Custom, Excise & Service Tax Tribunal
Ravi Crop Sciece vs Jammu & Kashmir on 11 October, 2023
1 E/2727,2728/2012
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
~~~~~
REGIONAL BENCH - COURT NO. 1
Excise Appeal No.2727 Of 2012
[Arising out of OIO No.JMK/CEX/008/2012 dated 08.06.2012 passed by the
Commissioner of Central Excise, J&K]
M/s Ravi Crop Science : Appellant (s)
IGC, Phase-I, Samba,
J&K-184121
Vs
The Commissioner of Central
Excise, Jammu & Kashmir : Respondent (s)
OB-32, Rail Head Complex, Jammu & Kashmir- 180012 With Excise Appeal No.2728 Of 2012 [Arising out of OIO No.JMK/CEX/008/2012 dated 08.06.2012 passed by the Commissioner of Central Excise, J&K] Shri Dinesh Garg, Partner : Appellant (s) M/s Ravi Crop Science, IGC, Phase-I, Samba, J&K-184121 Vs The Commissioner of Central Excise, Jammu & Kashmir : Respondent (s) OB-32, Rail Head Complex, Jammu & Kashmir- 180012 APPEARANCE:
Shri Naveen Bindal, Shri Aman Garg, Advocates for the Appellants Ms. Shivani, Authorised Representative for the Respondent CORAM:
HON'BLE Mr. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Mr. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER Nos.60486-60487/2023 Date of Hearing: 22.09.2023 Date of Decision: 11.10.2023
2 E/2727,2728/2012 Per: P. ANJANI KUMAR M/s Ravi Crop Science, the appellants, are engaged in manufacture and clearance of herbicides, insecticides and fungicides;
the appellants availed the benefit of area-based exemption Notification No. 56/2002; Revenue alleged that the appellants were clearing goods under Section 4 and Section 4A of Central Excise Act, 1944;the appellantswere issuing invoices as per Rule 11 of Central Excise Rules, 1944 and also commercial invoices; the price shown in commercial invoices was lower than the price shown in excise invoices and thus, the appellants have fraudulently availed excess refund under the said Notification by over-valuing the goods cleared. A show-cause notice dated 09.06.2011 was issued seeking to recover the erroneous refund of Rs.92,61,591/- under Section 11A of the Central Excise Act, 1944 along with interest under Section 11AB and penalty under Section 11AC ibid and proposing to levy penalty on Shri Dinesh Garg. The show-cause notice was confirmed vide Order dated 11.06.2012, passed by the Commissioner of Central Excise, J&K, which is impugned in this case.
2. Shri Naveen Bindal assisted by Shri Aman Garg, learned Counsel for the appellants, submits that Section 11A deals with recovery of duty of excise "erroneously refunded"; thus, it has to be a case of refund of duty of excise under Section 11B; as per Board Circular dated 19.12.2002, the provisions of Section 11B is not applicable to exemption under Notification No.56/2002 as the said notification is just a mechanism to operationalize the exemption and it is not a case 3 E/2727,2728/2012 of refund; therefore, the provisions for "erroneous refund" are not applicable in view of the facts of the present case.
3. Learned Counsel further submits that the refund was duly sanctioned by the Departmental officers in terms of Notification No.56/2002; the order, sanctioning the refund, is duly appealable under Section 35 of the Central Excise Act, 1944; in case, the Department wishes to recover the erroneously granted refund, if any, the order, sanctioning the refund, is to be necessarily reviewed and appealed against; the refund orders have been accepted after due application of mind by the Department and therefore, the refund granted cannot be termed to be "erroneous"; Section 11A does not empower any authority to declare any refund to be "erroneous"
though it empowers the proper officer to recover erroneous refund, if any. He relies upon the following cases:
Krishi Rasayan Exports Pvt. Ltd. (CEA No.06/2018), High Court of J&K. Final Order No.A/60328-60330/2023 dated 31.08.2023(V.S Industries, CESTAT, Chandigarh).
Jellalpore Tea Estate- 2011 (268) ELT 14 (Gau.). Tripura Ispat (A unit of Lohia Group) [2021-TIOL-146- HC-TRIPURA-CX].
Ajanta Manufacturing Pvt. Ltd.- 2021-TIOL-2233-HC- AHM-CX.
Flock (India) Pvt. Ltd.- 2000 (120) ELT 285 (SC). Priya Blue Industries Ltd.- 2004 (172) ELT 145 (SC). ITC Ltd.- 2019 (368) ELT 216 (SC).
Arviva Industries (I) Ltd.- 2007 (209) ELT 5 (SC). Jayant Dalal Private Ltd.- 1996 (88) ELT 638 (SC). Paper Products Ltd.- 1999 (112) ELT 765 (SC).
4 E/2727,2728/2012
4. Ms. Shivani, learned Authorized Representative for the Department reiterates the findings of the impugned order.
5. Heard both sides and perused the records of the case. We find that the Notification No.56/2002 is operationalized in the following manner:
(a) The manufacturer shall submit a statement of the duty paid from the said account current to the Assistant Commissioner or the Deputy Commissioner of Central Excise, as the case may be, by the 7th of the next month in which the duty has been paid from the account current.
(b) The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, after such verification, as may be deemed necessary, shall refund the amount of duty paid from the account current during the month under consideration to the manufacturer by the 15th of the next month.
(c) If there is likely to be any delay in the verification, Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall refund the amount on provisional basis by the 15th of the next month to the month under consideration and thereafter may adjust the amount of refund by such amount as may be necessary in the subsequent refunds admissible to the manufacturer.
6. On going through the provisions of the Notification, it is clear that the refund of duty as per the said Notification is different from refund of duty envisaged in Section 11B. We find, as submitted by the 5 E/2727,2728/2012 learned Counsel for the appellants, CBEC vide Circular No.682/73/2002-CX dated 19.12.2002 clarified as follows:
"In this context, it may be pointed out that the "Refund" envisaged in the notifications is not on account of any excess payment of excise duty by the manufacturers, but is basically designed to give effect to the exemption. In other words, the mechanism has been adopted to operationalize the exemption envisaged in these two notifications. In view of this aspect of the matter, the provisions of Section 11B of the Central Excise Act, 1944 would not apply in the case of these notifications."
In view of the above, it appears that the provisions of Section 11A, as far as recovery of "erroneous refund" is concerned, have no applicability to the refunds under the impugned notification.
7. We also find that the issue is no longer res integra. The jurisdictional High Court of J&K has gone into the very same issue in the case of Krishi Rasayan Exports Pvt. Ltd. (supra) and decided the matter in favour of the appellants. The Hon'ble High Court has observed as follows:
"11 Before we proceed to appreciate the rival contentions and adjudicate the substantial question of law framed by this Court in the instant appeal, it is necessary to first set out the provisions of Section 11A of the Act.
"11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded--
(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded,whether or not such non levy or non payment, short levy or short payment or acceptance or assessment relating to the rate of duty on or valuation 6 E/2727,2728/2012 of excisable goods under any other provisions of this Act or the rules made thereunder, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice--
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty by such person or his agent, the provisions of this sub section shall have effect Explanation: where the service of the notice is stayed by an order of a Court the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be.
8(1A) when any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, by such person or his agent, to whom a notice is served under the proviso to sub section (1) by the CENTRAL Excise Officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under section 11AB and penalty equal to twenty five per cent of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice.
2. The Central Excise Officer shall, after considering the representation if any made by the person on whom notice is served under sub section (1), determine the 7 E/2727,2728/2012 amount of duty of excise due from such person not being in excess of the amount specified in the notice and thereupon such person shall pay the amount so determined;
Provided that if such person has paid the duty in full together with, interest and penalty under sub section (1A), the proceedings in respect of such person and other persons to whom notice is served under sub section (1), shall, without prejudice to the provisions of sections 9, 9A and 9AA be deemed to be conclusive as to the matters stated therein:
Provided further that if such person has paid duty in part, interest and penalty under sub section (1A), the Central Excise Officer, shall determine the amount of duty or interest not being in excess of the amount partly due from such person.
(2A)............................................. (2B)............................................. (2C)......................................... (3) For the purposes of this section-9
(i) "refund" 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;
(ii) "relevant date" means,--
(a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short- levied or short- paid-
(A) where under the rules made under this Act a periodical return, showing particulars of the duty paid on the excisable goods removed during the period to which the said return relates, is to be filed by a manufacturer or a producer or a licensee of a warehouse as the case may be, the date on which such return is so filed (B) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
8 E/2727,2728/2012 (C) In any other case, the date on which the duty is to be paid under this Act or the rules made thereunder
(b) In a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;
(c) In the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund"
12 From a reading of Section 11A of the Act, it clearly transpires that when any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer, may within six months from the relevant date, serve a notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made to show why he should not be asked to pay the amount specified in the notice. Indisputably, in the instant case, the period of six months from the relevant date has since expired. To put it more clearly, the expression 'relevant date" is defined under sub-section 3 (ii) of Section 11A of the Act. Neither side has disputed that the 10 limitation, provided for issuance of show cause notice in terms of sub-section 1 of section 11 A of the Act had expired much prior to the issuance of show cause notice to the respondent. The revenue, however, has relied upon the proviso appended to sub-section (1) of Section 11A of the Act which provides for extended period of limitation of five years, provided it is a case where duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud or collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of this Act and the rules made thereunder with an intent to evade payment of duty by such person or his agent etc. The sine quo non for invoking the proviso is to demonstrate by reference to material on record that
9 E/2727,2728/2012 the assessee had claimed and has been paid erroneous refund of the excise duty by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any provisions of the Act and the rules framed thereunder and that this fraud, collusion, willful misstatement or suppression of facts etc., is made with an intention to evade payment of duty by the assessee or his agent. 13 We have gone through the entire record, but could not find an iota of material on record which would suggest that the assessee-the respondent herein had, at any time, suppressed any material facts or made any willful misstatement as is attributed to it by the Adjudicating Authority in the Order In Original passed for recovery of purported erroneous refund. Rather, it has come on record that the respondent had fairly and in a transparent manner explained the entire process leading to the manufacture of the product in question in the industrial unit of the respondent. The process of manufacture followed in the industrial unit and the product produced in the manufacturing process was all along clearly indicated by the respondent by filing periodical 11 returns. The periodical audits also took place and refunds were sanctioned by the Competent Authority in favour of the respondent by passing a speaking order for each month. It is pursuant to the refund sanctioning orders passed by the competent authority, the respondent was released the refund. 14 Viewed form any angle, we do not find sufficient material on record to come to the conclusion that the respondent, with an intention to evade payment of duty, suppressed or misstated any facts relating to the manufacturing process and the product which it produced and passed on by payment of excise duty. Whether the product produced by the respondent is a Gibbereillic acid simplicitor or is a plant growth regulator containing Gibbereillic acid as dominant ingredient, is a question of fact which cannot be gone into by this Court hearing an appeal on a substantial question of law. Be that as it may, even if we were to 10 E/2727,2728/2012 assume that the revenue had erroneously made the refund of the excise duty in favour of the respondent, yet the period of limitation for issuing show cause notice in terms of sub-section (1) of section 11A of the Act, had since expired and, therefore, the entire process had become time barred. As already explained, the extended period of limitation as provided under provision to sub -section (1) of Section 11A was not invocable for the simple reason that the twin factors which are sine quo non for invoking the proviso were missing in the instant case. We are not convinced with the argument of Mr. Jagpaul Singh that not only the respondent had misstated/suppressed the facts with regard to the classification of the product in question, but had done so with an intent to evade payment of excise duty. 15 That apart, we are also in agreement with CESTAT that, once the excise duty in favour of assessee is sanctioned by the competent authority after passing a speaking order and which order is appealable under section 35 of the 12 Act, parallel proceedings seeking recovery of the sanctioned refund cannot be launched by the Adjudicating Authority. Unless the orders of sanctioning refund passed by the Adjudicating Authority are reversed in appeal or revision under the Act, Section 11 cannot be invoked by terming such sanctioned refund of excise duty as 'erroneous refund' by holding collateral proceedings under section 11A of the Act. Any duty, which is paid /refunded to the assessee after holding formal proceedings and passing speaking orders in favour of the assessee, cannot be termed as 'erroneous refund'. The revenue, if it is of the opinion that the Adjudicating Authority has made an erroneous refund in favour of assessee to which it was not otherwise eligible, can avail the remedy of filing appeal or revision under the Act. So long as the orders stand as having attained finality, the same cannot be tampered with by the Adjudicating Authority by launching collateral proceedings purportedly under Section 11A of the Act.
11 E/2727,2728/2012 16 The judgment of the Hon'ble Supreme Court in the cases of Priya Blue Industries Pvt. Ltd., 2004 (172) ELT 145 (SC) and Flock India Pvt. Ltd., 2000 (12) ELT 285 (SC), relied upon by the CESTAT are exactly on the point and leaves no manner of doubt that Section 11A of the Act is not invocable when refund has been sanctioned by the Adjudicating Authority by passing a speaking order and which order is appealable under Section 35 of the Act, more particularly, when such order has not been challenged by the revenue and has attained finality.
17 The case in hand is also covered by the Division Bench judgment of the Gauhati High Court rendered in the case of Jellalpore Tea Estate (supra) wherein the issue has been considered and dealt with by the Division 13 Bench in paragraphs (12) to (15) which, for facility of reference are reproduced hereunder:
"12. The material portion of Section 11A of the Act reads as follows:
"11-A. Recovery of duties not levied or not paid or short- levied or short-paid or erroneously refunded- (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non- levy or non-
payment, short-levy or short-payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short- levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or 12 E/2727,2728/2012 any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if, for the words one year, the words "five years" were substituted.
A bare reading of Section 11A of the Act indicates that power can be exercised only if duty has not been levied or paid or has been short-levied etc. "on the basis of any approval, acceptance or assessment relating to the rate of duty on or 14 valuation of excisable goods under any other provisions of this Act". Insofar as the present case is concerned, the only issue that arose for consideration was whether the assessee was entitled to the benefit of Notification No.33/99-CE dated 8.7.99. There was no issue of any approval, acceptance or assessment relating to the rate of duty nor was there any issue relating to the valuation of any excisable goods. Ex-facie, therefore, Section 11A of the Act was inapplicable to the facts of the case".
13. That apart, the Assistant Commissioner of Central Excise, Silchar had passed a final order in favour of the assessee on 29.4.2002 and admittedly, this order was revisable under Section 35-E of the Act. For reasons best known to the Commissioner of Central Excise, Shillong no action was taken to have the order of the Assistant Commissioner revised or set aside. Having failed to avail of the statutory remedy available under the Act, the Revenue sought to circumvent the law (as it were) by taking recourse to Section 11A of the Act. In our opinion, this was clearly impermissible inasmuch as what is required to be done in a manner prescribed by law, ought to be done in that manner only or not at all.
14. Insofar as the present case is concerned, the prescription of law required that the order of the Assistant Commissioner passed on 29.4.2002 could be challenged only by resorting to Section 35- E of the Act. The Revenue could not initiate collateral proceedings to 13 E/2727,2728/2012 set aside the order dated 30.4.2002 by resorting to the enabling power under Section 11A of the Act.
15. Consequently, we are of the opinion that: (i) Section 11A of the Act is not applicable to the facts of the case since the issue raised did not concern any approval, acceptance or assessment relating to the rate of duty on or valuation of any excisable goods. The issue raised by the assessee related to its entitlement to the benefit of Notification No.33/99-CE dated 8.7.99.
(ii) Even 15 otherwise, the Revenue could not take recourse to Section 11A of the Act when it had a statutory remedy available to it to challenge the order dated 29.4.2002 passed by the Assistant Commissioner of Central Excise, Silchar by resorting to the revisional power available under Section 35-E of the Act"
18 The expression 'willful suppression' also fell for determination of the Supreme Court in the case of Anand Nishikawa Company Ltd vs. Commissioner of Central Excise, Meerut, 2005 (188) ELT 149 (SC) wherein the Apex Court, after considering the provisions of Section 11A of the Act in para 27 held thus:
"27.Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. Vs. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that "suppression of facts" can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty, when facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the 14 E/2727,2728/2012 manner indicated in proviso to section 11A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was not open to the CEGAT to come to a conclusion that the appellant was guilty of "suppression of facts".
In DensonsPultretaknik vs. Collector of Central Excise [2003 (11) SCC 390], this Court held that mere classification under a different sub-heading by the manufacturer cannot be said to be willful misstatement or 16 "suppression of facts". This view was also reiterated by this Court in Collector of Central Excise, Baroda, vs. LMP Precision Engg.Co.Ltd. [2004 (9) SCC 703]"
19 The judgment passed by the Hon'ble Supreme Court in Grasim Industries Ltd vs Commissioner of Central Excise, (2011) 14 Supreme Court Cases 685, relied upon by by Mr. Jagpaul Singh learned counsel appearing for the revenue, is beside the point and the question of law formulated for adjudication in this appeal. Para 10 of the judgment which has been strongly relied upon by Mr. Jagpaul is set out hereinbelow.
"10.Section 11A provides for a right of issuance of show cause notice, if, according to the Department, duty of excise has been erroneously refunded to a party. In the event of such erroneous refund of excise duty, the competent authority may then issue such a show cause notice as provided for under Section 11A in which case the assessee has to show cause as to why the aforesaid amount of refund, which it erroneously refunded, should not be recovered from him. In such a case, there is no question of filing any appeal, as appropriate remedy as provided under Section 11A is available. Therefore, in our considered opinion, the first contention of the counsel appearing for the appellant has no merit."
20 From a reading of para 10, it clearly transpires that the Supreme Court has only held that, once a show cause notice, in terms of section 11A of the Act has 15 E/2727,2728/2012 been issued by the revenue department to the assessee for recovery of erroneous refund made to it, the remedy of the aggrieved assessee is provided under section 11A itself. The judgment therefore cannot be held to lay down a proposition of law that section 11A is invocable even in a case where there is no erroneous refund, rather the refund of the excise duty is pursuant to a speaking order passed by the Adjudicating Authority after 17 following due process of law. Such order passed by the Assessing Authority is appealable under Section 35 of the Act or the competent Authority of the revenue may invoke Section 35E of the Act and direct the concerned Authority to take an appropriate remedy against such order sanctioning erroneous refund, if any, in favour of the assessee. 21 For the foregoing reasons, we find no illegality or infirmity in the final order passed by the CESTAT Chandigarh impugned in this appeal and, therefore, uphold the same. The substantial question of law framed by this Court vide order dated 16.04.20119 reproduced above is replied in the following manner:
The refund of excise duty claimed by an assessee and sanctioned by the competent Authority vide its order under Notification No. 56 of 2002-CE which order has attained finality as not having been challenged before any appellate or revisional authority under the Excise Act cannot be termed as 'erroneous refund' and recovered by resort to section 11A of the Act. The extended period of limitation as provided under proviso to sub section (1) of Section 11A would be attracted only in a case where the refund made in favour of the assessee is erroneous by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any provisions of the act and the rules framed thereunder with an intent to evade payment of duty by the assessee or his agent.
22 As conclusively held hereinabove in the instant case, the refund sanctioned by the adjudicating authority in favour of the respondent was after proper application of 16 E/2727,2728/2012 mind and by passing of speaking orders and therefore, cannot be termed as 'erroneous refund' for the purposes of section 11A of the Act. The extended period of limitation provided under proviso to sub section 1 of section 11A is not attracted as we find no material on record to demonstrate 18 that the purported erroneous refund was sanctioned in favour of the respondent-assessee on the basis of some fraud, collusion or misstatement /misrepresentation of facts and, that too, with an intention to evade payment of excise duty. The revenue has also failed to make out a case of unjust enrichment having failed to show as to how the respondent has been benefited by such purported erroneous refund sanctioned in its favour by the Competent Authority.
13. For the foregoing reasons, we find no merit in this appeal, accordingly, dismissed the same.
8. In view of the above, we find that the impugned order is not legally sustainable and is liable to be set aside. When the impugned order is not maintainable on merits, the question of penalty on the company or Shri Dinesh Garg would not arise. Accordingly, we allow both the appeals.
(Pronounced on 11/10/2023) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) PK