Rajasthan High Court - Jodhpur
Banswara Syntex Ltd vs The Commissioner Central Excise And ... on 24 September, 2018
Bench: Sangeet Lodha, Dinesh Mehta
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Central/Excise Appeal No. 82/2018
Banswara Syntex Ltd., Industrial Area, Dahod Road, Banswara
(Raj.).
----Appellant
Versus
1. The Commissioner, Central Excise & Service Tax, (called
CGST Now), Commissionerate, 142-B, Sector 11, Near
Shashi Bagh, Hiran Magri, Udaipur - 313 002.
2. The Assistant Commissioner, Central Excise & Service Tax
Division, Plot No.168-172, Sector-4, Gandhi Nagar,
Chittorgarh (Raj.)
----Respondents
For Appellant(s) : Mr. Sanjeev Johari
HON'BLE MR. JUSTICE SANGEET LODHA
HON'BLE MR. JUSTICE DINESH MEHTA
Judgment
24/09/2018
REPORTABLE
BY THE COURT (PER HON'BLE DINESH MEHTA, J) :
Feeling aggrieved of rejection of request of encashment of the amount lying in CENVAT credit account, by the authorities below, the appellant has approached this Court, by way of present appeal under Section 35-G of the Central Excise Act, 1944 (for short, hereinafter "the Act of 1944).
The appellant, a manufacturer of Cotton Yarn, Fabrics, Synthetic Filament Yarn, has been paying applicable Excise Duty, (2 of 12) [EXCIA-82/2018] Education Cess, Secondary and Higher Secondary Education Cess on the raw material procured by it. The Central Government, however, vide notification No.14/2015 and 15/2015 issued on 1.3.2015 exempted levy of Education Cess so also Secondary and Higher Secondary Education Cess.
On the fateful day i.e. on 1.3.2015, the appellant had an accumulated balance of Rs.7,08,993/- comprising Education Cess of Rs.4,74,725/- and Secondary and Higher Secondary Education Cess of Rs.2,34,208/- in its CENVAT credit account. Consequent to the very rescission of the Education Cess and Secondary and Higher Secondary Education Cess, the concerning credit lying in the CENVAT credit, paid on the inputs, input services and capital goods became unutilisable or unrealisable for the assessee.
Faced with such situation, the appellant filed a claim for refund of Rs.7,08,933/- on 1.12.2015 under Section 11B of the Act of 1944.
The adjudicating authority rejected appellant's refund claim vide order dated 02.03.2016, observing that the statutory provisions neither provide for sanction of refund in cash nor do they permit an assessee to utilize the accumulated CENVAT credit of Education Cess and Secondary & Higher Secondary Education Cess paid on inputs or input services against payment of excise duty etc. The appellant preferred a statutory appeal against the said order, which came to be rejected by the appellant authority vide its order dated 12.1.2018, more or less echoing the views of the adjudicating authority. It was additionally observed by the appellate Commissioner that intention of the Central Government was clear that balance of unutilized credit of Education Cess and (3 of 12) [EXCIA-82/2018] Secondary and Higher Secondary Education Cess as on 1.3.2015, would not be permitted to be used for payment of Excise Duty, as no such provision had been introduced to this effect while doing away with the Cess.
The appellant took up the matter to the Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") by way of filing a further appeal. The Tribunal also affirmed the orders passed by the authorities below vide its order dated 30.05.2018, holding inter-alia that there is no basic provision either in the Excise Act or under the CENVAT Credit Rules, 2004, permitting the refund of the accumulated credit. The Tribunal also observed that the Credit is admissible only for utilization towards the payment of duty on the final product and such credit can never be encashed by the assessee.
Feeling aggrieved of the order dated 30.05.2018 passed by the Tribunal, the appellant has preferred the present appeal, in a bid to claim encashment/ cash refund of the amount of Education Cess and Secondary and Higher Secondary Education Cess of Rs.7,08,933/-, lying in its CENVAT credit account on 1.03.2015.
Mr. Johari, learned counsel for the appellant assailing the order passed by the Tribunal argued that the appellant's appeal has been rejected by the Tribunal on flimsy ground that there is no provision under the Act of 1944, authorizing the assessee to claim refund of the Cess in question, lying unutilised in CENVAT credit of the assessee. He contended that true it is, that there is no provision for refund of the cess or duty lying in credit of an assessee's CENVAT account; but at the same time, it is undisputed that there is also no provision denying such right or prohibiting such refund. In such situation, as the assessee admittedly had a (4 of 12) [EXCIA-82/2018] credit balance of Rs.7,08,933/- in its CENVAT account on 01.03.2015, comprising of Education Cess and Secondary and Higher Secondary Education Cess, the assessee should be held entitled for cash refund of such amount, lest it would remain unavailed till eternity, emphasised learned counsel for the appellant.
In support of his arguments, Mr. Johari relied upon the judgment of Hon'ble Supreme Court, reported in 2018 (1) SCC 105, in the matter of SRD Nutrients Private Limited Vs. Commissioner of Central Excise, Guwahati.
For the purpose of proper appreciation of the issue canvassed before us, it would be apt to consider the relevant statutory provisions of the Act and the Rules in vogue as on 28.02.2015. Hence, they are being re-produced hereinbelow :-
"Section 11B. Claim for refund of duty and interest, if any, paid on such duty. - (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence including the documents referred to in section 12A as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person;
(5 of 12) [EXCIA-82/2018] Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act."
"Rule 8 of Central Excise Rules, 2002 :- Manner of payment. -
(1) ... ... ...
(2) The duty of excise shall be deemed to have been paid for the purposes of these rules on the excisable goods removed in the manner provided under sub-rule (1) and the credit of such duty allowed, as provided by or under any rule.
(3) ... ... ...
(4) The provisions of section 11 of the Act shall be applicable for recovery of the duty as assessed under rule 6 and the interest under sub-rule (3) in the same manner as they are applicable for recovery of any duty or other sums payable to the Central Government.
Explanation.- For the purposes of this rule, the expressions 'duty' or 'duty of excise' shall also include the amount payable in terms of the CENVAT Credit Rules, 2004."
(5) ... ... ...
(6) ... ... ...
"Rule 3 of CENVAT Credit Rules, 2004 :- CENVAT Credit. - (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -
(i) ... ... ...
(6 of 12) [EXCIA-82/2018] ......... .........
(vi) the Education Cess or excisable goods leviable under section 91 read with section 93 of the Financce (No.2) Act, 2004 (23 of 2004);
(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
(ix) ... ... ...
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance No.2 Act, 2004 (23 of 2004) ;
(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007);"
(2) ... ... ...
(3) ... ... ...
(4) ... ... ...
(7) Notwithstanding anything contained in sub-rule (1) and sub-rule (4), -
(a) ... ... ...
(b) CENVAT credit in respect of -
(i) ... ... ...
(ii) ... ... ...
(iii) the education cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);
(iiia) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
.........
.........
.........
Provided that the credit of the education cess on excisable goods and the education cess on taxable services can be utilized, either for payment of the (7 of 12) [EXCIA-82/2018] education cess on excisable goods or for the payment of the education cess on taxable services:
Provided further that the credit of the Secondary and Higher Education Cess on excisable goods and the Secondary and Higher Education Cess on taxable services can be utilized, either for payment of the Secondary and Higher Education Cess on excisable goods or for the payment of the Secondary and Higher Education Cess on taxable services." It is to be noted that on 1.3.2015, the Central Government issued the notification No.14/2015 and 15/2015 in exercise of powers available to it under Section 5 A (1) of the Act of 1944, exempting Education Cess and Higher Secondary Education Cess leviable on all goods.
On 30.04.2015, the Central Government issued a notification No.12/2015 whereby the CENVAT Credit Rules 2004 were amended and Rule 3 (7) (b) was substituted as under :-
"Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on inputs or capital goods received in the factory of manufacture of final product on or after the 1st day of March, 2015 can be utilized for payment of the duty of excise leviable under the First Schedule to the Excise Tariff Act;
Provided also that the credit of balance fifty percent. Education Cess and Secondary and Higher Education Cess paid on capital goods received in the factory of manufacture of final product in the financial year 2014-15 can be utilized for payment of the duty of excise specified in the First Schedule to the Excise Tariff Act:
Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on (8 of 12) [EXCIA-82/2018] input services received by the manufacturer of final product on or after the 1st day of March, 2015 can be utilized for payment of the duty of excise specified in the First Schedule to the Excise Tariff Act."
An appraisal of the above quoted statutory provisions and law relating thereto makes it clear that Section 11B of the Act of 1944 provides for refund of the duty of Excise, if such duty has been erroneously or wrongly paid; subject, however, to certain conditions and restrictions, including that the incidence thereof has not been passed on to the customer. After ensuring that there is no unjust enrichment and following the procedure prescribed in such provision, the adjudicating authority can either refund such amount to the assessee in cash or can order for crediting the amount in the fund, as the case may be.
Rule 8 of the Central Excise Rules, 2002 provides for manner of payment of the duty and by virtue of sub-rule (2) of Rule 8, the payment of duty is permissible from out of the amount of CENVAT credit, lying in an assessee's account.
Sub-rule (2), sub-rule (4) of Central Excise Rules, 2002 and the Explanation appended therewith entitles the assessee to make payment of the Excise Duty out of the Excise Duty or other levies paid by him on the input and input services in terms of the CENVAT Credit Rules, 2004.
Rule 3 of CENVAT Credit Rules, 2004 reproduced hereinabove provides that a manufacturer or producer of final product is allowed to appropriate CENVAT Credit of the duty of excise, service tax, education cess or Secondary and Higher Secondary Education Cess, paid by it, on the input or input services in (9 of 12) [EXCIA-82/2018] payment of the duties or cess etc. in the manner provided and subject to restrictions imposed.
A close and conjoint reading of the aforesaid provision makes it abundantly clear that an assessee is required to pay duty provided in the Schedule I and Schedule II to the Central Excise & Tariff Act and he can claim refund of such duty by making an application under Section 11 B of the Act of 1944, if the same has been erroneously paid or illegally recovered subject; of course, to the procedure and conditions contained therein.
The Act of 1944 does not contain any provision for refund of the Excise Duty or other levies payable under the Act, until and unless the same are proved to have been erroneously paid or recovered with a further proof that its burden has not been passed on to the customers.
Rule 8 (2) of the Central Excise Rules, 2002 authorises availment of credit of the duty of excise or other levies or service tax paid by the assessee on its inputs or capital goods in the manner provided under the CENVAT Credit Rules, 2004. While Rules of 2004 conveys a right upon an assessee to make payment of the duty, service tax, Education Cess and Secondary & Higher Secondary Education Cess etc. from out of the credit lying in CENVAT account.
Though not directly applicable, yet with a view to discern the true import of the Scheme of the Rules of 2004, it will not be out of place to refer to Rule 5 A of the CENVAT Credit Rules, 2004, which provide for refund of CENVAT credit. Rule 5 A of the Rules of 2004 provides for refund of CENVAT Credit subject to procedure, conditions and limitations as may be specified by the Central Government. An analysis of the Rules of 2004 shows that (10 of 12) [EXCIA-82/2018] refund of CENVAT Credit in relation to duty paid on input or input service has been provided only in cases of export of the final products, or in cases where the duty is exempt or subject to nil rate of duty. Except for such a contingency, there is no provision for grant of refund or encashment of CENVAT Credit, in the entire framework of the Rules of 2004.
Even while amending the Rules of 2004 and substituting the proviso to Rule 3 (7) (b) of the Rules of 2004, despite dispensing with the Education Cess and Secondary and Higher Secondary Education Cess, the Central Governmental has not thought it appropriate to provide for refund of the amount of such Cess, lying unutilised. In this view of the matter, in our considered view, the rule making authority has consciously not provided for refund of CENVAT credit.
It is noteworthy that an assessee is entitled to take CENVAT credit in respect of the inputs, immediately on their arrival in his factory or premises as provided in Rule 4 of the CENVAT Credit Rules, 2004. Hence, it is the CENVAT Credit Rules, 2004, which bestows upon an assessee, a right to claim credit of duty or cess paid on its inputs or input services. Such right accrues, fructifies and crystallizes on the date of procurement of the goods or services, but the same is available only to the extent of availing credit of such tax, in accordance with the existing conditions and provisions prevailing on that date.
In other words, CENVAT credit lying in an assessee's account creates an infallible and indefeasible right, which in the present case is indispensable and undeniable; however, to the extent of making payment of the corresponding cess, if any, payable on or (11 of 12) [EXCIA-82/2018] after that date, as categorically stipulated in 1 st and 2nd proviso to Rule 3 (7) (b) of the CENVAT Credit Rules, 2004.
Since the CENVAT Credit Rules, the repository of rights of an assessee to avail credit of the duty or other sums paid on inputs does not entail or even envisage refund of such credit in cash and encashment cannot be claimed as a matter of course. It can also not be asserted that an assessee is entitled to or has an ingrained or vested right to claim refund of Education Cess and Secondary and Higher Secondary Education Cess or any other duty paid in accordance with the law dehors the CENVAT Credit Rules, 2004. Provisions as enacted in the form of Section 11 B of the Act of 1944 or other provisions are of little avail to the assessee, as they do not even provide for availment of credit of the duty, much less refund or its payment in cash.
The judgment in case of SRD Nutrients Private Limited (supra) cited by learned counsel for the appellant - assessee has no bearing on the issue at hands, as the facts on record and question posed for consideration before us are entirely different from the facts and issues, which were involved in the case before Hon'ble the Supreme Court. The said judgment of Hon'ble the Apex Court simply lays down that Education Cess as well as Secondary and Higher Secondary Education Cess are a part of excise duty. This position of law perhaps cannot be disputed, even the authorities below have not denied claim of refund on such count; they have rather treated the Education Cess and Secondary and Higher Secondary Education Cess to be a duty under the Act of 1944, even while rejecting the assessee's claim.
In view of the discussion foregoing, we are of the considered opinion that the Tribunal has committed no error of law in holding (12 of 12) [EXCIA-82/2018] that the appellant cannot claim cash refund or encashment of the unutilized and unavailed amount of Education Cess and Secondary and Higher Secondary Education Cess, lying in its credit.
We, therefore, dismiss the appeal.
(DINESH MEHTA),J (SANGEET LODHA),J
Arun/PS
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