Custom, Excise & Service Tax Tribunal
Cce, Panchkula vs Yamuna Gages & Chemicals on 28 April, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing:09.12.2010
Date of decision:28.04.2011
Appeals Nos.E/479-480 of 2006-(SM)
CCE, Panchkula Appellant
Vs.
Yamuna Gages & Chemicals Respondent
Appearance: Rep. by Shri S.R. Meena, DR for the appellants.
Rep. by Shri A.R. Madhav Rao, Advocate for the respondent.
Coram: Honble Shri Rakesh Kumar, Member (Technical) Order No/Dated Per Rakesh Kumar This matter had been heard by a Division Bench on 7.4.2010. Since there is difference of opinion between the Member (Technical) and Member (Judicial), the point of difference had been referred to the undersigned by the Honble President, CESTAT for decision.
2. The facts of the case, in brief, are as under:-
2.1 The Respondent are manufacturers of Cable Jointing Kits (CJK). For manufacture of CJKs, some components are being manufactured by the respondent out of the inputs procured by them and some components are purchased from outside and are supplied with the other components manufactured in the factory. According to the respondent, CJK were not chargeable to duty, while according to the department, the same attracted central excise duty. However, the Respondent were paying duty on CJKs and were availing Cenvat credit of duty paid on bought out items supplied with kits Duty paid on inputs used in the manufacture of components used captively for supply with bought out items as CJKs. In respect of components manufactured and used captively, full duty exemption under Notification No.67/95-CE was being availed. However, this matter was decided by the Tribunal in favour of the respondent vide Final Order No.408/2000-B dated 15.3.2000 by which the Tribunal held that CJK are not excisable commodity. The department filed an appeal before the Honble Supreme Court against the Tribunals order and Honble Supreme Court vide Order dated 3.3.2001 upheld the Tribunals order. The implication of this judgement was that while CJK is not excisable commodity, the intermediate products manufactured by the respondent, which were being supplied along with the bought-out items as CJK, would be chargeable to duty as the same would no longer be eligible for duty exemption under Notification No.67/95-CE. However, the respondent, in spite of Honble Supreme Courts judgment dated 3.3.2001 continued to pay duty on CJK till October, 2003 when they intimated the department that from the next month they would not be paying duty on CJK. The dispute in this case pertains to the period from April, 2003 to October, 2003.
2.2 As mentioned above, during the period when the respondents were paying duty on CJK, they were also availing Cenvat credit of duty paid on inputs used in the manufacture of intermediate products being supplied as CJK along with bought-out items and were availing Cenvat credit in respect of such inputs and bought-out items. The department was of the view that during the period from 1.4.2003 to 31.10.2003, the respondents were liable to pay the duty on the intermediate products manufactured by them, as no duty was chargeable on their finished products as CJK. The duty chargeable on the intermediate products manufactured during the period of dispute was Rs.47 Lakhs. It is in this background that a show cause notice dated 16.04.2004 issued to the respondent for
(a) recovery of central excise duty amounting to Rs.47 Lakhs in respect of the clearances of intermediate products manufactured by the respondents and supplied along with other items as CJK along with interest on this duty on at the applicable rate under Section 11 A of the Central Excise Act, 1944; and
(b) imposition of penalty on the respondent under Rule 25 of the Central Excise Rules, 2002 for non-discharge of duty liability on the intermediate products.
2.3 The department was of the view that since no duty was payable on CJK and as such, the assembly of various manufactured and bought-out items into CJK did not amount to manufacture, the respondent would not be eligible for Cenvat credit of duty on bought-out items and on this ground, second show cause notice dated 16.04.2004 was issued to the respondent for
(a) recovery of allegedly wrongly taken Cenvat credit amounting to Rs.20,50,911/- during the period from April, 2003 to October, 2003 along with interest on this Credit at the applicable rate under Rule 12 of the Central Excise Act read with Section 11 A(1) and Section 11 AB of the Central Excise Act, 1944; and
(b) imposition of penalty on the respondent for taking wrong cenvat credit under Rule 13 of the Cenvat Credit Rules, 2002;
2.4 The show cause notice regarding demand of duty of Rs.47 Lakhs was adjudicated by the Addl.Commissioner vide Order-in-Original No.02/ADC/VK/PLK/05 dated 27/ 0105 by which
(a) duty demand of Rs.47 Lakh in respect of the clearances for captive consumption of various components of CJK during April, 2003 to October, 2003 was confirmed along with interest under Section 11 AB and besides this, penalty of Rs.1 Lakh was imposed on the respondent under Rule 25 of the Central Excise Rules, 2002.
2.5 The respondent filed an appeal against this order of the Addl. Commissioner and the Commissioner (Appeals) vide order-in-appeal No.405/GRM/RTK/2005 dated 21.11.2005, while upholding the Addl. Commissioners order regarding duty demand and penalty also ordered that the respondent have to be given adjustment of duty paid on the CJK, against their duty liability on the intermediate products and in this regard, the Commissioner (Appeals) relied upon the Honble Supreme Courts judgement in case of CCE Vs. Divya Enterprises Ltd. reported in 2003 (153) ELT 497 (SC). Earlier, the Addl. Commissioner, however in his order had not allowed this request of the respondent for adjustment. The department is in appeal before the Tribunal against the part of the Commissioner (Appeals)s order permitting adjustment of duty paid on CJK towards the respondents duty liability in respect of intermediate products. The departments appeal against this order is No.E/480/2006.
2.6. The other show cause notice regarding demand of Cenvat credit of Rs.20,50,911/- was adjudicated by the Addl. Commissioner by Order-in-Original No.1/ADC/VK/PKL/05 dated 27.01.2005 by which
(a) Cenvat credit demand of Rs.20,50,911/- was confirmed against the appellants along with interest; and
(b) penalty of Rs.50,000/- was imposed on them under Rule 13 of the Cenvat Credit Rules.
2.6.1 The Addl. Commissioner in this order also did not accept the respondents plea that the Cenvat credit should be treated as having been reversed, as the respondent had paid duty on CJK by fully utilising the Cenvat credit in respect of the bought-out items. On appeal to the Commissioner (Appeals), the Commissioner (Appeals) vide Order-in-Appeal No.406/GRM/RTK/05 dated 21.11.2005 while upholding the Cenvat credit demand, ordered that the Cenvat credit demand may be adjusted from the amount of duty paid by the respondent on CJK. The Commissioner (Appeals) also waived the interest and penalty. Against this order of the Commissioner (Appeals), Revenue has filed appeal No.E/479 of 2009 Ex challenging the portion of the Commissioner (Appeals)s order permitting the adjustment of Cenvat credit demand from the duty on CKJ paid by the respondent. The respondent in respect of these appeals have filed cross objection registered as E/CO/168/2006.
3. Both these appeals were heard on 7.4.2010 while so far Appeal No.E/479 of 2006 is concerned, there is no difference of opinion and as such both the Members were of the view that the Commissioner (Appeals)s order permitting adjustment of Cenvat credit demand from the duty paid on CJK cannot be allowed as availment of Cenvat credit of bought-out items being supplied with CJK was wrong and a wrong cannot be a remedied by another wrong, in respect of other Appeal No.E/480 2006, there is difference of opinion. While Member (Technical) is of the view that duty demand confirmed in respect of the intermediate products manufactured by the respondent which were supplied along with CJK can be adjusted from the duty paid on CJK, which was not required to be paid, the Member (Judicial) is of the view that this adjustment is not permissible as the same would result in unjust enrichment for the reason that duty paid on CKJ by the respondent had been recovered by them from the customers and the adjustment amounts to giving refund which is not permissible. It is in view of this that the Bench requested the Registry to place this appeal before the Honble President for referring the following points of difference:-
(1) Whether the Respondent have right to realise duty from buyers on CKJ when such goods were not manufactured and not dutiable as held by the Tribunal and affirmed by Apex Court?
(2) Whether the Respondent shall not be called upon to deposit the duty realised by them on CJK which is not dutiable, into the treasury following the ratio laid down by Apex Court in Sahakari Khand Udyog Mandal Ltd. Vs. CCE reported in 2005 (181) ELT 328 (SC)?
(3) Whether the Respondent is entitled to adjustment of duty payable on intermediate goods manufactured by it against the duty paid on CJK which was not a dutiable goods following decision of Apex Court in the case of Divya Enterprises Ltd. reported in 2003(153) ELT 497 (SC) and excess if any paid refundable?
4. The Honble President, CESTAT vide Order dated 16.11.2010 ordered the listing of the matter for decision on points of difference before the undersigned.
5. Heard both sides.
6. Shri S.R. Meena, learned Departmental Representative, pleaded that the adjustment of the duty payable on the intermediate products against the duty paid on CJK would amount to refund of duty paid on CJK, which is not permissible. in this case, as no application for such refund has been filled, that in any case, the refund is hit by unjust enrichment, as there is no dispute that the entire duty paid by the respondent on CJK had been realised recovered by them form the customers, that the respondent should have filed refund claim under Section 11B for refund of duty paid on CJK and since no such refund claim has been filed, there is no question of any adjustment for the duty paid on CJK towards their duty liability in respect of intermediate products, that the judgement of Honble Supreme Court in the case of Divya Enterprises (supra) , as is clear from the order, is applicable only for the period of the notification No.67/95-CE dated 1.3.95 and not for any other period and that the Commissioner (Appeals) has, therefore, wrongly relied upon the this judgement of the Apex Court. He also cited the judgement of the Apex Court in Sahkari Khand & Udyog Ltd. Vs. CCE reported in 2005 (181) ELT 328 (SC) wherein it was held that doctrine of unjust enrichment is applicable to all the refunds. He, therefore, pleaded that the impugned order permitting the adjustment of duty paid on CJK towards the respondents duty liability on intermediate products is not correct.
7. Shri A.R. Madhav Rao, Advocate, ld. Counsel for the respondent, pleaded that in this case during the period of dispute, total duty amounting to Rs.75,40,000/- had been paid on CJK, which in view of the judgment of the Honble Supreme Court was not liable to be paid, that out of the total amount of Rs.75.40 Lakhs, an amount of Rs.20.40 Lakhs had been paid by utilising the Cenvat credit in respect of the bought out items, duty of Rs.34 Lakhs had been paid through Cenvat credit available in respect of the inputs used in or in relation to the manufacture of the intermediate products and the balance amount of about Rs.21 Lakhs had been paid through PLA, that even if the Cenvat credit in respect of the bought out items of Rs.20.40 Lakhs is disallowed, the respondent were still left with Cenvat credit of Rs.34 Lakhs in respect of the inputs used in or in relation to manufacture of the intermediate products which can be used by them for discharging their duty liability, that since the duty paid on CJK through PLA and through Cenvat credit taken in respect of the inputs for intermediate products, used in manufacture of the intermediate products is about Rs.55 Lakhs ( Rs. 34 Lakhs credit on inputs used in intermediate products plus Rs.21 Lakhs paid through PLA) and since duty liability on the intermediate products is only Rs.47 Lakhs, the duty liability in respect of the intermediate products should be allowed to be adjusted from the duty paid on CJK, that this adjustment does not amount to unjust enrichment, that in this regard, he relies upon the judgement of the Larger Bench of the Tribunal in the case of Unison Metals Ltd. Vs. CCE, Ahmedabad reported in 2006 (204) ELT 323 (Tribunal-LB) and also the Boards Circular No.870/8/2008-CX dated 16.05.2008 and that since there is no unjust enrichment in permitting such adjustment, there is no infirmity in the impugned order. He emphasised that in this situation, the duty payable on the intermediate products can always be adjusted from the duty already paid on the finished products on CJK and there is no unjust enrichment in permitting this adjustment.
8. I have carefully considered the submissions from both the sides and perused the records. There are three points which have been referred to this Bench. Coming to the first and second point as to whether the respondents had right to realise the duty from the buyers on CJK when such goods were not manufactured and were not dutiable as held by the Tribunal and affirmed by the Apex Court and whether the respondent, in view of the provisions of Section 11 D shall not be called upon to deposit into the treasury the duty realised by them in respect of CJK from the customers, I find that prior to the judgement of the Tribunal and the Apex Court, the respondents were paying duty on the CJK by treating the same as excisable as the department was of the view that the process of assembly of CJK amounts to manufacture. However, the respondent continued to pay the duty on CJK even after the decision of this matter in their favour by the Tribunals order and upholding of the Tribunals order by the Honble Supreme Court vide judgement dated 3.3.2001. So long as the respondent were paying duty on the CJK, they could always recover the same from their customers as central excise duty is an indirect tax and there is no prohibition in the Central Excise Act, 1944 or the Rules made thereunder in this regard. The only provision in this regard in the Central Excise Act, 1944 is Section 11 D, according to which, when a person is liable to pay duty under Central Excise Act, 1944 or the Rules made thereunder and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act or Rules made thereunder, from the buyers of such goods in any manner as representing excise duty, he shall forthwith pay the amount so collected to the credit of Central Government. In this case, during the period of dispute though no duty was payable on the CJK, the respondents paid the duty on the same. There is no dispute that the duty so paid by the respondent had been recovered from their customers. It is not the case of the department that the amount collected by the respondent as duty in respect of the clearances of CJK from their customers was not paid to the Government. In other words, the amount representing excise duty collected by the respondent from the customers in respect of CJKs was paid to the Government. In view of this, while reply to the first point of different is in the affirmative, with regard to the second point of difference, my answer is that since the amount collected in respect of sale of CJKs as excise duty was paid by the respondent to the Government and, as such, there is no contravention of the provisions of Section 11 D, the question of asking them to pay this amount to the Government does not arise.
9. Coming to the third question whether the respondent are entitled to adjustment of the duty payable on the intermediate products manufactured by them against the duty paid on CJKs which were not dutiable, I find that the main objection of the department to this adjustment is that the same amounts to refund, which is not permissible as the same would result in unjust enrichment. Unjust enrichment takes place in a situation where some amount representing duty is collected by an assessee from his customer and the same is either not paid to the Government or having been paid, is refunded to him. In this case, neither of this has happened, as the amount representing duty collected by the respondent was paid by them to the Government and by the process of adjustment, it is not being refunded to the respondent. The process of adjustment of duty paid on CJK on which no duty is payable, towards duty liability in respect of the intermediate products, on which duty is payable, amounts to just changing the head under which the duty had been paid and so long as the duty is not being refunded to the respondent, there would not be any unjust enrichment. In my view, refund of tax means giving the tax paid back to the assessee, which he can use the way he wants and the same can not be equated with adjustment of tax paid under some head which was not payable, against tax liability under some other head, which is to be discharged. For such adjustment no application under Section 11 B is required. The unjust enrichment would take place only when after the adjustment of the duty paid on CJKs towards duty liability in respect of the intermediate products, some amount is still left and the same is refunded. But for this, there is no claim from the respondent. The refund would arise only when some amount paid as duty goes into the hands of the assessee, which has not happened in this case. The respondent had paid duty on CJK and recovered the same from their customers. In other words, the amount recovered from the customers towards duty was fully paid to the Government. If subsequently, the product on which the duty is paid is held to be as non-excisable and the intermediate product manufactured is treated as liable to duty and duty demand arises in respect of the same, in my view, there is no bar on adjustment of the duty paid in respect of the non-excisable item, towards the duty liability in respect of the dutiable product and no unjust enrichment takes place as the amount paid by the respondent to the Government as excise duty on CJK, has remained with the Government. I, therefore, agree with the view of the Honble Member (Technical) on this question.
10. The reference stands disposed of as above.
[pronounced in open court on 28.04.2011].
( Justice R.M.S. Khandeparkar ) President
( Rakesh Kumar )
Member (Technical)
Ckp.
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