Customs, Excise and Gold Tribunal - Tamil Nadu
Hwashin Automotive India Private ... vs Commissioner Of Central Excise on 19 September, 2007
Equivalent citations: 2007(123)ECC225, 2007(149)ECR225(TRI.-CHENNAI), 2007(218)ELT703(TRI-CHENNAI)
ORDER P. Karthikeyan, Member (T)
1. M/s. Hwashin Automotive India Private Limited, Irungattukottai manufactures automobile parts falling under CSH 8708 on job work basis for M/s. Hyundai Motor India Limited and M/s. JBM Sungwoo India Limited (JBM). Job worked goods are cleared availing exemption under Notification No. 214/86 dated 25.3.1986. M/s. Hwashin also manufactures and clears on payment of duty, automobile parts manufactured on their own account. They avail Cenvat credit of duty paid on inputs and capital goods. Following an audit of the records of the assessee by the internal audit party of the Department, it was observed that the party had availed credit of duty paid on inputs which were used in the manufacture of goods cleared on payment of duty as well as without payment of duty under Notification No. 214/86-CE dated 25.3.86. The assessee was asked to pay an amount at the rate of 8% on the price of the goods cleared on job work basis in terms of Rule 6(3)(b) of the Cenvat Credit Rules, 2002 (CCR). M/s. Hwashin paid Rs. 14,49,354/- along with interest of Rs. 50,352/- from their PLA on 4.11.2003 following the directions of the Department. M/s. Hwashin thus paid/debited a total amount of Rs. 63,68,953/- along with interest of Rs. 50,352/- from their Cenvat account in terms of Rule 6(3)(b) of the CCR upto 31.3.05. Subsequently, on 7.7.2005 they claimed refund of the above amount on the ground that job worked goods were not exempted from duty and they were not required to pay any amount in terms of Rule 6(3)(b) of the CCR. The Deputy Commissioner found that the job worked goods cleared by the assessee were exempted from payment of duty and therefore the assessee had correctly paid/debited an amount at the rate of 8%/10% of the price of the exempted goods in terms of Rule 6(3)(b) of the Cenvat CCR. The refund claim was within the time limit only as regards the amount paid from June, 2004 to March, 2005. Accordingly the refund claim filed by the assessee was rejected by the Deputy Commissioner. In the Order-in-Appeal No. 14/2007 (M-IV) dt. 28.2.2007 impugned, the Commissioner (Appeals) has confirmed the order of the original authority.
2. In the appeal filed by the assessee, it is argued that the refund was claimed of the amount they had paid which was not "duty". Therefore, the limitation prescribed under Section 11B did not apply to their case. Job worked goods cleared without payment of duty were not exempted goods.
3. Therefore, they were eligible for refund of the amount they had paid in respect of the job worked goods. It was submitted that the amount not being duty, the principle of unjust enrichment also could not be invoked to deny the refund of the amount they had paid. Moreover, after verification, the Range Officer had reported that the assessee had not collected the amount paid from the principal manufacturer.
4. During hearing, ld. Counsel appearing for the appellants submitted that the amount collected in terms of Rule 6(3)(b) of the CCR was to adjust the inadmissible credit in respect of inputs that went into the production of exempted goods. Job worked goods were held by the decision of the Tribunal to be not exempted goods. Therefore, the appellants were not liable to pay any amount in terms of Rule 6(3)(b) of the CCR, 2002. The amount paid by the assessee was not Central Excise duty. Therefore, its refund was not governed by Section 11B of the Act. The limitation prescribed under Section 11B did not regulate the refund of the amount they had claimed. In any case, the refund of the amount did not involve unjust enrichment as the assessee had not collected from its buyers the amount paid to the Department. This position was obvious from the order of the original authority which had noted the report of the jurisdictional Range Officer to the effect that the assessee had not passed on the amount to the principal manufacturer to whom they had supplied the job worked goods.
5. Ld. Counsel relied on the following decisions:
i) Shakti Insulated Wires Ltd. v. CCE, Mumbai 2002 (149) ELT 668 (Tri.Mumb)
ii) Mahindra & Mahindra Ltd. v. CCE, Mumbai 2007 (211) ELT 481 (Tri. Mum)
iii) Sterlite Industries (I) Ltd. v. CCE, Pune
iv) Final Order No. 1026 to 1028/07 dt.17.8.07 in the case of Sivaramakrishna Forgings Pvt. Ltd.
6. Ld. SDR reiterated the findings contained in the impugned order. He also cited the judgment of the Gujarat High Court in Indo-Nippon Chemical Co. Ltd. v. UOI as well as the decision of the Supreme Court reported as Asst. Commissioner v. Indo-Nippon Chemicals Co. Ltd. .
7. We have heard rival contentions. The appellants had originally paid from PLA/Cenvat Credit Account an amount at the rate of 8%/10% of the value of job worked goods cleared to its principal manufacturer without payment of duty. The appellants had used common inputs in the manufacture of finished goods cleared on payment of duty as well as the job worked goods cleared without payment of duty.
8. At the instance of the department, the appellants had paid an amount as required in terms of Rule 6(3)(b) of CCR followed by several letters of protest. Their claim for refund of the entire amount was rejected on the basis that the amount had been paid in accordance with law. It was also decided that part of the claim was barred by limitation. The original authority, however, had found that the amount involved was not duty.
9. We find that in Sterlite Industries Ltd. (supra), the Larger Bench of this Tribunal had decided that a job worker was eligible for Modvat credit of duty paid on inputs used in the manufacture of goods cleared by it without payment of duty. The Tribunal had observed as follows:
2. The revenue is denying the Modvat credit to the present job worker on the grounds that the inputs were used in the manufacture of the goods which were cleared without payment of duty. Pausing here for a second, let us take a situation where the basic inputs is sent by the principal manufacturer after debiting the Modvat credit taken by him. The job worker takes the credit of the same his factory, utilises other inputs procured directly by him after taking the Modvat credit on the same and clear the processed goods to the principal manufacturer on payment of duty and the principal manufacturer takes the credit of the same in his factory and utilises such credit for payment of duty on his final products at the time of clearance. In such a situation, there can be no objection or dispute by the revenue as regards the admissibility of the credit on the inputs received directly by the job worker and utilised in his factory. The only effect of the above procedure adopted by the principal manufacturer and the job worker would be additional paper work. It is basically to avoid such a situation the procedure under Rule 57F(3) has been enacted. As rightly observed by the earlier decision's the mechanical application of Rule 57C which destroys the basic benefit intended to be extended to the assessee should be avoided. If the interpretation adopted by the revenue is upheld, the benefit otherwise intended to be given will get frustrated apart from leading to discriminatory situation, where the manufacturer has himself processed the inputs and in the other case were he is sending it to the job worker.
10. In Mahindra & Mahindra Ltd. (supra), the Tribunal observed that the amount paid in terms of Ruld 6(3)(b) of CCR was for the adjustment of credit of inputs which went into the manufacture of exempted goods. This amount was collected towards the inadmissible credit availed by an assessee using common inputs and clearing also the exempted final product. As the appellants were eligible for the input credit relatable to job worked goods cleared to the principal manufacturer, they were not required to pay any amount in terms of Rule 6(3)(b) of CCR, 2002. This position was clarified by the following observation of this Bench in paragraph 3 of Final Order No. 1536/2005 in CCE, Chennai v. UCAL Machine Tools Ltd reported in 2006-TIOL-76-CESTAT-MAD:
3. After giving careful consideration to the submissions, I find that the Larger Bench did not recognize job-worked goods as "exempted goods" for purposes of Rule 57C, which provision mandated that no credit of duty paid on inputs shall be allowed where the final product manufactured out of such input was wholly exempted from the payment of duty of excise leviable thereon or was chargeable to 'nil' rate of duty. It was observed that, in the special procedure laid down under Rule 57F(3), duty did not get paid at the job worker's end at the time of clearance of goods, but ultimately got paid at the principal manufacturer's end. In other words, assessable value of the goods cleared by the job worker without payment of duty to the principal manufacturer would ultimately become as ingredient of the assessable value of the final product cleared by the latter on payment of duty. Thus, duty gets paid on the job-worked goods at a later stage and, therefore, such goods cannot be categorized as "exempted goods" for purposes of Rule 57C or Rule 57R. Thus, the Larger Bench decision operates in favour of the respondents.
11. In the circumstances we find that the appellants were not required to pay an amount of Rs. 63,68,953/- along with interest of Rs. 50,352/-. They were eligible for refund of the same. As these amounts do not represent duty, the refund of the same need not be subjected to the procedure prescribe under Section 11B of the Central Excise Act. It is seen from the order of the original authority that the amount impugned had not been collected from the customers by the appellants. Therefore, the refund of the same would not involve unjust enrichment. In the circumstances, we find that the impugned order is not sustainable.
12. We have also considered the case law cited by ld. SDR. The decision of the Tribunal cited was affirmed by the apex Court. The Tribunal had held that Rule 57F of erstwhile Central Excise Rules, 1944 and Notification issued thereunder enabled refund to be claimed under the Modvat scheme. But the procedure and the limitation for claiming such refund would be governed by the provisions of Section 11B of the Central Excise Act, 1944. Provisions contained in Rule 57F did not take away the right of a party to resort to the provisions of Section 11B for such a refund. We do not find these decisions to be relevant to the case on hand. The appellants did not seek refund of Modvat credit.
13. In the circumstances, we set aside the impugned order and allow the appeal filed by M/s. Hwashin Automotive India Private Limited.
(Order pronounced in open court on 19.09.07)