Custom, Excise & Service Tax Tribunal
General Commodities Private Limited vs Commissioner Of Central Excise on 12 July, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/2570/2010-SM [Arising out of Order-in-Appeal No. 231/2010 dated 08.09.2010 passed by the Commissioner of Central Excise, Bangalore] For approval and signature: HON'BLE SHRI S.S. GARG, JUDICIAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes General Commodities Private Limited No. 604, Queens Corner Building No. 3, Queens Road, Bangalore 560 001 Appellant(s) Versus Commissioner of Central Excise, Bangalore II Commissionerate P.B. No. 5400, Queens Road Bangalore 560 001 Respondent(s)
Appearance:
Shri N. Anand, Advocate #152, Race Course Road, Bangalore 560 001 For the Appellant Shri Ajay Saxena, AR For the Respondent Date of Hearing: 23/05/2016 Date of Decision: 12/07/2016 CORAM:
HON'BLE SHRI S.S. GARG, JUDICIAL MEMBER Final Order No. 20538/ 2016 Per: S.S. GARG This appeal is directed against the Order of the Commissioner (Appeals) dated 08.09.2010 vide which the Commissioner (Appeals) has upheld the order of the original authority and rejected the appeal of the appellant. Briefly the facts of the present case are that the appellant is a Private Limited Company and is basically an exporter of various goods and commodities and had incidentally engaged in the manufacture of articles of plastic falling under Chapter 39 of the Central Excise Tariff Act, 1985. The appellant is an exporter of goods and commodities and is a status holder i.e. Star Export House under Foreign Trade Policy. In terms of para 3.7.7 of the FTP, the additional customs duty/excise duty paid in cash or through debit under the Target Plus shall be adjusted as cenvat credit or duty drawback as per rules framed by the Department of Revenue. During the month of June 2009 appellant closed their operations relating to manufacture and surrendered their registration certificate vide their letter dated 24.06.2009 and thereafter filed application for refund on 09.07.2009 of the cenvat credit balance lying unutilized in their account as on 24.06.2009 (date of surrendering the registration certificate) which was mainly accrued on account of Target Plus Scheme. Thereafter a show-cause notice for denial of the refund was issued which culminated into Order-in-Original vide order dated 12.11.2009 rejecting the refund application of the appellant. Thereafter appellant filed an appeal before the Commissioner (Appeals) who vide order dated 08.09.2010 rejected the refund and confirmed the adjudication order. Hence the present appeal.
2. The learned counsel for the submitted that the impugned order is not sustainable in law as the same has been passed merely on technicalities and without considering provisions of refund in accordance with law and the judgments of the various judicial fora. In support of his submissions, the learned counsel for the appellant relied upon the following decisions:
a) Union of India V. Slovak Trading Co. Pvt. Ltd. 2006 (201) E.L.T. 559 (Kar.) affirmed in 2008 (223) E.L.T. A170 (SC)
b) CCE V. Apex Drugs & Intermediaries Ltd. 2015 (322) E.L.T. 834 (A.P)
c) CCE V. Apex Drugs & Intermediaries Ltd. 2014 (314) E.L.T. 729 (Tri.-Bang.)
d) CCE V. Jain Vanguard Polybutlene Ltd. 2010 (256) E.L.T. 523 (Bom.)
e) Century Rayon Twisting Unit V. CCE, 2015 (325) E.L.T. 205 (Tri.-Mum)
f) CIT V. Thana Electricity Supply Ltd. 1994 (206) ITR 727 (Bom.) The Honble High Court of Karnataka in the case of Union of India V. Slovak Trading Co. Pvt. Ltd. cited supra analysed Rule 5 of the Cenvat Credit Rules 2002 (which is identically worded to Rule 5 of the Cenvat Credit Rules 2004) and answered the following substantial question of laws, which are impugned in the instant case also:
a) Whether under the facts and circumstances of the case the Tribunal is right in ordering for refund even if there is no provision in Rule 5 of Cenvat Credit Rules 2002, to refund the unutilized credit?
b) Whether under the facts and circumstances of the case the Tribunal is right in ordering for refund even if there is no production and there is no clearance of finished goods?
c) Whether under the facts and circumstances of the case the Tribunal is right in holding that respondent is entitled for refund even if it goes out of Modvat Scheme or Company is closed?
The High Court while answering the above questions of law in favour of the appellant held as follows:
There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the company. Therefore, Rule 5 is not available for the purpose of rejection as rightly ruled by the Tribunal. The Tribunal has noticed that various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. In these circumstances, we answer all the three questions as framed in para 17 against the Revenue and in favour the assessee. 2.1. The learned counsel further submitted that the question whether the cash refund is allowable on cenvat credit balance lying unutilized at the time of closure of business is no longer res integra and has been settled by the Apex Court in Union of India V. Slovak Trading Co. Pvt. Ltd. cited supra. It was held that Rule 5 of the Cenvat Credit Rules did not expressly prohibited refund of unutilized cenvat credit where there was no manufacture due to closure of factory. Moreover since the assessee has come out of modvat scheme, refund of unutilized cenvat credit had to be made as per Section 11B of the Central Excise Act. The learned counsel further submitted that the judgments of the Karnataka High Court which was affirmed by the Supreme Court has been relied upon in the case of CCE, Hyderabad Vs. Apex Drugs & Intermediates Ltd. reported in 2014 (314) E.L.T. 729 and the same has been affirmed by the High Court of Andhra Pradesh reported in 2015 (322) E.L.T. 834 and has also been followed by the Bombay Bench of the Tribunal in the case of Century Rayon Twisting Unit Vs. CCE, Thane-I reported in 2015 (325) E.L.T. 205.
3. On the other hand the learned AR reiterated the findings of the Commissioner (Appeals) and submitted that on closure of the business of the appellant, the unutilized cenvat credit would lapse and in support of his submission he relied upon the following authorities:
a) Purvi Fabrics & Texturise (P) Ltd. Vs. CCE, Jaipur-II 2004 (172) E.L.T. 321 (Tri.-Del.)
b) Purvi Fabrics & Texturise (P) Ltd. Vs. CCE, Jaipur-II 2015 (319) E.L.T. 551 (S.C)
c) Modipon Ltd. Vs. CCE, Ghaziabad 2015 (324) E.L.T. 718 (Tri.-Del.)
d) Nav Durga Steel Products Vs. CCE, Chandigarh 2014 (309) E.L.T. 302 (Tri.-Del.)
e) Steel Strips Vs. CCE, Ludhiana 2011 (269) E.L.T. 257 (Tri.-LB)
4. I have heard the learned counsel for the parties and perused the relevant material on record. The relevant Rule deal with cenvat credit is Rule 5 of the Cenvat Credit Rules 2004 which is reproduced herein below:
Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the cenvat credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,
(i) Duty of excise on any final product cleared for home consumption or for export on payment of duty, or
(ii) Service tax on output service, and where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification;
Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1985 or claims rebate of duty under Central Excise Rules, 2002 in respect of such duty or claims rebate of Service Tax under the Export of Service Rules 2005 in respect of such tax.
5. In the present case it is not disputed that the appellant has closed their operations relating to manufacture and surrendered the registration certificate vide letter dated 24.06.2009. I have also gone through the various judgments cited by both the parties. The jurisdictional High Court of Karnataka in the case of Union of India V. Slovak Trading Co. Pvt. Ltd. cited supra has clearly held that there is no express prohibition in terms of Rule 5. The Honble High Court has observed that the Tribunal is fully justified in ordering refund partly in the light of the closure of the factory and in the light of the assessee coming out of modvat scheme and this judgment of the Honble High Court was affirmed by the Honble Supreme Court. Further the judgment of the Honble High Court has been followed in number of cases by various Tribunals as cited supra. On the other hand the judgments relied upon by the learned AR is not applicable in the facts and circumstances of the present case when the jurisdictional High Court has allowed the refund of unutilized cenvat credit under Rule 5 of the Cenvat Credit Rules 2004 and the same has been affirmed by the Honble Supreme Court. In view of this, I am of the considered opinion that the impugned judgment is not sustainable in law and is hereby set aside by allowing the appeal of the appellant with consequential relief, if any.
(Order pronounced in Open Court on )
(S.S.GARG)
JUDICIAL MEMBER
iss