Customs, Excise and Gold Tribunal - Bangalore
Commissioner Of Central Excise vs Vikrant Tyres Ltd. on 21 November, 2003
Equivalent citations: 2004(91)ECC348, 2004(165)ELT440(TRI-BANG)
JUDGMENT S.S. Sekhon, Member (T)
1. The respondents (hereinafer referred to as M/s VTL) are manufacturers of tyres and goods falling under Chapter 40 of the Central Excise Tariff. They availed under Rule 57A, modvat credit on the raw materials and are maintaining the credit accounts in Form RG23A for the credit, as prescribed.
2. They were also operating under VABAL, a scheme for import of custom duty free raw materials, against the goods exported. This customs duty free import was permissible under Notfn. No. 203/92-Cus dtd. 19.5.92 an in terms of Clause V(a) of this Notification, the exports to be made, were to be met from exporting final products using raw material, in respect of which no credit of duty had been availed under Rule 56A or 57A. To meet the Customs Duty exemption requirement, M/s VTL, were required to reverse credit entries alongwith interest charges in terms of amnesty scheme announced under the VABAL scheme by the Department and in accordance with Trade Notice No. 9/97 dtd. 11.1.97. A reversal of credit entries in RG 23A-Pt.II amounting to Rs. 1,05,72,716 was effected being the credit equivalent to the duty on the inputs, which had gone into the exported products under the VABAL scheme and interest on such sum. These reversals were effected during the period 9.1.95 to 31.1.97. Trade Notice No. 81/97 dtd. 8.7.97 was issued, requiring that where such credit entries were reversed on actual basis, a certificate should be issued by Cost Accountant appointed under Section 14AA of Central Excise Act, 1944. Accordingly, Cost Accountant was nominated and he submitted a report that the reversal of credit and interest was required to the extent of Rs. 89,96,493 and interest thereon of Rs. 18,30,737 for the period 92-93 to 95-96. Therefore, an excess of Rs. 15,75,923 towards credit and Rs. 2,14,263 towards interest charges were reversed in excess of the requirements of Customs Amnesty Scheme announced under VABAL. The assessees therefore, claimed Rs. 15,75,923 being excess credit reversed and Rs. 2,14,263 being the excess interest on the reversed credit, under the Amnesty Scheme, as refund claims.
3. The Assistant Commissioner rejected the above-said refund claims and passed the following order:
"I have carefully gone through the records of the case. As regards merits of the claim, the assessee is eligible for a refund of Rs. 15,75,923 (being the excess modvat credit reversed) and Rs. 2,14,263 (being the excess amount paid towards interest charges) since the same has been verified by a Cost Accountant appointed under Section 14AA for this purpose and also certified by the Assistant Commissioner.
The question of unjust enrichment does not arise in this case since the credit availed was reversed and the question of passing on the duty burden does not arise. However, the claims are hit by time limitation since the reversal of modvat credit and payment of interest was made during the period 9.1.95 to 31.1.97. As per Section 11B any claim for refund should be filed within 6 months from the date of payment unless the payment has been made under protest, since in this case the reversal of modvat credit and payment of interest was not made under protest, the refund claims filed on 23.11.98 is hit by time limitation, In view of the above, I pass the following order.
ORDER I reject the refund claims for Rs. 15,75,923 and Rs. 1,14,263 under Section 11B."
4. Aggrieved by this order of the Assistant Commissioner, the appellant took the matter to the Commissioner (Appeals), inter alia, on the following grounds:
(a) Mod vat credit cannot be equated with refund of duty under Section 11B of Central Excise Act, 1944 and hence the relevant date thereunder is not applicable for claiming mod vat credit.
(b) The reversal was made in pursuance of Trade Notice No. 9/97 dtd. 11.1.97 and refund claim was filed within 6 months from the date of issue of certificate by the Assistant Commissioner as contemplated in Trade Notice No. 81/97 dtd. 8.7.97 i.e. the date on which the amount was determined.
(c) Further, they have requested to decide the case on merits.
5. The Commissioner (Appeals) after going through the records of the case, found:
"I have carefully gone through the submissions made by the appellants in the grounds of appeal as well as the submissions made at the time of personal hearing. The lower authority has rejected the refund claim of the appellants as time barred. The appellants on the other hand have contested that since they had wrongly availed modvat credit while also availing the benefit of the VABAL Scheme, they on their own reversed the credit as per the formula enumerated in Commissionerate's Trade Notice No. 81/97 dtd. 8.7.97. In addition to the reversal of wrongly availed modvat credit, the appellants had rightly reversed the amount of modvat credit or not, the concerned Commissioner has appointed a Chartered Accountant under Section 14AA of the Central Excise Act The appointed Chartered Accountant in his audit report submitted that the appellants had reversed an excess amount than the amount required to be reversed by them. After the submission of the Chartered Accountant's report, the appellants had applied for refund, which has been wrongly rejected by the lower authority as time barred. .
It is observed that in this case, initially the appellants had reversed some amount of modvat credit as per the formula enumerated in the Commissionerate's Trade Notice as mentioned above. Subsequently, as per the Chartered Accountant's audit report who was appointed by the concerned Commissioner, the appellants have reversed an amount more than what was required to be reversed and hence on the basis of the Chartered Accountant's report, the appellants have applied for the refund. In this case, what is required to be seen is that initially the appellants have reversed the credit and they also paid interest by calculating the amount on the basis of formula enumerated in the above-mentioned trade notice. The appellants obviously were in a position to apply for refund only after the submission and acceptance of the Chartered Accountant's report of the concerned Commissioner. Therefore, the time period of 6 months in a case like this where the refund arises as a consequence of some departmental action would not arise. However, the lower authority is slient on that. Since the time limit of 6 months would not apply in such case, the lower authority seems to have erred in rejecting the refund claim of the appellants as time barred. The order passed by the lower authority is therefore, set aside and the appeal filed by the appellant is accordingly allowed."
6. Hence, these appeals by Revenue" on the grounds:
"The Commissioner (Appeals), Bangalore has failed to appreciate that:
(a) In terms of Section 11B the refund claim should be filed within the six months from the relevant date (unless the duty was paid under protest) and the relevant date in the instant case is the date on which the payment has been made.
(b) In the instant case the refund claim was filed on 23.11.98 for the reversals made during the period 9.1.95 to 31.1.97 i.e., much after the expiry of the stipulated time limit of six months.
(c) The reversals were not made under protest and hence the time limit of six months shall apply to the instant case.
(d) There is no provision under Section 11B for refund of interest paid on the duty."
7. After hearing both sides and considering the submissions, it is found:
(a) The reversals of the credit in the RG23A account registers, by a debit entry, were effected to meet the requirements of duty free imports under the Customs Act and Amnesty scheme under the VABAL Scheme. These reversals had nothing to do with duty obligations, or and availment of credit under the Central Excise Act and Rules made thereunder. In fact, the relevant notifications issued and the rules framed under Chapter V AA of the Central Excise Rules, 1944 do not permit any such debit against credit entries for discharge of a liability of interest and also does not permit such debit entries from the credit balances in the RG23A accounts, to render eligibility of exemption from duty under the Customs Act, 1962 or and VABAL Notfn. No, 203/92. These reversals, effected, pursuant to an Amnesty Scheme, are not under the Central Excise Act or the Rules framed thereunder. Therefore, interpretations being placed of the liability of a refund and applicability of time limit under Section 11B of the Central Excise Act, 1944 by the Ld. DR cannot be accepted. The case laws relied by the DR are found to be not applicable to reversals as in this case.
(b) It is also found that the word 'refund' under Section 11B has been defined as follows:
"refund includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India."
The present debit entries effected or required to be made, of certain credits, as per Amnesty Scheme formulae would not be covered by the word 'refund' as explained for the purposes of Section 11 B. Interest in any case will not be covered under Section 11B. Therefore, the time limit of Section 11B cannot be invoked on the grounds as has been pleaded in the Revenue's appeal and extracted hereinabove. The findings as arrived at by the Ld. Commissioner that the delay has been caused due to the verification required to be conducted by the Departmental officers cannot be lightly brushed aside.
(c) Utilisation of credit amounts can be, as prescribed under the Chapter V AA Rules; subsequent adjustments are governed by Rule 57E and recovery of an ineligible credit by invoking Rule 571. Credits and variations thereof, required, made or and permissible, under other schemes/orders would be exercises in accounting only. E & O.E are an accepted feature of any accounting exercise, and can be effected at any time after an error is detected. The error of an excess debits in this case is not questioned; that has to be corrected. Therefore, the refund claims made by M/s VTL, were therefore, required to be returned by the proper officer, to them, with an advise and sanction to correct the accounts under the provisions of Rule 226 of the Central Excise Rules, 1944.
8. The Commissioner's order in not applying the time limits prescribed under Section 11B of the Central Excise Act for ordering reversal of credit consequent to excess reversals effected under Amnesty Scheme is upheld and confirmed.
9. Revenue's appeals are therefore, dismissed.
Per : G.A. Brahma Deva
10. On going through the order written by my Ld. Brother, Shri S.S. Sekhon, Member (Technical), I persuaded myself to agree with the view taken by him in this matter, but in vain.
11. The point to be considered in this case is whether refund claim relating to Modvat Credit is governed by the provisions of Section 11B of the Act or not.
12. The respondent's Counsel while justifying the conclusion arrived at by the Commissioner (Appeals) submitted that the respondents have reversed more than whatever required to be reversed and on issuance of Chartered Accountant Certificate, knowing that the mistake has crept in, in calculation as per the formula, the respondents have filed refund claim. He said that correcting arithmetical mistakes and taking correct credit amount are not subject to limitation prescribed under Section 11B of the Act. In this context, Departmental Representative pointed out that if it was only arithmetical mistakes or errors or omissions as urged by the party, the party should have filed permission to appropriate authority for correcting such errors or they would have made correct credit entry on their own in their relevant books and in that case, probably, the position would have been different. Since they have chosen to file refund claim against the excess payment, same is governed by the provisions of Section 11B of the Act.
13. The respondent's counsel cited a case law including Rane Engine Valves Ltd. v. CCE, Chennai, 2003 (153) ELT 92 ; 2002 (52) RLT 66, in support of his contention that assessee is entitled to refund of credit reversed in excess of credit on actual basis and excess interest paid. But none of the case laws referred to and relied upon by the respondent's Counsel dealt with the issue of applicability of provisions of Section 11B of the Act.
14. The Departmental Representative emphatically argued that Section 11B of the Act is clearly applicable to the facts of this case. The arguments advanced on behalf of the Department cannot be brushed aside merely on the ground that Section 11B is not applicable particularly in view of the following decisions referred to and relied upon by the Departmental Representative during the course of the arguments:
1. Kerala State Electricity Board v. Asst. Collector of C.Ex., Cannanore, 2002 (144) ELT 302 (Ker.)
2. Asst. Collr. of Customs v. Anam Electrical Mnfg. Co., 1997 (90) ELT 260 (SC)
3. Wipro Ltd. v. Union of India, 1992(42) ECC 303 (Guj) : 1992 (60) ELT 370-Guj.
4. Polymer Paints v. CC, 2001 (137) ELT 1275 (T-LB)
5. G.S. Auto International Ltd. v. CCE, Chandigarh, (2000 (120) ELT 745)
6. Final Order No. 557/2002 dt. 19.4.021 CCE, Bangalore v. Sudhir Paper Pvt. Ltd.],
15. (i) In the case of Kerala State Electricity Board (supra), it was held that all refund claims except those arising as a result of declaration of unconstitutionality of a provision, to be preferred and adjudicated only under the provisions of the relevant Act. The Kerala High Court has taken this view following the decision of the Supreme Court in the case of Mafatlal Industries Ltd. v. Union of India, 2002 (83) ECC 85 (SC) : 2997 (89) ELT 247 (SC)
(ii) In the case of Anam Electrical Manufacturing Co., the Supreme Court has laid down the formula where refund claim is filed by manufacturer/purchaser beyond the statutory limit of Section 11B/27 ibid, all such petitions must be held to be untenable in law, regardless of any direction to the contrary contained in the order in any appeal, suit or writ petition. Statutory time limit not extendable by any authority or Court in case of illegal levy.
(iii) In the case of Wipro Ltd. (supra), High Court of Gujarat held that provisions of Section 11B of Central Excise and Salt Act, 1944 applicable where short credit availed of by manufacturer. While holding so, it was observed that:--
"The claim is preferred after a period of about 14 months from the date of expiry of the prescribed period of limitation. The officers exercising powers under the provisions of the Act and the Rules framed thereunder cannot ignore the provisions of the Act and the Rules. They are the creatures of the statute. They are bound by the provisions of the statute. It cannot therefore, be said that the order passed by the Assistant Collector rejecting the claim on grounds of limitation is in any way unjust or unlawful so as to call for, interference in exercise of the powers under Article 226/227. Where a manufacturer avails of short credit, he pays more amount of duty to the revenue than what he would have paid had be availed of the credit to the extent of maximum permissible limit. Thus in reality it would be a case of payment of excess amount of duty. Therefore, provisions of Section 11B would be applicable even in cases where a manufacturer has availed of short credit, [1998 (37) ELT 478 (SC); 1987 (30) ELT 641 (SC) rel. on / [paras 7, 8] It was also brought to our notice that the view taken by the Gujarat High Court was upheld by the Apex Court while dismissing the appeal as reported in 1997 (94) ELT 470.
(iv) In the case of Polymer Paints (supra), Larger Bench of the Tribunal has taken the view that time limit prescribed under Section 27 of the Customs Act, applicable to refund of excise duty paid due to clerical errors also.
(v) In the case of G.S. Auto International Ltd. (supra), it was held that refund claim filed on 16.6.97 after issue of Commissioner's Public Notice No. 3/97 dtd. 14.1.97, prescribing formula for quantifying irregularly availed of credit under DEEC/VABAL Schemes being beyond period of six months was barred by time. Similar to facts of this case, modvat credit was irregularly availed of contrary to Notfn. No. 203/92 in that case and subsequently reversed/paid by the party and on knowing the excess reverse of credit, refund claim was lodged and same was held to be barred by time.
(vi) Sitting as a single Member, in the case of Sudhir Papers Pvt. Ltd., as per Order No. 557/2002 dtd. 19.4.02, I have taken a view that Section 11B is the only section which deals with the refund claim unlike recovery of demand and limitation provided under various provisions including Section 11A of the Act. The finding portion in Para 6 of the said order is relevant in this context and same is as under:
"6. I have carefully considered the submissions made by both sides and perusal of records. The assessee has paid the amount payable as Cess in RG23A Pt. II account initially. When pointed out by the Department, an amount of Rs. 85,503 paid in RG 23A Pt. II was once again debited from their PLA Account and refund of the original Cess was claimed vide application dtd. 01.7.97 which is after a lapse of six months from the date of payment of duty on pointing out the mistake, if it was not debited in PLA account as directed, the course open to the Department to issue notice for raising demand and same would have been barred by time as the demand notice was hit by limitation under Section 11 A. It was the contention of the party that it was a case of debiting the amount, which wrongly credited and not payment of Cess as duty. If it was so they could have asked permission from the authority to debit the wrong credit. Instead of that the party has chosen to file a refund claim. I am not convinced with the arguments advanced on behalf of the party that provisions of Section 11B is not applicable to this case. I find that Section 11B is the only Section, which deals with the various provisions including Section 11A of the Act. No case law was brought to my notice to take a view that Section 11B is not applicable to this case. Furthermore, if contention of the party is accepted that what they have paid at the initial stage was not duty but only a deposit, then only course is open to recover that money/deposit through Civil Court subject to limitation under General Limitation Act. Since the Section 11B is the only Section concerned with refund claim and part has filed a refund claim, the Assistant Commissioner was right in rejecting the claim as barred by time. I am in agreement with the arguments advanced by the Departmental Representative that Revenue authorities acting under the Act were bound by the provisions of the statute. Precisely this was the view of the Supreme Court in the case of Collector of Central Excise, Chandigarh v. Doaba Co-operative Sugar Mills, 1988 (18) ECC 157 (SC): 1988 (37) ELT 478 (SC) and Supreme Court in the case of Mites India Ltd, v. Assistant Collector of Customs, 1987 (30) ELT 641 (SC). Since the Tribunal being a creature of the statute the Tribunal cannot go beyond provisions of the statute and more so relief, if any, cannot be granted on principle of the equity. In the result, the appeal filed by the Revenue is allowed."
16. In view of the aforesaid decisions and since the view has already been expressed in the decisions on the point at issue, I am of the view that if we want to take a different view or if there is an iota of doubt with the correctness of the judgment delivered by the co-ordinate benches, the best course open to us is to refer the issue to the Larger Bench to resolve the issue. In view of the serious nature of the matter, it is just and appropriate that the issue is to be referred to the Larger Bench. Accordingly, I propose to refer the issue to the Larger Bench to resolve the issue.
17. Since there has been difference of opinion, between the two members of the Bench who heard the matter, matter is required to be referred to the third member as per law. Accordingly, Registry is directed to place this file before the Hon'ble President to refer it to a third Member.
18. The following point of difference is required to be considered by the third member:
"Whether in the facts and circumstances of the case, appeals are required to be dismissed holding that refund claim relating to modvat credit is not subject to limitation of Section 11B of the Act as held by the Member (Technical) (OR) In view of the serious nature of the matter, the issue requires to be referred to the Larger Bench as per Member (Judicial)"
Per : C.N.B. Nair
19. I have perused the records and heard both sides. The case relates to implementation of Amnesty Scheme for exporters who simultaneously availed themselves of modvat on indigenously procured inputs and duty exemption in respect of imported inputs under Notification No. 203/93 dated 19.5.92. The appellant in this case reversed the irregularly taken modvat credit so as to satisfy the requirement of the Amnesty Scheme. On verification by the revenue, the amount of credit reversed was found to be more than the amount required to be reversed under the Scheme. The refund claim for the return of the excess amount was rejected on the ground that the claim was time-barred inasmuch as credit were originally taken between 1995-97. Commissioner (Appeals) reversed this order. Revenue has filed these appeals against the order of the Commissioner.
20. In terms of Circular No. 318/34/97-CX dated 26.6.97 of the Central Board of Excise and Customs, reversal of credit made by an assessee seeking to avail of Amnesty Scheme was required to be verified by Cost Accountant nominated by the Chief Commissioner of Excise. Para 4 of the Circular states as under:
"In the cases where credit is reversed on actual basis, such certificates should be issued only after verification of the records of the exporter by a Cost Accountant nominated by the Chief Commissioner under Section 14A of the Central Excise Act, 1944."
It is clear from the above that the correct amount would be known only after verification by the Cost Accountant. The amount reversed by the assessee is the amount it considered was required to be reversed. Obviously, no refund claim could have been filed before verification by the Cost Accountant. Therefore, the time-limit, if any, can run only after the verification by the Cost Accountant and the issue of certificate in this regard, In the present case, there is no dispute that if the time-limit is so counted, the claim would be within time. This Tribunal had an occasion to consider this issue in its Final Order 357 dt. 10.2.03 in Appeal No. E29/2000 filed by M/s Fertilizers and Chemicals Travancore Ltd. (FACT). The submission of the appellant is that the case is covered by that decision.
21. I am of the opinion that the present claim was required to be determined in terms of the Amnesty Scheme and the aforesaid Circular relating to the administration of the Scheme. And time limit prescribed in Section 11B of the Central Excise Act, 1944 had been wrongly applied by the original authority and Commissioner (Appeals) was right in setting aside that order.
22. In view of what has been stated above, I am of the view that the present appeals of the revenue have no merit.
23. Registry to place the appeals before the Division Bench for passing final orders on the appeals.
Per : G.A. Brahma Deva and S.S. Sekhon FINAL ORDER
24. By majority it is held that appeals are required to be dismissed holding that refund claim relating to modvat credit is not subject to limitation of Section 11B of the Act. Accordingly, Revenue's appeals are dismissed.