Custom, Excise & Service Tax Tribunal
Sandoz Pvt.Ltd vs Commissioner Of Central Excise, ... on 27 July, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.1
APPEAL NO.E/493, 494, 495, 496, 497 & 498/12-Mum
(Arising out of Order-in- Appeal No.BC/245-250/BEL/2011-12 dtd.16.1.12 passed by the Commissioner of Central Excise & Customs(Appeals), Belapur )
For approval and signature:
Honble Mr S.S.Kang, Vice President
Honble Mr.Sahab Singh, Member(Technical)
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1. Whether Press Reporters may be allowed to see : No
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 Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Sandoz Pvt.Ltd.
:
Appellants
VS
Commissioner of Central Excise, Belapur
Respondent
Appearance
Shri Prakash Shah, Advocate for Appellants
Shri Navneet, Addl.Commissioner (A.R.) for Respondent
CORAM:
Mr. S. S. Kang, Vice President
Mr.Sahab Singh, Member(Technical)
Date of hearing: 11/07/2012
Date of decision /2012
ORDER NO.
Per : Sahab Singh
These are six appeals filed by M/s. Sandoz Pvt.Ltd. against the order dated 16.1.2012 passed by the Commissioner of Central Excise(Appeals), Belapur.
3. The brief facts of the case are that the appellants are a registered 100% EOU for manufacture of goods falling under Chapter 29 & 30 of Central Excise Tariff Act, 1985. They have been regularly filing refund claim under Rule 5 of the Cenvat Credit Rule 2004 on the ground that they were not in a position to utilize the Cenvat Credit of duty/service tax taken on inputs or input services used in the manufacture of final products cleared for export under bond without payment of duty.
4. The appellants have filed six refund claims pertaining to the month of April, 2010 to September 2010 in March, 2011 before the Dy.Commissioner or Central Excise, Division Belapur-I The Dy.Commissioner of Central Excise, Belapur sanctioned the appellants refund claims on account of unutilized Cenvat Credit on inputs/input services. The Revenue did not accept the Orders-in-Original passed by the Dy.Commissioner of Central Excise and filed appeals before the Commissioner of Central Excise (Appeals) who vide the impugned order has allowed the Revenues appeal and the appellants are in appeals against the impugned order.
5. Ld. Advocate appearing for the appellants submitted that the Commissioner(Appeals) has committed a serious error of law in not following the Orders passed by her predecessor in appellants own case. He submitted that this is a fact that the Revenue has not challenged the entire Orders-in-Original passed by the Dy.Commissioner and the Revenue has accepted the Orders-in-Original with regard to payment of refund on input services. He further contended that the finding of the Commissioner(Appeals) that Notification No.5/2006 permits refund of credit of duty paid on the inputs only after final products are exported is not correct in as much as there is no such restriction under the law. He further submitted that Condition No.4 of the Notification No.5/2006 was fully satisfied by the appellants and it was verified by the department. He contended that under Condition No.4 there is no such requirement that the refund of credit of inputs actually used in the final products exported will be allowed. There is no one to one co-relation of inputs with final product required under Rule 5 or the Notification issued thereunder. He also relied upon the Boards circular dated 19.1.2010 issued with regard to problems faced by exporters in availing refund of the excess credit. He stated that as per para 3.2.2 of the Boards circular they have submitted Chartered Accountant certificate to the Dy. Commissioner of Central Excise alongwith refund application and they had fulfilled all the requirements of the Boards circular. He also relied upon the various case laws in support of his contention that there is no requirement for co-relation of input with final product exported as mentioned below:-
1. Commissioner of C.Ex. Hyderabad vs. Ravi Food Ltd.-2011(271)ELT 436(Tr- Bangalore.
2. Commissioner of C.Ex.Belapur vs. Ambica Internation P.Ltd. 2011(266)ELT 262(Tri-Mumbai)
3. Philco Exports Vs. Commissioner of C.Ex.New Delhi 2009(234)ELT 568(Tr-Del.)
4. Commr.of C.Ex.Bangalore.III vs. Motheron Sumi Electric Wires-2010(252)ELT 543(Tri-Bang.)
6. Ld. Addl.Commissioner(A.R.) appearing for the Revenue submitted that the Condition No.4 of the Notification 5/06 provides refund where a manufacturer is not in a position to utilize the input credit against the goods exported. Therefore, it follows that Cenvat credit involved in the goods shall be refunded not before the goods are exported. He further submitted that the Dy.Commissioner has allowed the refund of almost total Cenvat credit availed on inputs for the respective months without verifying whether the input on which credit was availed was used in or in relation to the manufacture of finished products which were exported during that months and the Dy.Commissioner has also not taken into account the finished goods lying in the factory but not exported. Similarly, he also not taken into account the inputs used in semi finished goods still lying in the stock in that particular month. Therefore, it was wrong on the part of the Dy.Commissioner to allow refund of entire Cenvat Credit particularly when certain inputs on which the credit was taken are contained in the finished goods lying the factory. He, therefore, submitted the Commissioner (Appeals) has rightly allowed the appeal filed by the Revenue and has set aside the Order-in-Original passed by the lower authority.
7. After hearing both sides, we find that the refund of CENVAT Credit in respect of inputs or input services used in the manufacture of final production cleared for export under Bond is governed under Rule 5 of the Cenvat Credit Rules, 2004, which reads as under: -
Rule 5. Refund of CENVAT credit. -Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,
(i) duty of excise on any final product cleared for home consumption or for export on payment of duty; or
(ii) service tax on output service, and where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification: The Central Government has issued another Notification No. 5/2006-CE (NT) dated 14.3.2006 which reads as under: -
G.S.R. (E) 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 (NT), 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. .
3. ..
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..
6..
7..
8. As per the above Rule Cenvat Credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or out put service provider towards payment of duty/service tax and where for any reason the manufacturer or output service provider is not able to adjust the credit taken, the refund of such amount subject o such safeguards, conditions and limitations as provided under Notification 5/2006 dated 14.3.2006 will be available to the manufacturer. We find that refund is subject to safeguards, conditions and limitations to be specified by the Central Government.
8.1 In the instant case, refunds were sanctioned by the Dy.Commissioner and Revenue has challenged the refund in respect of credit available on inputs only and the Revenue has not challenged the refund on account of input services. The Revenue has contended that the refund is admissible only in respect of those inputs which has gone in the manufacture of goods which have been exported. It is the contention of the Revenue that the inputs which are lying as such or contained in the semi-finished goods or even finished goods which are lying in the factory, refund is not admissible to the appellants.
8.2 The Ld.Advocate appearing for the appellants submitted that in view of the various decisions of the Tribunal and Board Circular, there is no one to one co-relation required to be satisfied by the appellants. We find that the Honble High Court of Karnataka has examined admissibility of refund under Rule 5 of the Cenvat Credit Rules,2004 in case of Shell India Markets Pvt.Ltd. vs. CCE, Bangalore 2012(278)E.L.T. 50 (Kar.) and the Honble High Court in para 7 of its judgment has held as under:-
It is necessary to verify not only that particular input service is consumed for providing particular output service but also that eligible service received under various invoices have actually gone into consumption for providing impugned exported output service and not utilized for other purposes. We find that though these observations of Honble High Court are in respect of input services, these are squarely applicable to inputs also as under Rule 5 of the Cenvat Credit Rules inputs and input services are treated at equal footing. We therefore hold that refund of Cenvat credit in respect of inputs is admissible if those inputs have actually gone into consumption of exported goods.
9. The Commissioner(Appeals) in para 10 of his order has observed that the Revenue has not quantified the amount which pertains to the inputs/semi-finished goods/finished goods lying the factory. This fact is not clearly coming from appeal papers whether some inputs in respect of which Cenvat credit taken and refund claimed are still lying as such or contained in semi -finished goods/finished goods lying in factory. This needs verification by the Department.
10. We also find that the original authority has sanctioned the refund on the basis of verification report of the Range officer who in para iv of the report has stated as under:-
The assessee has submitted certificate issued by Chartered Accountant M/s. Price Waterhouse firm Registration No.007568S signed by partner Himanshu Gordia, wherein categorically specified the aspects they have examined and found correct. They have also certified the nexus between input services used in accordance with the Cenvat Credit Tules, 2004 and Service Tax Rules. We also note that in para 12 of the Order-in-Original, the original authority has stated as under:-
The Chartered Accountant of the Claimant have verified the details of Goods/Services exported on which Refund of Cenvat Credit is claimed alongwith certificate in respect of examination of refund claim for the months of April, 2010 to September, 2010 for each month certifying the co-relation and the nexus between the inputs/input services and the exports as prescribed under para 3.2 f Circular No.120/01/2010-ST issued under F.No.354/268/2009-TRU dated the 19th January, 2010. We also find that in the verification report of the Supdt. it is stated that the Chartered Accountant has also certified the nexus between the input services used in accordance with the Cenvat Credit Rules, 2004 and Service Tax Rules whereas in para 12 , the original authority says that the Chartered Account has examined the refund claim and certified the co-relation and the nexus between the inputs/input services and the exports as prescribed under para 3.2. of Circular dated 19.2.2010. The copy of the Chartered Accountant certificate is not available in the file. We note that the Range Supdt. has not stated about the verification of the nexus between inputs used in accordance with the Cenvat Credit Rules and the export product.
11. In view of the above we are of the view that the matter needs to be remanded back to the original authority for verification as required in para 9 & 10 above. We, therefore, set aside the impugned order and remand the case back to original authority for fresh adjudication after giving an opportunity of hearing to the appellants.
12. Appeals are disposed of by way of remand.
(Pronounced in court on )
S. S. Kang
Vice President
Sahab Singh
Member(Technical)
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