Custom, Excise & Service Tax Tribunal
M/S. Apotex Pharmachem (I) Pvt. Ltd vs Commissioner Central Excise on 7 July, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
BANGALORE
FINAL ORDER No.21795-21797/2015
Application(s) Involved:
Appeal No: E/348/10-SM
[Arising out of Order in appeal No. 148-Cus(B)-22-10-09-133-2009 dated 22.10.2009 passed by Commissioner of Customs (Appeals), Bangalore]
Appeal No: E/27848/13-SM
[Arising out of Order in appeal No. 150-Cus(B)-22-10-09-133-2009 dated 22.10.2009 passed by Commissioner of Customs (Appeals), Bangalore]
Appeal No: E/27849/13-SM
[Arising out of Order in appeal No. 149-Cus(B)-22-10-09-133-2009 dated 22.10.2009 passed by Commissioner of Customs (Appeals), Bangalore]
M/S. Apotex Pharmachem (I) Pvt. Ltd.
Bangalore
Appellant(s)
Versus
Commissioner Central Excise
Bangalore Central Excise Commissionerate
Bangalore
Respondent(s)
Appearance:
Shri S. Sivakumar, Advocate
For the Appellant
Shri N. Jagdish, Superintendent (AR)
For the Respondent
CORAM:
HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER
Date of Hearing: 05/09/2014
Date of Decision:07/07/2015
Order Per : S.K. MOHANTY
These appeals are directed against the impugned order dated 22.10.2009 passed by the Commissioner of Customs (Appeals), Bangalore. Appeal filed by the appellant against three Adjudication Orders being Nos. 22/R/ST/AC/2009, 23/R/ST/AC/2009 and 24/R/ST/AC/2009, all dated 11.02.2009 having been disposed of vide the said impugned order, wherein refund of Cenvat credit of Rs.8,23,310/- has been denied to the appellant . The reason assigned for denial of the refund benefit, firstly is that the claim amount for Rs.3,31,274/- is barred by limitation of time; secondly, with regard to the balance amount of Rs.4,92,036/-, the claim has been denied on the ground that clearance of goods to the 100% Export Oriented Unit (EOU) cannot be treated as physical export, and thus, refund of unutilized Cenvat credit is not permissible under Rule 5 of the Cenvat Credit Rules, 2004. Rejection of the refund claims in the impugned order (Adjudication Order wise) is summarized herein below:-
Adjudication order reference
Period
On Limitation
(Rs.)
On Deemed Exports (Rs.)
Total (Rs.)
22/2009
01.07.2007 to 11.08.2007
331,274
29,169
3,60,443
23/2009
Oct.-Dec 2007
-
22,494 22,494 24/2009 Jan-Mar 2008
-
4,40,373 4,40,373 TOTAL 331,274 4,92,036 8,23,310
2. Brief facts of the case are as under:-
The appellant is a 100% EOU engaged in the manufacture of pharmaceutical products. During the dispute period, the appellant supplied certain quantities of these goods to another 100% EOU, namely M/s Apotex Research Pvt. Ltd. (located within India), under the procedure prescribed in the Foreign Trade Policy (FTP). As per the FTP, inter unit transfer of goods between two EOUs are treated as 'deemed export'. The appellant being a 100% EOU was not in a position to utilize the Cenvat credit of service tax paid on the input services and accordingly, filed the applications before the jurisdictional Service Tax authorities, claiming refund of the unutilized credit in terms of Rule 5 of the Cenvat Credit Rules, 2004 (for short, referred to as "the Rules"). The refund application filed by the appellant on 12.08.2008, involving the period from 01.07.2007 to 11.08.2007 was rejected by both the authorities below on the ground that the claim has been lodged beyond the period of one year, and as such, the same is barred by limitation of time as per Section 11B of the Central Excise Act, 1944 (for short, referred to as "the Act"). With regard to the other refund claims filed for the period October to December' 2007 and January to March' 2008, the same have been rejected on the ground that the provisions of Rule 5 of the Rules are only applicable to 'physical exports' and not for 'deemed export' of goods to other EOUs. Denial of Cenvat credit refund on the above two grounds are the subject matter of present dispute before this Tribunal.
3. The Ld. Advocate Shri S. Sivakumar appearing for the appellant submitted that the refund claim having been filed within one year from the end of the relevant quarter, is valid in law and is in consonance with the language used in Notification No. 5/2006 - Central Excise (N.T.) dated 14.03.2006. In this context, while relying on paragraph (2) of the Appendix to the said notification, the ld. Advocate submitted that since the word 'may' is used therein, the appellant is entitled to file the refund claim on a quarterly basis. Ld. Advocate also relied on the Board Circular No. 112/6/2009-S.T. dated 12.03.2009 to justify his above stand. Further, the ld. Advocate submitted that Section 11B of the Act is not applicable for refund claims filed under Rule 5 of the Rules. To substantiate such stand, the ld. Advocate has relied on the judgment of Hon'ble Karnataka High Court in the case of mPortal India Wireless Solutions P. Ltd. - Vs. -C.S.T., Bangalore, reported in 2012 (27) STR 134 (Kar.) and the judgment of Hon'ble Gujarat High Court delivered in the case of CCE, Surat -Vs. - Swagat Synthetics, reported in 2008 (232) ELT 413 (Guj.).
4. With regard to denial of Cenvat credit refund in the impugned order on the ground that supply of goods from one 100% EOU to another 100% EOU will not be considered as 'physical export', the submissions of Shri Shivkumar, the ld. Advocate are that deemed exports are to be treated at par with physical exports for the purpose of refund of unutilized Cenvat Credit under Rule 5 of the Rules. For defending his case in this front, the ld. Advocate relied on the judgment of Gujarat High Court in the case of Commissioner of Central Excise -Vs. - Shilpa Copper Wire Industries, reported in 2011 (269) ELT 17 (Guj.) and Commissioner of Central Excise & Customs -Vs. - NBM Industries, reported in 2013 (29) S.T.R. 208 (Guj.).
5. Per contra, Shri N. Jagdish, the ld. D.R. appearing for the revenue-respondent submitted that even though Section 11B of Act does not cover refund of Cenvat Credit, but Notification No. 5/2006-C.E. (N.T.) dated 14.03.2006 issued under Rule 5 of the Rules, which adopts the limitation period under Section 11B of the Act, provides that the relevant date for filing the refund claim shall be confined to one year from the date on which the goods are cleared for 'deemed export'. The ld. D.R. relied on the judgment of Hon'ble Madras High Court, delivered in the case of Commissioner of Central Excise, Coimbatore - Vs. - GTN Engineering (I) Ltd., reported in 2012 (281) ELT 185 (Mad.) to justify his above stand. The ld. D.R. further submitted that physical export is not to be equated with deemed export, and therefore, the appellant is not entitled for refund of Cenvat credit in terms of Rule 5 of the Rules. In this context, the judgment of Hon'ble Madras High Court, in the case of BAPL Industries Ltd. - Vs.- Union of India , reported in 2007 (211) ELT 23 (Mad.) has been relied on by the ld. D.R.
6. I have heard the ld. Counsel for both sides and perused the records. The issues involved in this appeal for consideration by this Tribunal are, as to whether, the time limit prescribed in Section 11B of the Act would be applicable for refund of accumulated Cenvat credit in terms of Rule 5 of the Rules; and, supply of goods between two EOUs, which is recognized as 'deemed export' under the FTP, would be considered as 'physical export', for the purpose of getting the benefit of refund under Rule 5 of the said rules.
7. The provisions governing refund of Cenvat credit of service tax paid on the input services, used for exportation of the manufactured goods are contained in Rule 5 of the Rules. The said rule provides that even though export of goods does not attract payment of Central Excise duty, yet the manufacturer is permitted to utilize the Cenvat credit attributable to the input services towards payment of Central Excise duty on any final products cleared for home consumption or for export on payment of duty. However, for any reason, where such adjustment is not possible, the said rule mandates that the manufacturer shall be allowed for refund of such amount, subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by issuance of notification.
8. In exercise of the powers conferred by Rule 5 of the Rules, the Central Government vide Notification No. 5/2006-C.E. (N.T.) dated 14.3.2006 prescribed the conditions/limitations for claiming refund of service tax by a manufacturer. In Appendix No. 6 of the said notification, it has been provided that refund application in Form A is to be filed with the jurisdictional Central Excise authorities before the expiry of period specified in Section 11B of the Central Excise Act, 1944 (1 of 1944).
9. The term 'relevant date has neither been defined in Rule 5 of the Rules nor in the notification issued there under. Further, the said term defined in Section 11B of the Act is not compatible with the situation envisaged in the aforesaid rule. Therefore, there was ambiguity in interpreting the importance/ significance of the term 'relevant date' in context with the said rule. The Hon'ble High Court of Madras in the case of GTN Engineering (supra), upon analysis of the provisions of Rule 5 of the Rules, Notification dated 14.03.2006 and Section 11B of the Act, have held that the date on which the export of the goods was made and for such goods, refund of Cenvat credit is claimed, should be construed as the relevant date for the purpose of Rule 5 of the Cenvat Credit Rules. The relevant paragraph in the said judgment is extracted below:-
"15.?A reading of the above rule, though there is no specific relevant date is prescribed in the notification, the relevant date must be the date on which the final products are cleared for export. If any other conclusion is arrived, it will result in disentitling any person to make a claim of refund of CENVAT credit. Admittedly, the respondent has made a claim only invoking Rule 5 of the CENVAT Credit Rules, 2004. In that view of the matter, there cannot be any difficulty for us to hold that the relevant date should be the date on which the export of the goods was made and for such goods, refund of CENVAT credit is claimed."
10. On a conjoint reading of Appendix 2 and 7 in the notification dated 14.03.2006, it reveals that there is no contradiction among the said provisions. In the former provisions, the restriction contained is to the effect that refund cannot be claimed more than once for any quarter in a calendar year by a manufacturer other than the EOU; that for EOUs, the option has been provided for submission of refund claim for each calendar month. Whereas, the later provisions are entirely different, which clearly prescribes a period of one year, as provided under Section 11B of the Act for the purpose of making application in Form A. Thus, the submission of the ld. Advocate for the appellant that the refund claim is not barred by limitation in terms of Appendix 2 in the above referred notification is far-fetched and not sustainable.
11. The facts in the case of M/s Portal India (supra) is different from the facts of the present case, in as much as, the issue in the said decided case is not in context with the time limit prescribed in notification dated 14.03.2006, providing the embargo for filing the refund claim within one year from the relevant date. Contrary is the situation in the case in hand, where the issue is entirely confined to the applicability of the time limit prescribed in the said notification read with the provisions of Section 11B of the Act, for claiming refund of unutilized Cenvat credit on account of exportation of goods. Hence, the judgment of Hon'ble Karnataka High Court in the case of mPortal India (supra), cited by the ld. Advocate is distinguishable from the present case. Rather, the case of the appellant is directly covered by the judgment of Hon'ble Madras High Court in the case of GTN Engineering (supra).
12. Further, the judgment of Hon'ble Gujarat High Court in the case of Swagat Synthetics (supra) relied on by the ld. counsel for the appellant has been distinguished by the Hon'ble Madras High Court in the case of GTN Engineering (supra). The relevant paragraph in the said judgment is extracted below:-
"16.?The learned counsel for the respondent would rely upon a judgment of the Gujarat High Court reported in 2008 (232) E.L.T. 413 (Guj.) [Commissioner of Central Excise and Customs, Surat-I v. Swagat Synthetics]. That was a case relating to sub-rule (13) of Rule 57F of Central Excise Rules, 1944, which reads as under:
(13)?Where any inputs are used in the final products which are cleared for export under bond or used in the intermediate products cleared for export in according with sub-rule (4), the credit of specified duty in respect of the inputs so used shall be allowed to be utilised 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 in the Official Gazette. The said rule does not prescribe any time-limit. In the absence of such prescription as to the limitation, the Gujarat High Court has held that the claim of refund could not be rejected on the ground of limitation."
13. The findings recorded in the impugned order that physical export is not to be equated with deemed export, and thus, the appellant is not entitled for refund of Cenvat credit in terms of Rule 5 of the Rules, in my considered opinion, is not legal and proper, in view of the judgment of Hon'ble Gujarat High Court in the case of Shilpa Copper (supra). In response to the question framed in paragraph 1(a), as to whether, the clearances made by one 100% EOU to another 100% EOU which are deemed export are to be treated as physical export for the purpose of entitling refund of unutilized Cenvat credit, the Hon'ble Court vide paragraph 16 have answered as follows:-
? "16. In the above fact situation, we are of the view that no question of law much less any substantial question of law, arises out of the order of the Tribunal and even if it arises, the answer is very obvious and we, therefore, hold that the Tribunal is justified and has not committed any substantial error of law in dismissing the appeal of the Revenue and confirming the order of the learned Commissioner (Appeals) holding that the clearances made by one 100% EOU to another 100% EOU which are deemed exports are to be treated as physical exports for the purpose of entitling refund of unutilized Cenvat credit contemplated under the provisions of Rule 5 of the Cenvat Credit Rule, 2004."
14. In view of the judgment of the Division Bench of Hon'ble Gujarat High Court in the case of Shilpa Copper (supra), deciding the specific issue arising out of Rule 5 of the rules, reliance place by the ld. D.R. for Revenue on the judgment of the Single Bench of Honble Madras High Court in the case of BAPL Industries (supra) will not have the binding precedence, because as per settled principles of law, in case of two conflicting orders; one of a single judge and one by a division bench, the order issued by the division bench would prevail.
15. In view of the above, the impugned order so far as to the rejection of refund claim on the ground of being time barred under Section 11B of the Act is sustained (Rs.3,31,274/-). The rejection of refund claim on the ground that supply of goods between two EOUs, is not eligible for refund being a deemed export is set aside (Rs.4,92,036/-).
16. The appeals are disposed of in above terms.
(Pronounced in open court on 07/07/2015.) (S.K. MOHANTY) JUDICIAL MEMBER Page | 7