Custom, Excise & Service Tax Tribunal
Ashima Limited vs Ahmedabad-I on 2 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH - COURT NO. 3
EXCISE Appeal No. 10199 of 2023-DB
[Arising out of Order-in-Original/Appeal No AHM-EXCUS-001-APP-098-2022-23 dated
14.12.2022 passed by Commissioner of Central Excise, Customs and Service Tax-
AHMEDABAD-I]
Ashima Limited .... Appellant
Texcellence Complex Nr. Anupam Cinema
Khokhara, Ahmedabad, Gujarat - 380008
VERSUS
Commissioner of Central Excise & ST, Ahmedabad .... Respondent
C. Ex Bhavan, Nr Panjrapole & Polytechnic, Ambavadi, Ahmedabad, Gujarat -380015 APPEARANCE :
Shri Hardik Modh, Advocate for the Appellant Shri Rajesh R. Kurup, Superintendent for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) DATE OF HEARING : 06.02.2024 DATE OF DECISION: 02.04.2024 FINAL ORDER NO. 10740/2024 RAMESH NAIR :
M/s. Ashima Limited (hereinafter referred to as "the Appellant") prefers the present appeal against Order-in-Appeal No. AHM-EXCUS-001- APP-098/2022-23 dated 14.12.2022 passed by the Commissioner (Appeals) of Central GST & Central Excise, Ahmedabad. The Appellant had claimed CENVAT Credit of Additional Duties of Excise (Textiles and Textile Articles) ("ADE(TTA)") as per Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 ("ADE (TTA) Act") paid on the inputs used for manufacturing the finished products. The refund claim was denied by the Respondent on the grounds that the Appellant is not eligible for CENVAT Credit as per Rule 11(3) of the CENVAT Credit Rules, 2004.The Respondent had denied the refund to the tune of Rs. 53,46,085/. Being aggrieved and feeling 2 E/10199/2023-DB dissatisfied by the impugned order dated 14.12.2022, the Appellant preferred the captioned Appeal.
2. Shri Hardik Modh, Learned Counsel appearing on behalf of the Appellant submits that the refund was denied invoking the Rule 11 (3) of Cenvat Credit Rules, 2004 which was introduced with effect from 01.03.2007 vide Notification No. 10/2007 - CE (NT) dated 01.03.2007 whereas the goods were exempted from Additional Duties of Excise (Textiles and Textile Articles) "ADE (TTA)" vide Notification No. 31/2004- CE dated 09.07.2004. Therefore, the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004 is not applicable retrospectively when the additional duties of excise was exempted under Notification No. 31/2004-CE. Accordingly, the Cenvat credit on ADE shall not lapse. In support, he placed reliance on the following judgments:-
(a) CCEx, Bangalore- II vs. Gokaldas Intimate Wear [2011 (70) ELT 351 (Kar.)] upheld by Hon'ble Supreme Court reported at - 2020(374) E.L.T. A41 (S.C.).
(b) Ramco International vs. CCEx, Jalandhar [2014 (304) ELT434) (Tri.-
Delhi)], 2.1 He further submits that pursuant to the CGST Amendment Act, 2018 Education cess, Secondary &Higher Education cess and duty levied under ADE(TTA) levied under the erstwhile regime were not transferred to the CGST regime as transitional credit and therefore, remained unutilised under the erstwhile regime. Since, the same were unutilised under the erstwhile regime, many of the registered person filed refund claim under Section 11B 3 E/10199/2023-DB of the Central Excise Act, 1944 and refund was sanctioned by various forums. He placed reliance on the following judgments:-
(a) Kirloskar Toyota Textile Machinery Pvt. Limited vs. Commissioner of Central Tax, Bangaluru, South GST - 2022 (379) ELT 256 (Tri-
Bang.)
(b) USV Pvt. Limited vs. CCEX & ST, Daman - 2023-TIOL-114- CESTAT-AHM 2.2 He further submits that Cenvat credit once lawfully availed is indefeasible. Once credit is availed, there is no legal basis to deny the assessee their accrued right to utilise the credit for payment of its output taxes. He placed reliance on the judgment of CCE, Pune v. Dai Ichi Karkaria Limited - 1999(112) ELT 353 (SC).
2.3 He further submits that one of grounds for rejection of refund claim is that since the appellant's refund claim was earlier rejected, the present claim cannot be entertained. In this regard he submits that the appellant had filed the refund claim in the past under Rule 5 of the CENVAT Credit Rules, 2004 on the ground of unutilised CENVAT credit due to exemption of the duty levied under the ADE(TTA) on the finished products vide Notification No. 31/2004-Central Excise dated 09.07.2004. The said refund application was rejected vide OIO No. 47/AC/Ref/2005 dated 26.04.2005 on the ground of non-fulfillment of conditions as prescribed under Rule 5 of the CENVAT Credit Rules, 2004. He submits that after rejection of the refund claim under Rule 5 the same amount being correctly taken as Cenvat credit stands restored as Cenvat credit and the same was reflected in their monthly return which was carried forward time to time was lying in the balance and due to introduction of GST, appellant became eligible for refund under Section 142 (3) of CGST 4 E/10199/2023-DB Act, 2017. Therefore, even though the refund claim under Rule 5 was initially rejected, the same amount was carried forward as accumulated Cenvat credit. Hence, the refund of the same under CGST Act, 2017 is legally admissible.
3. Shri R.R Kurup, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both sides and perused the records. We find that the appellant's refund claim in terms of Section 142 was rejected on the following grounds:-
(i) The credit of Additional Duty of Excise ADE (TTA) was lapsed in terms of Rule 11 (3) of Cenvat Credit Rules, 2004.
(ii) The refund claim for the same amount was rejected in the past.
4.1 As regard the first ground we find that the appellant availed the exemption from ADE (TTA) in respect of their finished product vide Notification No. 31/2004 dated 09.07.2004 at that time Rule 11 (3) of Cenvat Credit Rules, 2004 was not in force whereas the same came into force on 01.03.2007 vide Notification No. 10/2007 - CE (NT), therefore, the provisions of Rule 11 (3) cannot be applied retrospectively in respect of exemption Notification No. 31/2004- CE. This issue has been considered in the following judgment:-
(a) CCEx, Bangalore- II vs. Gokaldas Intimate Wear -2011 (270) ELT 351 (Kar.) "This appeal is preferred against the order passed by the Tribunal which held that the assessee is not liable to reverse the cenvat credit in respect of the inputs which were purchased prior to 1-8-2004, the day from which an exemption was granted, from payment of excise duty in respect of final products.5
E/10199/2023-DB
2. The assessee are the manufacturers of readymade garments. They availed Cenvat credit and cleared the finished products on payment of duty. A notification came to be issued on 9-4-2004 granting exemption in respect of the final products and consequently, from 1-8-2004, the day from which the notification came into force, the assessee was not entitled to Cenvat credit. However, as on 1-8-2004, the assessee held inputs and semi-finished goods in stock. The revenue proceeded against the assessee invoking the proviso of Section 11A and proposed demand for irregularly availed cenvat credit and interest thereon. Penalty was also proposed. The Original Authority held that the assessee is liable to reverse the credit. In appeal, the Commissioner of Appeals upheld the said order. It is against the said order, the assessee preferred an appeal to the Tribunal. The Tribunal held that in respect of semi-finished products and raw materials held in stock prior to 1-8-2004, the assessee is entitled to the benefit of cenvat credit and is not under any obligation to reverse the credit. Aggrieved by the said order, the revenue is in appeal.
3. This appeal was admitted to consider the following substantial questions of law :
(i) Whether the CESTAT is correct in holding that once the input credit is taken legally, then the same cannot be denied after the issue of exemption notification on the final product?
(ii) Is not the assessee who has taken credit on the input lying in the stock and those contained in semi-finished and finished goods required to be reversed when final product is exempted?
(iii) Whether the CESTAT was justified in passing the impugned order without discussing the facts of the case alleged to be covered and its application to the case on hand?
4. This Court in the case of the Commissioner Central Excise v. M/s. TAFE Limited (Tractor Division) disposed off on 1st March 2011 [2011 (268) E.L.T. 49 (Kar.)] after referring to the various judgments held that once the input credit is legally taken and utilized on the duitable 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. Therefore, the judgment in the aforesaid case squarely applies to the case on hand and the Tribunal was justified in granting benefit.
5. It was pointed out to us that in the year 2008 (sic) sub-rule (3) was inserted by a Notification No. 10/2007 with effect from 1-3-2007, which reads as under :-
"(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if, -6
E/10199/2023-DB
(i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under section 5A of the Act; or
(ii) the said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported."
6. Therefore, it is clear from the aforesaid. Rule that till 1-3-2007, the assessee was entitled to benefit, of the cenvat credit in respect of inputs contained in the work in progress and semi finished products. The said amendment is prospective in nature. It comes into effect from only 1-3-2007. In the instant case, the period is anterior to 1-3- 2007, which has no application. Therefore, the substantial questions of law raised in this appeal are answered in favour of the assessee and against the revenue."
4.2 The above judgment has been upheld by Hon'ble Supreme Court reported at - 2020 (374) E.L.T. A41 (S.C.). wherein while dismissing the department's appeal, the Hon'ble Supreme Court has given the following observation:-
The Supreme Court Bench comprising Hon'ble Mr. Justice A.K. Sikri and Hon'ble Mr. Justice Rohinton Fali Nariman on 11-3-2016 dismissed the Civil Appeal No. 9008 of 2011 with C.A. Nos. 472-473 & 482 of 2011 filed by Commissioner of Central Excise, Bangalore against the Judgment and Order dated 11-4-2011 of Karnataka High Court in C.E.A. No. 109 of 2009 as reported in 2011 (270) E.L.T. 351 (Kar.) (Commissioner v. Gokaldas Intimate Wear). While dismissing the appeal, the Supreme Court passed the following order :
"Leave granted.
On the facts of these cases we find that the assessee had been rightly held entitled to reversal of the Cenvat credit in respect of the inputs which were produced with effect from 1-8-2004 the date from which the assessee was granted exemption from payment of Excise duty in respect of final products. Thus, when the reverse of Cenvat credit was given to the assessee on that date, final product was not exempted. In view thereof, Rule 6(1) of the Cenvat Credit Rules, 2002/2004 shall not be applied since the present cases are squarely covered by the judgment dated 11-8-1999 passed by this Court in "Collector of Central Excise, Pune v. Dai Ichi Karkaria Ltd." *1999 (112) E.L.T. 353 S.C.)].
In the circumstances therefore and for the reasons stated in the said judgment, these appeals fail and are accordingly dismissed.
No costs."7
E/10199/2023-DB The Karnataka High Court in its impugned order had held that Cenvat credit availed on inputs till the date of amendment of Cenvat Credit Rules, 2004 on 1-3-2007 was available. Till this date, assessee was entitled to benefit, of the Cenvat credit in respect of inputs contained in the work in progress and semi-finished products. Since amendment in CCR restricting availment of credit is prospective in nature and period involved anterior to 1-3-2007, there was no need to reverse the credit. High Court relied on its earlier judgment in 2011 (268) E.L.T. 49 (Kar.) for this decision.
4.3 In the case of Ramco International vs. CCE, Jalandhar - 2014 (304) ELT 434 (Tri.-Delhi), the similar issue was decided by this Tribunal wherein the following order was passed:-
"All the three appeals are being disposed of by a common order as they arise out of the same impugned order of the Commissioner (Appeals) vide which, he has upheld the confirmation of demands by holding that the appellants are liable to reverse the earned CENVAT credit when their final product became exempted.
2. It is seen that all the appellants were engaged in the manufacture of garden tools falling under Chapter 82 of the First Schedule to the Central Excise Tariff Act, 1985. They were availing CENVAT credit of duty paid on various inputs, which was being used by them on payment of duty on their final product. They were also exporting the goods under rebate claim and as such there was accumulation of CENVAT credit.
However, garden tools became unconditionally exempted with effect from 9-7-2004. The dispute in the present appeals relates to the reversal of the CENVAT credit available as on the said date either in the appellants' CENVAT accounts or as contained in the inputs or semi-finished goods or the final products lying in stock. The lower authorities directed the appellants to reverse the credit and also imposed penalties upon them.
3. I find that the issue is no more res integra and stands settled by various decisions of the Larger Bench of the Tribunal. One such reference can be made to the Larger Bench decision in the case of CCE v. Ashok Iron and Steel Fabricators [2002 (140) E.L.T. 277 (Tribunal-LB)+, upheld by the Hon'ble Supreme Court reported in 2003 (156) E.L.T. A212 (S.C.). It stands held that when the final product becoming exempted there is no legal requirement of reversing the credit.
4. I further find that during the relevant period, the Rule 9 of the CENVAT Credit Rules, 2002 were in operation. Sub-rule (ii) of the said Rule lays down as under :-
"(ii) The said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilised for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported."
As is seen from the above Rule, the obligation on the part of the assessee to reverse the credit is only in that case where he opts for exemption from the duty based upon a Notification relatable to value or quantum of the clearances. Inasmuch in the present case, the appellants' final product became unconditionally exempt and the exemption 8 E/10199/2023-DB was not dependent upon the value or quantum of clearance in a financial year, it has to be held that the said Rule 9(2) is not applicable. In fact, I find that the provisions were subsequently changed in the new CENVAT Credit Rules, 2002, with the introduction of Rule 11(3), with effect from 1-3-2007. In terms of the said Rule 11(3)(ii), where the final product become exempted absolutely under Section 5A of the Act, the quantum of CENVAT credit lying in his balance credit shall lapse and shall not be available for utilisation for payment of duty on any other product whether cleared for home consumption or for export. The said mandate of law was effective with effect from 1-3- 2007, i.e., after the period involved in the present appeals.
5. In view of the above, I set aside the impugned order and allow all the three appeals with consequential relief to the appellants."
4.4 From the above judgments one of which i.e. in the case of Gokaldas Intimate Wear upheld by the Hon'ble Supreme Court, it is settled law that the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004 shall not apply in respect of the exemption notification which was issue prior to insertion of Rule 11(3). Therefore, in the present case also, the refund claim cannot be rejected by invoking Rule 11(3) of Cenvat Credit Rules, 2004.
4.5 As regard the second ground for rejection of refund claim i.e. refund claim was rejected in past, we find that the appellant had filed the refund claim under altogether different provision i.e. Rule 5 and notification issued thereunder. The refund claim was rejected for non compliance of the condition of Rule 5 and notification thereof. Once the refund claim was rejected under Rule 5, the accumulated Cenvat credit of ADE (TTA) stands restored in the appellant's Cenvat account and the same can be utilized in future but in the present case since the appellant could not utilize the same and due to the introduction of GST with effect from 01.07.2017, the accumulated credit of ADE (TTA) cannot be utilized by the appellant. The only remedy is to claim the refund under Section 142 of CGST Act, 2017. Therefore, the rejection of refund in the past under Rule has no relevance and does not create any embargo for 9 E/10199/2023-DB processing the refund claim which is otherwise admissible to the appellant in terms of Section 142 of CGST Act, 2017. This view is supported by the following judgments:-
(a) Kirloskar Toyota Textile Machinery Pvt. Limited vs. Commissioner of Central Tax, Bangalore, South GST - 2022 (379) ELT 256 (Tri-
Bang.) "6. After considering the submissions of both the parties and perusal of the material on record as well as various judgments relied upon by both the parties cited supra, I find that in the present case the appellant has filed the refund claim of accumulated balance of unutilized credit of Education Cess and Secondary and Higher Education Cess available in their books under Section 11B of the Central Excise Act within a period of one year i.e. on 29-6-2018 from the introduction of GST law. I also find that with the introduction of GST there is a restriction for these cesses to be transitioned into GST by virtue of Section 140(1) of the Act and therefore the appellant did not transfer the said credit of cesses into GST and preferred to file the refund claim under Section 11B of the Central Excise Act. This issue was considered by the Division Bench of the CESTAT, New Delhi in the case of Bharat Heavy Electricals Ltd. cited supra and after considering the decision of the Apex Court as well as the High Court of Karnataka in the case of Slovak India Trading Co. Pvt. Ltd. has held that the assessee is entitled to refund of an unutilized credit of Education Cess and Higher Education Cess after the introduction of GST. It is pertinent to reproduce the said findings of the Division Bench which is contained in paras 4 & 5 which is reproduced herein below :
"4. We have carefully gone through the rival arguments. There is no dispute that on 1-7-2017, the cesses credit validly stood in the accounts of the assessee and very much utilizable under the existing provisions. The appellants could not carry over the same under the GST regime. Thus the appellants were in a position where they could not utilize the same. We agree with Learned Counsel of the appellant that the credits earned were a vested right in terms of the Hon'ble Apex Court judgment in Eicher Motors case and will not extinguish with the change of law unless there was a specific provision which would debar such refund. It is also not rebutted by the revenue that the appellants had earned these credits and could not utilize the same due to substantial physical or deemed exports where no Central Excise duty was payable and under the existing provisions, had the appellants chosen to do so they could have availed refunds/rebates under the existing provisions. There is no provision in the newly enacted law that such credits would lapse. Thus merely by change of legislation suddenly the appellants could not be put in a position to lose this valuable right. Thus we find that the ratio of Apex Courts judgment is applicable as decided in cases where the assessee could not utilize the credit due to closure of factory or shifting of factory to a non-dutiable area where it became impossibly to use these credits. Accordingly the ratio of such cases would be squarely applicable to the appellant's case. Following the judgment of Hon'ble Karnataka High Court in the case of 2006 (201) E.L.T. 559 (Kar.) in the case of Slovak India Trading Co. Pvt. Ltd. = 2006-TIOL-469-KAR-CX and similar other judgments/decisions cited supra, we hold that the assessee is eligible for the cash refund of the cesses lying as Cenvat credit balance as on 30-6-2017 in their accounts. The decision of the Larger Bench in the case of Steel Strips cited by the Learned Departmental Representative could not be applicable in view of the contradictory decisions of High Courts on the same issue.10
E/10199/2023-DB
5. Accordingly we hold that impugned order-in-appeal is without any merit and thus we set aside the same. The appeal is accordingly allowed."
6.1 Further, I find that the Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. (cited supra) has held that when the assessee has moved out of Modvat Scheme/Cenvat Scheme, portion of unutilized credit should be allowed as refund. Since the issue is covered by the decision of the Slovak India Trading Co. Pvt. Ltd. (cited supra) and the same being the decision of a jurisdictional High Court would prevail over decision of other High Courts and the Tribunal as held in the case of CCE & ST v. Andhra Sugars Ltd. cited supra and the Larger Bench decision of the Tribunal, Bangalore in the case of J.K. Tyre & Industries Ltd. v. Asst. Commissioner of Central Excise wherein the Larger Bench has held that the Tribunal is bound by the decision of the jurisdictional High Court and is not bound by the decision of other High Courts. Further, I find that the two decisions relied upon by the Department in the case of Bharat Heavy Electricals Ltd. and Mylan Laboratories both the decisions have been rendered by Single Member of the Tribunal whereas the decision in the case of Bharat Heavy Electricals Ltd. has been rendered by Division Bench of CESTAT, New Delhi which would prevail over the decision of the Single Member. Further, I find that the decision of the Hon'ble Madras High Court in the case of Sutherland Global Services Pvt. Ltd. is not applicable in the present case because the said decision was on the issue whether cess can be transitioned into GST or not? Whereas the issue in the present case is whether unutilized Cenvat credit of Education Cess and Secondary and Higher Education Cess could be claimed as refund under Section 11B of the Central Excise Act, 1944? Therefore, in view of the contradictory decisions of various High Courts, this Tribunal is bound to follow the decision of the jurisdictional High Court and the jurisdictional High Court has held in the case of Slovak India Trading Company (cited supra) which has been relied upon by the Division Bench of the Delhi Tribunal in the case of Bharat Heavy Electricals Ltd. has categorically held that refund can be granted of the cesses viz. Education Cess and Higher Education Cess which could not be transitioned into GST. As far as time-bar aspect is concerned, the findings in the impugned order regarding time-bar is beyond the show cause notice as well as Order-in-Original and the same is not sustainable in law. Hence, by following the ratios of the Division Bench of Delhi Tribunal in Bharat Heavy Electricals Ltd. and jurisdictional High Court in Slovak India Trading Co. Pvt. Ltd., I allow the appeal of the appellant.
(b) In the case of Nu vista Limited vs. Commissioner (Appeals), CGST
- 2022 (381) ELT 681 (Tri. Delhi), the principal bench of this Tribunal considered the same issue and passed the following order:-
"10. It is not in dispute that prior to 1-3-2015 cess was leviable on manufactured goods, in addition to excise duty and the appellant had availed credit under the provisions of the Credit Rules on cess paid on procurement of goods and services. It is also not in dispute that by a notification dated 1-3-2015, levy of cess was exempted. The closing balance of credit of cess as on 28-2-2015, therefore, could not be utilized by the appellant and it was carried forward by him in the Central Excise returns.
11. The submission of Learned Counsel for the appellant is that refund of credit of cess cannot be denied merely on the ground that such credit which could not be utilised prior to GST regime would stand lapsed. In this connection, Learned Counsel placed reliance upon the decision of the Tribunal in Slovak India Trading.
12. The Tribunal, in the aforesaid decision rendered in Slovak India Trading held that refund has to be made when an assessee goes out of the Modvat Scheme or when the Company is closed.11
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13. The appeal filed by the Department before the Karnataka High Court to assail the aforesaid decision of the Tribunal was dismissed and the relevant portion of the judgment is reproduced below :
"5. ******* 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."
14. The Supreme Court also dismissed the appeal filed by the Department to assail the aforesaid order of the Karnataka High Court and the order is reproduced below :
"Delay condoned.
The Tribunal while allowing the appeal filed by the respondent assessee has relied upon the following decisions :
(1) Eicher Tractors v. CCE, Hyderabad, 2002 (147) E.L.T. 457 (Tri. - Del.) (2) Shree Prakash Textiles (Guj.) Ltd. v. CCE, Ahmedabad, 2004 (169) E.L.T. 162 (Tri. - Mumbai) (3) CCE, Ahmedabad v. Babu Textile Industries, 2003 (158) E.L.T. 215 (Tri. -
Mumbai); and (4) CCE, Ahmedabad v. Arcoy Industries, 2004 (170) E.L.T. 507 (Tri. - Mumbai).
of the Tribunal in which it has been held that the assessee is entitled to refund of the amount deposited if the assessee has gone out of the Modvat Scheme or their unit is closed. Aggrieved against the order of the Tribunal, Revenue filed C.E.A. No. 5/2006 in the High Court of Karnataka at Bangalore. The High Court by its impugned order has affirmed the order of the Tribunal and dismissed C.E.A. No. 5/2006 filed by the Revenue.
Learned ASG appearing for the Union of India fairly concedes that those decisions of the Tribunal, which were relied upon by the Tribunal, have not been appealed against.
In view of the concession made by the Learned ASG, this special leave petition is dismissed."
15. It is, therefore, clear from the aforesaid decision rendered in Slovak India Trading by the Tribunal, the Karnataka High Court and the Supreme Court that refund has to be granted when either there is a closure of the factory or when an assessee goes out of the Modvat scheme.
16. In Bharat Heavy Electricals, a Division Bench of the Tribunal examined whether credits create a vested right and do not extinguish with the change of law and held that change of law cannot be a ground for divesting an assessee from this valuable right and in this connection, the Tribunal placed reliance upon the decision of the Karnataka High Court in Slovak India Trading. The observations of the Tribunal are as follows :
12E/10199/2023-DB "4. We have carefully gone through the rival arguments. There is no dispute that on 1-7-2017, the cesses credit validly stood in the accounts of the assessee and very much utilizable under the existing provisions. The appellants could not carry over the same under the GST regime. Thus the appellants were in a position where they could not utilize the same. We agree with Learned Counsel of the appellant that the credits earned were a vested right in terms of the Hon'ble Apex Court judgment in Eicher Motors case and will not extinguish with the change of law unless there was a specific provision which would debar such refund. It is also not rebutted by the Revenue that the appellants had earned these credits and could not utilize the same due to substantial physical or deemed exports where no Central Excise duty was payable and under the existing provisions, had the appellants chosen to do so they could have availed refunds/rebates under the existing provisions. There is no provision in the newly enacted law that such credits would lapse. Thus merely by change of legislation suddenly the appellants could not be put in a position to lose this valuable right.
Thus we find that the ratio of Apex Court's judgment is applicable as decided in cases where the assessee could not utilize the credit due to closure of factory or shifting of factory to a non-dutiable area where it became impossible to use these credits. Accordingly the ratio of such cases would be squarely applicable to the appellant's case. Following the judgment of Hon'ble Karnataka High Court in the case of 2006 (201) E.L.T. 559 (Kar.) in the case of Slovak India Trading Co. Pvt. Ltd. and similar other judgments/decisions cited supra, we hold that the assessee is eligible for the cash refund of the cessess lying as Cenvat credit balance as on 30-6-2017 in their accounts. The decision of the Larger Bench in the case of Steel Strips cited by the Learned Departmental Representative could not be applicable in view of the contradictory decisions of High Courts on the same issue."
(Emphasis supplied)
17. In Schlumberger Asia Services, the Tribunal followed the aforesaid decision of the Tribunal in Bharat Heavy Electricals.
18. In Kirloskar Toyota, the Tribunal while examining whether refund claim of accumulated balance of unutilised credit of cess available in the books, can be refunded under Section 11B of the Central Excise Act, 1944 [the Excise Act] and held, in view of the aforesaid Division Bench decision of the Tribunal in Bharat Heavy Electricals, as also the decisions of the Supreme Court and the Karnataka High Court in Slovak India Trading that an assessee is entitled to refund of unutilised credit of cess after the introduction of GST. The relevant observations of the Tribunal are as follows :
"6. After considering the submissions of both the parties and perusal of the material on record as well as various judgments relied upon by both the parties cited supra, I find that in the present case the appellant has filed the refund claim of accumulated balance of unutilized credit of Education Cess and Secondary and Higher Education Cess available in their books under Section 11B of the Central Excise Act within a period of one year i.e. on 29-6-2018 from the introduction of GST law. I also find that with the introduction of GST there is a restriction for these cesses to be transitioned into GST by virtue of Section 140(1) of the Act and therefore the appellant did not transfer the said credit of cesses into GST and preferred to file the refund claim under Section 11B of the Central Excise Act. This issue was considered by the Division Bench of the CESTAT, New Delhi in the case of Bharat Heavy Electricals Ltd. cited supra and after considering the decision of the Apex Court as well as the High Court of Karnataka in the case of Slovak India Trading Co. Pvt. Ltd. has held that the assessee is entitled to refund 13 E/10199/2023-DB of an unutilized credit of Education Cess and Higher Education Cess after the introduction of GST.
xx xx xx 6.1 Further, I find that the Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. (cited supra) has held that when the assessee has moved out of Modvat Scheme/Cenvat Scheme, portion of unutilized credit should be allowed as refund. Since the issue is covered by the decision of the Slovak India Trading Co. Pvt. Ltd. (cited supra) and the same being the decision of a jurisdictional High Court would prevail over decision of other High Courts and the Tribunal as held in the case of CCE & ST v. Andhra Sugars Ltd. cited supra and the Larger Bench decision of the Tribunal, Bangalore in the case of J.K. Tyre & Industries Ltd. v. Asst. Commissioner of Central Excise wherein the Larger Bench has held that the Tribunal is bound by the decision of the jurisdictional High Court and is not bound by the decision of other High Courts. Further, I find that the two decisions relied upon by the Department in the case of Bharat Heavy Electricals Ltd. and Mylan Laboratories both the decisions have been rendered by Single Member of the Tribunal whereas the decision in the case of Bharat Heavy Electricals Ltd. has been rendered by Division Bench of CESTAT, New Delhi which would prevail over the decision of the Single Member. Further, I find that the decision of the Hon'ble Madras High Court in the case of Sutherland Global Services Pvt. Ltd. is not applicable in the present case because the said decision was on the issue whether cess can be transitioned into GST or not? Whereas the issue in the present case is whether unutilized Cenvat credit of Education Cess and Secondary and Higher Education Cess could be claimed as refund under Section 11B of the Central Excise Act, 1944? Therefore, in view of the contradictory decisions of various High Courts, this Tribunal is bound to follow the decision of the jurisdictional High Court and the jurisdictional High Court has held in the case of Slovak India Trading Company (cited supra) which has been relied upon by the Division Bench of the Delhi Tribunal in the case of Bharat Heavy Electricals Ltd. has categorically held that refund can be granted of the cesses viz. Education Cess and Higher Education Cess which could not be transitioned into GST. As far as time-bar aspect is concerned, the findings in the impugned order regarding time-bar is beyond the show cause notice as well as Order-in-Original and the same is not sustainable in law. Hence, by following the ratios of the Division Bench of Delhi Tribunal in Bharat Heavy Electricals Ltd. and jurisdictional High Court in Slovak India Trading Co. Pvt. Ltd., I allow the appeal of the appellant."
(Emphasis supplied)
19. In Nichiplast India, a Learned Member of the Tribunal observed as follows :
"12. Having following considered the rival contentions, the rulings of Karnataka High Court as confirmed by the Hon'ble Supreme Court, I hold that the appellant is entitled to refund of the amount of Cenvat credit lying in their Cenvat Credit account on closure of business. I further direct that the appellant is entitled to interest as per Rules, as per section 11BB of Central Excise Act, i.e. three months after the date of application till the date of grant of refund. Appeal allowed."
20. In Shree Krishna Paper Mills, the Punjab and Haryana High Court examined whether refund could be ordered of unutilised credit on closure of the unit and held, in view of the earlier decision of the Punjab and Haryana High Court in Rama Industries Ltd. v. CCE, Chandigarh [2009-TIOL-100-HC-P&H-CX = 2009 (248) E.L.T. 110 (P & H)] and 14 E/10199/2023-DB the decision of the Karnataka High Court in Slovak India, that refund should be granted. The observations of the Punjab and Haryana High Court are as follows :
"8. We further find that this Court in Rama Industries (supra) relying upon judgment of Karnataka High Court in the case of Union of India v. Slovak India Trading Co. Pvt. Ltd. - 2006 (201) E.L.T. 559 (Kar.) has sanctioned refund of unutilised Cenvat credit on the closure of factory. Rajasthan High Court in the case of Lav Kush Textiles v. CCE, Jaipur - 2017 (353) E.L.T. 417 (Raj.), Welcure Drugs & Pharmaceuticals Ltd. v. CCE - 2018 (15) G.S.T.L. 257 (Raj.) has formed similar view. High Courts have held that judicial discipline is required to be maintained; Tribunal cannot distinguish High Court judgments and is bound by High Court judgments. However, Larger Bench of Bombay High Courts in the case of Gauri Plasticulture (supra) has formed a different opinion.
It is true that judgment cited by Counsel for the Revenue has been delivered by a Bench of three judges of Bombay High Court, nonetheless, as per judicial discipline we cannot ignore judgment of this Court and take contrary view. We do not find any fault in the judgment of this Court in the case of Rama Industries as well judgments delivered by Rajasthan and Karnataka High Courts, thus we do not deem it fit to disagree with judgment of this Court and refer the matter to Larger Bench. ........."
21. Shri O.P. Bisht, Learned Authorised Representative appearing for the Department has, however, placed reliance upon the decision of a Learned Member of the Tribunal in Bharat Heavy Electricals Ltd., wherein it has been held as follows :
Learned Departmental Representative draws "4. the attention of the Bench to the judgment of the Larger Bench of the Hon'ble High Court of Bombay in the case of Gauri Plasticulture Pvt. Ltd. [2019-TIOL-1248-HC-MUM-CX-LB] on this issue in which questions framed by the Hon'ble Larger Bench were as follows :
"(a) Whether cash refund is permissible in terms of clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 where an assessee is unable to utilize credit on inputs?
(b) Whether by exercising power under Section 11B of the said Act of 1944, a refund of unutilised amount of Cenvat credit on account of the closure of manufacturing activities can be granted?
(c) Whether what is observed in the order dated 25th January, 2007 passed by the Apex Court in Petition for Special Leave to Appeal (Civil) No. CC 467 of 2007 (Union of India v. Slovak India Trading Company Pvt. Ltd.) can be read as a declaration of law under Article 141 of the Constitution of India?"
and they were answered as follows :
"40. As a result of the above discussion, we answer the questions of law framed above as (a) and (b) in the negative. They have to be answered against the assessee and in favour of the Revenue. Questions (a) and (b) having been answered accordingly, needless to state that the order of the Hon'ble Supreme Court in the case of Slovak India (supra) cannot be read as a declaration of law under Article 141 of the Constitution of India."
5. Per contra, Learned Counsel for the appellant relies on the judgment of the Hon'ble High Court of Madras in the case of Sutherland Global Services Pvt.
15E/10199/2023-DB Ltd. [2019 (11) TMI 278 - Madras HC] to assert that the accumulated credit of EC, SHEC & KKC does not lapse on switchover to the GST regime and could be carried forward as credit under GST.
6. I have carefully considered the judgments relied upon by the both sides. The judgment of the Larger Bench of the Hon'ble High Court of Bombay was precisely on the point as to whether the assessee can get cash refund of Cenvat credit which they were not able to utilize and it was answered in negative. The Hon'ble High Court of Madras was examining a different issue as to whether the precision of the credit of EC, SHEC & KKC into the new GST regime was permissible or otherwise. The Hon'ble High Court of Madras has not dealt with the issue of cash refund of unutilized Cenvat credit which is the question in dispute. In view of the above, I find that there is no legal provision under which the assessee's appeal could be entertained."
22. The aforesaid decision of a Learned Member is contrary to the Division Bench judgment of the Tribunal in Bharat Heavy Electricals and was also distinguished by the Tribunal in Kirloskar Toyota.
23. Learned Authorised Representative of the Department also placed reliance upon the decision of the Rajasthan High Court in Banswara Syntex Ltd. The Rajasthan High Court observed as follows :
"22. Even while amending the Rules of 2004 and substituting the proviso to Rule 3(7)(b) of the Rules of 2004, despite dispensing with the Education Cess and Secondary and Higher Secondary Education Cess, the Central Government has not thought it appropriate to provide for refund of the amount of such Cess, lying unutilized. In this view of the matter, in our considered view, the rule making authority has consciously not provided for refund of Cenvat credit.
23. It is noteworthy that an assessee is entitled to take Cenvat credit in respect of the inputs, immediately on their arrival in his factory or premises as provided in Rule 4 of the Cenvat Credit Rules, 2004. Hence, it is the Cenvat Credit Rules, 2004, which bestows upon an assessee, a right to claim credit of duty or cess paid on its inputs or input services. Such right accrues, fructifies and crystallizes on the date of procurement of the goods or services, but the same is available only to the extent of availing credit of such tax, in accordance with the existing conditions and provisions prevailing on that date.
24. In other words, Cenvat credit lying in an assessee's account creates an infallible and indefeasible right, which in the present case is indispensable and undeniable; however, to the extent of making payment of the corresponding cess, if any, payable on or after that date, as categorically stipulated in 1st and 2nd proviso to Rule 3(7)(b) of the Cenvat Credit Rules, 2004.
25. Since the Cenvat Credit Rules, the repository of rights of an assessee to avail credit of the duty or other sums paid on inputs does not entail or even envisage refund of such credit in cash and encashment cannot be claimed as a matter of course. It can also not be asserted that an assessee is entitled to or has an ingrained or vested right to claim refund of Education Cess and Secondary and Higher Secondary Education Cess or any other duty paid in accordance with the law de hors the Cenvat Credit Rules, 2004. Provisions as enacted in the form of Section 11B of the Act of 1944 or other provisions are of little avail to the assessee, as they do not even provide for availment of credit of the duty, much less refund or its payment in cash.16
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26. The judgment in case of SRD Nutrients Private Limited (supra) cited by Learned Counsel for the appellant-assessee has no bearing on the issue at hands, as the facts on record and question posed for consideration before us are entirely different from the facts and issues, which were involved in the case before Hon'ble the Supreme Court. The said judgment of Hon'ble the Apex Court simply lays down that Education Cess as well as Secondary and Higher Secondary Education Cess are a part of Excise duty. This position of law perhaps cannot be disputed, even the authorities below have not denied claim of refund on such count; they have rather treated the Education Cess and Secondary and Higher Secondary Education Cess to be a duty under the Act of 1944, even while rejecting the assessee's claim.
27. In view of the discussion foregoing, we are of the considered opinion that the Tribunal has committed no error of law in holding that the appellant cannot claim cash refund or encashment of the unutilized and unavailed amount of Education Cess and Secondary and Higher Secondary Education Cess, lying in its credit."
24. It is, therefore, seen that there are conflicting decisions of the Karnataka High Court and the Punjab and Haryana High Court on the one hand and the Rajasthan High Court on the other hand. The decision of the Karnataka High Court in Slovak India was affirmed by the Supreme Court. It would, therefore, be appropriate to follow the view taken by the Karnataka High Court and the Punjab and Haryana High Court.
25. Learned Authorised Representative for the Department also placed upon the decision of the Delhi High Court in Cellular Operators Association. This judgment was rendered in a Writ Petition that had been filed for quashing the notification dated 29- 10-2015 and for a direction that the credit accumulated on account of cess should be allowed to be utilised for payment of service tax leviable on telecommunication services. The submissions of the petitioner was that the unutilized amount of cess, after it was exempted w.e.f. 1-3-2015, should be permitted to be utilized for payment of tax on excisable goods and taxable services as it was subsumed in the Central Excise duty which had been raised in 2015. The High Court rejected this contention.
26. In the present case, the plea of the appellant is not for adjustment of the credit on cess amount against payment of excise duty or service tax, but it is for refund of credit accumulated on account of payment of tax on cess. This decision would, therefore, not help the respondent.
27. Learned Authorised Representative also placed reliance upon the notification dated 7-12-2015 issued by CBE & C to contend that a policy decision had been taken not to allow utilisation of accumulated credit of cess, after cess had been phased out and it is reproduced below :
"Discussion & Decision The conference after discussion and briefing from the officers from the Board noted that it was Government conscious policy decision to withdraw the Education Cess and Secondary and Higher Education Cess. It is a policy decision to not allow utilization of accumulated credit of education cess and secondary and higher education cess after these Cesses have been phased out. As these Cesses have been phased out and no new liability to pay such Cess arises, no vested right can be said to exist in relation to the accumulated credit of the past. The rule and notifications as they exist need to be followed and do not need any amendment.17
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28. The aforesaid policy contained in the notification dated 7-12-2015 is clearly contrary to the decisions of the High Courts and the Tribunal referred to above and, therefore, cannot be come to the aid of the Revenue.
29. It needs to be noted that Cenvat credit avail is a vested right as has held by the Supreme Court in Eicher Motors and Samtel India.
30. The appellant is, therefore, clearly entitled to the refund of the balance amount of credit of cess and the decision to the contrary taken by the Commissioner (Appeals) cannot be sustained. The order dated 12-6-2019 passed by the Commissioner (Appeals) is, therefore, set aside and the appeal is allowed with consequential reliefs, if any.
4.6 In view of the above judgments, the appellant, being also on the same footing, claiming the refund of accumulated ADE (TTA) are eligible for refund.
5. As per above discussion and finding which is supported by various judgments, we hold that the appellant are eligible for the refund of accumulated Cenvat credit of ADE (TTA) in terms of Section 142 of the CGST Act, 2017 read with Section 11 B of Central Excise Act, 1944.
Accordingly, the impugned order is set aside. Appeal is allowed with consequential relief.
(Pronounced in the open court on 02.04.2024) (Ramesh Nair) Member (Judicial) (C L Mahar) Member (Technical) KL