Custom, Excise & Service Tax Tribunal
Alfred Berg Co Pvt Ltd vs Chennai-Iii on 1 December, 2022
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
Excise Appeal No. 41842 of 2017
(Arising out of Order-in-Appeal No. 256/2017 (CXA - II) dated 22.5.2017 passed by
the Commissioner of Central Excise (Appeals - II), Chennai)
M/s. Alfred Berg & Co. Pvt. Ltd. Appellant
C-28 SIDCO
Pharmaceutical Complex Alathur
Chennai - 603 110.
Vs.
Commissioner of GST & Central Excise Respondent
Chennai North Commissionerate 26/1, Mahatma Gandhi Road Nungambakkam, Chennai - 600 034.
APPEARANCE:
Shri N. Viswanathan, Advocate for the Appellant Mrs. K. Komathi, ADC (AR) for the Respondent CORAM Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) Final Order No. 40370 / 2022 Date of Hearing : 17.10.2022 Date of Decision: 01.12.2022 The appellant is aggrieved by rejection of refund claim to the tune of Rs.2,97,007/- filed on 30.11.1998.
2. Brief facts are that the appellants are engaged in manufacture of P or P medicaments of Chapter 30 of CETA, 1985 and they were also clearing some of the products for export. They were availing MODVAT credit under Rule 57A of the erstwhile MODVAT Credit Rules on the duty paid on inputs used in the manufacture of their final products. For their MODVAT credit account, the appellants were maintaining two separate RG23A 2 E/41842/2017 Part II registers of which one register was for the amount of credit for export clearances and the other in respect of clearance for domestic market.
3. They filed a refund claim of the unutilized credit totalling to Rs.2,97,007/- which was received by the department on 21.12.1998. The claim was in regard to goods exported by them by four AR4s. In respect of three AR4s, amounting to Rs.15,300/- they claimed rebate under Rule 12(1)(a). In respect of one AR4 namely 1/98-99 dated 30.11.1998, they claimed cash refund of Rs.2,97,007/- under Ruel 57F(13) of Central Excise Rules, 1944. The claim of Rs.15,300/- was duly passed and the rebate for equivalent amount was sanctioned to them. However, in respect of other refund claim (Rs.2,97,007/-), the department was of the opinion that as the appellants were utilizing credit for payment of duty on goods cleared for home consumption, it would be possible for them to utilize the credit for payment of duty on clearances for home consumption. Accordingly, letter dated 24.3.1999 was issued by the department returning the refund claim. The appellants made a representation vide letter dated 1.4.1999 and submitted details of the claim put forward by them and contended that they are eligible for cash refund. After granting personal hearing on 9.4.1999, Order in Original No. 108/99 dated 29.4.199 was passed holding that appellant has already utilized the credit for payment of duty and that there is no balance of unutilized credit for granting refund.
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4. In the above Order in Original, it was noted by the adjudicating authority that in RG23A Part II (Export Register) the appellant had debited an amount of Rs.3,45,644/- towards the refund claim earlier sanctioned to them. Further, goods exported by them to Sri Lanka as per AR4 No. 25 to 29/95-96 on 26.12.1995 were called back since the customer had not cleared the goods. These goods were later cleared by appellant for home consumption. The appellant ought to have debited an amount of Rs.3,38,564/- in regard to these returned goods. The adjudicating authority opined that if this amount pertaining to returned goods are expunged in RG23A Part II (Export Register) then the closing balance of credit in export register as on 31.3.1999 will only be Rs.20,574/- (Rs.3,59,138/- minus Rs.3,38,564/-). It was thus held by the adjudicating authority that the MODVAT credit pertaining to the subsequent export which is claimed as refund of Rs.2,97,007/- has already been utilized by the appellant. That the remaining balance being only Rs.20,574/-, the refund claim was rejected by the original authority.
5. Against such order, the appellant filed appeal before Commissioner (Appeals). The appellant explained before the first appellate authority that they maintained two separate registers and that even after debiting the amount of Rs.3,38,564/-, there would be sufficient balance in the export register for granting refund claimed by them. The Commissioner (Appeals) after 4 E/41842/2017 appreciating the facts and evidences observed in para 5 that the adjudicating authority has fallen in error to presume that the appellant had failed to debit an amount of Rs.3,38,564/- pertaining to re-entered export goods which were subsequently cleared for home consumption. The Commissioner (Appeals) remanded the matter directing the original authority for denovo examination after issuance of a Show Cause Notice.
6. Pursuant to this remand by the Commissioner (Appeals), a Show Cause Notice dated 9.2.2000 was issued to the appellant. In para 3 of the said Show Cause Notice, details of the refund claim submitted by the appellant is stated as under:-
The Assessees have filed the rebate / refund claims on 21.12.98 in respect of the goods exported by them as detailed below:
S. No. A.R.4 No. & Date Rules under which Amount of claim the claims are filed (Rs.) (1) (2) (3) (4)
1. 1/98-99/28.07.98 12(1)(9) 11,400/-
2. 2/98-99/28.07.98 12(1)(9) 1,200/-
3. 3/98-99/30.11.98 12(1)(9) 2,700/-
4. 1/98-99/30.11.98 57F(13) 2,97,007/-
7. It is understood that the said Show Cause Notice was not taken up for immediate adjudication and the appellant had sent several letters requesting for processing of the refund claim. Pursuant to a letter dated 19.12.2014 requesting to process and pass an order in respect of the refund claim made by them, a further Show Cause Notice dated 10.3.2015 was issued to the appellant alleging that the appellant has been in silence for over 15 years and has suddenly requested for refund without furnishing any order / document warranting refund. 5
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8. The appellant filed a reply dated 4.4.2015 to the said Show Cause Notice. It was stated by the appellant that they were continuously corresponding and asking for personal hearing after remand of the matter and issuance of Show Cause Notice dated 9.2.2000. They also mentioned about the order passed by the Commissioner (Appeals). The said Show Cause Notice dated 10.3.2015 was taken up for adjudication and Order in Original No. 204/2015 dated 6.8.2015 was passed wherein the refund claim was rejected. The main reason for rejecting the refund claim is that the assessee has kept quiet for long time and has not pressed for the refund from 2000 to 2008 and then from the year 2009 - 2013. The adjudicating authority has rejected the refund claim on the ground that there is laches on the part of the appellant.
9. Subsequently, the appellant moved the Hon'ble High Court by filing W.P. No. 29132/2015 seeking direction to adjudicate the earlier Show Cause Notice dated 9.2.2000 issued to them. The writ petition was disposed by the Hon'ble High Court directing to adjudicate the Show Cause Notice dated 9.2.2000 within a period of six weeks. Thereupon, the original authority passed Order in Original No. 25/16 dated 17.2.2016 rejecting the refund claim. The claim was rejected on the ground that as per Rule 57(13) it is not necessary to allow refund if manufacturer is able to use the credit for payment of duty. That the appellant would be able to utilize the credit for payment of duty for home clearances and 6 E/41842/2017 thus it is not required to sanction cash refund in terms of Rule 57F(1) of Central Excise Rules, 1944 as it existed during the material period. The said order was appealed before the Commissioner (Appeals) who vide the order impugned herein upheld the order passed by the original authority. The relevant part of the impugned order reads as under:-
"From the above findings, it is clear that the appellant have maintained two registers for their conveniences but they have not made proper debit/credit entries in their RG23A-Part-II registers as and when goods are cleared for export or for home clearances. Instead of furnishing correct reply to the allegations, the appellant have stated that they always had excess credit in their account in respect of domestic clearances and that a wrong debit was made in the RG23Apart-II (Export) register which was later made good by debiting the same from their other account maintained for domestic clearances which itself shows that the appellant has not maintained their accounts properly. They have not produced any extract of their RG23A Part-II registers as documentary evidence that always they have excess credit in their credit account. They have not given any valid reasons for the wrong debit/credit entries in their registers. Further, the appellant has stated that they were not in a position utilize the credit for the payment of duty on the goods and hence they are eligible for refund. The Rule 57F(13) of CER, 1944, clearly states that the credit of specified duty in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export on payment of duty and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund. In the instant case, it could be noticed that the appellant is utilizing the credit for payment of duty on the goods cleared for export and as well as for home clearances and hence the appellant contention that they could not utilize the credit and were eligible for refund is not sustainable under law."
(Emphasis supplied)
10. The present appeal is filed against the said order passed by the Commissioner (Appeals) who upheld the view taken by the original authority that the appellant would be able to use the unutilized credit and therefore cash refund need not be sanctioned.
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11. The learned counsel Shri N. Viswanathan appeared and argued for the appellant. He explained that the main ground for rejecting the refund is that the appellant would be able to utilize the credit for payment of duty on finished products cleared for home consumption. He adverted to Rule 57F(13) which reads as under:-
"Rule 57F. Manner of utilisation of inputs and the credit allowed in respect of duty paid thereon ***** ****** ****** ***** Where any inputs are used in the final products which are cleared for export under bond or used in the intermediate products cleared for export in accordance with sub-rule (4), the credit of specified duty in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export on payment of duty and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitations as may be specified by the Central Government by notification in the Official Gazette"
12. The main reason for denying the credit is that the appellant could use the credit for payment of duty on home consumption. It is pointed out by learned counsel that Rule 57F(13) of Central Excise Rules, 1944 gives an option to the manufacturer to utilize MODVAT credit for payment of duty for home clearances. If for any reason, it is not possible, then the manufacturer can apply for refund. The appellant has valid reasons that they are not able to utilize the credit and therefore the refund ought to be allowed. He explained that the MODVAT credit available as on 1.4.1998 in RG 23A Part II (Export) register was Rs.8,51,002/-. Further, input credit taken during this year was Rs.3,07,432/-. So the total credit comes to Rs.11,58,434/-. The refund / rebate claim 8 E/41842/2017 pending with the department was Rs.6,57,91/- (Rs.15,300 + Rs.3,45,644 + Rs.29,707). Thus, they would any way be able to utilize credit of Rs.5,00,483/- for payment of duty on home clearances. Therefore, they would have sufficient and excess credit even if used for home clearances. It is pointed out by the learned counsel that the department had sanctioned cash refund of Rs.3,45,644/- vide their letter dated 11.9.1998. The department having considered the claim of such refunds eaerlier ought not to have denied subsequent claim stating that it is possible to utilize the credit.
13. The learned counsel relied upon the decision of the Tribunal in the case of Bishen Dye Printing & Weaving Mills Vs. CCE, Thane
- I reported in 2008 (227) ELT 608 (Tri. Mum.) to submit that refund cannot be denied stating that the accumulated credit can be utilized for payment of duty of goods cleared for home consumption.
14. The learned counsel explained that the appellant had sufficient credit in their MODVAT account. They were clearing the goods for home consumption on payment of duty and also exported goods under bond as well as on payment of duty. They availed the MODVAT credit under erstwhile Central Excise Rules and for the purpose of easily maintaining the account, they had kept two registers separately for export and domestic clearances. Thus, they had separate RG23A Part II registers, one for accounting MODVAT credit of export and the other for domestic 9 E/41842/2017 clearances. The entire confusion arose as the appellant had made some wrong debit entry in their export register instead of debiting in their domestic register. On perusal of RG23A Part II (Export Register), it would show that as on 8.1.1999, the appellant had a credit balance of Rs.7,87,065/-. Out of this, the appellant made four wrong debit entries to the tune of Rs.4,13,077/- in their export register. These debit entries ought to have been made in RG 23A Part II domestic register as it pertained to clearances on account of the home consumption. These wrong debit entries made by them in their export register to the tune of Rs.4,13,077/- was later corrected by the appellant by debiting in their domestic register. The credit balance lying as on 1.8.1999 in their domestic register was Rs.11,09,952/- by correcting the wrong entries, the balance in domestic register was brought down to Rs.6,96,815/-. Corresponding recredit entry was made by them in their RG23A Part II (Export Register) and the balance in the export register as on 1.8.1999 stood as Rs.7,72,215/-. The allegation in the Show Cause Notice that the balance in the export register is merely Rs.20,574/- is incorrect. The appellant had furnished the copies of RG23A Part II register as well as 23A domestic register pertaining during the relevant time before the authorities below.
15. Though the appellant had maintained separate registers, the MODVAT credit earned by them in terms of Rule is required to be considered as a whole and not separately. 10
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16. The view taken by the adjudicating authority that the appellant ought to have debited an amount of Rs.3,38,564/- from export register in respect of goods which had reentered is baseless. The appellant has sufficient balance in their export register to the tune of Rs.7,72,215/-. Even if an amount of Rs.3,38,564/- is debited, the balance credit in the export register would be Rs.3,03,680/-. That therefore there is sufficient balance to allow the claim. He prayed that the appeal may be allowed.
17. The learned AR Mrs. K. Komathi appeared for the department. She supported the findings in the impugned order. It was argued by her that as per Rule 57F(13), the refund need not be sanctioned in cash, if it is possible for the appellant to utilize the same for payment of duty on finished goods cleared for home consumption. During the relevant period, the appellant could use the credit and therefore refund has been rightly denied.
18. Heard both sides.
19. On perusal of facts, it is seen that the refund claim was originally returned to the appellant stating that they could use the accumulated balance credit for payment of duty on goods cleared for home consumption. The appellant approached the department to process the refund claim and pass a speaking order. Interestingly, thereupon Order in Original No. 108/199 was passed rejecting the refund holding that there is no balance to sanction refund. As per the appeal preferred by the appellant, the matter was remanded to the original authority with a direction to 11 E/41842/2017 issue Show Cause Notice and re-examine the claim. A Show Cause Notice dated 9.2.2000 was then issued. It is seen that again a Show Cause Notice dated 10.3.2015 also was issued. I fail to understand why repeated Show Cause Notices have been issued even though it is a remand by the first appellate authority. The department then opted to adjudicate the second Show Cause Notice and rejected the claim stating that there is delay on the part of the appellant to press for processing of the claim. How can the appellant be said to be at fault when the matter has been remanded by Commissioner (Appeals) directing to re-examine the matter after issuing Show Cause Notice.
20. Be that as it may, pursuant to the direction of the Hon'ble High Court, the Show Cause Notice dated 9.2.2000 was taken up for adjudication. The refund claim was rejected again observing that during the material period, the appellant was in a position to utilize the accumulated credit for payment of duty on goods cleared for home consumption. In para 12 of the Order in Original, the original authority has discussed this view in detail. It is strange that even after the remand by the Commissioner (Appeals) directing to look into the error committed by the original authority in the first round of litigation, the department has again rejected the claim contending that it is possible for appellant to utilize the accumulated credit.
21. In para 9, 10, 11, the original authority has indeed discussed as to whether there is sufficient balance for granting 12 E/41842/2017 the refund. The argument put forward by the appellant with regard to the wrong entries made by them in their separate RG23A Part II registers have also been mentioned. The learned counsel for appellant has produced the copies of the relevant part of RG23A Part II (Export) and (Domestic) registers. It is seen that they have made some wrong entries in their export register. Later, they corrected these entries to the tune of Rs.4,13,077/- by debiting in their domestic register and making the contra credit entries in their export register. There is no dispute with regard to the exports made in terms of AR4 1/98-99 dated 30.11.1998 to the tune of Rs.2,97,007/-. The whole confusion has arisen due to the wrong entries and the correction entries made by the appellant. Needless to say that both registers have to be considered as a whole. The appellant by their practice has maintained two registers which has created the confusion. Both these registers have to be taken as a whole to consider the balance credit.
22. After hearing the matter on 8.9.2022, it was posted for clarification on the side of the department as to whether there is a dispute with regard to the balance available in their register as on the date of filing the refund claim. The department has not put forward any reply or clarification. From the arguments put forward by the learned counsel for appellant and also the photocopies of the relevant part of the registers furnished by the learned counsel for the appellant, I find that the contention of the 13 E/41842/2017 appellant that there was wrong debit entry and contra credit entry made in the registers is not without substance. From the letters written by the appellant to the department, it is seen that they have produced these documents before the authorities below also.
23. After appreciating the facts and evidences placed before me, I am of the view that the rejection of refund claim is on erroneous facts and misconception of Rule 57F of Central Excise Rules, 1944. The impugned order is set aside. The appeal is allowed with consequential relief if any.
(Pronounced in open court on 01.12.2022) (SULEKHA BEEVI C.S.) Member (Judicial) Rex