Custom, Excise & Service Tax Tribunal
M/S Tata Chemicals Ltd vs Cce&St, Indore on 7 December, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No.2, R. K. Puram, New Delhi, Court No. 1 Date of hearing: 21.11.2016 Date of pronouncement: 07.12.2016 Excise Appeal No. 3923 of 2005 (Arising out of order in appeal No. 38/CE/IND/APPL-II/2005 dated 31.01.2005 passed by the Commissioner of Central Excise & Customs (Appeals-II) Indore). M/s Tata Chemicals Ltd. Appellant Vs. CCE&ST, Indore Respondent
Appearance:
Sh. Hemant Bajaj, Advocate for the appellant Sh. Yogesh Agarwal, AR for the Revenue Coram:
Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. V. Padmanabhan, Member (Technical) Final Order No. 55739 / 2016 Per: V. Padmanabhan:
The present appeal is directed against the order dated 31.01.2005 passed by the Commissioner (Appeals), Indore.
2. The appellant is engaged in the manufacture of detergent powder falling under Chapter No. 34 of Central Excise Tariff Act, 1985. Commercial production of detergent started in 1991. Appellant was clearing detergent in bulk packing of 50 kgs. on payment of duty to their distributor i.e. M/s Vardhaman Chemicals Ltd., who would convert the same into retail packaging. However, due to low demand in market, the production was stopped in July 1993. In 1996, realizing that the existing stock with M/s Vardhman Chemicals Ltd. would have undergone deteriotion, appellant decided to undertake reprocessing and also marketing of the product. Guidance was sought from the Central Excise Officers during February 1996 and the appellant sought permission to avail credit of the duty paid on clearance of bulk goods against the original duty paying documents. Appellant was granted permission under Rule 173H to bring back the goods, repack and clear the same on payment of duty. However, they were informed vide letter dated 03.02.1997, that no credit would be available in terms of second proviso to Rule 57G inserted by Notification No. 28/95-CE(NT), which stated that the credit is to be availed within 6 months from the date of issue of any documents specified in proviso 1 to Rule 57G(2). Appellant, then sought to claim refund of the duty paid on the repacked goods cleared. However, it was informed by the Department vide letter dated 03.02.1997, that the permission granted to bring back goods cannot be considered as an acceptance by the department that the appellant was entitled to refund. Appellant brought back the detergent and intimated the department regarding the details of the same. After reprocessing and packaging, clearance of detergent started in February, 1997, on payment of duty. Credit notes were issued to M/s Vardhaman Chemicals and M/s Khaitan Enterprises (distributors) for the value and duty originally paid thereon. As per the condition stipulated by the department, certificates from excise authorities having jurisdiction over packing centers were obtained, stating that no credit was availed by them on the bulk detergent powder initially cleared. Appellants filed a refund claim for the amount of Rs. 1,43,62,588/- representing the duty paid on the repacked goods cleared on payment of duty, in terms of the provisions of Rule 173L of the Central Excise Rules, 1944.
3. Show cause notice dated 15.03.1999 was issued to the appellant, on the grounds that:
i) No modvat credit shall be admissible on the bulk goods brought in the factory in view of the second proviso to Rule 57-G inserted vide Notification No. 28/95-CE dated 29.06.2005 and the gate pass not being the specified document under Rule 57-G;
(ii) The refund claim filed for the duty paid subsequently, is time barred, as the same was filed on 04.01.1999 and the last consignment was received on 29.03.1998;
(iii) The appellant has not submitted any proof regarding their refund claim not being hit by bar of unjust enrichment.
4. Appellant filed detailed replies to the aforesaid SCN, stating that denial of modvat credit as a condition for bringing back goods is illegal. Further, in respect of the refund claim, it was stated that the condition imposed requiring certificates from respective jurisdictional excise officers of packing centers, was illegal. Further, the delay by the department in granting such certificates was the reason for the refund claim being filed after statutory time period. The last certificates were issued on 23.12.1998 and the refund application was filed on 30.12.1998 i.e. within seven days. Further, proof was enclosed of credit notes being issued to original buyers towards return of duty paid on bulk detergent.
5. Order-in-original dated 07.04.1999 was passed by the ld. Assistant Commissioner, rejecting the refund claim on merits and on the grounds of limitation and unjust enrichment. Further, the claim to avail modvat was denied on the ground that requirements under Rule 57-G were not fulfilled. Further, it was held that once the conditions imposed by the Commissioners order were not challenged by the appellant, the same were binding on the appellant.
6. The Commissioner (Appeals), after hearing the appellant against the aforesaid order-in-original, upheld the same vide the impugned order and held as follows:
(a) Refund claim of the appellant is time barred;
(b) Claim of modvat credit is deniable as no appeal was filed against the permission granted by the Commissioner;
(c ) Claim of modvat credit is deniable, as the requirements of Rule 57-G are not satisfied in the instant case.
7. The appellant is challenging the order on the ground that they will be entitled to the credit of the duty originally paid on the defective goods on the strength of the gate passes alongwith the accompanied challans. They have further submitted that the credit cannot be denied on the basis of the 2nd proviso to Rule 57G since such proviso itself has been struck down as ultra virus by the Honble Gujarat High Court in the case of Baroda Rayon Corporation Ltd. vs. Union of India 2014 (306) ELT 551 (Guj.). They have also relied upon the decision of the Honble Supreme Court in Osram Surya (P) Ltd. vs. CCE 2002 (142) ELT 5 (SC) in which it has been held that such conditions prescribed in Rule 57G will be applicable prospectively.
8. In the alternative the appellant has claimed that they will be entitled to refund of duty paid on subsequent clearance of the reprocessed goods, since duty cannot be charged twice on the same goods. They have also submitted that their refund claim should be considered as filed within time inasmuch as the delay in submission of the refund claim occurred on account of the delay in procurements of certificates from the departmental authorities as required by Commissioner in his order of permission issued under Rule 173H.
9. Heard both the sides.
10. The undisputed facts are that the goods viz. detergents, were cleared by the appellant to their distributor in bulk packs during the period October, 1992 to November, 1993. Such goods, which continued to lie with the distributor until 1996, deteriorated in quality and hence, the appellant wanted to bring it back to the factory for reprocessing. For this purpose, they obtained the permission of the jurisdictional Commissioner as required under Rule 173H. After reprocessing, the goods were cleared on payment of duty once again. The last such consignment of the reprocessed goods were cleared on 29.03.1998. One of the conditions imposed by the Commissioner for allowing re-entry of the goods into the factory was that no modvat credit will be admissible on such goods. A refund claim was filed claiming the refund of duty originally paid on the goods under Rule 173L of the Central Excise Rules, 1944. This claim has been rejected by the authorities below on the ground of time bar.
11. Initially, we deal with the claim of the appellant for allowing modvat credit of the duty paid at the time of original clearance on the strength of the gate passes under which these goods were cleared from the factory. Modvat credit under the erstwhile rule, was admissible for goods which are in the nature of inputs as well as capital goods. The defective goods brought back into the factory cannot be categorized under either of the two categories; consequently, the claim of modvat credit has to be disallowed as has been rightly done by the authority below. A lot of arguments have been raised by the appellant regarding the 2nd proviso to Rule 57G which allows modvat credit to be taken only within a period of six months from the date of the gate pass. However, we find that the modvat credit itself is not admissible for the basic reason that these goods do not satisfy the criteria of input or capital goods.
12. When goods manufactured and cleared by an assessee are found to be defective after clearance, the Central Excise Rules provided for bringing back such goods to the factory for being repaired or reprocessed. Before bringing back such goods, permission of the Commissioner of Central Excise is required to be taken under Rule 173H. Such permission in this case has been granted by the jurisdictional Commissioner. Once the goods are returned back to the factory, the same are required to be segregated separately and subject to re-processing. If the process undertaken amounts to manufacture and new product emerges, the resultant goods are required to be cleared on payment of duty. However, to obviate the difficulty of payment of duty twice, Rule 173L provides for refund of the duty paid on the goods at the time of original clearance. Such refunds are subject to the condition prescribed in Rule 173L. The refund claim under such circumstances is required to be filed within the period prescribed under Section 11B. The relevant date as per Section 11B in this case is the date of entry of the goods into the factory for the purposes of remaking, refinishing, reconditioning etc. It is on record that the last consignment was brought back to the factory on 29.03.1998. Consequently, the refund claim is required to be filed within a period of six months from this date i.e. 29.09.1998. It is on record that the refund claim stands filed on 04.01.1999 which is clearly time barred. The appellant has also claimed that the refund claim was originally filed with the jurisdictional Assistant Commissioner on 30.12.1998 which was returned for making good certain deficiencies. Even if this date is taken, the claim is hopelessly time barred.
The other argument advanced by the appellant is that the delay in filing of the refund claim was on account of the delay in procuring certificates from various jurisdictional Central Excise authorities to the effect that no modvat credit has been availed on the defective goods originally cleared and subsequently returned. The time limit prescribed under Section 11B of the Central Excise Act is mandatory and cannot be diluted for a reason other than that mentioned therein. While we are able to appreciate the claim of the appellant that such delays might have occurred in procuring the certificates, we are unable to give any relief on the question of time bar.
13. In line with the above discussions, we find no reason to interfere with the impugned order. Consequently, the appeal is dismissed.
(Pronounced on 07.12.2016).
(Justice (Dr.) Satish Chandra)
President
(V. Padmanabhan)
Member (Technical)
Pant