim Cenvat Credit of the duty paid on inputs lying in stock or in process when the manufactured or produced goods cease to be exempted goods or any goods become excisable (see Rule 3(2) of the Cenvat Credit Rules, 2004). Thus, refund of Cenvat Credit is permissible where any input is used for the final product which is 66 E/87084/2019 cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export. In the scheme of the rules, therefore, what is sought by the assessee is not permissible. Thus, the attempt by the assessee to claim refund of un-utilised Cenvat Credit cannot be upheld. Merely because the inputs were lying un-utilised or were capable of being utilised, but the manufacturing activities came to a stand still on account of closure of the factory would not enable the assessee to claim refund of Cenvat Credit. That such credit can be availed of provided the inputs are used and not otherwise is clear from the scheme of the rules to which we have made a detailed reference in the foregoing paragraphs.
31. The sheet anchor of Mr.Patil's arguments is the judgment of the earlier Division Bench of this court and that is based on the view taken by the High Court of Karnataka. The High Court of Karnataka has not discussed the scheme of Cenvat Credit in details. The South Zonal Bench of the CESTAT in Slovak India (supra) considered the case of refund of un-utilised Cenvat Credit on account of closure of the factory of the said Slovak India. The Commissioner (Appeals) took the view that there is no provision in Rule 5 of the Cenvat Credit Rules to grant cash refund. After being approached, what the CESTAT observed is that there is a consistent view taken by the tribunal that such claim is eligible and the assessee can seek refund when it goes out of the Modvat scheme (predecessor of Cenvat) or the unit is closed. This is the reasoning in the tribunal's order and though the appeal of the Revenue before the High Court of Karnataka at Bengaluru raised several grounds and pleas, the High Court referred to the arguments and in para 4 of its order, reproduced Rule 5 of the Cenvat Credit Rules, 2002. In para 5, the reasoning of the High Court of Karnataka reads thus:-
"5. There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light 67 E/87084/2019 of closure of the Company. Therefore, Rule 5 is not available for the purpose of rejection as rightly rules by the Tribunal. The Tribunal has noticed that various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. In these circumstances, we answer all the three questions as framed in para 17 against the Revenue and in favour of the assessee."
32. Thus, the High Court of Karnataka took the view that there is no express prohibition in terms of Rule 5 and that rule refers to a manufacturer. Thus, even if there is no manufacture in the light of the closure of the factory, the assessee being a manufacturer is construed as one coming out of the Modvat scheme but still eligible for cash refund. The factory is closed and the inputs were not used in the manufacture of a final product is, thus, overlooked. So long as the assessee is a manufacturer even if his factory is closed, the input credit was available, is thus the view.. Hence, the refund was held to be permissible.
33. When the matter was carried to the Hon'ble Supreme Court by the Revenue, the Hon'ble Supreme Court noted the concession of the learned Additional Solicitor General. That concession is that the views of the tribunals to the aforesaid effect have not been appealed against by the Revenue/Union of India. Pertinently, there is no concession by the Additional Solicitor General of India on the point of law. Hence, going by this concession on fact, the Special Leave Petition of the Revenue was dismissed. This, by no stretch of imagination, is a confirmation or approval of the view taken by the South Zonal Bench of the Tribunal at Bengaluru or the High Court of Karnataka. 34. Pertinently, when the matter was brought before this court in the case of Jain Venguard (supra), this court, relying upon the judgment in the case of Slovak India (supra) and the order in the Special Leave Petition, dismissed the Revenue's appeal. The 68 E/87084/2019 aggrieved Revenue, carried the matter to the Hon'ble Supreme Court and the order passed on that Special Leave Petition reads as under:-
"Delay condoned.
We find no reason to interfere with the impugned order in exercise of our discretion under Article 136 of the Constitution. The Special Leave Petition is, accordingly, dismissed leaving the question of law open."
35. The Special Leave Petition was dismissed, but the question of law was expressly kept open. It is in these circumstances that we are not in agreement with Mr.Patil that the issue or the controversy before us stands concluded against the Revenue. The question of law was still open to be raised and equally examined by us. There is no question of judicial discipline in such matters. The counsel relied upon this principle of judicial discipline by inviting our attention to the judgment of the Hon'ble Rajasthan High Court in the case of Welcure Drugs and Pharmaceuticals Ltd. vs. Commissioner of Central Excise, Jaipur reported in 2018 (15) GST Law Times Page 257 = 2018-TIOL-380-HC-RAJ-CX. There, the Hon'ble Rajasthan High Court concluded that the Revenue cannot seek to urge before that High Court that the view taken by four different High Courts approving the order of CESTAT has lost its persuasive value, particularly when the Special Leave Petitions against the view taken by four different High Courts were either not filed or filed but not entertained. Thus, the tribunals have taken a consistent view and the Revenue could not succeed in having that set aside. It is in these circumstances, the Rajasthan High Court negatived the contention of the Revenue that the tribunal under the jurisdiction of that High Court could have distinguished the orders and judgments of its Benches. That was found to be contrary to the judicial discipline. It is in these circumstances so also when there was a larger Bench view of the tribunal having a binding effect, that the principle of judicial discipline was pressed into service.
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36. After the view taken in Steel Strips Ltd. (supra) and which was also fairly brought to our notice, it is evident that this principle has no application to the facts and circumstances before us.
37. Finally, we do not find any merit in the arguments of Mr.Patil to the effect that if the earlier judgment is not appealed against, an appeal against the subsequent order or judgment passed relying upon the earlier judgment cannot be sustained. He pressed into service the judgment of the Hon'ble Supreme Court in the case of Birla Corporation Ltd. vs. Commissioner of Central Excise 2005 (186) ELT 266 (SC) = 2005-TIOL-99-SC-CX. There, the issue was entirely different. The issue was whether the duty paid on spares of rope way used for the purpose of transporting the crushed limestone from the mines located 4.2 kilometer away to the factory is entitled to Modvat Credit. That was disallowed on the ground that rope way transports raw material from the mines to the factory premises and is not a material handling equipment within the factory premises. It was not disputed that the crushed limestone is brought from the mines to the factory premises where it is deposited utilising the rope way as a means of transportation.
38. An identical issue came up for consideration in the case of J.K.Udaipur Udyog Limited vs. Commissioner of Central Excise 2001 (130) ELT 996. In that case, the tribunal followed the principles laid down in its prior decision and held that the Modvat Credit was admissible. A civil appeal was preferred to the Hon'ble Supreme Court, but that was dismissed as not pressed. That is because the judgment relied upon by the tribunal in the case of J.K.Udaipur Udyog Limited (supra) and the Commissioner of Central Excise, Chennai vs. Pepsico India Holdings Limited 2001(130) ELT 193 (Tri.) was accepted by the Chief Commissioner of Central Excise, Chennai. In these circumstances, the Special Leave Petition by Birla Corporation Limited came to be allowed. The Hon'ble Supreme Court held that when same question arises for consideration, the facts are almost identical, then, the Revenue cannot be permitted to take a 70 E/87084/2019 different stand. More so, when the earlier appeal involving identical issue was not pressed and therefore, dismissed. Hence, a contrary stand cannot be taken and that will confuse everybody. This judgment, therefore, has no application to the issue before us.
39. The referring order has already discussed in detail as to how the principle of merger cannot be invoked in this case. In the order passed in the case of Jain Venguard (supra), the question of law was expressly kept open. Hence, the earlier view of the tribunal does not merge with dismissal of the Special Leave Petition in the case of Slovak India (supra). Hence, this principle has also no application.
40. As a result of the above discussion, we answer the questions of law framed above as (a) and (b) in the negative. They have to be answered against the assessee and in favour of the Revenue. Questions (a) and (b) having been answered accordingly, needless to state that the order of the Hon'ble Supreme Court in the case of Slovak India (supra) cannot be read as a declaration of law under Article 141 of the Constitution of India."
21. Tribunal has in case of Saera Electric Auto Pvt Ltd [2020 (372) ELT 452 (T-Chand) has in similar circumstances taking into account the changes made in the rule 5 of CENVAT Credit Rules, 2004 with effect from held as follows:
"9. A plain reading of Section 11B shows that it provides for refund of excise duty paid. It does not provide for the refund of unutilized Cenvat Credit. The entire Cenvat credit is governed by the Cenvat Credit Rules, 2004, which provide for availment/utilization of the Cenvat credit. In some specific cases, refund of unutilized Cenvat credit in cash has also been provided under Rule 5 of the Cenvat Credit Rules, 2004. The appellant's case is not under this rule. The appellant has applied for refund under Section 11B of the Central Excise Act, 1944 read with Rule 10 of the Cenvat Credit Rules, 2004.71
E/87084/2019 This rule only provides for transfer of unutilized Cenvat credit but not encashment. The fact that they have subsequently come under GST regime makes no difference and the appellant cannot claim the refund under a legal provision which does not exist. Rule 5 of the Cenvat Credit Rules, 2004 provides for refund of Cenvat credit in case of export of goods or export of services if the assessee is not able to utilize the corresponding Cenvat credit. Earlier, prior to 1-4- 2012, this Rule also provided the refund of the Cenvat credit if the Cenvat credit could not be utilized for any other reason. In that context, the Hon'ble High Court of Karnataka in the case of Slovak India Trading Company Pvt. Ltd. (supra) has held that refund of the Cenvat credit is admissible under Rule 5 of the Cenvat Credit Rules, 2004 if the factory is closed. Subsequently, this rule has been amended and right now there is no scope of refund of the Cenvat credit which has not been utilized at the time of closer of the factory. At any rate, the appellant's application was not under Rule 5 of the Cenvat Credit Rules, 2004."
22. A three member bench of Hon'ble Supreme Court has in case of Dharamendra Textiles Processors {2008 (231) ELT 3 (SC)], stated the law on "casus omissus" as follows:
"11. The decision in Bharat Heavy Electricals's case (supra) cannot be of any assistance to the assessee because the same proceeded on the basis of concession. Even otherwise, it was not open to the Bench to read, into a statute which was specific and clear, something which is not specifically provided for in the statute.
12. The stand of learned counsel for the assessee is that the absence of specific reference to mens rea is a case of casus omissus. If the contention of learned counsel for the assessee is accepted that the use of the expression "assessee shall be liable" proves the existence of discretion, it would lead to a very absurd result. In fact in the same provision there is an expression used i.e. "liability to pay duty". It can by no stretch of imagination be said that the adjudicating authority has even a discretion to levy duty less than 72 E/87084/2019 what is legally and statutorily leviable. Most of cases relied upon by learned counsel for the assessee had their foundation on Bharat Heavy Electrical's case (supra). As noted above, the same is based on concession and in any event did not indicate the correct position in law.
13. It is a well-settled principle in law that the court cannot read anything into a statutory provision or a stipulated condition which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. Similar is the position for conditions stipulated in advertisements.
14. Words and phrases are symbols that stimulate mental references to referents. The object of interpreting a statute is to ascertain the intention of the legislature enacting it. (See Institute of Chartered Accountants of India v. Price Waterhouse - 1977 6 SCC
312). The intention of the legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said as also to what has not been said. As a consequence, a construction which requires for its support, addition or substitution of words or which results in rejection of words as meaningless has to be avoided. As observed in Crawford v. Spooner (1846) 6 MOO PC 1, the courts cannot aid the legislature's defective phrasing of an Act, they cannot add or mend, and by construction make up deficiencies which are left there. (See State of Gujarat v.
Dilipbhai Nathjibhai Patel - 1998 (3) SCC 234). It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so. [See Stock v. Frank Jones (Tipton) Ltd. - 1978 (1) ALL ER 948.] Rules of interpretation do not permit the courts to do so, unless the provision as it stands is meaningless or of doubtful meaning. The courts are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself. (Per Lord Loreburn, L.C. in Vickers Sons") 73 E/87084/2019
15. The question is not what may be supposed and has been intended but what has been said. "Statutes should be construed not as theorems of Euclid", Judge Learned Hand said, "but words must be construed with some imagination of the purposes which lie behind them". (See Lenigh Valley Coal Co. v. Yensavage - 218 FR 547) The view was reiterated in Union of India v. Filip Tiago De Gama of Vedem Vasco De Gama - (1990) 1 SCC 277 (SCC p. 284, para 16).
16. In D.R. Venkatachalam v. Dy. Transport Commr. (1977) 2 SCC 273, it was observed that the courts must avoid the danger of a priori determination of the meaning of a provision based on their own preconceived notions of ideological structure or scheme into which the provision to be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of interpretation.
17. While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. [See CST v. Popular Trading Co. - (2000) 5 SCC 511] The legislative casus omissus cannot be supplied by judicial interpretative process.
18. Two principles of construction - one relating to casus omissus and the other in regard to reading the statute as a whole, appear to be well settled. Under the first principle a casus omissus cannot be supplied by the court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the 74 E/87084/2019 legislature. "An intention to produce an unreasonable result", said Danckwerts, L.J. in Artemiou v. Procopiou - (1965) 3 ALL ER 539 (All ER p. 544 I) "is not to be imputed to a statute if there is some other construction available". Where to apply words literally would "defeat the obvious intention of the legislation and produce a wholly unreasonable result", we must "do some violence to the words" and so achieve that obvious intention and produce a rational construction. [Per Lord Reid in Luke v. IRC - (1963) AC 557 where at AC p. 577 he also observed : (All ER p.664 I) "This is not a new problem, though our standard of drafting is such.
19. It is then true that :
"When the words of a law extend not to an inconvenience rarely happening, but due to those which often happen, it is good reason not to strain the words further than they reach, by saying it is casus omissus, and that the law intended quae frequentius accidunt."
"But", on the other hand, "it is no reason, when the words of a law do enough extend to an inconvenience seldom happening, that they should not extend to it as well as if it happened more frequently, because it happens but seldom". (See Fenton v. Hampton (1858) 11 MOO PC 347).
20. A casus omissus ought not to be created by interpretation, save in some case of strong necessity. Where, however, a casus omissus does really occur, either through the inadvertence of the legislature, or on the principle quod enim semel aut bis existit praetereunt legislatores, the rule is that the particular case, thus left unprovided for, must be disposed of according to the law as it existed before such statute - casus omissus et oblivioni datus dispositioni communis juris relinquitur; "a casus omissus", observed Buller, J. in Jones v. Smart - 1785 (1) TR 44:99 ER 963 (ER p. 967) "can in no case be supplied by a court of law, for that would be to make laws". The principles were examined in detail in Maulavi Hussein Haji Abraham Umarji v. State of Gujarat [2004 (6) SCC 672].
75E/87084/2019
21. The golden rule for construing all written instruments has been thus stated :
"The grammatical and ordinary sense of the words is to be adhered to unless that would lead to some absurdity or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no further." (See Grey v. Pearson.)
22. The latter part of this "golden rule" must, however, be applied with much caution. "If", remarked Jervis, C.J., "the precise words used are plain and unambiguous, in our judgment, we are bound to construe them in their ordinary sense, even though it do lead, in our view of the case, to an absurdity or manifest injustice. Words may be modified or varied, where their import is doubtful or obscure. But we assume the functions of legislators when we depart from the ordinary meaning of the precise words used, merely, because we see, or fancy we see, an absurdity or manifest injustice from an adherence to their literal meaning". (See Abley v. Dale, ER p. 525)
23. The above position was highlighted in Sangeeta Singh v. Union of India and Ors. [2005 (7) SCC 484]."
23. A five Judges bench of Hon'ble Supreme Court has in case of Dilip Kumar & Company [2018 (366) ELT (SC)] laid down the law in respect of interpretation of taxing statutes as follows:
"18. It is well accepted that a statute must be construed according to the intention of the Legislature and the Courts should act upon the true intention of the legislation while applying law and while interpreting law. If a statutory provision is open to more than one meaning, the Court has to choose the interpretation which represents the intention of the Legislature. In this connection, the 76 E/87084/2019 following observations made by this Court in District Mining Officer v. Tata Iron and Steel Co., (2001) 7 SCC 358, may be noticed :
"... A statute is an edict of the Legislature and in construing a statute, it is necessary, to seek the intention of its maker. A statute has to be construed according to the intent of them that make it and the duty of the Court is to act upon the true intention of the Legislature. If a statutory provision is open to more than one interpretation the Court has to choose that interpretation which represents the true intention of the Legislature. This task very often raises the difficulties because of various reasons, inasmuch as the words used may not be scientific symbols having any precise or definite meaning and the language may be an imperfect medium to convey one's thought or that the assembly of Legislatures consisting of persons of various shades of opinion purport to convey a meaning which may be obscure. It is impossible even for the most imaginative Legislature to forestall exhaustively situations and circumstances that may emerge after enacting a statute where its application may be called for. Nonetheless, the function of the Courts is only to expound and not to legislate. Legislation in a modern State is actuated with some policy to curb some public evil or to effectuate some public benefit. The legislation is primarily directed to the problems before the Legislature based on information derived from past and present experience. It may also be designed by use of general words to cover similar problems arising in future. But, from the very nature of things, it is impossible to anticipate fully the varied situations arising in future in which the application of the legislation in hand may be called for, and, words chosen to communicate such indefinite referents are bound to be in many cases lacking in clarity and precision and thus giving rise to controversial questions of construction. The process of construction combines both literal and purposive approaches. In other words the legislative intention, i.e., the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or 77 E/87084/2019 object which comprehends the mischief and its remedy to which the enactment is directed..."
19. The well-settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. In Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words used are capable of one construction only then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act.
20. In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose [Assistant Commissioner, Gadag Sub-Division, Gadag v. Mathapathi Basavannewwa, 1995 (6) SCC 355]. Not only that, if the plain construction leads to anomaly and absurdity, the Court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation.
21. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision-making. Insofar as taxation statutes are 78 E/87084/2019 concerned, Article 265 of the Constitution [265. Taxes not to be imposed save by authority of law - No tax shall be levied or collected except by authority of law.] prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the Legislature.
22. At the outset, we must clarify the position of 'plain meaning rule or clear and unambiguous rule' with respect of tax law. 'The plain meaning rule' suggests that when the language in the statute is plain and unambiguous, the Court has to read and understand the plain language as such, and there is no scope for any interpretation. This salutary maxim flows from the phrase "cum inverbis nulla ambiguitas est, non debet admitti voluntatis quaestio". Following such maxim, the Courts sometimes have made strict interpretation subordinate to the plain meaning rule [Mangalore Chemicals case (Infra para 37).], though strict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self-contradictory.
23. Next, we may consider the meaning and scope of 'strict interpretation', as evolved in Indian law and how the higher Courts have made a distinction while interpreting a taxation statute on one hand and tax exemption notification on the other. In Black's Law Dictionary (10th Edn.) 'strict interpretation' is described as under :
Strict interpretation. (16c) 1. An interpretation according to the narrowest, most literal meaning of the words without regard for context and other permissible meanings. 2. An interpretation according to what the interpreter narrowly believes to have been the specific intentions or understandings of the text's authors or ratifiers, 79 E/87084/2019 and no more. - Also termed (in senses 1 & 2) strict construction, literal interpretation; literal construction; restricted interpretation; interpretatio stricta; interpretatio restricta; interpretatio verbalis. 3. The philosophy underlying strict interpretation of statutes. - Also termed as close interpretation; interpretatio restrictive.
See strict constructionism under constructionism. Cf. large interpretation; liberal interpretation (2).
"Strict construction of a statute is that which refuses to expand the law by implications or equitable considerations, but confines its operation to cases which are clearly within the letter of the statute, as well as within its spirit or reason, not so as to defeat the manifest purpose of the legislature, but so as to resolve all reasonable doubts against the applicability of the statute to the particular case.' Wiliam M. Lile et al., Brief Making and the use of Law Books 343 (Roger W. Cooley & Charles Lesly Ames eds., 3d ed. 1914).
"Strict interpretation is an equivocal expression, for it means either literal or narrow. When a provision is ambiguous, one of its meaning may be wider than the other, and the strict (i.e., narrow) sense is not necessarily the strict (i.e., literal) sense." John Salmond, Jurisprudence 171 n. (t) (Glanville L. Williams ed., 10th ed. 1947).
24. As contended by Ms. Pinky Anand, Learned Additional Solicitor General, the principle of literal interpretation and the principle of strict interpretation are sometimes used interchangeably. This principle, however, may not be sustainable in all contexts and situations. There is certainly scope to sustain an argument that all cases of literal interpretation would involve strict rule of interpretation, but strict rule may not necessarily involve the former, especially in the area of taxation. The decision of this Court in Punjab Land Development and Reclamation Corporation Ltd., Chandigarh v. Presiding Officer, Labour Court Chandigarh and Ors., (1990) 3 SCC 682, made the said distinction, and explained the literal rule-
80E/87084/2019 "The literal rules of construction require the wording of the Act to be construed according to its literal and grammatical meaning whatever the result may be. Unless otherwise provided, the same word must normally be construed throughout the Act in the same sense, and in the case of old statutes regard must be had to its contemporary meaning if there has been no change with the passage of time."
That strict interpretation does not encompass strict - literalism into its fold. It may be relevant to note that simply juxtaposing 'strict interpretation' with literal rule' would result in ignoring an important aspect that is 'apparent legislative intent'. We are alive to the fact that there may be overlapping in some cases between the aforesaid two rules. With certainty, we can observe that, 'strict interpretation' does not encompass such literalism, which lead to absurdity and go against the legislative intent. As noted above, if literalism is at the far end of the spectrum, wherein it accepts no implications or inferences, then 'strict interpretation' can be implied to accept some form of essential inferences which literal rule may not accept.
25. We are not suggesting that literal rule de hors the strict interpretation nor one should ignore to ascertain the interplay between 'strict interpretation' and 'literal interpretation'. We may reiterate at the cost of repetition that strict interpretation of a statute certainly involves literal or plain meaning test. The other tools of interpretation, namely contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well-settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be 81 E/87084/2019 read into nor should anything be implied other than essential inferences while considering a taxation statute."
24. In view of the discussions as above I do not find any merits in the appeal and the same needs to be dismissed following the decision of larger bench of CESTAT in the case of Steel Strips and also the larger bench of Hon'ble Bombay High Court (Jurisdictional High Court) in case of Gauri Plasticulture.
(Sanjiv Srivastava) Member (Technical) tvu POINTS OF DIFFERENCE On the point of application of binding precedent for the Tribunal vis-à-vis revisiting to the legality of the issue involved and applicability of stare decisis, there emerged certain difference of opinion between learned Member (Judicial) and learned Member (Technical). To settle the issues and give finality to the divergent opinion emerged, the Registry is directed to place the matter before the Hon'ble President. The following points are required to be settled to give a finality to the issue:-
i. Whether the decision of the Hon'ble High Court of Karnataka in case of Slovak India Trading Co Pvt, and affirmed by the Hon'ble Supreme Court, is applicable to the facts of the case in hand as held by Member (Judicial); or The decision of the Hon'ble Karnataka High Court is clearly distinguishable and not applicable to the facts of the case as held by Member (Technical) ii. Whether the order passed by the Hon'ble Supreme Court is to be accepted as binding precedent in view of Kunhayammed and others judgment [2001 (129) ELT 11 (S.C.)] read with Gangadhar Pal Vs RDC [2012 (25) STR 273 (SC)] in view of 82 E/87084/2019 operation of Article 141 of the Constitution of India irrespective of the merger or no merger of the judgment of Hon'ble High Court with the judgment of the Hon'ble Supreme Court; or CESTAT is bound to follow the decision of the larger Bench of CESTAT ( in the case of Steel Strips) and larger Bench of the Hon'ble Bombay High Court (Jurisdictional High Court) in the case of Gouri Plastic Culture - [2019 (6) TMI 820 (Bombay- HC)] which has dealt with the findings of Kunhayammed.
iii. After the decision of the Hon'ble Supreme Court in case of Mafatlal Industries, and subsequent decisions, can CESTAT which is an authority created under the statute, decide any claim of the refund in terms of Rule 5 of CENVAT Credit Rules, 2004, filed for the reason beyond the reason of export of goods under bond. Member (Judicial) has held in favour of appellant and Member (Technical) has held in negative.
iv. Whether the decision of the Hon'ble Karnataka High Court will hold goods after amendments made in the Rule 5 of CENVAT Credit Rules, 2004 in the year 2012, Member (Judicial) has held in favour of the Appellant while Member (Technical) disagrees and holds that the refund claim needs to be filed and adjudged as per the provisions of Rule 5 as they existed when the refund claim was filed.
v. Whether the refund claim is barred by limitation, Member (Judicial) has not dealt with the issue as not in adjudication order whereas Member (Technical) has held the refund claim to be hit by limitation.
vi. Whether the larger Bench orders of the Tribunal passed in the case of Mira Silk Mills Vs. Commissioner of Central Excise, Mumbai [2003 (153) ELT 686 (Tri. LB)] and Atma Steel Private Limited and others Vs. Collector Central Excise, Chandigarh and others [RLT (LB) CEGAT-87] on the application of binding precedent is to be followed by the Tribunal to arrive at a conclusion as held by the Member (Judicial); or 83 E/87084/2019 Observation of the larger Bench of the Hon'ble Bombay High Court upon non-application of Article 141 in the context of the findings of the Hon'ble Supreme Court is to be followed by this Tribunal, as held by the learned Member (Technical) though ratio of the judgment in Gangadhar Pal had not been brought to the knowledge of the Hon'ble Bombay High court. vii. Whether legality of the issue involved in the present appeal concerning cash refund upon closer of factory can be revisited after the same is given a finality by the Hon'ble Supreme Court with a reason, may be meager, in confirming the order of the Hon'ble Karnataka High court, which is opined in the negative by the Member (Judicial) and In the affirmative and in express analysis of the provisions of the relevant Act and rules by the Member (Technical).
(Pronounced in court on 28.09.2021) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) E/87084/2019 84 ORDER ON DIFFERENCE OF OPINION INTERIM ORDER NO. 31/2023 Date of Hearing: 08.09.2022 Date of decision: 06.03.2023 PER: S.K. MOHANTY
25. The back ground facts, leading to the difference of opinion by the learned Members in the Division Bench, in a nut shell, are that the appellants herein M/s ATV Projects India Ltd., during the material period, was a manufacturer of excisable goods and subsequently had closed down the factory in the year 1998, but continued to have the registration certificate effective till June, 2017. Thereafter, they have surrendered the certificate to the department and on 26.10.2017, filed the application before the jurisdictional Central Excise authorities, claiming refund of the accumulated Cenvat credit amounting to Rs.1,80,26,559/-, owing to the reason of closure of the factory. The said refund application was filed under Rule 5 of the Cenvat Credit Rules, 2004. The Assistant Commissioner of Central Excise vide Order dated 25.01.2018 had rejected the refund application filed by the appellant. Against the said original order, the appellant had preferred appeal before the learned Commissioner (Appeals), which was disposed of vide Order-in-Appeal dated 26.04.2019 (for short, referred to as the "impugned order"), by dismissing the appeal filed by the appellant. By placing reliance on the judgment of Hon'ble Bombay High Court in the case of Gauri Plasticulture Pvt. Ltd., 2018 (360) ELT 967 (Bom.), the learned Commissioner in the impugned order has held that refund of unutilized Cenvat credit cannot be granted on closure of the factory. Aggrieved with the order dated 26.04.2019, the appellant has preferred the appeal before this Tribunal. While hearing the appeal, the learned Members in the Division Bench have raised the difference of opinion with regard to the issue of grant of refund of accumulated Cenvat credit, in the event of closure of the factory. Points of difference between the learned Member (Technical) and learned Member (Judicial) of the Bench have already been set out in the preceding paragraphs. However, for ease of reference, the issue of difference, views expressed by both the learned Members and relevant paragraphs recorded in the Interim Order No. 10/2021 dated 28.09.2021 are set out in a tabular form, as under:-
E/87084/2019 85 Sr. Issue/ Points of Views expressed by the Views expressed by the No. difference Member (Judicial) & relevant Member (Technical) & para in Interim order relevant para in Interim order 1 Whether the decision The facts in RE: Slovak India, The issue in RE: Slovak, was of the Hon'ble High as well as other Tribunal a refund arising on account of Court of Karnataka in judgements, wherein refund the disputed credit which case of Slovak India of CENVAT Credit on account could not have been utilized Trading Co Pvt, and of factory closure, relying at the time when the unit was affirmed by the upon Slovak are similar to the in operation. Further, all the Hon'ble Supreme instant case. In obedience to Tribunal cases, which allowed Court, is applicable the judicial precedent, set by refund of CENVAT Credit on to the facts of the the highest Court of the land, the basis of Slovak, are per case in hand as held the Appeal had been allowed incuriam.
by Ld. Member with consequential relief. (Paras18.6 to 18.9) (Judicial); or (Paras10.1, 14) The decision of the Hon'ble Karnataka High Court is clearly distinguishable and not applicable to the facts of the case as held by Member (Technical) 2 Whether the order In para 40 of the judgement Not discussed;
passed by the in RE: Kunhayammed, the
Hon'ble Supreme Hon'ble Supreme Court had The New Delhi Tribunal in RE:
Court is to be found that where the SLP is Steel Strips had considered
accepted as binding dismissed at the threshold, the decision of the larger
precedent in view of without having been allowed bench of Hon'ble Bombay
Kunhayammed and to enter the appellate High Court in Gauri
others judgment jurisdiction, the doctrine of Plasticulture. The Mumbai
[2001 (129) ELT 11 merger would not apply, CESTAT is bound by the said
(S.C.)] read with however, it would still remain judgements.
Gangadhar Pal Vs. a declaration of law U/Art. (Paras 23, 24)
RDC [2012 (25) STR 141 and therefore, will take
273 (SC)] in view of away the jurisdiction of any
operation of Article other Court, Tribunal or
141 of the authority to express any
Constitution of India opinion in conflict with or in
irrespective of the departure from the view
merger or no merger taken by the Hon'ble
of the judgment of Supreme Court, because
Hon'ble High Court permitting to do so would be
with the judgment of subversive of judicial
the Hon'ble Supreme discipline and affront to the
Court; or Hon'ble Supreme Court Order.
CESTAT is bound to The L.B. of the New Delhi
follow the decision of Tribunal in RE: Mira Silk Mills,
the larger Bench of has laid down the norm to the
CESTAT (in the case effect that if there is conflict
of Steel Strips) and between law laid down by the
larger Bench of the Hon'ble High Court and ratio
Hon'ble Bombay High of the decision of the
Court (Jurisdictional Tribunal, whether it is a
High Court) in the Larger Bench or not, Hon'ble
case of Gauri Plastic High Court decisions will
Culture - [2019 (6) prevail over Tribunal
TMI 820 (Bombay- decisions, unless the same is
HC)] which has dealt inflict with a decision of the
with the findings of Hon'ble Apex Court. The L.B.
Kunhayammed. of New Delhi Tribunal in RE:
Atma Steel Private Limited in
para 70 had held that in case
of conflicting decisions of
different High Courts
including that of the particular
High Court where the
assessee or the Jurisdictional
E/87084/2019
86
Sr. Issue/ Points of Views expressed by the Views expressed by the
No. difference Member (Judicial) & relevant Member (Technical) &
para in Interim order relevant para in Interim
order
Officer is residing, Tribunal
while dealing with Central
Acts, will have the
independence to analyse the
issue objectively and arrive at
a finding.
(Paras 11, 12, 12.1,13, 10)
3 After the decision of Not discussed Not discussed
the Hon'ble Supreme
Court in case of
Mafatlal Industries,
and subsequent
decisions, can
CESTAT which is an
authority created
under the statute,
decide any claim of
the refund in terms
of Rule 5 of CENVAT
Credit Rules, 2004,
filed for the reason
beyond the reason of
export of goods
under bond. Member
(Judicial) has held in
favour of appellant
and Member
(Technical) has held
in negative.
4 Whether the decision Not discussed Not discussed
of the Hon'ble
Karnataka High
Court will hold
goods, after
amendments made
in Rule 5 of CENVAT
Credit Rules, 2004 in
the year 2012,
Member (Judicial)
has held in favour of
the Appellant while
Member (Technical)
disagrees and holds
that the refund claim
needs to be filed and
adjudged as per the
provisions of Rule 5
as they existed when
the refund claim was
filed.
5 Whether the refund Not discussed Not discussed
claim is barred by
limitation, Member
(Judicial) has not
dealt with the issue
as not in
adjudication order
whereas Member
(Technical) has held
the refund claim to
be hit by limitation.
6 Whether the larger If there is conflict between a) Not discussed;
Bench orders of the law laid down by the Hon'ble
Tribunal passed in High Court and ratio of the b) The Mumbai CESTAT is
the case of Mira Silk decision of the Tribunal, bound by the judgement of
Mills Vs. whether it is a Larger Bench the LB of Delhi Tribunal in RE:
E/87084/2019
87
Sr. Issue/ Points of Views expressed by the Views expressed by the
No. difference Member (Judicial) & relevant Member (Technical) &
para in Interim order relevant para in Interim
order
Commissioner of or not, Hon'ble High Court Steel Strips and LB of
Central Excise, decisions will prevail over Bombay HC in RE: Gauri
Mumbai [2003 (153) Tribunal's decisions, unless Plasticulture, wherein it was
ELT 686 (Tri. LB)] the same is inflict with a held that cash refund of
and Atma Steel decision of the Apex Court. CENVAT Credit cannot be
Private Limited and Similarly, in case of conflicting allowed u/s. 11B of the
others Vs. Collector decisions of different High Excise Act.
Central Excise, Courts including that of the (Para 24)
Chandigarh and particular High Court where
others [RLT (LB) the assessee or the
CEGAT-87] on the Jurisdictional Officer is
application of binding residing, Tribunal while
precedent is to be dealing with Central Acts, will
followed by the have the independence to
Tribunal to arrive at analyse the issue objectively
a conclusion as held and arrive at a finding;
by the Member
(Judicial); or Irrespective of whether the
judgement of Hon'ble
Observation of the Supreme Court in RE:
larger Bench of the Gangadhar Palo was brought
Hon'ble Bombay High before the LB of Bombay HC
Court upon non- in RE: Gauri Plasticulture, as
application of Article it has been held by
141 in the context of Kunhayammed, whether the
the findings of the order passed by the Hon'ble
Hon'ble Supreme Supreme Court merges with
Court is to be itself the order passed by the
followed by this Court/Tribunal below it or not,
Tribunal, as held by its decisions with a reason
the learned Member (may be one sentence in view
(Technical) though of Gangadhar Palo) will have
ratio of the judgment binding effect on all Courts,
in Gangadhar Pal had Tribunal etc., in view of the
not been brought to mandate in Article 141 of the
the knowledge of the Constitution of India.
Hon'ble Bombay High Accordingly, in obedience with
court. the law set by the highest
court, the instant Appeal shall
be allowed.
(Paras 10, 13, 14)
7 Whether legality of The Hon'ble Supreme Court in The issue in Slovak India was
the issue involved in RE: Dunlop [1985 (1) SCC a refund arising on account of
the present appeal 260] had held that the the disputed credit which
concerning cash judicial system only works if could not have been utilized
refund upon closer of someone is allowed to have at the time when the unit was
factory can be the last word and that last in operation. Whereas, the
revisited after the word, once spoken, is loyally issue regarding refund of
same is given a accepted. The better wisdom CENVAT credit on factory
finality by the of the Court below must yield closure had been decided by
Hon'ble Supreme to the higher wisdom of the the LB of the Delhi Tribunal in
Court with a reason, Court above. Further, in line Steel Strips.
may be meger, in with the findings of the (Paras 18.96, 19)
confirming the order Hon'ble Supreme Court in
of the Hon'ble Kunhayammed and
Karnataka High Gangadhar Palo, the decision
court, which is of the Hon'ble SC in RE:
opined in the Slovak India will have a
negative by the binding effect on all the lower
Member (Judicial) courts.
and (Paras 13, 14)
In the affirmative
and in express
analysis of the
provisions of the
relevant Act and
E/87084/2019
88
Sr. Issue/ Points of Views expressed by the Views expressed by the
No. difference Member (Judicial) & relevant Member (Technical) &
para in Interim order relevant para in Interim
order
rules by the Member
(Technical).
26. Heard learned Advocate for the appellant and learned Authorised Representative for Revenue and examined the case records, including the written notes of submissions filed by both sides.
27. On careful reading of the questions framed as above, I find that the opinions of the learned Members in the Bench are explicitly divergent only on the effect of the dismissal of SLP of Revenue against the decision of the Hon'ble Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd (supra). The issue of limitation raised by the learned Member (Technical), though has not been discussed separately by the learned Member (Judicial); but vide the Interim Order dated 28.09.2021, since has directed for grant of refund along with interest, a divergent stand has been taken impliedly. The other issues, though stated explicitly as points of reference, are not required to be addressed by me inasmuch as no discussions have been made by either of the Members on those issues in the body of the Interim Order. I therefore, confine myself only on two issues (referred supra) for recording my opinion.
28.1 The Tribunal in the case of Slovak India Trading Co. Pvt. Ltd. Vs. Commissioner of C.Ex., Bangalore - 2005 - TIOL - 1698 - CESTAT - BANG., has held that refund claim is eligible and refund has to be made in cash, when the assessee goes out of Modvat Scheme or when the company is closed. While allowing the appeal in favour of the appellant, the Tribunal has relied upon various Co-ordinate Bench decisions rendered on the similar set of facts. Feeling aggrieved with the order of Tribunal in the case of Slovak (supra), the department had field appeal before the Hon'ble Karnataka High Court, which was disposed of by way of rejection of appeal, reported in 2006 (201) E.L.T. 559 (Kar.). In the said judgement, the Hon'ble High Court had upheld the views of the Tribunal and had recorded the findings that there is no express prohibition for refund in terms of Rule 5 of Cenvat Credit Rules, 2004; that the said provision refers to a manufacturer; and that since there is no manufacture in the light of closure of the company, the provisions of Rule 5 ibid is not available for the purpose of rejection of the refund application. The said judgement of the Hon'ble Karnataka High Court was challenged by the Union of India by way of filing of Special Leave Petition E/87084/2019 89 (SLP) before the Hon'ble Supreme Court. The SLP was dismissed by the Hon'ble Court [2008 (223) E.L.T. A 170 (S.C.)], holding that learned ASG appearing for the Union of India, had fairly conceded that those decisions of the Tribunal, which were relied upon by the Tribunal to allow cash refund of accumulated Cenvat credit, had not been appealed against. The judgment dated 25.01.2007 delivered by the Hon'ble Supreme Court is extracted hereinbelow:
"Delay condoned.
The Tribunal while allowing the appeal filed by the respondent assessee has relied upon the following decisions:
1. Eicher Tractors v. CCE, Hyderabad, 2002 (147) E.L.T. 457 (Tri.-Del.);
2. Shree Prakash Textiles (Guj.) Ltd. v. CCE, Ahmedabad, 2004 (169) E.L.T. 162 (Tri. - Mumbai);
3. CCE, Ahmedabad v. Babu Textile Industries, 2003 (158) E.L.T. 215 (Tri. - Mumbai); and
4. CCE, Ahmedabad v. Arcoy Industries, 2004 (170) E.L.T. 507 (Tri. -
Mumbai).
of the Tribunal in which it has been held that the assessee is entitled to refund of the amount deposited if the assessee has gone out of the Modvat Scheme or their unit is closed. Aggrieved against the order of the Tribunal, revenue filed C.E.A. No. 5/2006 in the High Court of Karnataka at Bangalore. The High Court by its impugned order has affirmed the order of the tribunal and dismissed C.E.A. No. 5/2006 filed by the revenue.
Learned ASG appearing for the Union of India fairly concedes that those decisions of the Tribunal, which were relied upon by the Tribunal, have not been appealed against.
In view of the concession made by the learned ASG, this special leave petition is dismissed."
28.2 On reading of the judgement of Hon'ble Supreme Court, referred supra, it is amply made clear that the issue regarding cash refund of accumulated Modavt/Cenvat credit, in the case of closure of factory was appreciated by the Hon'ble Court and upon consideration of various decisions rendered by the Tribunal, in allowing such refunds, the concession made by the learned ASG to such extent was accepted and accordingly, the SLP was dismissed. Further, it is an admitted fact on record that the decisions of the Tribunal referred to by the Hon'ble Supreme Court in the judgement dated 25.01.2007 have not been appealed against by the Revenue, meaning thereby that the principles or the issue dealt with and decided by the Tribunal were accepted by the Revenue. On a close reading of the judgment E/87084/2019 90 dated 25.01.2007, it transpires that the learned ASG had made the concession or consent, owing to the reason that in absence of non-filing of appeal(s) against the referred decisions of the Tribunal, the issue had already attained finality and cannot be re-opened for adjudication in a different manner. In this context, the law is well settled that when the department has accepted the principles decided in earlier cases, in preferring for non-filing of appeals, then the issue cannot be raised subsequently for deciding such settled issue differently. The issue in hand has also been examined by the Hon'ble Supreme Court in the case of Commissioner of C. Ex., Hyderabad vs. Novapan Industries Ltd., 2007 (209) E.L.T. 161 (S.C.). The relevant paragraphs of the judgment are reproduced below:
"12. The Tribunal in its order has relied upon its earlier judgment in ICI India Ltd. v. CCE, Hyderabad [2000 (91) ECR 152 (T)] in which the similar issue was involved and the Tribunal had taken the view that interest being inbuilt in the price which had not been charged separately, was deductible from the assessable value.
xxxxxxxxx
13. Counsel for the Revenue fairly concedes that the Department did not file an appeal against the decision of the Tribunal in ICI India's case (supra). Thus, the same has attained finality.
14. In view of a catena of decisions of this Court, it is settled law that the department having accepted the principles laid down in the earlier case cannot be permitted to take a contra stand in the subsequent cases [See: Birla Corporation Ltd. v. CCE [2005 (186) E.L.T. 266 (S.C.)], Jayaswals Neco Ltd. v. CCE, Nagpur [2006 (195) E.L.T. 142 (S.C.)] etc.].
15. The point in issue being concluded by the decision of this Court in MRF case (supra) and the fact that the Revenue did not file an appeal against the order of the Tribunal in ICI India case (supra), we do not find any merit in these appeals and dismiss the same with no order as to costs."
28.3 In view of the above and more particularly, the aforementioned judgment of the Hon'ble Apex Court in the case of Novapan Industries Ltd. (supra), I am of the considered view that it cannot be said that the Hon'ble Supreme Court had dismissed the SLP in case of Slovak India Trading Co. Pvt. Ltd. (supra), without assigning any reasons therein.
28.4 The issue in context with doctrine of merger was discussed by the Hon'ble Supreme Court in the case of Gangadhara Palo Vs. Revenue E/87084/2019 91 Divisional Officer [2012 (25) S.T.R.273 (S.C)], wherein the Hon'ble Court have held that even if the SLP is dismissed with reasons, however meagre (one sentence), there is merger of orders. It has further been held that once the SLP is dismissed, giving reasons by the Hon'ble Supreme Court, however meagre, it becomes a declaration of law. Thereafter, the decision which is merged with the decision of Hon'ble Apex Court, is non-existent, and thus, cannot be reviewed. The relevant paragraphs in the said judgement are extracted herein below:
"8. When this Court dismisses a special leave petition by giving some reasons, however meagre (it can be even of just one sentence) , there will be a merger of the judgment of the High Court into the order of the Supreme Court dismissing the special leave petition. According to the doctrine of merger, the judgment of the lower court merges into the judgment of the higher court. Hence, if some reasons, however meagre, are given by this Court while dismissing the special leave petition, then by the doctrine of merger, the judgment of the High Court merges into the judgment of this Court and after merger there is no judgment of the High Court. Hence, obviously, there can be no review of a judgment which does not even exist.
9. The situation is totally different where a special leave petition is dismissed without giving any reasons whatsoever. It is well settled that special leave under "Article 136" of the Constitution of India is a discretionary remedy, and hence a special leave petition can be dismissed for a variety of reasons and not necessarily on merits. We cannot say what was in the mind of the Court while dismissing the special leave petition without giving any reasons. Hence, when a special leave petition is dismissed without giving any reasons, there is no merger of the judgment of the High Court with the order of this Court. Hence, the judgment of the High Court can be reviewed since it continues to exist, though the scope of the review petition is limited to errors apparent on the face of the record. If, on the other hand, a special leave petition is dismissed with reasons, however meagre (it can be even of just one sentence), there is a merger of the judgment of the High Court in the order of the Supreme Court. (See the decisions of this Court in the cases of Kunhayammed & Others v. State of Kerala & Another - (2000) 6 SCC 359 = 2001 (129) E.L.T. 11 (S.C.); S. Shanmugavel Nadar v. State of Tamil Nadu & Another - JT 2002 (7) SCC 568; State of Manipur v. ThingujamBrojenMeetei - AIR 1996 SC 2124; and U.P. State Road Transport Corporation v. Omaditya Verma and Others - AIR 2005 SC 2250)."
28.5 On careful reading of the judgment referred above, it is manifestly clear that where any SLP has been dismissed by the Hon'ble Supreme Court, even on account of a sparse reason, still it becomes a declaration of law under Article 141 of the Constitution. In the case of Slovak India (supra), undisputedly a SLP was filed by Revenue, which has been dismissed by the Hon'ble Supreme Court, by accepting the concession made by the learned E/87084/2019 92 ASG that the issue decided by the Tribunal vide several orders have attained finality, in absence of any appeal(s) being filed by Revenue there against. Further, it is also observed from the above quoted paragraphs that the Hon'ble Apex Court, while delivering the judgment in case of Gangadhara Palo (supra), have referred to and relied upon the earlier judgment delivered in the case of Kunhayammed Vs. State of Kerala [2001 (129) E.L.T. 11], but have interpreted the legal position with regard to the doctrine of merger, holding that when a SLP is dismissed, without assigning any reason, then in that case, it cannot be inferred that the judgment of High Court has merged with the Judgment of the Hon'ble Apex Court. At the same time, it was also held that when a SLP is dismissed with reasons, even if by recording only one sentence, then the judgment of the High Court can be said to be merged with the judgment of Hon'ble Supreme Court. I find that the judgement of Hon'ble Supreme Court in the case of Gangadhara Palo (supra), was not placed by the counsel from either side before the Hon'ble Bombay High Court, while deciding the appeal in the case of Gauri Plasticulture Pvt. Ltd. (supra); and therefore, I am of the view that the ratio of the judgment of Hon'ble Apex Court (supra) were not considered by the Hon'ble High Court, for a decision on the subject issue in the case of Gauri Plasticulture Pvt. Ltd.(supra). Therefore, it cannot conclusively be said that the decision of the Hon'ble Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. (supra), lacks value as a precedent and the contextual facts and circumstances must be examined.
28.6 Since the principle of the doctrine of merger has been adequately dealt with by the Hon'ble Supreme Court in Gangadhara Palo (supra), I do not feel it proper to discuss the binding precedence of the judgments referred to by the learned Members at the referral paragraphs.
28.7 In view of the above discussions, I conclude on the subject dispute, holding that the ratio of the judgment by the Hon'ble Supreme Court in Slovak India Trading Co. Pvt. Ltd. (supra), has the binding effect on all Courts, Tribunal etc., in view of the mandates, contained in Article 141 of the Constitution of India.
29.1 Cenvat scheme is a beneficial piece of legislation, which aims at avoiding the cascading effect of duty on duty, in the course of manufacture of the excisable goods or provision of the output service. Upon deriving the powers conferred by Section 37 of the Central Excise Act, 1944 and Section E/87084/2019 93 94 of the Finance Act, 1994, the Central Government has framed the Cenvat Credit Rules, 2004. Sub-rule (1) of Rule 3 ibid, permits a manufacturer to take cenvat credit of various duties and taxes paid on the inputs/input services for use in, or in relation to the manufacture of the excisable final product(s). The credit so availed, is permitted for utilisation in the manner provided under sub-rule (4) of Rule 3 ibid. It has been provided that cenvat credit may be utilised for payment of any duty of excise on any final product; or an amount equal to cenvat credit taken on inputs, if such inputs are removed as such or after being partially processed; or an amount equal to the cenvat credit taken on capital goods, if such capital goods are removed as such; or an amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002; or service tax on any output service.
29.2 As a manufacturer of excisable goods, the appellant herein got itself registered with the jurisdictional Central Excise authorities. It has also availed cenvat credit of central excise duty paid on the inputs and capital goods as well as service tax on the input services. Availment of cenvat credit by the appellant as per the statutory provisions has never been objected to by the department. Further, it is not the case of Revenue that the cenvat credit availed inputs or capital goods were removed by the appellant, without putting the same for intended purpose i.e., manufacture of final products. This is evident from the fact that the appellant had continued to maintain the credit balance in the cenvat account till closure of the factory. Since, the appellant could not continue to carry on its business activities, for whatever reason, had ultimately surrendered the registration certificate. Owing to the reason of non-utilisation of cenvat credit for the intended purpose, the appellant had claimed the un-utilised cenvat credit lying in its books of accounts. The only active provision for grant of refund of cenvat credit is available in Rule 5 ibid. Though, the said rule has considered for grant of refund in case of exportation of goods or services, but in terms of judgement of Hon'ble Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. (supra), the accumulated cenvat credit is available for refund in absence of any express prohibition being contained in Rule 5 ibid. The modality for grant of refund of the excise duty is contained in Section 11B of the Central Excise Act, 1944. The relevant date of computation of the expiry period has been explained in Explanation-(B) appended to Section 11B ibid. Various circumstances for consideration of relevant date in the course of ongoing activities undertaken by a business establishment, have been elucidated therein. Since, closure of a factory is not a routine E/87084/2019 94 phenomenon, but happens in rarest occasion, the relevant date in context with the limitation for filing of refund application under such circumstances, cannot be reckoned by reading the Explanation clause provided in Section 11B ibid. In the case in hand, though the factory of the appellant was non- operational for quite a long time, but it had continued to file the statutory returns before the authorities and finally surrendered the registration certificate. Immediately thereafter, since the accumulated cenvat balance lying in the books was claimed as refund, in my considered view, it cannot be said that such claim is barred by limitation of time. In other words, availment of cenvat credit is an indefeasible right of an assessee and such right conferred under the statue cannot be taken away on the ground of limitation. Further, Rule 5 ibid does not prescribe any time limit for grant of refund of the cenvat credit. Even if the time limit under Section 11B ibid is to applied, then logically it should be effective from the date of surrender of the registration certificate upon closure of the factory. The appellant in this case, since has filed the refund application within a reasonable time frame, from the date of closure of the factory, in my opinion, the same should not be denied on the ground of limitation, inasmuch as the purpose of the cenvat scheme would be defeated, if the benefits accrued in lawful manner is denied.
29.3 Therefore, I am of the considered view that the limitation aspect would not apply to the facts of the present case for denial of the refund benefit to the appellant.
30. In view of the foregoing discussions, I am in agreement with the learned Member (Judicial) that the impugned order is required to be set aside and the appeal is required to be allowed with consequential benefit to the appellant.
31. Registry is directed to place the Order before the Regular Bench for recording of the majority order.
(Order pronounced in open court on 06.03.2023) (S.K. Mohanty) Member (Judicial) E/87084/2019 95 MAJORITY ORDER FINAL ORDER NO. A/86340/2023 PER: CORAM
32. In view of the majority opinion for setting aside the impugned order with consequential relief, appeal is allowed accordingly.
(Dictated and Pronounced in Open Court on 6th September 2023) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as