Custom, Excise & Service Tax Tribunal
M/S. The Sirpur Paper Mills Ltd vs Cce, Hyderabad on 18 January, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing:03/12/2009
Date of decision:..
Appeal No.E/240/08
(Arising out of Order-in-Original No.12/2007-(CE)-Commr. dt. 31/12/2007 passed by CC&CE, Hyderabad )
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. The Sirpur Paper Mills Ltd.
..Appellant(s)
Vs.
CCE, Hyderabad
..Respondent(s)
Appearance Ms.L.Maithili, Advocate for the appellant.
Ms.Sudha Koka, SDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2009 Per M.V.Ravindran This appeal is directed against the Order-in-Original No.12/2007-(CE)-Commr. dt. 31/12/2007.
2. The relevant facts that arise for consideration are that during the course of verification monthly returns filed by the appellant for the month of October, 2006, it was noticed that the appellant has taken credit of Rs.1,69,25,640/- vide entry No.15 of page 98 of the PLA. The description given in the column against the said credit was Refund amount of PME as per Commissioner(Appeals) Order Nos.37/2006 dt. 20/3/2006 and 43/2006 dt. 17/7/2006. It was also noticed that the appellant had utilized the said credit towards payment of duty on the final product cleared during the month of October, 2006. On noticing such an error, the lower authorities issued show cause notice dt. 10/10/2007 directing the appellant to show cause as to why the said amount should not be demanded from them as duty short paid not paid on the goods cleared for the month of October, 2006 and interest should not be collected from and penalty should not be imposed.
3. Appellants contested the entire allegations of the show cause notice and replied in detail the factual matrix that arose for availment of the said credit in the PLA. Adjudicating authority after considering the submissions made by the appellant before him, confirmed the demand, ordered for the payment of interest and also imposed penalties. Aggrieved by such an order, the appellant is before us.
4.1. Ld. Counsel appearing on behalf of the appellant submits as under:-
a. The present case relates to adjustment of refund arising out of finalization of assessment for the period 30.05.1981 to 31.07.1983. The finalization of assessment for the said period has a chequered history. The facts of the case leading to the said refund on finalization of assessment are recorded in detail in Order-in- Appeal No. 43/ 2006 dated 1L07.2006(P.53 of Paper Book) and are as such undisputed. The detailed facts are set out in pages 55 to 59 of the Paper-Book and the same are not repeated herein for the sake of brevity. Briefly stated, the assessments in question related to pricelists filed by the Appellant on 23.05.81 claiming various deductions on Post Manufacturing Expenses (PME) and the assessments were finalized as per the directions of the Honble Supreme Court.
b. The Appellant submits that the above narration would show that provisional assessment for the clearances during the period 30.05.81 to 12.07.83 was resorted to as per the directions of the Honble A.P. High Court and the finalization was done as per the specific directions and also the direct supervision of the Honble Supreme Court. The entire exercise of finalization was admittedly required to be done in terms of the orders of the Honble Supreme Court in the Bombay Tyre International case. The actual finalization in this manner was done by the Assistant Commissioner by his Order-in-Original no. 37/2005-06 dated 20.03.06, which gave effect to the Orders of the Honble Supreme Court. So far as the demand in excess (to the tune of Rs.1.19 Crores) of that mentioned in the show cause notice, the Commissioner (Appeals) held that the said demand was without the authority of law and unsubstantiated. It would be seen that neither the Order of the Assistant Commissioner finalizing the assessment nor that of the Commissioner (Appeals) holding that the excess collection to the tune of Rs.1.19 Crores has been challenged by the department and hence, it is undisputed that the Appellant has made an excess deposit to the tune of Rs.1,69,25,640 /-, which had become refundable. Further, it is also a matter of record that the entire amount was paid long after clearance.
c. Essentially, the questions arising in the present case are:
i. Whether the sum of Rs.1, 69, 25,640/- is refundable to the Appellant?
ii. If so, whether the said refund can be taken by adjustment in PLA or whether a formal refund claim is required to be filed for the same under section 11B?
iii. Whether the claim is barred by unjust enrichment?
iv. Whether the clearance for the month of October 2006 can be treated as having been made without payment of duty to the tune of Rs.1, 69, 25,640 7- , if so under what provision of law.
d. As regards the question whether the refund arising on finalization of assessment can be taken as an adjustment in PLA, it submitted that as per the law laid down by the Honble Supreme Court in the Allied Photographics case, refund became due on finalization of assessment does not require a formal refund claim and is permissible as an adjustment in terms of the provisions of the erstwhile Rule 9B, which is applicable to the present case. During the course of arguments, a specific reference was made to the aforesaid three judge Bench judgment of the Supreme Court in the Allied Photographics case in which a clear distinction has been made between a claim for refund under Section 11B and making of a refund under Rule 9B on finalization of assessment. In fact, during the period of provisional assessment the applicable Rule 9 B did not contemplate an application for refund to be made for excess payment found to be made on finalization of assessment, as much as no show cause under Section 11A was contemplated for making a demand for the duty found to be short paid when the assessments were provisional, as held by the Honble Supreme Court in the Serai Kela Glass Works case. It is submitted that in an almost identical situation this very South Zonal Bench of the Honble Tribunal has accepted similar contentions on behalf of the assessee. We wish to rely on the said decision in the case of CCE Guntur Vs. Nutrine Confectionery Co. Pvt. Ltd. reported in 2007 (6) S.T.R. 394 (Tri. - Bang.) and submit that the same squarely covers the issue at hand.
e. It is respectfully submitted that in view of the aforesaid categoric pronouncement by the jurisdictional Bench under identical circumstances, in the light of Apex Court judgments, the present appeal is liable to be allowed. It is further submitted that the reliance placed by the Revenue in judgment of the larger Bench of the Tribunal in the case of BDH Industries is of no avail since, unlike the present case, in that case the refund in question did not arise on finalization of assessment relating to a period prior to the amendment of Rule 98 incorporating the principles of unjust enrichment. Hence, it is submitted that the facts are clearly distinguishable.
f. It is further submitted that in any event, there can be no question of applying the provisions of Section 11 B or the concept of unjust enrichment to refund arising on finalization of provisional assessment for a period prior to the amendment of Rule 9B w.e.f. 26-6-1999. This has been clearly laid down by the Constitution Bench of the Honble Supreme Court (in Para 95)in the Mafatlal Industries case, which was followed by the Supreme Court in the TVS Suzuki case and subsequently by a three judge Bench of the Supreme Court in the Allied Photographics case. Hence, it is submitted that the reliance placed by the Revenue on the judgment of the Honble Supreme Court in the Sahakari Khand Udyog case (of a lower strength) does not in any way support the case of the department. It is submitted that the said judgment cannot be relied upon with regard to refunds arising on finalization of provisional assessment (prior to amendment of Rule 9B), or in the case of refund of pre-deposit, which are governed by the judgment of the Constitution Bench of the Supreme Court and also by a three judge Bench., as stated supra.
g. Without prejudice to the above, it is further submitted that even otherwise the bar of unjust enrichment will not apply since the entire deposit was made long after clearance and could therefore not have been passed on. I am enclosing the Statement filed by the Appellant before the Commissioner during the adjudication culminating in the impugned Order, which would show the dates on which the refundable sum of Rs.1, 69,25,640 /- came to be deposited, pending finalization of assessment. Different Benches of the Tribunal have consistently held in the following among other cases that the principles of unjust enrichment would not be applicable where payments are made post-clearance.
a. Easter Industries Ltd. v. Collector 2003 (161) EL.T.1034 (Tribunal);
b. CCE Vs. Modi Oil & General Mills -2002 (150) ELT 430 (T);
c. Punjab Beverages Vs. CCE, Chandigarh -2000 (118) E.L.T. 506 (Tribunal);
d. Commr. of C. Ex., Pondicherry Vs. Southern Agrifurane lndus. Ltd.- 2004 (178) E.L.T. 980 (Tn.
- Chennai) Affirmed in 2006(205) E.L.T. 39 (Mad.);
In view of the foregoing, as per settled law, the entire sum of Rs.1,69,25,640/- is infact refundable to the Appellant even if the provisions of section 118 are sought to be applied in the present case.
h. Without prejudice to the above, even assuming for the sake of argument that the refund taken by the Appellant in its PLA account was not in accordance with law, the only course open to the department would have been to issue a Show cause notice under Section 11 A for demanding erroneous refund. There is no provision under the Central Excise law for adjusting an alleged account. The authorities working under the Central Excise Act, being creatures of the statute are bound to act strictly in accordance with express statutory provisions. Hence, the demand upheld by the impugned order is anyhow not in accordance with law and is therefore liable to be set aside.
i. It is submitted that the authorities below, instead effecting refund of monies collected from the Appellant over 13 years ago along with interest, the department has made a demand for an equivalent sum along with interest and penalty, showing gross disregard to binding precedents and express statutory provisions. Intact, since the refund is anyhow due to the Appellant, there would be no Revenue implications even it the test of unjust enrichment was to be applied. It is well settled law that where the issue is Revenue neutral, a demand under Section 11A would not arise.
j. It is further submitted that in any event, the case of the department falls purely in the realm of procedure. There can be no doubt that the Appellant had acted on a bonafide belief that under the circumstances it was to take credit of the refund arising on finalization of assessment. This belief is supported by a number of binding precedents. In this connection I wish to place reliance on the Tribunal decision in the case of l.T.l Ltd. Vs. CCE, Allahabad reported in 2005 (180) ELT 273 (T), wherein the Tribunal held that the refund due on finalization of assessment could be taken as credit in PLA. Under the circumstances the question of levy of penalty would not arise.
4.2. It is her submission that since the amount involved in this case is legally due to them, the credit availed by them in PLA is correct and the impugned order be set aside.
5. Ld. SDR on the other hand would submit that the assessments were finalized by an order of the jurisdictional Asst. Commissioner after the amendment to Rule 9B of the Central Excise Rules, 1944. It is her submission that Tribunal in the case of Hindustan Level Ltd. [2004(171) ELT 12 (Tri. Del.)] relying upon the Honble Supreme Courts judgment in the case of Mafatlal Industries, held that Section 11B of the Act is applicable, when the order of assessment was challenged and consequent refund emerged and the amended provisions of Rule 9B are applicable to the goods which relate to the duty liability pertaining to unamended period, but the finalization took place after the amendment. It is her submission that the order of the assessment of the Asst. Commissioner took place on 20/3/2006 and there was no refund that arose due to the finalization. It is her submission that the appellant challenged order of the assessment only on the ground of technicalities and ld. Commissioner(Appeals) gave certain relief on technicalities. It is her submission that the appellant filed a refund letter dt. 16/10/2006 and without waiting for any decision by the refund sanctioning authority, on his own took the credit and utilized the same. It is her submission that there is no provision in the Central Excise Rules to have suo motto credit without an order of sanction from the competent authority, for this proposition she relies upon the decision of the Larger Bench in the case of BDH Industries Ltd. [2008(229) ELT 364(Tri. LB)].
6. We have considered the submissions made at length by both sides and perused records. The issue involved in this case is whether the availment of the credit of Rs.1,69,25,640/- by the appellant in their PLA during October, 2006 with a notiing Refund amount of PME as per Commissioner(Appeals) Order Nos.37/2006 dt. 20/3/2006 and 43/2006 dt. 17/7/2006 is correct or otherwise. We find that in this case the appellant has not filed any refund claim or refund application with the authorities. It is also seen from the records that the Order-in-Original as decided by the Asst. Commissioner i.e. regarding provisional assessment did not arise in any excess payment of duty but the amount of Rs.1,69,25,640/- was wrongly confirmed by the adjudicating authority in excess of the amount demanded in the show cause notice . The said amount being deposited by the appellant during the pendancy of assessment cannot be considered as arising out of provisional assessment. The amount which is eligible to be refunded to the appellant would at most cannot be considered as an amount of duty paid by the appellant in excess during the relevant period.
7. We find that the Larger Bench of the Tribunal in the case of BDH Industries Ltd. (supra) has clearly settled the law. As to issue there being no provision on the Central Excise Act, 1944 and the rules made thereunder allowing suo-motto taking of credit or refund without sanction by appropriate officer and any correction in PLA /Cenvat Credit account needs sanction of Department. Hence, no suo-motto refund / credit of the duty can be taken. We find ourselves in agreement with the findings as has been recorded by the ld. adjudicating authority in the Order-in-Original. Accordingly, we do not find any merits in the appeal filed by the appellant and the same is rejected.
(Pronounced in court on ..) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr 11