Custom, Excise & Service Tax Tribunal
Cce, Hyderabad vs Oia No.76/2010 (H-Iv)Ce Dt. 10/08/2010 on 5 August, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench DB Court I Appeal No. Appellant Respondent
Impugned Order No. E/706/2010 CCE, Hyderabad M/s. HBL Power Systems Ltd.
OIA No.01&02/2010 (H-IV)CE dt. 06/01/2010 E/707/2010 CCE, Hyderabad M/s. HBL Power Systems Ltd.
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E/CO/152 & 153/2010 M/s. HBL Power Systems Ltd.
CCE, Hyderabad
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E/2409/2010 M/s. HBL Power Systems Ltd.
CCE, Hyderabad OIA No.76/2010 (H-IV)CE dt. 10/08/2010 For approval and signature:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Honble Shri Madhu Mohan Damodhar, 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?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordship wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
Appearance Shri Y. Srinivasa Reddy, Advocate for the assessee.
Shri H.M. Dixit and Shri Ajit Kumar, Asst. Commissioners (ARs) for the Department.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Honble Shri Madhu Mohan Damodhar, Member(Technical) Date of Hearing:20/05/2016 Date of decision: FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The facts of the case are:
a. The assessee is a manufacturer of Nickel Cadmium Pocket Plate Batteries falling under Chapter 85 of the first Schedule to the Central Excise Tariff Act, 1985. They filed a refund claim for Ra 1,05,82,951/- with the jurisdictional Deputy Commissioner in terms of Rule 5 of the Cenvat Credit Rules, 2004 for the period 2008-2009, quarter wise on 14-05-2009 and subsequently filed a revised claim on 23.07.2009 for Rs1,49,591/-.
b. Vide Orders-in-Original No.57/2009 (R) dated 12.08.2009 and 63/2009 (R) dated 08.10.2009, the Deputy Commissioner of Central Excise, Hyderabad-K Division rejected the claim on the following grounds:
i. For the first three quarters i.e April to December 2008, the Cenvat credit taken is less than the Cenvat credit utilised whereby there is no accumulation of credit at all.
ii. For the quarter January to March, 2009, though there is an accumulation of credit, the same cannot be attributed to export clearances since the DTA clearances are more than thrice the export clearances and the question of the assessee not being able to utilize such accumulated credit for DTA clearances, does not arise at all. Hence, the assessee is very much in a position to utilize the input credit or input service credit.
iii. The value of DTA clearances is higher than the value of export clearances during all the four quarters of the financial year 2008-09 due to which accumulation of Cenvat Credit on account of export clearances and the assessee not being able to utilize the same for domestic clearances is not correct.
iv. The refund claim for Rs.1,11,700/- for the first quarter i,e April, 2008 to June, 2008 is time barred as the claim was filed on 23.07.2009.
c. Aggrieved by the above orders, the assessee preferred appeal to the Commissioner (Appeals) on the following grounds:
i. The findings of the lower authority are extraneous to the provisions of Rule 5 of the Cenvat Credit Rules, 2004 and Notification No.5/2006 CE(NT) dated 14.3.06.
ii. Reliance is placed on the decision of the Honble Tribunal in the case of CCE Jaipur-II Vs Bhilwara Spinners and lspat Industries Ltd in support of the contention that refund is available to them.
iii. The lower authority has tried to tide over the decision in Pee Vee Textiles on the reason that there were substantial exports in the said case whereas in the present case the DTA sales are more. This reasoning is baseless as the said case law does not contain even a whisper about substantial quantity of exports.
d. Vide Order-in-Appeal No.01&02/2010 (H-IV) CE dated 06.01.2010, the Commissioner (Appeals) held that the assessee is eligible for the refund sought by them and directed the lower authority to grant the same amounting to Rs.1,48,47,891/- (excluding the amount of Rs.1,11,700/- which is time barred out of their original claim of Rs. 1,49,59,591/-). However, he upheld the order of the lower authority rejecting the claim of Rs.1,11,700/- for the period April-June 2008 on limitation of time.
e. Aggrieved by this Order, Dept has filed appeal E/706-707/2010, on the following main grounds:
i. The Commissioner (Appeals) in Para 7 of the Order-in-Appeal held that Rule 5 of the Cenvat Credit Rules, 2004 provides for refund of credit lying unutilized and it does not envisage any restriction on account of more DTA clearances. However, Sl no.2 (a) of Notification no.5/2006- CE (NT) dated 14-03-2006 issued under the Rule 5 of the Cenvat Credit Rules, 2004, prescribes that the average export clearances of final products or the output services in value terms is fifty percent or more of the total clearances of final products or output service, as the case may be, in the preceding quarter in respect of all the four quarters for the period 2008-2009 ii. The Commissioner (Appeals) in Para 7 of the Order-in-Appeal further held that Rule 5 of the Cenvat Credit Rules, 2004 grants a substantive right to the assessee for obtaining refund of accumulated credit if the same cannot be adjusted for any reason. However, the said Rule does not grant any substantive right but it is a beneficial piece of legislation intended to provide benefit subject to certain conditions.
iii. The Commissioner (Appeals) in the said Para 7 of the Order-in-Appeal further held that the analysis as to how much credit was taken during the month/quarter, how much was utilised during the month/quarter ignoring the opening balance of accumulated credit as was done by the lower authority in the impugned order is not permissible. The question of considering opening balance or closing balance does not arise when the conditions prescribed for granting the refund are not satisfied.
iv. The rationale of the case laws relied upon by the Commissioner (Appeals) cannot be applied to the present case as the facts and circumstances are entirely different.
f. In the meantime, the aforesaid orders in Appeal No.01 and 02/2010 both dated 06-01-2010, were acted upon by the Assistant Commissioner who passed a de novo Order-in-Original No.17/2010 dated 13-04-2010 and sanctioned Rs.92,27,749/- citing following reasons;
i. Time barred amount of Rs.1,11,700/- has been reduced from total claim;
ii. Irregularly availed credit of Rs.4,38,460/- on service tax amount paid towards outward freight; and iii. Based on the appellants letter bearing No.HBL/SPET/ITD/CE-REFUND/2010-11 dt. 10.4.2010, wherein they requested to sanction Rs.1,02,68,867/- instead of their original claim of Rs.1,48,47,891/- in view of the re-quantification made by them consequent to recent budgetary changes made in the Rule of Cenvat Credit Rules,2004 read with Notification No.5/2006-CE (NT) dt.14.3.2006.
g. The assessee once again preferred an appeal to the Commissioner(Appeals), who vide an Order-in-Appeal No.76/2010 dated 10-08-2010 upheld the order of Asst Commissioner and dismissed the appeal. Aggrieved by this order, the assessee has filed the related appeal E/2409/2010.
2. During the course of the hearing the Ld AR H.M. Dixit appearing on behalf of the department reiterated the grounds of appeal and stressed that as required under notification No.5/2006 CE (NT) dated 14.03.2006, average export clearances of final products in value terms should be 50% or more of the total clearances of final products in the preceding quarter. In the instant case export value is less than 50% of the total clearances of final products in respect of all the four quarters for the period 2008-09.
3.1. On behalf of the assessee the ld. counsel Sri Y.S. Reddy made the following main counter arguments:
i. The appellate authority in Order-in-Appeal dt. 06/01/2010 had rightly held that there is no restriction in Rule 5 of CCR 2004 on account of DTA clearances. A perusal of the Rule makes this clear. The reference to S.No. 2(a) of Notification No.5/2006 CE(NT) dt. 14/13/06 and the averment that instant case the export value is less than 50% of the total clearances of the final products in the preceding quarter in respect of all the quarters for the period 2008-09 are totally irrelevant and misleading. The said S.No. 2(a) of Notification No.5/2006 CE(NT) dt.14/3/2006 specifies the circumstances in which a claim can be made once in a month while normally such claim can be made only once in a quarter. They were filing the refund claims on quarterly basis only as it does not fulfil the conditions of S.No. 2(a) of Notification No.5/2006 CE(NT).
ii. The grounds on which the adjudicating authority rejected the claim were thoroughly examined by the Commissioner Appeals and elaborately brought out in the impugned order. As such, the averment that the refund claim was rightly rejected as the conditions prescribed for granting the refund were not satisfied is nothing but a futile swan song.
iii. He also submitted the case laws on the issue at hand which are in their favor.
3.2. In respect of their own appeal No.E/2409/2010, the ld. Counsel made the following main submissions:
i. The Commissioner erred in coming to a conclusion that notification No.5/2006 CE (NT) dated 14/3/2006 read with Notification No.7/2010 CE (NT) dated 27.02.2010 stipulated that Cenvat Credit availed in the manufacture of the exported goods has to be sanctioned subject to formula prescribed therein. The Commissioner failed to take note of the submission that the formula is applicable only for calculating the refund admissible in respect of input service credit.
ii. Having erred in misrepresenting the relevant notifications the Commissioner further erred in supporting the sanction of restricted amount of refund contrary to the orders of the previous commissioner appeals.
iii. The Commissioner failed to notice that the retrospective change had only widened the scope of input & input service and that the prospective changes amended only the Annexure in Form-A to Notification No. 5/2006 CE(NT) dt. 14.03.2006 and none of these changes justify recalculation and reduction of the refund ordered to be sanctioned.
4. We have heard both sides and gone through the records of the case. Before entering into the analysis of the issue, it would be worthwhile to extract the relevant portions of Notification No. 5/2006-CE (NT) dated 14.03.2006 as below:
In exercise of the powers conferred by rule 5 of the CENVAT Credit Rules, 2004 (hereinafter referred to as the said rules), and in supercession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 11/2002-Central Excise (N.T.), dated 1st March, 2002, published in the Gazette of India Extraordinary, vide number G.S.R. 150(E), dated 1st March, 2002, the Central Government hereby directs that refund of CENVAT credit shall be allowed in respect of :
(a) input or input service used in the manufacture of final product which is cleared for export under bond or letter of undertaking;
(b) input or input service used in providing output service which has been exported without payment of service tax, subject to safeguards, conditions and limitations, set out in the Appendix to this notification.
Appendix
1.?The final product or the output service is exported in accordance with the procedure laid down in the Central Excise Rules, 2002, or the Export of Services Rules, 2005, as the case may be.
2.?The claims for such refund are submitted not more than once for any quarter in a calendar year Provided that where, -
(a) the average export clearances of final products or the output services in value terms is fifty percent or more of the total clearances of final products or output services, as the case may be, in the preceding quarter; or
(b) the claim is filed by Export Oriented Unit, the claim for such refund may be submitted for each calendar month.
3.?The manufacturer or provider of output service, as the case may be, submits an application in Form A annexed to this notification to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, in whose jurisdiction, -
(a) the factory from which the final products are exported is situated, along with the Shipping Bill or Bill of Export, duly certified by the officer of customs to the effect that goods have in fact been exported; or
(b) the registered premises of the service provider from which output services are exported is situated, along with a copy of the invoice and a certificate from the bank certifying realization of export proceeds.
4.?The refund is allowed only in those circumstances where a manufacturer or provider of output service is not in a position to utilize the input credit or input service credit allowed under rule 3 of the said rules against goods exported during the quarter or month to which the claim relates (hereinafter referred to as the given period).
5.?The refund of unutilised input service credit will be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates i.e. Maximum refund ( Total CENVAT credit taken on input services during the given period W export turnover w Total turnover. Illustration : If total credit taken on input services for a quarter = Rs. 100 Export turnover during the quarter = Rs. 250 Total turnover during the quarter = Rs. 500 Refund of input service credit under Rule 5 of the CENVAT Credit Rules, during the quarter ( 100*250/500 i.e. Rs. 50. Explanation : For the purposes of condition no. 5, -
1. Export turnover shall mean the sum total of the value of final products and output services exported during the given period in respect of which the exporter claims the facility of refund under this rule.
2. Total turnover means the sum total of the value of, -
(a) all output services and exempted services provided, including value of services exported;
(b) all excisable and non excisable goods cleared, including the value of goods exported;
(c) The value of bought out goods sold, during the given period.
5. From the above it is clear that in the ordinary course, claim for refund can be submitted only once in every quarter of the calendar year. However, the notification does not any where mandate or require that for all such quarterly claims, average export clearances of final products in value terms should be 50% or more of the total clearances of the final products in the preceding quarter. In fact, the only important conditionality with respect to refund of Cenvat credit in clause (b) of the notification is that it shall be allowed only in respect of refund of input or input service used in manufacture of final products which is cleared for export under bond or letter of undertaking. The notification only qualifies that in cases where average export clearances of final products in value terms should be 50% or more of the total clearances of the final products in the preceding quarter, or, claim is filed by an EOU, the claim for such refund are required to be submitted for each calendar month.
This being so, we have to say that the Commissioner (Appeals) is correct in finding that there is no stipulation in the notification that correlation is to be made between inputs used and the goods exported. So also, it does not envisage any restriction on account of DTA clearances being more than export clearances.
6. This view finds sustenance in the case of Idol Textiles Ltd Vs CCE Thane I, [2007(217) ELT 299 (Tri-Mum)], where the Tribunal has held that Rule 5 of CCR 2004 being a beneficiary piece of legislation, refund of unutilized credit being a substantive right, central excise officers have no jurisdiction to curtail it and find reason for non adjustment. The relevant portion of the judgment is reproduced below:
We agree with the ld. Advocate appearing for the appellant that the provisions of Rule 5 relating to refund of Modvat credit accumulated in the records on account of their non-utilisation for the exported goods is a beneficiary piece of legislation, the refund arising on account of the same cannot be denied being a substantive right of the citizen. The wording of Rule 5 read with Rule 3 are very clear providing for refund of accumulated Modvat credit if the same cannot be adjusted for any reason. As such the only condition in the said Rule is non-utilisation of the credit and no-jurisdiction vests in the Central Excise officer to find out the reason for such non-adjustment. The use of the expression that where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount is an unlimited expression and cannot be narrowed or curtailed down by the Departmental authorities. It can be noticed that the issue involved in this case is squarely covered the decision of the Division Bench in the case of Navbharat Industries (supra). Accordingly, in the facts and circumstances of the case, respectfully applying the ratio of the decision of Division Bench in the case of Navbharat Industries (supra) the impugned order dated 22-8-2005 is set aside and the appeal is allowed with consequential relief, if any.
The same view is reflected in a plethora of other judgments on the same issue.
7. In view of these discussions, no infirmities are found in the Orders in Appeal 01/2010 and 02/2010 dated 06.01.2010, and in consequence the Department appeals No.E/706/2010 and No.E/707/2010 do not contain any merit and are liable to be dismissed, which we hereby do.
8. With regard to assessee Appeal No.E/2049/2010, the assessee is aggrieved with the order of Commissioner (Appeals) No. 76/2010 dated 10.08.2010 upholding order of lower authority who restricted the amount of refund amount to Rs 92,27,749/-for the following reasons:
* Out of the refund claim of Rs. 1,49,59,591/ refund of credit availed in the period prior to the quarter has been claimed , eligibility of refund amount worked out based on proposed changes [retrospective changes] in notification No.7/2010-CE dated 27.02.2010, comes to Rs. 97,77,909/-
* Further amount of Rs1,11,700/- is time barred out of their original claim as held by Commissioner (Appeals) in his de novo order No.01 and 02/2010 dated 06-01-2010.
* Further amount of Rs.4,38,460/- of Cenvat credit constitutes irregularly availed credit on outward freight.
* Based on these calculations, eligible credit of 92,27,749/ has been arrived.
9. From the foregoing discussions, we find that the lower authority has correctly arrived at the eligible amount of refund that can be sanctioned; in consequence, the impugned Order in Appeal dated 10.08.2010 upholding order of lower authority does not suffer from any legal impropriety and therefore does not require any interference. Hence the appeal No.E/2409/2010 of assessee requires to be dismissed, which we hereby do.
10. The appeals E/706-707/2010 and E/2409/2010 are disposed of in above terms. The cross objections No.E/CO/152 & 153/2010 filed by assessee are disposed of accordingly. (Pronounced in open court on ..) MADHU MOHAN DAMODHAR MEMBER(TECHNICAL) SULEKHA BEEVI C.S. MEMBER(JUDICIAL) Raja.
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