Custom, Excise & Service Tax Tribunal
M/S. Mahindra & Mahindra Ltd vs Cce, Mangalore on 22 March, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing:02/02/2010
Date of decision:.
Appeal No.E/188/06
(Arising out of Order-in-Appeal No.302/2005-CE dt. 24/11/2005 passed by Commissioner(Appeals), Mangalore)
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
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?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Mahindra & Mahindra Ltd.
..Appellant(s)
Vs.
CCE, Mangalore
..Respondent(s)
Appearance Mr. Venkatesh, Advocate for the appellant.
Mr.U.Raja Ram, DR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2010 Per M.V.Ravindran This appeal is directed against the Order-in-Appeal No.302/2005-CE dt. 24/11/2005.
2. The relevant facts that arise for consideration are that (as reproduced from the impugned order):
The appellants were manufacture of tractors falling under Chapter 87. The goods were exempted from payment of duty w.e.f. 9/7/2004 consequent on issue of Notification No.23/2004 dt. 9/7/2004. The appellant had a balance of Cenvat Credit of Rs.15,78,196/- on the said date. The appellant preferred a refund claim for this amount. As it was found that the appellants are not entitled for refund, a show cause notice was issued proposing to deny the refund. The adjudicating authority rejected the refund claim. Aggrieved by the impugned order, the appellants preferred an appeal before the Commissioner(Appeals) on the following grounds:-
a. The appellants are eligible for the refund of balance of amount in their Cenvat Credit. Rule 9(2) of the Cenvat Credit Rules, 2002 is not applicable in their case.
b. The appellants had reversed the credit on the inputs lying in stock, and on the finished products as on 8/7/2004.
c. The supplementary invoices received in July, 2004 and the same was taken into credit but could not be utilized before 8th July. The refund application is not for the cenvat credit balance lying in cenvat account, but for the money paid by them for payment of duty on tractors and requested to allow the refund.
Ld. Commissioner(Appeals) vide his impugned order upheld the Order-in-Original and rejected the appeal. Hence this appeal.
3.1. Ld. Counsel appearing on behalf of the appellant would submit that the ld. Commissioner(Appeals) has erred in rejecting the refund claim. He would submit as under:-
a. The appellants submit that they were forced to file a refund claim only because the payment in PLA was necessitated due to their inability to utilize their Cenvat balance and also on account of closure of the factory w.e.f. 31.3.2005.
b. In an identical situation, in the case of M/s. Slovak India Trading Co. Pvt. Ltd. Vs. CCE, Bangalore reported in 2006 (205) ELT 956 (Tri.-Bang) this Honble Tribunal held that refund of un-utilized Cenvat credit is available when the factory is closed.
c. The Revenue filed an appeal before the High Court of Karnataka and the High Court vide its order dated 7.7.2006 reported in 2006 (201) ELT 559 (Kar.) affirmed the order of the Honble Tribunal and held that refund of un-utilized credit lying in balance on the date of closure of the factory.
d. The Revenue filed an SLP before the Honble Supreme Court in CC47612007 which was dismissed, thereby affirming the order of the High Court of Karnataka.
e. A similar view has been taken by this Tribunal in the case of CCE Vs. Maha Sree Aruna Chemicals reported in 2008 (230) ELT 571.
f. The appellants also rely on the decision of the Tribunal in the case of STI Products (P) Ltd. Vs. CCE reported in 2006 (198) liLT 521.
g. In view of the above, the appellants submit that they are entitled to refund of the credit lying in balance in their Cenvat account as on the date of closure of the factory.
h. The original authority rejected the claim on an additional ground that by application of Rule 9(2) of Cenvat Credit Rules, the credit held in the Cenvat account would lapse when the final products become exempt.
i. The appellants submit that Rule 9(2) would apply only in a case where assessee avails exemption based on value of the clearances in any particular year. The lower authority failed to note that tractors become unconditionally exempt by Notification No. 23/2004 -CE dated 8.7.2004 and consequently provisions of Rule 9(2) would not apply.
3.2. It is also his submission that the provisions of Rule 3, 5 and 6 of the Cenvat Credit Rules do not apply in this case as the question of lapsing of refund does not arise. It is his submission that the decision of the Tribunal in the case of Slovak India Trading Co. Pvt. Ltd. (supra) will squarely apply in their case.
4. Ld. DR on the other hand would rely on the decision of the Larger Bench of the Tribunal in the case of Hotline Teletubes & Components Ltd. Vs. CCE, Bhopal [2001(131) ELT 300(Tri. LB)] and submit that once the appellant has closed the factory and surrendered the Central Excise Registration certificate, the question of refund of the duty does not arise. It is his submission that in any case the credit of the duty was taken on the inputs which were received and utilized earlier. He reiterated the findings of the lower authorities.
5. We have considered the submissions made at length by both sides and perused the records. The issue involved in this case is regarding the denial of refund claim by the lower authorities of the amount involved which is taken as a credit on the inputs which were used by the appellants in their final products which were cleared on payment of duty prior to such finished goods being exempted by Notification No.23/2004-CE dt. 9/7/2004.
6. It is undisputed that the credit of duty paid on the inputs was availed by the appellant on supplementary invoices. It is also undisputed that the appellant had utilized these inputs on the finished goods which were cleared on payment of duty. It is also not in dispute that consequent to issuance of Notification No.23/2004 dt. 9/7/2004 the appellant had reversed cenvat credit attributable to the inputs lying in stock, inputs found in work-in-process and inputs in the finished goods, lying in stock as on date in the appellants factory. The only amount which is claimed as refund is in respect of inputs which were utilized by them in the manufacture of final products which were cleared on payment of duty. We find that the ld. Commissioner(Appeals) while upholding the Order-in-Original has recorded the following findings:-
I find that denial of refund by adjudicating authority is correct in terms of Rule 3, 5 and 6 of Cenvat Credit Rules, 2002. The amount involved is nothing but lapsed credit available in the account of the appellant which cannot be encashed as refund. Such encashment is considered under Rule 5 ibid but under entirely different circumstances. Even if we assume that the appellants were aware of differential duty amount on the date of exemption coming into effect, they would have had no option to reverse this credit before making clearance of exempted goods. In the present circumstances, they have to allow it to lapse. Similarly in case of inputs sent back to suppliers on reversal of credit, it is open to supplier to claim refund of differential duty paid through TR6 challans by producing necessary proof to the concerned authorities.
7. It can be seen from the above reproduced portion of the finding of the ld. Commissioner(Appeals) that the entire findings has proceeded on the footing that the appellant has to let the credit lapse. On the perusal of the relevant Cenvat Credit Rules as has been relied upon by the ld. Commissioner(Appeals), it is not in respect of the lapsing of the credit. Rule 3 talks about the eligibility to cenvat credit, Rule 5 talks about refund of the cenvat credit and Rule 6 talks about obligation of manufacturer of dutiable and exempted goods. In the case before us, it is not in dispute that the appellant was eligible to avail cenvat credit on the central excise duty paid on the goods prior to 09/07/2004 as their final products were dutiable during the relevant period. It is also seen that the inputs (the credit of duty was availed by them on the basis of supplementary invoices for the revision of prices) were in fact received and utilized prior to 9/7/2004. As regards Rule 6, we find that the appellant has, from 9/7/2004, not availed any Cenvat Credit on the inputs which are duty paid and brought into factory premises and utilized in manufacturing of finished goods. It is also seen that the appellants have followed the provisions of Rule 6 by reversing the amount of cenvat credit attributable to the inputs lying in stock on the date of exemption of the goods along with the inputs used in the work-in-process and finished goods. The question of Rule 6 getting attracted in this case does not arise. As regards the transitional provisions of Rule 11, we find that the transitional provisions are in respect of only the units which are availing benefit of exemption from the whole of the duty of execise leviable on the goods manufactured by them under a Notification based on value or quantity of clearances in a financial year. The said Rule 11 talks about reversal of the cenvat credit on the date of opting out for the exemption based upon value on the quantity cleared during the financial year. Provisions of Rule 11 will definitely not attract in the case before us. The issue is covered by the provisions of Rule 5. We find that in the case of Slovak India Trading Co. Pvt. Ltd. (supra), the Honble High Court of Karnataka has settled the law. Their lordships, while deciding an identical issue in their judgment, held as under:-
The Union of India is before us raising the following questions of law in para 17 in the light of the order of the Tribunal dated 9-8-2005 passed in Excise Appeal No. 934/2004 on the file of the Customs, Excise and service Tax Appellate Tribunal, Bangalore.
(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?
2.?Respondent-company is engaged in manufacture of shoes for M/s. Bata India Ltd. They are registered under the Central Excise Registration. The respondent surrendered their registration. A refund application was made on 14-5-2003 claiming a refund of Rs. 4,15,057/- During the Internal Audit, it was noticed that the assessee has availed Cenvat Credit of the materials received by them during the past on the strength of the photocopies of the duplicate copy of invoices and the original copies of the invoices were never produced. The assessee had availed the credit to the tune of Rs. 3,09,390/-. On scrutiny, it was noticed that there was neither production nor clearance of finished goods. Cenvat Credit availed by the respondent is irregular. A show cause notice was issued in the matter with regard to irregular availment and also with regard to rejection of refund claim. Reply was submitted. Thereafter, an order was passed ordering allowance of Cenvat Credit of Rs. 3,72,405/- availed on the invoices mentioned in the show cause notice except invoice No. 62 dated 19-2-2002. Refund claim was also rejected in terms of Sec. 11B of the Act. It was stated that there is no provision in Rule 5 of Cenvat Credit Rules, 2002 with regard to refund. An unsuccessful appeal was filed by the assessee. Thereafter, he moved the Tribunal and the Tribunal has chosen to allow the appeal in terms of the impugned order. It is in these circumstances, the Revenue is before us raising the above referred questions of law.
3.?Heard the learned Counsel appearing for the appellant and perused the material placed on record.
4.?Admitted facts would reveal of a claim of cash refund and admitted facts would reveal of rejection at the hands of the Assistant Commissioner and also the appellate authority. The Tribunal has chosen to allow the claim application on the ground that refund cannot be rejected when the assessee goes out of Modvat scheme or when the Company is closed. The argument is that there is no provision for refund in terms of Rule 5 of Cenvat Credit Rules, 2002. Rule 5 reads as under:
Rule 5. Refund of CENVAT Credit: When any inputs are used in the final products which are cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export, the CENVAT credit in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export on payment of duty and where for any reason such adjustment is not possible, the manufacturer 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 avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty.
5.?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 of the assessee.
6.?Ordered accordingly. No costs.
8. Accordingly in view of our reasonings recorded hereinabove and respectfully following the decision of the Honble High Court of Karnataka in an identical situation, we hold that the orders of lower authorities are incorrect, inconsistent with the settled law and liable to be set aside and we do so. The impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Pronounced in court on ..) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr 9