Custom, Excise & Service Tax Tribunal
M/S Kitex Ltd vs Commissioner Of Central Excise, Cochin on 11 January, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/249/2007-DB [Arising out of Order-in-Appeal No. 03/2007-CE dated 23/01/2007 passed by Commissioner of Central Excise, Customs & Service Tax (Appeals), Cochin] For approval and signature: HON'BLE SHRI M.V.RAVINDRAN, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER 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 Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s KITEX LTD POS BOX NO.4, KIZHAKKAMHALAM, ALUVA 683 562. Appellant(s) Versus Commissioner of Central Excise, COCHIN Respondent(s)
Appearance:
Mr. G. Shivadass, Advocate For the Appellant Mr. Ajay Saxena, Commissioner(A.R.) For the Respondent Date of Hearing: 11/01/2016 Date of Decision: 11/01/2016 CORAM:
HON'BLE SHRI M.V.RAVINDRAN, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No. 20008 / 2016 PER M.V. RAVINDRAN This appeal is directed against the Order-in-Appeal No. 3/2007 C.E. dated 23.1.2007.
2. The brief facts of the case are that the appellants are manufacturers of grey cotton fabrics and were availing benefit of Cenvat credit on different input services and were utilizing the same towards payment of duty on final product at the time of clearances from the factory. The final product namely cotton fabric is exempted from payment of duty by Notification No. 30/2004-CE dated 9.7.2004. The demand of duty is on stock of inputs as such, in semi finished and finished products as on 9.7.2004, the Revenue sought to demand Cenvat credit relating to such inputs on the ground that the final products were exempted. The appellants have utilized the entire credit in the Cenvat Credit account, paid the amount so demanded by the Department by Challan No. 5 dated 18.8.2004 and Challan No. 6 dated 07.9.2004. Subsequently, on realization of the fact that they need not to have paid such Cenvat credit, they filed refund claim. The refund claim was sought to be rejected by show-cause notice on the ground that the judgement of the Tribunal in the case of Albert David Ltd. Vs. Commissioner of C. Excise, Meerut [2003 (151) E.L.T. 443 (Tri.-Del.)] was directly on the issue and the amount has to be reversed as per the provisions of the Cenvat Credit Rules, 2002. The adjudicating authority as well as the first appellate authority after following the due process of law rejected the contentions and denied the refund to the appellants.
3. The learned counsel submits that the issue involved in this case is settled by the Honble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore-II Vs. TAFE Ltd. (Tractors Division) reported in 2011 (268) E.L.T. 49 (Kar.) and has also been upheld by the apex court as reported in 2015 (320) E.L.T. A185 (S.C.). It is the submission that the said judgment was followed by the Honble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore-II Vs. Gokuldas Intimate Wear [2011 (270) E.L.T. 351 (Kar.)] and the Honble High Court of Madras in the case of TAFE Ltd. Vs. CCE, Madurai-II [2015 (320) E.L.T. 357 (Mad.)] and was followed by various Tribunal Benches including the Larger Bench. It is the further submission that Notification does not provide for reversal of credit on the inputs lying in stock, work in progress (WIP) and contained in the finished goods; there is no machinery provisions to recover the credit availed validly/correctly as has been settled by the Supreme Court in the case of Commissioner of Central Excise Vs. Dai Ichi Karkaria Ltd. [1999 (112) E.L.T. 353]. He also took us through the various provisions of the Modvat / Cenvat Credit Rules.
4. The learned A.R. on the other hand submits that the Notification No. 30/2004-CE dated 09.7.2004 was a conditional notification and was depending upon the condition of non-availment of the Cenvat Credit. It is the submission that all the judgements cited by the learned counsel are in respect of the exemption notification which granted unconditional exemption and hence, the ratio will not apply. He submits that the judgment of the Tribunal in the case of Albert David Ltd. (supra) would directly apply which was in respect of the demand of inputs lying in stock unutilized when the final products are exempted from payment of duty. It is the submission that the said judgment of the Tribunal was upheld by the apex court as reported in 2003 (157) E.L.T. A81 (S.C.). He submits that the lower authorities were correct in rejecting the refund claim.
5. In rejoinder, the learned counsel submits that the issue involved in this case is not regarding the demand of Cenvat credit on the inputs lying in stock or in WIP or finished goods. It is the submission that the appellants are seeking refund of the amount which they paid erroneously and the Notification No. 30/2004-C.E. is not conditional. He submits that the judgment of the Tribunal in the case of Albert David Ltd. (supra) was considered by the Tribunal in the case of TAFE Ltd. and the Honble High Court of Karnataka has also gone into the same and rejected the contention and upheld the Tribunals view.
6. We have considered the submissions made by both sides and perused the records.
7. The issue involved in this case is regarding refund of the amount paid by the appellants under misunderstanding of the law. The appellant had utilized the Cenvat credit paid on the inputs which were used for the manufacture of finished goods. The appellant had stock of inputs in WIP as well as in finished goods when the Notification No. 30/2004-CE was brought into statute which was availed by them. The said notification only bars the assessee from availing the benefit of notification if they had taken Cenvat credit. In the case in hand, the issue is not the demand of duty or the reversal of Cenvat credit but refund of amount which was paid under misunderstanding of the law by the appellant.
8. We find that the Honble High Court of Karnataka in the case of TAFE Ltd. (supra) has considered the very same issue. In that case, the issue was regarding the reversal of Cenvat credit of the inputs lying in stock, in WIP and final products whether needs to be reversed when final products are exempted from payment of duty. Their Lordship while deciding the issue held as under :
6. Dealing with Cenvat credit and reversal of said credit, the Apex Court in the case of Collector of Central Excise, Pune v. Dai Ichi Karkaria Ltd. reported in 1999 (112) E.L.T. 353 (S.C.), at paragraph 17 and 18 interpreting Rule 57A and 57J of the Central Excise Rules 1944, has held as under :
17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to used the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses no to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available.
It is therefore, that in the case of 18. Eicher Motors Ltd. v. Union of India [1999 (106) E.L.T. 3] this Court said that a credit under the Modvat scheme was as good as tax paid.
7. There is no provision in the modvat rules which provides for a reversal of the credit by the Excise authorities where it has been illegally and irregularly taken, in which event it stands cancelled or if utilised, has to be paid for.
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9. Therefore it is clear from the aforesaid judgment of the Apex Court that once the input credit is legally taken and utilized on the dutiable final product, it need not be reversed on the final product being exempted subsequently. Only if any products are purchased subsequent to the said exemption and if any tax is paid on such inputs, as the final product is exempted from payment of tax, the assessee would not be entitled to avail the Cenvat credit on such inputs. But the Cenvat credit availed on such inputs till the date of exemption, they vest in the assessee and the assessee cannot be divested of that credit as the law does not provide for the same. Therefore the authorities taking advantage of the notification exempting the final product cannot claim reversal of Cenvat credit either in respect of final product which have come into existence on the date of the notification or on the inputs stored in the godown or the work in progress and finished products. We find that this judgment of the Honble High Court of Karnataka was upheld by the apex court as reported in 2015 (320) E.L.T. A185 (S.C.).
9. As regards the reliance placed by the learned A.R. on the judgment of Albert David Ltd. (supra), we have to follow the judgment of TAFE Ltd. (supra) as upheld by the Supreme Court, as it is the recent judgment. It is settled law that ratio of the latter case needs to be followed. Accordingly, we hold that in view of the foregoing, the impugned order is incorrect and the appeal needs to be allowed.
10. The impugned order is set aside and appeal is allowed with consequential relief.
(Pronounced in open court) (ASHOK K. ARYA) TECHNICAL MEMBER (M.V. RAVINDRAN) JUDICIAL MEMBER /vc/