Custom, Excise & Service Tax Tribunal
Allied Chemicals And Pharmaceuticals ... vs Jaipur-I on 1 February, 2019
Author: Dilip Gupta
Bench: Dilip Gupta
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CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
West Block No.2, R. K. Puram, New Delhi.
Date of hearing: 15.01.2019
Date of decision: 01.02.2019
Excise Appeal No. 52302 of 2018
(Arising out of Order-in-Appeal No. 96 - 131(SJ)CE/JPR/2018 dated
27.04.2018 passed by the Commissioner (Appeals), Central Excise
and CGST, Jaipur).
M/s Allied Chemical & Pharmaceuticals Pvt. Limited Appellant
Vs.
CCE&ST, Jaipur-I Respondent
with Excise Appeal Nos. 52303, 52304, 52305, 52306, 52307, 52308, 52309, 52310, 52311, 52312, 52313, 52314, 52315, 52316, 52317, 52318 & 52319 of 2018 Appearance:
Sh. Amit Jain & Sh. Rahul Tangri, Advocates for the appellant Sh. H. Saini, AR for the Respondent Coram:
Hon‟ble Mr. Justice Dilip Gupta, President Hon‟ble Mr. C. L. Mahar, Member (Technical) Final Order Nos. 50146-50163/2019 Per: Justice Dilip Gupta:
The appellant had filed applications claiming refund of excise duty of Rs.9,35,97,502/- paid under protest for the period from April, 2006 to March, 2014. The Adjudicating Authority by orders passed in April/May, 2016 allowed refund of Rs. 5,11,56,276/- paid from PLA towards duty but denied refund of Rs. 4,24,41,226/- paid 2 by utilisation of cenvat credit towards duty on the ground that the appellant could not have claimed cenvat credit on inputs for a product that was exempted from payment of duty. Thus, out of the total refund claims of Rs.9,35,97,502/-, the Department denied refund claims of Rs.4,24,41,226/- on the ground that the appellant was not entitled to cenvat credit on inputs. The appellant filed appeals against that part of the original orders whereby refund of duty paid by utilisation of cenvat credit was denied. The Department also filed appeals against that part of the original orders whereby refund of duty paid from PLA was allowed, alleging that there was unjust enrichment. The learned Commissioner (Appeals) decided the appeals by order dated 27 April, 2018. The appeals filed by the appellant were dismissed, while those filed by the Department were allowed. Thus, the entire refund claim of Rs. 9,35,97,502/- stood denied to the appellant. These 18 appeals have, accordingly, been filed against the common order dated 27 April 2018 passed by the Commissioner (Appeals) seeking refund of the entire amount of duty paid under protest.
2. The appellant, M/s Allied Chemicals & Pharmaceuticals Pvt. Limited is engaged in the manufacture of Phenotil which is said to a pharmaceutical product with formulation of Diphenoxylate Hydrochloride with Atropine Sulphate. According to the appellant, formulation of Diphenoxylate Hydrochloride with Atropine Sulphate was covered by the exemption Notification No. 4/2006-CE dated 01 3 March, 2006 at Sl. No.59. This entry relates to "formulations manufactured from the bulk drugs specified in list 1". List 1 of the Notification mentions various bulk drugs including Atropine. The view of the Department was that Diphenoxylate Hydrochloride being a major constituent (99% by weight), the formulation has to be treated as made out of Diphenoxylate Hydrochloride and since this bulk drug was not mentioned in List 1, the formulation cannot be said to be covered by the exemption notification. It is for this reason that a demand was raised against the appellant by issuance of show cause notices. One such show cause notice was decided by the Additional Commissioner denying the benefit to the appellant. The appellant filed an appeal before the Commissioner (Appeals), who by order dated 29 May 2006 set aside the original order and held that the product was eligible for exemption from payment of excise duty under the Notification dated 01 March, 2006. The Department filed an appeal before this Tribunal.
3. However, the Department also kept on issuing show cause notices demanding duty on the clearances of the bulk drugs containing Atropine. The appellant, therefore, addressed a letter dated 31 January, 2007 to the Central Excise Division-I Jaipur intimating that it was depositing the excise duty on the product under protest without prejudice to its right to claim refund when the issue is decided in favour of the Appellant by the Appellate Forum. It, accordingly, 4 regularly paid the duty under protest partly by utilisation of cenvat credit and partly through PLA.
4. The appeal filed by the Department was ultimately dismissed by the Tribunal by order dated 06 May, 2015 as a result of which the order passed by the Commissioner (Appeals) holding that the drug was eligible for exemption from duty was affirmed.
5. It is as a consequence of the order dated 06 May, 2015 passed by the Tribunal that the appellant filed applications for refund of duty paid under protest. The Adjudicating Authority, as noted above, allowed refund of duty paid through PLA to the extent of Rs.5,11,56,276/- but denied refund of duty paid through cenvat credit to the extent of Rs. 4,24,41,226/-. Both the appellant and the Department thereafter filed appeals.
6. The Commissioner (Appeals), in so far as the appeals filed by the appellant are concerned, observed that once the original order dated 29 May, 2006 was passed by the Commissioner (Appeals) in favour of the appellant, the Department could not have pressurised the appellant to pay duty under protest and so the payment of duty was a conscious decision taken by the appellant. The Commissioner (Appeals) also observed that since the product was exempted from payment of duty by the Tribunal by order dated 29 May, 2006, then in view of Rule 6 of the Cenvat Credit Rules, 2004, the appellant could not have claimed cenvat credit on inputs/ input service used therein. 5 The Commissioner (Appeals) rejected the plea of the appellant that the admissibility of cenvat credit was never challenged by the Department and that cenvat credit cannot be denied at the stage of deciding the refund claims since each refund claim had to be examined on merits and there was no requirement for the Department to raise any issue about inadmissibility of credit at the time when it was taken since the assessee was paying excise duty on the goods.
7. In regard to the appeals filed by the Department, the learned Commissioner (Appeals) observed that even though the show cause notices were issued by the Department only to deny partial refund of claims on duty paid by utilisation of cenvat credit, but the Department was justified in raising an issue about unjust enrichment in regard to duty paid through PLA in the appeals filed by the Department. Learned Commissioner also observed that the disclosure of excise duty in the Profit and Loss Account wherein the appellant showed it as deduction from the Gross Sales was sufficient to hold that the Gross Sales was inclusive of excise duty and the appellant had recovered the same from the customers. According to learned Commissioner (Appeals), if the appellant thought that excise duty was not leviable on subject goods and had paid it under protest, it should have shown it as recoverable in the balance sheet under the head "Deposit and Advances". It was for this reason that the certificate given by the Chartered Accountant that the burden of duty had not been passed to the customer was not accepted and the invoices 6 showing NIL duty and product was exempted was found to be not sufficient evidence to substantiate that the duty had not been passed to the customers. Learned Commissioner (Appeals) also observed that since duty was paid, it was difficult to believe that the burden was not passed to the customers.
8. Shri Amit Jain, learned counsel appearing for the Appellant, submitted that the order passed by the Commissioner (Appeals) is based on conjectures and surmises and disregards all the documentary evidences placed by the appellant; that the claims made by the Appellant for refund of duty paid through PLA cannot be said to be hit by „unjust enrichment‟ and that the Appellant was clearly entitled to refund of duty paid by utilization of Cenvat Credit. In support of his submission, he placed reliance upon certain documents and decisions to which we shall refer to at the appropriate stage.
9. The learned representative of the Department has, however, reiterated the findings recorded by the Commissioner (Appeals) and has placed reliance upon the judgment of the Principal Bench at New Delhi in Ranbaxy Laboratories LLtd. Vs CCE, Chandigarh, reported in 2010 (253) ELT 578 (Tri.-Del.). He submitted that the Cenvat Credit is available only when the final product is subjected to excise duty and since in the present case the product was exempted from excise duty, the Appellant could not have availed the benefit of Cenvat Credit.
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10. We have considered the submissions advanced by both the parties.
11. The Appellant is manufacturing „PHENOTIL‟, a pharmaceutical product with a formulation of Diphenoxylate Hydrochloride with Atropine Sulphate. According to the Appellant, this formulation was covered by exemption Notification dated 01 March, 2006 which inter alia mentions various bulk drugs, including Atropine. The view of the Department was that the major constituent of „PHENOTIL‟ was Diphenoxylate Hydrochloride and since this bulk drug was not mentioned in the exemption Notification, the Appellant was not entitled to claim exemption from payment of excise duty. Accordingly, show cause notice dated 07 April, 2006 was issued and the Adjudicating Authority denied the benefit of the exemption Notification. The Appellant filed an appeal before the Commissioner (Appeals), who by order dated 29 May, 2006 held that the bulk drug was eligible for exemption under the aforesaid Notification dated 01 March, 2006. Feeling aggrieved, the Department filed an appeal before the Tribunal. At the same time, it also issued further show cause notices to the Appellant demanding payment of duty on the bulk drug containing Atropine failing which it was stated penalty would be imposed. It is for this reason, the Appellant addressed a letter dated 31 January, 2007 to the Central Excise Division intimating them that it was depositing the Central Excise duty on the goods henceforth under protest with a rider that it will claim refund when the matter is decided 8 by the Appellate Tribunal. The appeal filed by the Department was, however, dismissed by the Tribunal by order dated 06 May, 2015 and the contention of the Appellant that the product was exempted from payment of excise duty was accepted.
12. It is as a consequence of the order dated 06 May, 2015 passed by the Tribunal that the Appellant filed applications seeking refund of the duty paid with interest for the period April, 2006 to March, 2014. The Adjudicating Authority partly allowed the refund applications with regard to the duty paid by the Appellant from PLA but rejected the claim of the Appellant for refund of duty paid through input credits. This led to the filing of appeals both by the Appellant and the Department. The Commissioner (Appeals) dismissed the appeals filed by the Appellant and allowed the appeals filed by the Department.
13. The learned counsel for the Appellant submitted that the finding recorded by the Commissioner (Appeals) that the payment of excise duty was voluntary and no pressure had been exerted by the Department is factually incorrect. It is his submission that even though in the earlier round of proceedings, the Commissioner (Appeals) by order dated 29 May, 2006 held that the product was exempted from payment of excise duty, but the Department kept on issuing show cause notices demanding duty and it is for this reason that the Appellant was compelled to send a letter dated 31 January, 9 2007 to the Assistant Commissioner, Central Excise, mentioning therein that though the Appellant was eligible for exemption under the Notification dated 01 March, 2006, but since show cause notices were being issued by the Department demanding excise duty by denying the exemption and seeking to impose penalties, it had decided to deposit Central Excise duty on the goods henceforth under protest. It was also specifically mentioned in the letter that the payment of duty under protest was without prejudice to the right of the Appellant to seek refund of the excise duty deposited with interest and other compensation. It was also made clear in the letter that the Appellant would file claims for refund of the duty once the issue was decided in favour of the Appellant.
14. In our view, in such circumstances, the Commissioner (Appeals) was not justified in observing that the payment of Central Excise duty by the Appellant even after the Commissioner (Appeals) had decided the matter in favour of the Appellant by order dated 29 May, 2006, was voluntary. The show cause notices issued by the Department resulted in payment of duty "under protest" with a further rider that the Appellant would claim refund of excise duty when the matter was finally decided by the Tribunal. It needs to be noted that against the order dated 29 May 2006 passed by the Commissioner (Appeals), the Department had filed an Appeal before this Tribunal which Appeal was finally dismissed on 06 January, 2015. 10
15. What also needs to be stated at this stage, is that in response to the applications filed by the Appellant for refund of excise duty paid through PLA and Cenvat Credit, the Department issued a show cause notice dated 07 April, 2016 only with regard to the claim of the Appellant for refund of excise duty paid through Cenvat Credit. It was, therefore, stated in the show cause notice that the refund claimed to the extent of Central Excise duty paid through Cenvat Credit amounting to Rs. 4,24,41,226/- was not admissible. The Adjudicating Authority by order dated 13 April, 2004 rejected the claim made by the Appellant for refund of excise duty debited through Cenvat Credit account. The show cause notice had not called upon the Appellant to explain why the refund of excise duty paid through PLA should be rejected nor did it mention about unjust enrichment in regard to payment of duty through the PLA account. The order of the Adjudicating Authority also granted refund of excise duty paid through PLA, but rejected the claim for refund of excise duty paid through Cenvat Credit account. The Commissioner (Appeals), in the appeals filed by the Department against the order of the Adjudicating Authority, however, denied the refund of excise duty paid through PLA account on the ground of unjust enrichment. The submission of the learned counsel for the Appellant, therefore, that the claim of refund of duty paid through PLA could not have been denied on the ground of unjust enrichment as this was not even the case taken up by the Department in the show cause notice issued to the Appellant in 11 response to the application filed for refund of the excise duty is well founded.
16. Learned counsel for the Appellant also submitted that even otherwise, the refund claimed for duty paid through PLA was not hit by unjust enrichment since the burden of duty had not been passed on to the buyers, as was so evident from the documentary evidence, but the evidence had been ignored in a perverse manner by the Commissioner (Appeals). In this connection, learned counsel placed reliance on various documents including the invoices and the Chartered Accountant certificate to substantiate that the incidence of duty had not been passed to the buyers. He submitted that the invoices raised by the Appellant explicitly mentioned that the duty applicable was „NIL‟ by declaring that the goods were exempted under Notification dated 01 March, 2006. He also submitted that the invoices are the best proof of not passing on the incidence of duty and in support of his submission, reliance was placed on certain decisions. In connection with the Chartered Accountant certificates, learned counsel submitted that the certificates had been issued after detailed scrutiny of the books of accounts and not merely on the basis of disclosure in the Profit & Loss account. According to the learned counsel for the Appellant, the same was an expert opinion which could not have been brushed aside without any evidence to the contrary. 12
17. It is not in dispute that the invoices raised by the Appellant clearly mention that the duty applicable was „NIL‟ as the goods were exempted under Notification dated 01 March, 2006. It is also not in dispute that the Appellate had filed certificates issued by a Chartered Accountant that the incidence of duty had not been passed to the customers. The ER-1 returns filed by the Appellate also showed that the goods were exempted from payment of duty and duty was being paid under protest. An affidavit of the Manager of the Appellant firm was also filed stating that the duty was borne by the Appellant.
18. In Indian Metals & Ferro Alloys vs CCE, Bhubaneswar, reported in 2000 (125) ELT 943 (Tribunal), a Division Bench of this Tribunal had held that invoices are normally the best evidence to show whether the burden of duty had been passed on or not by a manufacturer to the customers and if the invoices do not show any element of duty having been recovered from the customers, it has to be assumed, in the absence of any evidence to the contrary produced by the Department, that the burden of duty had not been passed on to the customers. Civil Appeal No. 76/1997 filed by the Department against the said order of the Tribunal in the Supreme Court was dismissed by order dated 17 July, 1997.
19. The Gujarat High Court in Ahish Metal Rolling Mills vs CCE, Ahmedabad-I, reported in 2014 (305) ELT 510 (Guj), also held that the invoices reflect whether excise duty has been charged or not. The 13 Madras High Court in CCE, Coimbatore vs EL.P.EM. Industries, reported in 2017 (356) ELT 565 (Mad.), also observed that if the burden of excise duty is not passed on, it gets reflected in the bills and invoices which is a positive evidence which had also been produced by the assessee and, therefore, the adjudicating authority committed a mistake in denying the benefit.
20. The Commissioner (Appeals) ignored this evidence merely by deducing from the Schedule forming part of the Profit & Loss A/c of the Appellant that the Appellant has shown the excise duty as deduction from gross sales in the Profit & Loss A/c and not as receivable in the balance sheet. This has been taken as the basis to observe that the duty had been recovered from the customers and the Appellant should have issued credit notes to the customers to prove that the incidence of duty had not been passed on. Learned counsel for the Appellant submitted that the balance sheet was prepared in accordance with the Accounting Standard-9 (AS-9) and Accounting Standards Interpretation-14 (ASI-14), which the Appellant was bound to comply with. He submitted that there was no question of issuing any credit note to the customers to return the incidence of duty when, in fact, no duty had been recovered from the customers on the invoices.
21. The Appellant has brought on record the AS-9 and in particular Clause 10 which provides as under :
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"10. Revenue from sales or service transactions should be recognised when the requirements as to performance set out in paragraphs 11 and 12 are satisfied, provided that at the time of performance it is not unreasonable to expect ultimate collection. If at the time of raising of any claim it is unreasonable to expect ultimate collection, revenue recognition should be postponed. Explanation:
The amount of revenue from sales transactions (turnover) should be disclosed in the following manner on the face of the statement of profit and loss:
Turnover (Gross) XX
Less: Excise Duty XX
Turnover (Net) XX
The amount of excise duty to be deducted from the turnover should be the total excise duty for the year except the excise duty related to the difference between the closing stock and opening stock. The excise duty related to the difference between the closing stock and opening stock should be recognised separately in the statement of profit and loss, with an explanatory note in the notes to accounts to explain the nature of the two amounts of excise duty."
The revised Accounting Standards Interpretation (ASI) replaces ASI -14 issued have also been brought on record and the same are reproduced below :
"ISSUE
1. What should be the manner of disclosure of excise duty in the presentation of revenue from sales transactions (turnover) in the statement of profit and loss.
CONSENSUS
2. The amount of turnover should be disclosed in the following manner on the face of the statement of profit and loss:
Turnover XX
(Gross)
Less: Excise XX
Duty
Turnover (Net) XX
3. The amount of excise duty to be shown as deduction from turnover as per paragraph 2 above should be the total excise duty for the year except the excise duty related to the difference between the closing stock and opening stock. The excise duty related to the difference between the closing stock and opening stock should be recognised separately in the statement of profit and loss, with an explanatory note in the notes to accounts to explain the nature of 15 the two amounts of excise duty.
BASIS FOR CONCLUSIONS
4. Financial analysts and other users of financial statements, sometimes, require the information related to turnover gross of excise duty as well as net of excise duty for meaningful understanding of financial statements. However, it was noted that some enterprises disclose turnover net of excise duty while others disclose turnover at gross amount. Accordingly, this Interpretation requires disclosure of turnover gross of excise duty as well as net of excise duty on the face of the statement of profit and loss.
5. The excise duty related to the difference between the closing stock and opening stock is not shown as deduction from turnover since it is not included in the turnover (gross). As per the interpretation, the excise duty related to the difference between the closing stock and opening stock is recognised separately in the statement of profit and loss.
6. As per the interpretation, two amounts of excise duty would be appearing in the statement of profit and loss: one as deduction from turnover and the other as a separate item in the statement of profit and loss. With a view to explain the nature of these two amounts of excise duty appearing in the statement of profit and loss, this Interpretation requires an explanatory note to be included in this regard in the notes to accounts."
22. The statement of Profit & Loss A/c was in accordance with the manner contemplated under the aforesaid ASI-14 and the Appellant was bound to follow the procedure. This is what has also been observed by the Calcutta High Court in SKP Securities Ltd. vs Deputy Director (RA-IDT), reported in 2013 (291) ELT 33 (Cal.) and by the Gujarat High Court in CCE vs Ingersoll Rand (India) Ltd., reported in 2014 (300) ELT 347 (Guj.).
23. The accounting disclosure contained in the Profit & Loss A/c, therefore, cannot conclusively prove that the incidence of duty had been passed on to the customer, as was also observed by the Bombay High Court in CCE, Pune-I vs Sandvik Asia Ltd., reported 16 in 2015 (323) ELT 431 (Bom.). The relevant paragraph 4 is reproduced below :
"4. On perusal of the impugned order and considering the arguments of both learned counsel, we are unable to agree with Mr. Kantharia. The Tribunal was not concerned with the treatment given to the amount and as deposited in the Assessee‟s profit and loss account. It is immaterial and irrelevant for the Tribunal and equally for us as to what the Assessee terms this amount in his Books of Account. Even if it is shown on the „expense side‟ that does not mean that the presumption that the burden has been passed to the consumer can be raised."
24. The certificates given by the Chartered Accountant to the effect that the incidence of duty had not been passed on also could not have been ignored. These certificates were issued on the basis of detailed scrutiny of the books of accounts and could not have been ignored in the absence of any evidence to disprove it. The Bench of the Tribunal at Bangalore in Tirumala Bearings Pvt. Ltd. vs CCE & Cus (Appeals), Visakhapatnam, reported in 2016 (335) ELT 145, observed that the certificate of the Chartered Accountant shifts the burden to the Revenue to prove recovery of extra duty collected from the customer by producing positive evidence but as the Revenue failed to advance any evidence to rebut the certificate, the allegation of unjust enrichment cannot be upheld. It is for this reason that the Tribunal observed that the certificate given by the Chartered Accountant is good evidence to show that the disputed duty amount had not been collected from the customers and the said certificate 17 could not have been sidelined without production of any evidence to show that the certificates were wrong certificates.
25. Thus, in the face of documentary evidence available on record, namely, copies of the invoices indicating that the incidence of duty had not been passed on, the certificates given by the Chartered Accountant and the ER-1 returns filed by the Appellant, the Commissioner (Appeals) could not have held that the incidence of duty had been passed on to the customers merely on account of the statements contained in the Profit & Loss A/c. The finding, therefore, that the claim for refund was hit by doctrine of unjust enrichment cannot be sustained.
26. This brings us to the issue relating to refund of duty paid by utilization of Cenvat Credit. As noticed above, the contention of the Appellant was that payment of excise duty for manufacture of „PHENOTIL‟ was exempted under the Notification dated 01 March, 2006. However, show cause notices were issued denying this benefit to the Appellant and though the Additional Commissioner denied the benefit to the Appellant, the Commissioner (Appeals) by order dated 29 May, 2006 held that the Appellant was justified in claiming exemption under aforesaid Notification dated 01 March, 2006. The Department, however, filed an appeal before the Tribunal and also continued to issue notices to the Appellant demanding duty on clearances of the bulk drugs containing Atropine with penalties. The 18 Appellant contends that it is in such circumstances that it addressed a letter to the Department pointing out that it would henceforth deposit the excise duty but under protest and will seek its recovery, if its contention was upheld by the Tribunal in the Appeal filed by the Department. The appeal filed by the Department was dismissed by the Tribunal and it is for this reason that the Appellant claimed refund of the excise duty. The claim of the Appellant for refund of excise duty paid through Cenvat Credit has been denied both by the Adjudicating Authority and the Appellate Authority for the reason that Cenvat Credit could not have been availed of if the goods were exempted.
27. The Appellant contended that the Appellant had been emphasizing before the Department that it was not required to pay excise duty as duty was exempted, but as the Department kept on issuing notices for payment of excise duty failing which it was stated that action would be taken against the Appellant, the Appellant was compelled to deposit the excise duty under protest with a condition that refund would be sought if the claim of the Appellant was upheld. The learned Counsel for the Appellant also contended that the Department never raised any objection to the availing of Cenvat Credit for payment of the excise duty and, therefore, it cannot deny the refund merely because the mode of payment of duty was by Cenvat Credit. The learned Counsel for the appellant also contended that a proceeding for refund of duty cannot be turned into proceeding for determining the eligibility of Cenvat Credit and in any case if Cenvat 19 Credit was to be denied to the assessee, it was imperative for the Department to have issued a show cause notice under Rule 14 of the Cenvat Credit Rules, 2004 within the time prescribed under Rule 11A. The learned counsel for the Appellant also contended that the Cenvat Credit, validly availed, cannot be denied on the goods subsequently becoming exempted.
28. In the present case, the Department itself required the Appellant to pay excise duty on the drugs by not accepting the claim of the Appellant that it was exempted from payment of excise duty. It is not the case of the Department that payment of excise duty could not have been made by utilizing the Cenvat Credit if the goods were not exempted and this is the reason why no objection was raised by the Department when excise duty was paid by utilization of Cenvat Credit. It is, therefore, not open to the Department to now contend that since the final product has been exempted from payment of excise duty by the Tribunal, Cenvat Credit could not have been utilized for payment of excise duty.
29. The learned Representative for the Department has, however, placed reliance upon the decision of the Principal Bench of the Tribunal at New Delhi in the case of Ranbaxy Laboratories Ltd. vs CCE, Chandigarh, 2010 (253) ELT 578 (Tri.-Del), to contend that the Cenvat Credit scheme is available only if the final product suffers the excise duty. This decision is clearly distinguishable and in 20 any view was reversed by the Himachal Pradesh High Court in Ranbaxy Laboratories Ltd. vs CCE, Chandigarh, reported in 2012 (279) ELT 194 (HP).
30. When no show cause notice was issued by the Department to the Appellant under Rule 14 of the Cenvat Credit Rules, 2004 for denying the Cenvat Credit, the claim of the Appellant for refund of excise duty paid through Cenvat Credit cannot be denied for the reason that Cenvat Credit could not have been availed of. In proceeding for deciding refund of excise duty, the eligibility of Cenvat Credit cannot be examined.
31. In this connection, reference needs to be made to the decision of the Allahabad High Court in Central Excise Appeal No. 138 of 2017 (Commissioner, Service Tax Commissionerate, Noida vs M/s HCL Comnnet System & Services Ltd., Noida), decided on 21 December, 2017. The High Court examined the provisions of Rule 14 of the Cenvat Credit Rules, 2004 and observed that in the absence of a notice under Rule 14, action taken to reject the claim is bad in law and the observations are :
"One of the stipulations in the said Rules is that a recovery of CENVAT credit may be made from the manufacturer if it had wrongly been taken and utilized or had been erroneously refunded to him. The Rules, therefore, contemplate that if such a situation arises, a notice to that effect must be given to the assessee for recovery. In the absence of such a notice for recovery, as is contemplated under Rules 14 of the Rules, any action taken or order passed to reject refund claimed would become bad. The Tribunal has come to the conclusion that in the present case compliance of the Rule 14 had not been made. There is no challenge to the correctness of that finding of the 21 Tribunal. Also, it is seen that the total amount of refund claimed is only about Rs. 2.5 lacs."
32. Thus, for all the reasons stated above, the claim of the Appellant for refund of excise duty paid through Cenvat Credit could not have been denied. However, this order will not prohibit the Department from issuing a notice under Rule 14 of the Cenvat Credit Rules, 2004, if it is now permissible in law.
33. We are, therefore, unable to sustain the order dated 27 April, 2018 passed by the Commissioner (Appeals) and, accordingly, set aside the same. The Appellant shall be entitled to the refund of the entire amount of Rs. 9,35,97,502/- towards refund of the excise duty paid under protest with consequential benefits. It shall, however, be open to the Department to issue a notice under Rule 14 of the Cenvat Credit Rules, 2004, if it is now permissible in law. The appeals are, accordingly, allowed to the extent indicated above.
(Pronounced on 01.02.2019)
(Justice Dilip Gupta)
President
(C. L. Mahar)
Member (Technical)
Golay