Customs, Excise and Gold Tribunal - Tamil Nadu
Flow Tech Power vs Commissioner Of Central Excise on 22 October, 2007
Equivalent citations: 2008(125)ECC62, 2008(151)ECR62(TRI.-CHENNAI), 2008(223)ELT104(TRI-CHENNAI)
ORDER P. Karthikeyan, Member (T)
1. M/s Flow Tech Power (Assessee or FTP for short) manufactured and cleared plastic articles necessary for Drip/Sprinkler Irrigation System (SIS) during 1992 to 2000. They claimed exemption for these clearances under Notification No. 46/94-CE dated 01.03.94 (later Notification No. 56/95 dated 16.03.95) as parts of SIS falling under CSH 84.24. As the department was of the view that the goods involved were plastic pipes/tubes, the exemption claimed was not allowed. During the material period the assessee paid duty applicable to plastic parts under protest. Assessee had availed input credit all through under the Modvat scheme. The dispute was finally resolved vide Final Order No. 1262/2000 dated 05.09.2000 of the Chennai Bench of the Tribunal. The Tribunal decided that the impugned goods were covered by Notification No. 46/94-CE dated 01.03.94 and Notification No. 56/95 dated 16.03.95. Assessee claimed refund of the duty paid pursuant to the final order. Claim was for an amount of Rs. 64,72,809/- paid in RG23A and Rs. 25,58,995/- paid from PLA. The claim was rejected as being barred by unjust enrichment and limitation vide Assistant Commissioner's order No. 207/2003 dated 21.08.03. The Commissioner (Appeals) allowed FTP's appeal and decided that the refund claim was not barred by limitation nor would involve unjust enrichment vide his order No. 88/2004(SCN)-Try-II dated 31.03.04. The Cestat vide Final Order No. 302/05 dated 3.03.05 decided that the refund claim was not barred by limitation or attracted unjust enrichment. As the order dated 21.08.03 of the original authority rejecting the refund claim had not considered captive consumption of inputs and unjust enrichment, department filed appeal against that order on those grounds. Disposing the appeal, Commissioner (Appeals) concurred with the order No. 88/2004(SCN)-Try-II dated 31.03.04 and decided that refund would not entail unjust enrichment. Department's petition against the final order No. 302/05 dated 3.3.05 of Cestat (supra) was rejected by the Madras High Court. The Hon'ble High Court observed that no question of law arose from the final order.
2. The assessee sought consequential relief. The assessee was then issued a SCN proposing to reject the refund claim to the extent the same represented payment from Modvat credit on the ground that the assessee was not eligible for the credit taken as the final products were exempt. Refund claim was disposed off sanctioning the amount paid from PLA i.e. Rs. 25,58,995/- and the interest for the delay of more than three months from the date of order of the High Court. Commissioner (Appeals) upheld the order of the original authority on the basis that credit used to pay the amount claimed had not been admissible in the first place in terms of Rule 57C. The assessee was not eligible for the credit. FTP filed the subject appeal against the said order seeking refund of Rs. 64,72,809/- and interest for the entire amount for the period of delay with reference to the date of initial claim.
Heard both sides.
3. Before the lower authority, FTP took the stand that the admissibility of the entire refund claim had been decided by the Commissioner (Appeals) vide his order in appeal No. 88/2004 dated 31.3.2004. Department was bound to honour the said order which had become final. In the Show Cause Notice dated 26.04.02 issued to reject the refund claim at the first instance, the inadmissibility of Modvat credit utilized to pay duty had not been taken as a ground. This issue was not raised at any time earlier in the proceedings. In the order impugned before him interest was sanctioned on the amount of Rs. 25,58,995/- for the delay beyond three months of the High Court's order. This was incorrect. It was submitted during hearing that no proceedings had been initiated earlier to deny the credit on the ground that the inputs had been used to manufacture exempted goods and Rule 57C applied.
4. Disposing the appeal the Commissioner (Appeals) held in the impugned order that as per Rule 57C current during the material period, if a product became exempted, credit of duty paid on inputs had to be reversed. This was a basic requirement under Modvat scheme. In his view the eligibility of Modvat credit could be taken up only while sanctioning the refund and the same had not merged with earlier orders as contended. He relied on the decision of the Tribunal in CCE, Pune III v. Solar Busiforms Ltd. (2007-TIOL-298-CESTAT MUMBAI). The Tribunal had decided in that case that when the final product was found to be not liable to duty after clearance on payment of duty, refund was admissible only to the extent the duty was paid from PLA as the input credit taken was not admissible. As regards the interest due, the Commissioner (Appeals) decided that the same was admissible only with reference to the date of order of the Hon'ble High Court in terms of Section 11BB of the Central Excise Act '44.
5. The impugned order had decided the admissibility of refund to the extent of Rs. 64,72,809/- paid from RG 23A and the interest due on the entire refund claimed. Before us the Ld. Counsel for FTP argued that proceedings to reject the entire amount of refund claimed had attained finality in the decisions of the Tribunal and the Hon'ble High Court. It was incorrect for the Commissioner to consider sanction of refund following culmination of quasi judicial proceedings as different proceedings. Denial of refund to the extent duty was paid from Modvat credit was a quasi judicial process which had become final and settled against the Revenue. Once the issue was settled in favour of the assessee refund had to be granted. The assessee cited several case laws in support including the following.
(a) In Boying Fairess Ltd. [2006 (202) ELT 389 SC)] the Apex Court held that once issue had attained finality Department was not permitted to take a different stand.
(b) In 1993 (50) ELT 507 (ALL) the High Court had held that it was not permissible not to implement order of Appellate authorities which had categorically granted consequential relief.
(c) In in the case of Shree Cements Ltd. v. UOI the High Court had held that when the matter had reached finality the Department could not start the proceedings taking a different stand.
(d) In 2005 (191) ELT 847 (Tri)] in the case of CCE v. TTK Prestige the Tribunal held that when proceedings reached finality no further proceedings could be initiated for re-opening the settled refund issue.
(e) In Tien Yuan India Pvt. Ltd. v. CCE (2007 TIOL 426 CESTAT MUM) dated 2.2.2007, the Tribunal held that there could not be investigation in two parts and issue of two notices, one relating to seizure and other relating to eligibility to credit. All issues were to be examined together.
(f) In CCE v. Simplex Mills Co. , the Tribunal held that once the order passed by the lower authority was set aside all sums paid must be refunded.
6. As regards the claim for interest the assessee relied particularly on the Explanation under Section 11BB of the Central Excise Act. The assessee cited several decisions of the Tribunal in support of its claim for interest; for example, [2003 (154) ELT 745 (Tri-LB)] wherein the Tribunal had held that once the appellate authority allowed the appeal of the assessee, interest had to be paid from the date of expiry of three months from the date of application till the date of payment.
7. During hearing the ld. Counsel for the appellants cited the decision of the Tribunal in Goldstone Teleservices Ltd. v. CCE, Hyderabad (2007 (210) ELT 157 (Tri.Bang)). The ld SDR cited the case law CCE, Pune III v. Solar Busiforms Ltd. (2007-TIOL-298-CESTAT MUMBAI) in defence of the impugned order.
8. We have studied the records and the submissions by both sides. In CCE, Pune III v. Solar Busiforms Ltd. (2007-TIOL-298-CESTAT MUMBAI) cited by the SDR, the Tribunal had decided that refund of input credit availed when the assessee paid duty on final products was not to be allowed when it was decided later that the goods were exempt. Essentially the facts of that case are similar to those of the instant case. However the order cited does not say if in that case proceedings had been initiated by department in time to recover the inadmissible credit. We find that rejection of the refund claim for utilized Modvat credit amounts to disallowing the credit initially taken as irregular if the refund was admissible otherwise. It has been decided by the Cestat and the Hon'ble High Court in this case that the assessee's claim did not suffer from the refund entailing unjust enrichment or the claim being hit by time bar. On merits there is no dispute that the entire refund was due to the assessee. Therefore the refund claim could be rejected only if the Modvat credit availed by the assessee was disallowed. When the assessee took the credit the final products were dutiable and the credit was legally availed. This was with the knowledge of the department and also at the instance of the department which had held the assessee's final products to be dutiable. The Tribunal decided on 5th September, 2000 that FTP was eligible for exemption for clearances of the finished goods. The department accepted this decision. As per Rule 571 current at that time department was required to disallow and recover the inadmissible credit within six months of the assessee taking the credit. In the instant case notice was not issued invoking Rule 57C even within six months of the decision of this Tribunal in 2000 to the effect that FTP's final products were not liable to duty. In the proceedings initiated to deny the refund, FTP's ineligibility to take credit initially was not taken as a ground. Department was of the view that the refund claimed was admissible subject to limitation and unjust enrichment. We find support for our view that FTP is eligible for the refund claimed from the following case law, both of which dealt with cases of similar facts. We reproduce relevant extracts.
9. The CESTAT in its Final Order No. 1183/2002 dated 6-9-02 observed as follows:
4. We have heard both sides and considered the matter and find that:
(a) Payment of duty by Debiting RG 23A Part II is also payment of duties levied under the Central Excise Act, 1944. When the Hon'ble High Court held that the cable joining kits are not exigible and no manufacture is involved on placing of articles in one kit and the SLPs filed by the Department on the same issue have been dismissed by Hon'ble Supreme Court, then there was no case ab initio for levy of any duty under the Central Excise Act, 1944. If such a duty was levied and or recovered the same is required to be refunded. Duties which have been discharged by debit in RG 23A Part II, are therefore required to be restored in the RG 23 Part II registers, by a reversal of entry in the said registers. We agree with the plea made by the ld. Consultant that if the appellants are not eligible for the credit on the inputs per se the kits, i.e. final product, for which the inputs were brought and used have been held to be non-excisable, then a separate proceedings for denial of the Modvat credit not admissible should have been launched. We agree with the propositions so made.
10. The Bangalore Bench of the CESTAT followed the above decision and observed in its decision in Goldstone Teleservices v. Commissioner of C. EX., Hyderabad vide Final Order No. 1915/2006, dated 16-11-2006 in Appeal No. E/619/2006 as follows:
5. ...The appellant was compelled by the Revenue to pay Central Excise duty on the cable jointing kits though they contested the issue. While paying the Central Excise duty, they had availed Modvat credit.... Later, the Hon'ble Andhra Pradesh High Court decided that the cable jointing kits are not excisable.... Consequent to the decision of the Andhra Pradesh High Court, the appellants claimed refund of the Central Excise duty paid. The refund claim was rejected by the lower authority. The Commissioner (Appeals) held that the appellants were entitled only for the refund of duty paid through PLA and not through Modvat account. He observed that the appellants were not entitled to Modvat credit. The appellants approached the CESTAT and the CESTAT in the decision quoted supra has held that once the High Court has held that the cable jointing kits are not exigible, there was no case ab initio for levy of any duty under the Central Excise Act, 1944. If such a duty was levied, the same is required to be refunded. Duty which has been discharged by debit in RG 23A Part II, is therefore required to be restored by a reversal of entry. The above order of the Tribunal was passed on 6-9-2002. The appellants have contended that the Revenue authorities themselves ought to have informed the appellants to take back the amount in RG 23A Part II, but they have not done so. Consequently the appellants took the credit in the month of September 2004. Consequent to that, the Show Cause Notice dated 27-9-2005 has been issued for disallowance of the credit by way of reversal. There was also a proposal for recovery of Rs. 51,05,582/- on the ground that they had availed the above credit for payment of duty. The adjudicating authority has confirmed the proposals in the show cause notice. In the course of hearing, the learned Advocate vociferously argued that the appellants had only carried out the directions of the authority and also the Tribunal and for that, they should not be penalized. It was also pointed out that they had never utilized the credit and the amount of Rs. 1,91,48,485/- is still lying in balance. They took credit only consequent to the CESTAT order. Therefore there is no illegality in taking credit of the amount. As regards the recovery of the credit of Rs. 51,05,582/-, it was pointed out that when the Department insisted them to pay duty, they availed Modvat credit and utilized a part of the amount. The above amount represents only that and actually there was no illegality at all.... Taking credit of an amount of Rs. 1,19,48,485/- is correct as per the Tribunal's order. Utilisation of credit when the appellants were directed by the Department to pay duty on the cable jointing kits is also in order. Therefore, we see great force in the learned Advocate's contention that the question of invoking Rule 57C after a lapse of nearly 8 years does not arise especially when Revenue held the impugned products excisable and the appellant was forced to avail Modvat credit. This act of taking credit, cannot become illegal at a later date.... The appeal is allowed.
11. As regards the claim for interest we reproduce below the relevant provisions of Section 11 BB.
11BB Interest on delayed refunds. - If any duty ordered to be refunded under Sub-section (2) of Section 11B to any applicant is not refunded within three months from the date of receipt of application under Sub-section (1) of that section, there shall be paid to that applicant interest at such rate, [not below five per cent] and not exceeding thirty per cent per annum as is for the time being fixed [by the Central Government, by Notification in the Official Gazette], on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty:
Provided that where any duty ordered to be refunded under....
...
Explanation. - Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal [National Tax Tribunal] or any court against an order of the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise], under Sub-section (2) of Section 11B, the order passed by the Commissioner (Appeals), Appellate Tribunal or, as the case may be, by the court shall be deemed to be an order passed under the said Sub-section (2) for the purposes of this section.
12. We find that the appellant had claimed refund of the entire duty paid, on 02.03.01. As we have decided that the assessee is eligible for the refund, in terms of the Explanation to Section 11BB, the claimant is eligible for interest on the refund due at the notified rate for the period of delay in payment of the entire amount beyond three months of filing the refund claim. As per the Explanation, for reckoning the delay to quantify the admissible interest when refund is paid following an appellate order favourable to the assessee, the order under Section 11B(2) for the computation is the said appellate order pursuant to which the refund is made. This position has been settled by several decisions of this Tribunal.
13. In the instant case, the department has not taken timely action to deny inadmissible credit in terms of Rule 57C of the then existing Central Excise Rules 1944. We find that the order rejecting the refund claim on the grounds of limitation and unjust enrichment was decided in favour of the assessee by this Tribunal and the High Court. The appellants have strenuously argued before us citing several judicial authorities in support of the plea that admissibility to the impugned refund claim had reached finality and could not be reopened. It was settled that the claim did not suffer from limitation or involved unjust enrichment. We find that the issue of unjust enrichment was examined from the angle whether FTP had passed the duty paid on the final products to their customers. We find that none of the case law cited by FTP supports their plea that department is barred from initiating proceedings to deny refund on a ground omitted in the initial round if the proceedings in the first round had reached finality at any level. Where such re-examination of eligibility to refund was held to be impermissible, the appellate authority had directed the authorities to make the refund involved. There is no such order in this case.
We allow the appeal filed by FTP as regards the refund claimed and interest due.
(Operative part of the Order pronounced in open court on 22.10.07)