Custom, Excise & Service Tax Tribunal
Balaji Prints Ltd vs Cce Thane I on 29 August, 2019
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH - COURT NO. 4
EXCISE APPEAL NO: 1414 of 2010
[Arising out of Order-in-Appeal No: SB/59/Th-I/2010 dated 28th April 2010
passed by the Commissioner of Central Excise (Appeals), Mumbai Zone - I.]
Idol Textile Ltd ... Appellant
Plot No. D/1/2 MIDC, Dombivli, Dist: Thane
versus
Commissioner of Central Excise ...Respondent
Thane - I, 4 Floor, Navprabhat Chambers, th Ranade Road, Dadar West, Mumbai - 400 028 WITH EXCISE APPEAL NO: 1415 of 2010 [Arising out of Order-in-Appeal No: SB/58/Th-I/2010 dated 28th April 2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone - I.] Balaji Prints Ltd ... Appellant Plot No. C-21/PART, MIDC, Phase - I Dombivli, Dist: Thane versus Commissioner of Central Excise ...Respondent Thane - I, 4 Floor, Navprabhat Chambers, th Ranade Road, Dadar West, Mumbai - 400 028 APPEARANCE:
Shri None for the appellant Shri Anil Choudhary, Deputy Commissioner (AR) and Shri NN Prabhudesai, Superintendent (AR) for the respondent CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE DR SUVENDU KUMAR PATI, MEMBER (JUDICIAL) FINAL ORDER NO: A/86495-86496/2019 E/1414 & 1415/2010 2 DATE OF HEARING: 08/04/2019 DATE OF DECISION: 29/08/2019 PER: C J MATHEW In this dispute of M/s Idol Textile Ltd and M/s Balaji Prints Ltd, the issue for determination is the legality and propriety of the rejection of claim for refund of ₹ 24,72,465 and ₹ 12,40,173/- respectively by the competent authority as upheld by Commissioner of Central Excise (Appeals), Mumbai Zone - I in order-in-appeal no. SB/58/Th-I/2010 dated 28th April 2010.
2. The claims pertained to the balance in the CENVAT credit account that remained unutilized upon closure of business and surrender of registration certificate under Central Excise Rules, 2002.
According to the appellants herein, the unutilized credit are duties of central excise paid in cash and no different from similar unutilized balance in the 'personal ledger account'.
3. None appeared for the appellants.
4. Learned Authorised Representative places reliance on the decision of the Tribunal in Voltas Ltd v. Commissioner of Central Excise [2018-TIOL-3092-CESTAT-MUM]. A number of other precedent decisions of the Tribunal on similar lines were also referred to.
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5. In the written submission of the Learned Counsel for the appellant, reliance has been placed on the decision of the Tribunal in Commissioner of Customs v. Bombay Burmah Trading Corporation Ltd [2005 (190) ELT 40 (Tri. Del.)], Commissioner of Central Excise, Ahmedabad - I v. Arcoy Industries [2004 (170) ELT 507 (Tri.Mumbai)], Gauri Plasticulture (P) Ltd v. Commissioner Central Excise, Indore [2006 (202) ELT 199 (Tri.-LB)], AG Export Industries v. Commissioner of Central Excise, Bangalore [2007 (212) ELT 421 (Tri.Bang.)] as well as that of the Hon'ble High Court of Karnataka in Union of India v. Slovak India Trading Co Pvt Ltd [2006 (201) ELT 559 (Kar.)].
6. It is seen that the Tribunal, in re Bombay Burmah Trading Corpn Ltd and in re Arcoy Industries, was considering the appeal of Revenue against the sanction, in cash, of refund of duties collected without authority of law and relief had been granted even though collected through debit of the MODVAT/CENVAT credit account. In these, as well as that of the Larger Bench in re Gauri Plasticulture (P) Ltd, it has been held that cash refund is not precluded even if duty was not paid in cash. All these pertained to ongoing business where the discharge of duty liability itself was in dispute. The present proceedings arise, not from discharge of duty liability on the part of appellant but of credit taken on discharge of duty liability by their suppliers.
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7. The decision of the Hon'ble High Court of Karnataka in re Slovak India Trading Co Pvt Ltd, cited by appellants, was considered by a Larger Bench of the Hon'ble High Court of Bombay in Gauri Plasticulture (P) Ltd v. Commissioner of Central Excise, Indore et al [2019-TIOL-1248-HC-MUM-CX-LB], arising from a reference owing to disagreement with an earlier decision of the Hon'ble High Court in Commissioner of Central Excise v. Jain Vanguard Polybutylene Ltd [2010-TIOL-911-HC-MUM-CX], and it was held that '30. Prior to such substitution, we have not seen anything in Rule 5 permitting refund of un-utilised credit. We are not dealing with a situation or case of a manufacturer or producer of final products seeks to claim Cenvat Credit of the duty paid on inputs lying in stock or in process when the manufactured or produced goods cease to be exempted goods or any goods become excisable (see Rule 3(2) of the Cenvat Credit Rules, 2004). Thus, refund of Cenvat Credit is permissible where any input is used for the final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export. In the scheme of the rules, therefore, what is sought by the assessee is not permissible. Thus, the attempt by the assessee to claim refund of un- utilised Cenvat Credit cannot be upheld. Merely because the inputs were lying unutilised or were capable of being utilised, but the manufacturing activities came to a stand still on account of closure of the factory would not enable the assessee to claim refund of Cenvat Credit. That such credit can be availed of provided the inputs are used and not otherwise is clear from the scheme of the rules to which we have made a detailed reference in the foregoing paragraphs.
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31. The sheet anchor of Mr.Patil's arguments is the judgment of the earlier Division Bench of this court and that is based on the view taken by the High Court of Karnataka. The High Court of Karnataka has not discussed the scheme of Cenvat Credit in details. The South Zonal Bench of the CESTAT in Slovak India (supra) considered the case of refund of un- utilised Cenvat Credit on account of closure of the factory of the said Slovak India. The Commissioner (Appeals) took the view that there is no provision in Rule 5 of the Cenvat Credit Rules to grant cash refund. After being approached, what the CESTAT observed is that there is a consistent view taken by the tribunal that such claim is eligible and the assessee can seek refund when it goes out of the Modvat scheme (predecessor of Cenvat) or the unit is closed. This is the reasoning in the tribunal's order and though the appeal of the Revenue before the High Court of Karnataka at Bengaluru raised several grounds and pleas, the High Court referred to the arguments and in para 4 of its order, reproduced Rule 5 of the Cenvat Credit Rules, 2002. In para 5, the reasoning of the High Court of Karnataka reads thus:-
"5. There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for the purpose of rejection as rightly rules by the Tribunal. The Tribunal has noticed that various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. In these circumstances, we answer all the three questions as framed in para 17 against the Revenue and in favour of the assessee."
32. Thus, the High Court of Karnataka took the view that there is no express prohibition in terms of Rule 5 and that rule refers to a manufacturer. Thus, even if there is no manufacture in the light of the closure of the factory, the assessee being a manufacturer is construed as one coming E/1414 & 1415/2010 6 out of the Modvat scheme but still eligible for cash refund. The factory is closed and the inputs were not used in the manufacture of a final product is, thus, overlooked. So long as the assessee is a manufacturer even if his factory is closed, the input credit was available, is thus the view. Hence, the refund was held to be permissible.
33. When the matter was carried to the Hon'ble Supreme Court by the Revenue, the Hon'ble Supreme Court noted the concession of the learned Additional Solicitor General. That concession is that the views of the tribunals to the aforesaid effect have not been appealed against by the Revenue/Union of India. Pertinently, there is no concession by the Additional Solicitor General of India on the point of law. Hence, going by this concession on fact, the Special Leave Petition of the Revenue was dismissed. This, by no stretch of imagination, is a confirmation or approval of the view taken by the South Zonal Bench of the Tribunal at Bengaluru or the High Court of Karnataka. 34. Pertinently, when the matter was brought before this court in the case of Jain Vanguard (supra), this court, relying upon the judgment in the case of Slovak India (supra) and the order in the Special Leave Petition, dismissed the Revenue's appeal. The aggrieved Revenue, carried the matter to the Hon'ble Supreme Court and the order passed on that Special Leave Petition reads as under:-
"Delay condoned.
We find no reason to interfere with the impugned order in exercise of our discretion under Article 136 of the Constitution. The Special Leave Petition is, accordingly, dismissed leaving the question of law open."
35. The Special Leave Petition was dismissed, but the question of law was expressly kept open. It is in these circumstances that we are not in agreement with Mr.Patil that the issue or the controversy before us stands concluded E/1414 & 1415/2010 7 against the Revenue. The question of law was still open to be raised and equally examined by us. There is no question of judicial discipline in such matters. The counsel relied upon this principle of judicial discipline by inviting our attention to the judgment of the Hon'ble Rajasthan High Court in the case of Welcure Drugs and Pharmaceuticals Ltd. vs. Commissioner of Central Excise, Jaipur reported in 2018 (15) GST Law Times Page 257 = 2018-TIOL-380-HC- RAJCX. There, the Hon'ble Rajasthan High Court concluded that the Revenue cannot seek to urge before that High Court that the view taken by four different High Courts approving the order of CESTAT has lost its persuasive value, particularly when the Special Leave Petitions against the view taken by four different High Courts were either not filed or filed but not entertained. Thus, the tribunals have taken a consistent view and the Revenue could not succeed in having that set aside. It is in these circumstances, the Rajasthan High Court negatived the contention of the Revenue that the tribunal under the jurisdiction of that High Court could have distinguished the orders and judgments of its Benches. That was found to be contrary to the judicial discipline. It is in these circumstances so also when there was a larger Bench view of the tribunal having a binding effect, that the principle of judicial discipline was pressed into service.
36. After the view taken in Steel Strips Ltd. (supra) and which was also fairly brought to our notice, itis evident that this principle has no application to the facts and circumstances before us.' The non-applicability of the decision of the Hon'ble High Court of Karnataka to the present dispute in the light of the decision of the Hon'ble High Court of Bombay would render this dispute to be identical to that in re Voltas Ltd in which the legal and schematic E/1414 & 1415/2010 8 aspects have been examined by the Tribunal to decide that '6. It would appear from these decisions that neither assures a precedent to be followed without examining the circumstances of eligibility. Indeed, the Hon'ble High Court of Karnataka did, in re Slovak India Trading Co Ltd, emphasise the importance of scrutinising the circumstances of each claim for refund and directed that a disposal solely on that one statutory exclusion would not suffice. Following that prescription, it is necessary to examine the circumstances in which this claim has been made. Before so doing, the CENVAT credit and the implication of allowing the claim preferred by the appellant must also be subject to examination.
7. CENVAT credit, the accumulated pool of taxes and duties collected on supply of input services and inputs from an assessee, was in vogue till recently as the successor scheme of MODVAT credit for discharge of duty liability on outputs. The erstwhile Central Excise Rules, 2002 by rule 8(2) deemed goods to have been cleared under authority of law if discharged by payment or by utilisation of credit; this flows from the authority to levy and collect duty of excise in section 3 of Central Excise Act, 1944.
8. Thus the scheme, with the avowed objective of preventing the cascading effects of tax, allows discharge of tax liability from two sources: the cash deposit known as 'account current' and from the credit of the tax already collected from the production chain known as 'CENVAT credit account' with the latter as an option to be used fully or partially in each instance. This is also in pursuance of the constitutional power to tax manufacture and provides the mechanism to restrict the actual payment to the contribution of an assessee to the production chain. At the root is the E/1414 & 1415/2010 9 resting of the tax burden on the ultimate consumer, which could either be the entity that is not a registered assessee or an assessee who is beyond the ambit of Central Excise Act, 1944. We are not here concerned with the former. As far as the latter is concerned, the assessee is within the authority of Central Excise Act, 1944 only to the extent that it produces excisable goods or is in possession of such goods that are yet to be cleared. Without production in process or without possession of processed goods, an assessee is not an assessee but in the same status as the ultimate consumer.
9. For that reason, if an assessee has CENVAT credit balance without any duty on which to apply it, such assessee is an ultimate consumer to the extent that duty or tax has been paid upto the preceding stage and there no scope for setting off of such credit - just as the ultimate consumer, as commonly understood, is. It is clear that legislative intent did not envisage the monetisation of CENVAT credit in the event of impossibility of utilisation. CENVAT Credit Rules, 2004 is not an exemption scheme but a contrivance to ensure that the incidence of duty or tax is borne by the ultimate purchaser of goods or service in a chain.
10. If it were an exemption scheme, entitling assessees to refund of unused accumulated credit, the CENVAT Credit Rules, 2004 would have had the authority of section 5A of Central Excise Act, 1944 and section 93 of Finance Act, 1994. The Rules are issued under section 37 of Central Excise Act, 1944 and section 94 of Finance Act, 1994 to operationalize section 3 of the former and section 66 of the latter.
11. Moreover, the conversion of credit into cash would be a refund to the buyer of the tax collected under authority of law from a manufacturer-seller. Refund in tax statute is the E/1414 & 1415/2010 10 return of a tax collected without authority of law and, hence, not validly retainable with the exchequer. Refund of such accumulated credit arising from payment of duty or tax at the stage of manufacture is tantamount to a finding that the duty or tax was collected at the preceding stage without the authority of law. That is certainly not, and can never be, the contention of the appellant.'
8. In view of the above, the appeals of M/s Idol Textile Ltd and M/s Balaji Prints Ltd lack merit and are dismissed.
(Order pronounced in the open court on 29/08/2019) (C J Mathew) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) */as2908200921082708