Custom, Excise & Service Tax Tribunal
Shree Ambe Mata Industries vs Aurangabad on 2 August, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/1752/2011
[Arising out of Order-in-Appeal No: AGS (140) 107/2011 dated 25th July 2011 passed by the Commissioner of Central Excise & Customs (Appeals), Aurangabad.]
For approval and signature:
Honble Shri C J Mathew, 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
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
Shree Ambe Mata Industries
Appellant
Versus
Commissioner of Central Excise & Customs
Aurangabad
Respondent
Appearance:
Shri Bharat Raichandani, Advocate for the appellant Shri N.N. Prabhudesai, Superintendent (AR) for the respondent CORAM:
Honble Shri C J Mathew, Member (Technical) Date of hearing: 04/08/2016 Date of decision: 05/12/2016 ORDER NO: ____________________________ Appeal against order-in-appeal no. AGS (140) 107/2011 dated 25th July 2011 of Commissioner of Central Excise & Customs (Appeals), Aurangabad has been filed by M/s Jai Ambe Mata Industries, manufacturers of MS CTD bars, whose claim for refund of ` 1,70,621/- had been rejected by competent authority and which was concurred with by first appellate authority.
2. From the facts on record, it appears that appellant had stopped production of goods in February 2007 and had a balance of ` 1,70,621/- as on the date of closure. With intent to re-start production, appellant procured scrap from the open market and took credit thereon. Appellant was held liable to duty of ` 2,04,621/- being credit taken, under section 11A(1) of Central Excise Act, 1944 and imposed with penalty of ` 2,00,000/- under rule 173Q of Central Excise Rules, 1944 which was confirmed by the first appellate authority. Appellant carried the matter to the Tribunal which confirmed the demand while reducing the penalty to ` 1,00,000/-. Appellant claims that ` 1,09,315/- was paid as pre-deposit at various stages of appeal and the balance of duty of ` 81,307/- as well as penalty after the order of the Tribunal. An application for rectification of mistake was rejected by the Tribunal.
3. Appellant then filed a refund claim for the MODVAT credit of ` 1,70,621/- lying unutilised as on date of intimation of closure in February 2007which was rejected and which rejection was upheld in the impugned order.
4. It is contended that the rejection of claim has travelled beyond the notice which proposed rejection on grounds of limitation, failure to evidence payment under protest and insufficiency of original documents filed in support of the claim by rejecting the claim on the ground that there had been no payment in excess to warrant refund. Their primary contention is that they are entitled to cash refund of accumulated credit at the time of closure and sale of factory of production. Reliance has been placed by Learned Counsel for appellant on the decision of the Tribunal in Slovak India Trading Co Limited v. Commissioner of Central Excise [2006 (205) ELT 956] which was upheld by Honble High Court of Karnataka in Union of India v. Slovak India Trading Co Limited [2006 (201) ELT 559 (Kar)] and affirmed by the Honble Supreme Court.
5. Learned Counsel further submitted that the first appellate authority had mixed up the facts in rendering his order by presuming that the refund claim in the impugned order pertained to the amount paid in pursuance of the proceedings relating to availment of MODVAT credit. It is his contention that appellant had discharged that duty liability and penalty and that the refund claim pertained to the credit of MODVAT which, admittedly, remained in the books as unutilised as on date of closure of the factory. Further reliance was placed on the decision of the Tribunal in Computer Graphics Ltd v. Commissioner of Central Excise, Tirunelveli [Final order no. 41185-41186/2016] which, too, relied upon the decision of Honble High Court in re Slovak Trading Co Ltd referred supra. In arriving at the conclusion that the decision in re Slovak India Trading Co Ltd would prevail, the Tribunal rejected the contention of Revenue that, in Steel Strips v. Commissioner of Central Excise, Ludhiana [2011 (269) ELT 257 (Tri-Del)], a Larger Bench decision did not favour the claim for refund of unutilised credit, as unacceptable owing to the decision of the Honble High Court of Karnataka which was not placed before the Larger Bench.
6. Learned Authorized Representative drew attention to the decision of the Tribunal in M/s Scan Synthetics Ltd v. Commissioner of Central Excise, Jaipur-I [2016-TIOL-1915-CESTAT-DEL] which has considered the judgment of the Hon'ble High Court of Karnataka in re Slovak India Trading Co Pvt Ltd and that of the Larger Bench of the Tribunal in re Steel Strips.
7. A perusal of the decision in re Scan Synthetics Ltd has highlighted an aspect that erroneously, it would now appear, influenced the decision of the Tribunal in re Computer Graphics Ltd to follow the judgment of Honble High Court of Karnataka viz., that the Larger Bench had not considered Slovak India Trading Co Pvt Ltd. In re Scan Synthetics Ltd, it was observed that 7. While there can be no dispute that the decision of the Hon'ble High Court would prevail, in case of dispute with the Tribunal's decision but we find that Larger Bench decision of the Tribunal, which has resolved the disputed issue in favour of the Revenue, was duly aware of the Hon'ble Karnataka High Court decision, as confirmed by the Hon'ble Supreme Court. As such, the Larger Bench decision stands given by considering the Hon'ble Karnataka High Court, and subsequent confirmation of the same by the Hon'ble Supreme Court. Further, Tribunal being a creature of the Statute cannot go beyond the provisions of the Act and can't exercise power which are not available to it like writ jurisdiction powers. Judicial discipline requires us to follow the law declared by the Larger Bench's of the Tribunal. We also note that the insistence of the learned Advocate on the fact that appeal filed by the Revenue before Hon'ble Supreme Court in the case of Union of India vs. Slovak India Trading Co. Pvt. Ltd. (supra) stands dismissed by the Hon'ble Supreme Court and as such it is the declaration of law by the Hon'ble Supreme Court which should be followed, is not appropriate. Apart from the fact that the dismissal of the appeal by the Hon'ble Supreme Court already stands taken note of by the Larger Bench, we also note that dismissal of appeal by the Hon'ble Supreme Court was in view of the concession made by the learned ASG appearing for the Union of India. As such, it cannot be said that the Hon'ble Supreme Court interpreted and declared the law in favour of the assessee.
8. In view of the above, I am of the opinion that the decision in re Computer Graphics Ltd, not being in conformity with the decision of the Larger Bench, is not binding despite my having been a constituent of that Bench.
9. In resolving the present dispute, I am faced with the decision of the Larger Bench which has discussed, at length, the various judgments and decisions on eligibility for refund of credit as well as the binding nature of provisions of fiscal statutes upon creatures of the statute. This decision cannot be ignored by another Bench of the Tribunal unless set aside by appropriate judicial body.
10. The scheme of credit, whether the erstwhile MODVAT or extant CENVAT credit, is, undoubtedly, to facilitate the use of accumulated pool of credit for discharge of duty liability on output with the laudable object of elimination of cascading effect of taxation. However, at the same time, this facility is not availability to every entity in the commercial chain; there is a final purchaser who bears the entire burden of duty and without option of adjusting the duty paid thereon. Those entitled to utilise accumulated credit are also permitted to clear inputs, as such, by discharge of duty liability. In these circumstances, the continued existence of surplus of credit is questionable. It is difficult to lend credence to the supposition that inputs on which credit has been availed has been consumed in production of output that was cleared on payment of duty without resort to drawal from the accumulated pool. Inefficiency in production can lead to disproportionate use of inputs and allowing refund of the duties on such inputs, would be tantamount to the public exchequer subsidising such inefficiency.
11. The decision in re Slovak India Trading Co Pvt Ltd relies on the absence of an express prohibition in the statute for allowing such refunds thus 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.
12. The absence of a provision for refund also implies the absence of a mechanism for processing a refund claim. The safeguards, conditions and limitations that are specified in a mechanism designed for the specifically permitted situation of refunds may not necessarily apply to the situation of a manufacturer who closes the factory of production. It could also well lead to claims by functioning undertakings which would throw the entire scheme into disarray. I notice the Honble High Court of Karnataka has merely endorsed the principle of refund as ordered by the Tribunal without examining the applicability of the safeguards, conditions and limitations specified by Central Government in the refund mechanism. The Tribunal also does not appear to have considered that specific in deciding the principle that refund is allowable in re Slovak India Trading Co Pvt Ltd.
13. On the other hand, the Larger Bench, in the decision in re Steel Strips, took note of the variance in the decision of another Larger Bench of the Tribunal in Gauri Plasticulture (P) Ltd v. Commissioner of Central Excise [2006 (202) ELT 199 (T-LB)] and that of the Honble High Court of Karnataka in Union of India v. Slovak India Trading Co (P) Ltd both of which favoured the assessee. That the latter should prevail over the decision of the Larger Bench is, itself, in doubt as the Larger Bench had taken further note of the decision of the Honble High Court of Calcutta in Rasoi Ltd v. Union of India [2004 (176) ELT 101 (Cal)] which has denied the scope for refund of credit as money. The background, as laid down, by the Larger Bench in re Steel Strips 1.1?The referring bench was of the opinion that law does not permit cash refund of unutilized Modvat Credit during the material period for which they were unable to subscribe to the view expressed by the earlier Larger Bench in Gauri Plasticulture (P) Ltd. v. CCE, Indore - 2006 (202) E.L.T. 199 (T.-LB.). Judicial discipline therefore required, to refer the matter in that regard to the Larger Bench to decide the issue on the touch stone of law. The referring Bench while hearing the matter also noticed that the assessee had made allegation that it was required to make huge deposit in its PLA under coercion and required to pay duty out of such account being allowed to utilize its credit remaining in the Modvat Account. But such allegation did not get appreciation for lack of evidence. For the same reasons, there was also a similar denial by the learned first Appellate Authority.
1.2?Without citing the statutory provisions in the Act permitting re-fund of unutilized Modvat credit in cash, mere plea was raised by the assessee that Modvat credit having been remained unutilized at the time when the unit became inoperative and there was no possibility of restarting process in the factory, refund thereof was permissible relying on the decision of Honble High Court of Karnataka in the case of UOI v. Slovak India Trading Co. (P) Ltd. - 2006 (201) E.L.T. 559 (Kar.) = 2008 (10) S.T.R. 101 (Kar.). According to the Assessee, Rule 5 of the Central Excise Rules, 2002 was invokable on the ground that the decision of Honble High Court of Karnataka was confirmed by the Apex Court. But the Referring Bench observed that substantive provision of the statute in respect of refund was not subject matter of scrutiny in the said judgment and appeal preferred by Revenue was dismissed on the concession of learned Additional Solicitor General on the ground that the decisions in Eicher Tractors v. CCE, Allahabad, reported in 2002 (147) E.L.T. 457, Shree Prakash Textiles (Guj.) Ltd. v. CCE, Ahmedabad, reported in 2004 (169) E.L.T. 162; CCE, Ahmedabad v. Babu Textile Industries, reported in 2003 (158) E.L.T. 215; and CCE, Ahmedabad v. Arcoy Industries, reported in 2004 (170) E.L.T. 507, which were relied upon by the Tribunal while deciding the matter, were not appealed against by Revenue.
1.3?The Referring Bench noticed that the decision of the Larger Bench in Gauri Plasticulture (P) Ltd. v. CCE, Indore - 2006 (202) E.L.T. 199 (T.-LB.) permitting refund of unutilized credit, in cash was without examination of the law relating to Modvat and object of Modvat credit procedure. Therefore, according to referring Bench, in absence of provision under the Act for cash refund of the unutilized amount in Modvat credit, that is not permissible (Para 28 of Referral order). is significant.
14. The finding of the Larger Bench is worth recalling to mind as it goes on to expound thus:
5.7?A distinction between provisions of statute which are of substantive character and are built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in their nature, on the other, must be kept clearly distinguished. An eligibility criteria to get refund calls for a strict construction, although construction of a condition thereof may be given a liberal meaning if the same is directory in nature. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can be reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or the substance of the requirements. Like the concept of reasonableness, the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance essential to every reasonable objective of the statute and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed.
Refunds and Exemption are Governed by Rule of Strict Compliance 5.8?Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted.
Substance and Essence of Statute are Paramount Considerations 5.9?The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the substance or essence of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential. In the cases of refund substantial compliance to the law granting refund is sine qua non.
Courts have to decide what the law is but not what it should be 5.10?In a plethora of cases, it has been stated by various judicial pronouncements that where, the language is clear, the intention of the legislature is to be gathered from the language used. It is not the duty of the court either to enlarge the scope of legislation or the intention of the legislature, when the language of the provision is plain. The court cannot rewrite the legislation for the reason that it had no power to legislate. The court cannot add words to a statute or read words into it which are not there. The court cannot, on an assumption that there is a defect or an omission in the words used by the legislature, correct or make up assumed deficiency, when the words are clear and unambiguous. Courts have to decide what the law is and not what it should be. The courts adopt a construction which will carry out the obvious intention of the legislature but cannot set at naught legislative judgment because such course would be subversive of constitutional harmony [See : Union of India & Anr. v. Deokinandan Aggarwal].
No person has vested right in any course of procedure 5.11?No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner laid down by law. He has no right than to proceed according to the mandate of the statute governing the subject. Claim of refund is not a matter of right unless vested by law. That would depend upon the object of the statute and eligibility. The purpose for which law has been made and its nature, the intention of the legislature in making the provision, the relation of the particular provision to other provisions dealing with the subject including the language of the provision are considerable factors in arriving at the conclusion whether a particular claim is in accordance with law. No injustice or hardship can be raised as plea to claim refund in absence of statutory mandate in that behalf and no equity or good conscience influence fiscal courts without the same being embedded to the statutory provisions.
15. It would appear that the decision in re Computer Graphics has been based on erroneous assumption that the judgment of the Honble High Court would in all situations prevail over that of the Tribunal. That would be so in normal circumstances. The Larger Bench was however faced with the antipodal decisions of two High Courts and the mechanism of reference to Larger Bench is intended to induce consistency in the decisions of the Tribunal when confronted with such variances of persuasive value. Hence, the decision of the Larger Bench would in this context prevail over that of the Division Bench which rendered the ruling cited by Learned Counsel for appellant.
16. The Larger Bench has adduced to the lack of statutory provision for grant of refund of credit lying unutilized at the time of closure of a factory. I have referred also to the lack of safeguards, conditions and limitations to handle such eventuality and to which all refund claims are, necessarily, subject.
17. Appellant claims that first appellate authority has travelled beyond the show cause notice. One of the grounds in the notice is limitation of time and another is the failure to furnish documents in original. Non-consideration of these would have been pertinent if the refund provision were to be extendable to the claim of appellant. Settled law holds otherwise and, therefore, no purpose would be served in re-examining these lacunae in the claim. On behalf of appellant, the legality of claim was raised by invoking the decision of the Honble High Court of Karnataka. Such circumstance warrants examination of challenge to that submission as made on behalf of Revenue.
18. In view of the above, the refund claim of appellant is devoid of merit and there is no cause to interfere with the impugned order.
(Pronounced in Court on 05/12/2016) (C J Mathew) Member (Technical) */as 2 2