Custom, Excise & Service Tax Tribunal
Neelesh Datir vs Commissioner Cgst And Central ... on 21 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 89027 of 2014
(Arising out of Order-in-Original No. Belapur/04/Taloja/R-VI/COMMR/KA/2013-14
dated 12.06.2014 passed by the Commissioner of Central Excise, Belapur)
VVF (India) Limited .... Appellants
Plot No. V-41, MIDC, Taloja
Taluk Panvel, District Raigad
Maharashtra - 410 208.
Versus
Commissioner of Central Excise & Customs .... Respondent
Belapur Commissionerate 1st Floor, CGO Complex CBD Belapur Navi Mumbai - 400 614.
(i) Excise Appeal No. 89028 of 2014 / NEELIESH DATIR;
(ii) Excise Appeal No. 89029 of 2014 / BIJU GEORGE;
(iii) Excise Appeal No. 89031 of 2014 / RUSTOM THANAWALLA;
Appearance:
S/Shri Vishal Agarwal, along with Ramnath Prabhu, Advocates for the Appellants Shri Mahesh Patil, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) FINAL ORDER NO. A/86109-86112/2025 Date of Hearing: 21.03.2025 Date of Decision: 21.07.2025 Per: M.M. PARTHIBAN These appeals have been filed by M/s VVF (India) Limited, Raigad along with its employees viz., Shri Neelesh Datir, General Manager, Exim Commercial & Indirect Taxes; Shri Biju George, General Manager & Production in-charge and Shri Rustom Thanawalla, Chartered Engineer (herein after, referred together as "the appellants", for short) assailing the Order-in-Original No. Belapur/04/Taloja/R-VI/COMMR/KA/2013-14 dated 12.06.2014 (herein after, referred to as "the impugned order") passed by the Commissioner of Central Excise, Belapur.2 E/89027 to 89029/2014
& E/89031/2014 2.1 Brief facts of the case, leading to these appeals, are summarized herein below:
2.2. The appellants herein is a 100% Export Oriented Unit (EOU) and is engaged inter alia, in the manufacture of 'fatty acids, fatty alcohols and soap noodles' falling under chapter heading 3823 and 3401 of the First Schedule to the Central Excise Tariff Act, 1985 at their factory in Taloja.
The appellants are the registered taxpayers holding Central Excise Registration No. AAACV3847RXM007 for manufacture of aforesaid finished products and for compliance with the central excise statute.
2.3 The appellants avail CENVAT credit on inputs used in the manufacture of its finished goods. Since, the appellants are engaged as a 100% EOU, they were unable to utilise the input credit of CENVAT, and in respect of unutilised CENVAT credit lying in the account, they had filed various refund claims of the accumulated CENVAT credit for the period December, 2007 to July, 2010. The details of some of such refund claims filed by the appellants which were sanctioned by the Department are given in the form of Table below:
Period for which Date of Amount Amount Order reference refund relates to claim claimed sanctioned December, 2007 04.12.2008 29,91,29,602 29,08,42,850 R/1534 to 1541/ to April, 2008 08-09 dated May, 2008 to 08.12.2008 29.12.2008 July, 2008 February, 2010 01.06.2010 1,00,31,131 1,00,31,131 R/1653/10-11 dated 29.06.2010 March, 2010 28.05.2010 1,07,34,671 1,07,34,671 R/1655/10-11 dated 30.06.2010 The orders sanctioning refund claims by the jurisdictional Assistant/Deputy Commissioner was reviewed by the Commissioner and an appeal was preferred before the Commissioner (Appeals) on the ground that the investigations carried out on similar matters indicated that the input- output ratio given by the Chartered Engineer was on average basis and not actual basis, and that the distilled fatty acid was subjected to plain fractional acid distillation and the same did not amount to manufacture, as no new commercial commodity emerged during the process. During the pendency of the appeal before the Commissioner (Appeals), demand notices were issued alleging that refund has been wrongly sanctioned to the appellants. In respect of the Orders-in-Original dated 29.06.2010 and 30.06.2010 referred above in the Table, the learned Commissioner 3 E/89027 to 89029/2014 & E/89031/2014 (Appeals) vide his order dated 29.09.2011 upheld the refund amount sanctioned by the original authority and rejected the appeals filed by the Department. On a passing reference in the said order he had stated that earlier in an Order-in-Appeal No. PKS/441-442/Bel/2010 dated 25.11.2010 passed in another case of self-same appellants, he had set aside the order of original authority sanctioning refunds for earlier period, and distinguished those cases from the case dealt by him, for upholding the sanction of refunds in the present case. The said order dated 25.11.2010 was appealed against before the Tribunal in Excise Appeal Nos. 429/2011 and 1824/2011, wherein the Tribunal had granted relief to the appellants by stating that refund of accumulated credit which is available in CENVAT account cannot be denied as refund. Further, learned advocate also stated that on the basis of order dated 29.09.2011 issued by the Commissioner (Appeals), subsequent two Show Cause Notices (SCNs) both dated 17.01.2011 were also dropped.
2.4 However on the basis of the investigation conducted by the officers of the Headquarters (Preventive) on the appellants, the Department had again initiated show cause proceedings for recovery of CENVAT credit of duty sanctioned earlier under Rule 5 of CENVAT Credit Rules, 2004 read with Section 11B of the Central Excise Act, 1944 covering the period December, 2007 to July, 2008; February, 2010 and March, 2010, totally for an amount of Rs.3,41,28,330/- along with interest under Section 11A(1) of the Central Excise Act, 1944 by invoking the extended period of time and for imposition of consequent penalty under section 11AC ibid read with Rule 26(2)(ii) of the Central Excise Rules, 2002 vide Show Cause Notice (SCN) dated 03.12.2013. In adjudication of the aforesaid SCN, learned Commissioner of Central Excise, upon examination of the various issues had confirmed the duty demands raised in the SCN, besides imposing of penalty for equal amount of duty demanded, under Section 11AC ibid read with Rule 26(2)(ii) ibid vide order dated 12.06.2014. Feeling aggrieved with the impugned order, the appellants have preferred these appeals before the Tribunal.
3. Learned Advocate appearing for the appellants had submitted that the issue as to whether the appellants are eligible to the refund of accumulated CENVAT credit has been settled in their favour by the Final Order of the Tribunal in their own case vide Excise Appeal No. 837 of 2012, 429 & 1824 of 2011, for the period November, 2008 and December, 2008. Further, he 4 E/89027 to 89029/2014 & E/89031/2014 stated that earlier the very same issue was examined by the Commissioner as well as the Commissioner (Appeals) and therefore the Department cannot reopen the same issue, by invoking the extended period for a demand of CENVAT credit refunds sanctioned to them. Therefore, he submitted that demand of CENVAT duty is not legally sustainable.
4. Learned Authorised Representative (AR) appearing for the department, on the other hand, reiterated the findings made in the impugned order and submitted that the demands are sustainable in view of the facts mentioned therein.
5. Heard both sides and perused the records of the case. We have also perused the additional written submissions in the form of paper books submitted by both sides.
6. The issue involved in this appeal is to examine whether the appellants are eligible for refund of accommodated CENVAT credit lying in their account in terms of Rule 5 of the CENVAT Credit Rules, 2004, during the disputed period of December, 2007 to July, 2008; February, 2010 & March, 2010; and whether the adjudged demands confirmed in the impugned order is legally sustainable.
7. On perusal of the records of the case, it transpires that the appellants are manufacturing the finished products under 100% EOU Scheme on account of such products being exported, the eligible CENVAT credit taken on inputs used in the manufacture of finished products could not be availed towards payment of Excise duty on such finished goods. The provisions of Rule 5 ibid provide for manufacturer(s) clearing the final product for export without payment of duty, to claim refund of the CENVAT credit accumulated in their CENVAT records. Therefore, we find that the refund claims submitted by the appellants is eligible to be considered under Rule 5 ibid.
Since, the very same issue of eligibility to refund of accumulated CENVAT credit have been examined by the jurisdictional Commissioner and the Commissioner (Appeals), the Department cannot issue demand notices by invoking extended period under the grounds of mis-declaration, suppression, mis-statement, fraud etc., 5 E/89027 to 89029/2014 & E/89031/2014 8.1 In this regard, we find that the in the case of Collector of Central Excise Vs. Chemphar Drugs & Liniments1, the Hon'ble Supreme Court has held that there should be evidential record to prove that something positive other than mere inaction or failure on the part of the manufacturer or producer, or conscious or deliberate withholding of information, when the manufacturer knew otherwise, is required to saddle the manufacturer with duty liability for the extended period. The relevant paragraph in the said judgement is extracted and given below:
"8........In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case."
In the case before us, all the issues discussed in the impugned order including those relating to the allegation of incorrect input-output ratio for manufacture of final products, distillation process whether amounts to manufacture or not, etc., have been considered earlier by the authorities below and all details were known to the department, and there is no fresh ground for invocation of extended period. In view of the above facts, and on the basis of the aforesaid Hon'ble Supreme Court judgement, we are of the considered opinion that the adjudged demands invoking extended period in the impugned order do not stand the legal scrutiny and therefore it is liable to be set-aside on this ground alone.
8.2 We further find that the above issue was examined by the Co- ordinate Bench of this Tribunal in the case of appellants themselves, for a different period in the case of VVF Limited Vs. Commissioner of Central Excise, Belapur - Final Order No. A/87442-87444/2019 dated 05.12.2019, wherein it was held that appellants are eligible for refund of CENVAT credit. The relevant paragraphs of the said Order are extracted and given below:
11989 (40) E.L.T. 276 (S.C.) 6 E/89027 to 89029/2014 & E/89031/2014
"9. The issue involved in the present appeals for consideration is whether the appellants are entitled to cash refund of accumulated CENVAT Credit availed on inputs used in the manufacture of finished goods exported under Rule 5 of the CENVAT Credit Rules, 2004 for the period October 2008 and November, 2008. It is not in dispute that the appellants received duty paid distilled fatty acid from their other unit at SION, Mumbai subjected it to further process of distillation and exported the same. They have claimed refund of accumulated CENVAT Credit paid on inputs after export of the finished goods following the laid down procedure under Rule 5 of CENVAT Credit Rules, 2004. Revenue initially sanctioned the cash refund of accumulated CENVAT Credit but latter issued a show-cause notice for recovery of the credit on the ground that the raw materials/inputs i.e. distilled fatty acid received by the appellant is since already marketable and further distillation of same does not result into 'manufacture' and accordingly, on export of the said goods, cash refund cannot be allowed. Further, since the process of distillation carried out by the appellant is continuous one and there is no one to one correlation between the inputs and export goods manufactured and cleared in a particular month, accordingly, cash refund of accumulated credit cannot be granted to the appellant.
10. As far as the issue of marketability, the appellant admittedly received duty paid distilled fatty acid and in the impugned order the learned Commissioner (Appeals) observed that the raw material is subjected to further process of distillation. The finding of the learned Commissioner (Appeals) is that the further distillation process only improves/enhances the marketability of the raw material i.e. the distilled fatty acid, hence cannot be considered that a new commodity resulted out of further distillation. The relevant Chapter Note 9 to Chapter 38 reads as under: -
"9. In relation to products of heading 3808, addition of chemicals and other ingredients like inert carriers or solvents, surface active dispersing and stabilising agents, emulsifires, wetting and dispersing agents, deodorant, masking agent, attractants and feeding stimulants to pesticidal chemicals in concentrated form, labelling or relabelling of containers intended for consumers or repacking from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumer shall amount to 'manufacture'."
In the said chapter note, it is clearly laid down that any other treatment which makes the product marketable would result into manufacture. We are of the opinion that it is an immaterial whether the product was earlier marketable and its marketability is enhanced by further process carried out by the appellant, which may comprise of the same process of distillation also. This principle has been laid down by the Hon'ble Supreme Court in Air Liquide North India Pvt. Ltd.'s case. The relevant para 13 of the judgment is reproduced as under: -
"13. In the instant case, Helium gas was having different marketability, which it did not possess earlier and hence the gas sold by the appellant was a distinct commercial commodity in the trade, rendering it liable to duty under Chapter Note 10 of Chapter 28 of the Act. If the product/commodity, after some process is undertaken or treatment is given, assumes a distinct marketability, different than its original marketability, then it can be said that such process undertaken or treatment given to confer such distinct marketability would amount to "manufacture" in terms of Chapter note 10 to Chapter 28 of the Act."7 E/89027 to 89029/2014
& E/89031/2014
11. The learned Commissioner (Appeals) heavily relied on the principle laid down in S.D. Fine Chemical's case (supra). We do not find the principle laid down in the said case is applicable to the present circumstances inasmuch as in the present case Note 9 of Chapter 38 of Central Excise Tariff Act, 1985 lays down specifically that any treatment that renders the product marketable to the consumer is to be considered as manufacture. This deemed clause was not present in the old Tariff, which was before the Tribunal in S.D. Fine Chemcial's case, therefore, the ratio of the said case is not applicable.
12. On the issue of one to one correlation between the inputs and finished goods exported during the month so as to allow refund of the accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004, we find that the issue is considered by this Tribunal in a series of cases referred by the learned Advocate where under it has been held that to claim refund of accumulated credit under Rule 5 of CENVAT Credit Rules, 2004, there is no need to show that the same input on which credit taken and claimed as fund must have been used in the finished goods and exported during the period for which the refund is claimed.
13. In the result, the impugned orders are set aside and the appeals are allowed with consequential relief, if any, as per law.
Member (Judicial)
2. The present issue is in respect of the refund claims filed in terms of Rule 6 of the CENVAT Credit Rules, 2004 as amended from time to time. The said rule provides for the refund of accumulated credit in the CENVAT account in respect of goods and services exported under bond or undertaking. This rule is very specific and lays down how to determine the quantum of admissible refund from the accumulated credit. It is not a proceeding for the denial of credit available in the CENVAT account of the claimant. Thus even if the refund is denied then also the amount continues to be in the CENVAT account of the claimant.
3. If the case of revenue is that the activities undertaken by the appellants in present case is not amounting to manufacture then what was the need for registration and permit exports to be undertaken against bond or letter of undertaking. Even if revenue holds that the activities undertaken did not amount to the manufacture, then the CENVAT Credit itself should have been recovered by application of Rule 3 and Rule 6 of the CENVAT Credit Rules, 2004. The proceedings under rule 5 do not envisage denial of CENVAT Credit, but only seeks to deny the refund of accumulated CENVAT Credit. Nothing has been brought on record to show that revenue envisaged to deny the credit by proceeding against the appellants under Rule 13 read Section 11A of the inadmissible credit as the processes undertaken do not amount to manufacture. Having not done so they cannot, in a proceeding under rule 5 of CENVAT Credit Rules, 2004, for refund of accumulated credit which is available in CENVAT account, deny the refund on these grounds. In any case even if the refund under Rule 5 is denied equivalent credit continues to stand in books of accounts of the appellants and they can use it for the clearances to be made by them in in the domestic market...
13. In the result, impugned orders are set aside and the appeals are allowed with consequential relief, if any, as per law."
"Member (Judicial) 8 E/89027 to 89029/2014 & E/89031/2014
9. In view of the foregoing discussions and analysis, and on the basis of the Final Order No. A/87442-87444/2019 dated 05.12.2019 passed by the Tribunal in respect of self-same appellants on identical set of facts, we cannot take a different view. Therefore, we are of the considered view that the impugned order dated 12.06.2014 in confirmation of the adjudged demands and consequent imposition of penalties on the appellants is not legally sustainable.
10. In the result, the impugned order dated 12.06.2014 passed by the learned adjudicating authority is set aside and the appeals filed by the appellants are allowed in their favour, with consequential relief, if any, as per law.
(Order pronounced in open court on 21.07.2025) (S.K. MOHANTY) MEMBER (JUDICIAL) (M.M. PARTHIBAN) MEMBER (TECHNICAL) Sinha