Custom, Excise & Service Tax Tribunal
M/S Ceat Ltd vs Ccex, Nashik on 6 February, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/1231/03 (Arising out of Order-in-Appeal No. CEX.XI/JMJ/15/916/NSK/APPEAL /2003 dated 18.02.2003 passed by the Commissioner of Central Excise & Customs (Appeals), Nashik). For approval and signature: Honble Shri P.G. Chacko, Member (Judicial) Honble Shri K.K. Agarwal, Member (Technical) ======================================================
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 : Yes 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? ====================================================== M/s CEAT Ltd. Appellant Vs. CCEx, Nashik Respondent Appearance: Shri D.B. Shroff Advocate for Appellant Shri Kishori Lal SDR for Respondent CORAM: SHRI P.G. CHACKO, MEMBER (JUDICIAL) SHRI K.K. AGARWAL, MEMBER (TECHNICAL) Date of Hearing: 06.02.2009 Date of Decision: 06.02.2009 ORDER NO. WZB/MUM/2009 Per: Shri P.G. Chacko, Member (Judicial)
The appellants, in this appeal, had availed the benefit of Customs Notification No. 203/92 in respect of raw materials imported by them under DEEC scheme during the period 1992-96. One of the conditions of the Notification (condition V) was that, when the importer exported his final product for fulfillment of export obligation under the scheme, no input stage credit should have been taken in respect of such export goods so that the benefit of exemption under the Notification could be availed in respect of imported raw materials. When the appellants made export of their final product in discharge of export obligation in relation to the raw materials imported by them, they had availed Modvat credit on the inputs used in the manufacture of such export goods. In other words, there was breach of condition-V of the Notification, which made the Revenue demand duty of customs on the raw materials imported. However, the department, while demanding duty on the imported raw materials, asked the appellants to reverse the entire Modvat credit availed on the inputs used in the export goods. Towards this demand, the party reversed input duty credit to the extent of Rs.47,97,362/-. They subsequently made further payment of Rs.82 lakhs towards the above demand. Nevertheless, they pleaded before the jurisdictional Assistant Commissioner that the amount reversed under RG-23A Part-II register was in excess over what was required to be reversed proportionate to the quantum of export. On this basis, they filed a refund claim with the Assistant Commissioner. During the pendency of this claim, the Govt. of India announced a scheme called Amnesty Scheme for the benefit of those exporters under DEEC scheme who had not complied with condition-V of the above Notification. This scheme was introduced through a Circular dated 4.1.1997, which required such exporters to reverse the Modvat credit and pay interest thereon @ 20% within 31.01.1997. The Circular laid down that, in the event of such reversal of credit and payment of interest, there would be no penal action or prosecution against the parties and no demand of duty on the raw materials imported by them duty-free under the above Notification. Subsequently, through a Public Notice No. 2/97 dated 10.1.97, the Commissioner of Central Excise & Customs, Vadodara brought to the notice of the trade a formula for quantification of Modvat credit on inputs to be reversed by the exporters of the above category. It appears that this Public Notice was issued on the heels of Circular No. 285/1/97-CX dated 10.01.1997 issued by the Ministry of Finance (Department of Revenue), Govt. of India. The Ministrys Circular and the Commissioners Public Notice laid down the following formula:
A = B x C D + B Where, A - Modvat credit to be reversed.
B - Total value of exports under VABAL during the financial year, as declared in AR 4 (See 4 value).
C - Total credit availed in RG-23A during the financial year on all inputs.
D - Total value of goods cleared for home consumption during the financial year arrived at under Section 4.
All those exporters who had availed input stage credit in relation to their finished goods exported under DEEC scheme in discharge of export obligation in relation to raw materials imported duty-free under Notification No. 203/92-Cus were required to follow the above formula in the matter of reversal of such credit. Later on, however, the CBEC came out with an alternative after having found that some of the exporters encountered difficulty in quantification of the Modvat credit to be reversed in terms of the above formula. This alternative came through Circular No. 318/34/97-CX dated 26.6.97. It was provided in this circular that, in the first instance, quantification of Modvat credit to be reversed in accordance with the above formula should be got verified by the jurisdictional Assistant Commissioner with reference to records and a certificate of correct reversal of credit should be obtained from an officer of the rank of Assistant Commissioner on the relevant documents. It was also laid down that where the reversal was not in conformity with the Boards formula the same should be got determined by the Cost Accountant nominated by the Chief Commissioner under Section 14A of the Central Excise Act. More significantly, it was also laid down by the Board that in cases where the credit was reversed on actual basis, the certificate should be issued only after verification of the records by a Cost Accountant nominated by the Chief Commissioner under Section 14A of the Central Excise Act. Meanwhile, there was a Public Notice issued by the Commissioner of Customs & Central Excise, Vadodara viz. Public Notice No. 3/97 dated 28.1.97, wherein also it had been clarified that the exporters could reverse the actual credit availed by them provided they were in a position to substantiate the same on the basis of the available records subject to satisfaction of the jurisdictional Assistant Commissioner of Central Excise. The appellants chose to go by this Public Notice and, accordingly, quantified the actual input duty credit to be reversed within 31.1.97 so as to claim the benefit of amnesty announced by the Central Government. Apparently, it was on this basis that they effected the reversal of credit.
2. However, the Cost Accountant appointed by the Chief Commissioner under Section 14A of the Central Excise Act conducted a special audit of the appellants accounts and found that they had reversed Modvat credit to the tune of Rs.1,29,97,362/- and paid interest thereon amounting to Rs.5,63,261/-, totaling to over Rs.1.35 crores. These figures pertained to the period July, 1992 to October, 1996. It was on the strength of this audit report that the appellant filed the refund claim. They relied on it before the original authority, who took up the refund claim for consideration. The Assistant Commissioner, however, did not accept the Cost Accountants report to be correct. He took the position that the report was based on assumptions and presumptions and hence not acceptable to the Department. He, further, insisted that the Modvat credit reversal should be in accordance with the Boards formula prescribed in Circular dated 10.1.97 and, accordingly, a total amount of Rs.1,56,29,000/- required to be reversed. As the appellants had reversed a total amount of over Rs.1.29 crores only, the Assistant Commissioner asked them to reverse the balance amount of Rs.26,31,638/-. In this scenario, the refund claim was held to be premature. The Assistant Commissioners decision was taken in appeal by the party before the Commissioner (Appeals). The learned Commissioner (Appeals) found no reason to interfere with the order of the lower authority and, accordingly, dismissed the appeal subject to the outcome of the Writ Petition filed on the subject by the party before the Honble High Court of Delhi. The present appeal is directed against the appellate Commissioners order.
3. We have heard both sides at length and also examined the records. It appears that the impugned order relates to the appellants factory at Nashik. They have a factory at Bhandup too. In respect of both the factories, they had taken the issue to the Honble High Court of Delhi. They contended that they were not bound by the formula prescribed by the Commissioner of Customs and Central Excise, Vadodara in Public Notice No. 3/97. In the Writ Petition, they challenged this Public Notice and prayed that they should be allowed to avail the benefit of the amnesty scheme on the basis of reversal of Modvat credit on inputs on actual basis. The learned Counsel for the appellants has submitted that, in relation to their Bhandup factory, they have withdrawn the Writ Petition. The case is said to be pending before the High Court in respect of the Nashik factory.
4. The learned Counsel has also relied on decisions of this Tribunal, in support of his plea that the Modvat credit reversal to the extent determined by the Cost Accountant under Section 14A of the Central Excise Act should be accepted as sufficient reversal for the amnesty under Circular dated 4.1.97. The decisions cited are Rane Engine Valves Ltd. Vs. CCE, Chennai 2003 (153) ELT 92 (Tri-Chennai) and Fertilizers & Chemicals Travancore Ltd. Vs. CCE, Cochin 2003 (155) ELT 197 (Tri-Bang). Learned Counsel has argued that, on the facts of the present case, the appellants are entitled to the benefit of the Boards Circular dated 26.6.97 coupled with Public Notice No. 3 dated 28.1.97 of the Commissioner of Customs & Central Excise, Vadodara. He submits that it was not open to the original authority to discard the Cost Accountants report.
5. We have heard the learned SDR also. He submits that the Cost Accountants report need not be accepted on its face value and that it was still open to the Assistant Commissioner to independently apply his mind to ascertain the veracity of the particulars of reversal of Modvat credit. It is also pointed out that the appellants have not chosen to withdraw their Writ Petition on the same subject pending before the Honble High Court of Delhi in relation to the Nashik factory. According to the learned SDR, any decision on the issue can only be subject to the outcome of the Writ Petition.
6. After giving careful consideration to the submissions, we find that the appellants had been consistently taking the position that they were entitled to the benefit of Public Notice No. 3/97 dated 28.1.97 issued by the Commissioner of Customs & Central Excise, Vadodara, wherein exporters like the appellants were permitted to reverse input duty credit on actual basis within the time limit prescribed by the Central Government in Circular dated 4.1.97 (Amnesty Scheme). At this stage, the appellants position is better inasmuch as their Counsel has brought on record the Boards Circular dated 26.6.97, which also permitted reversal of input duty credit on actual basis even while an option for reversal of credit in accordance with the formula laid down in the earlier Circular dated 4.1.97 was left open. We find that the appellants, by their conduct have been able to establish that they chose to follow the option provided by the Commissioner under Public Notice No. 3/97 dated 28.1.97. It is their case that whatever Modvat credit on inputs, reversed on actual basis upto 31.1.97, should be reckoned for the purpose of amnesty declared in Circular dated 4.1.97. The Boards circular dated 26.6.97 had clarified the position with respect to the exporters like the appellants and expressly recognized reversal on actual basis as an alternative. It further laid down that, in such cases also, there shall be verification by a Cost Accountant nominated by the Chief Commissioner under Section 14A of the Central Excise Act and the jurisdictional Assistant Commissioner shall issue certificate of correctness of the quantum of credit after such verification of records by the Cost Accountant. We find that it was precisely the provisions made by the department through the Vadodara Commissioners Public Notice No. 3/97 and the Boards Circular dated 26.6.97 which were followed in the cases of Rane Engine Valves (supra) and Fertilisers & Chemicals Travancore Ltd. (supra).
7. In the light of our findings recorded above, we have got to examine the orders of the lower authorities. The original authority rejected the Cost Accountants report and insisted on the Boards formula dated 10.1.97 to be followed. Its decision was sustained by the Commissioner (Appeals) without having regard of Public Notice No. 3/97 dated 28.1.97. The appellate authority referred to the Cost Accountants report but refused to accept the same on the ground that the reliance placed on the Public Notice was redundant. We find that the provisions contained in the above Public Notice of the Commissioner of Customs & Central Excise, Vadodara as also in the Boards Circular dated 26.6.97 were given effect to by this Tribunal in the cases cited by the learned Counsel and, therefore, it can hardly be said that reliance placed on the Public Notice is redundant. Moreover, we also find that the Cost Accountant nominated by the Chief Commissioner under Section 14A of the Central Excise Act had audited the accounts. Its report could not have been rejected by the lower authorities without stating cogent reasons. That report was on the particulars of Modvat credit reversed by the party during the relevant period in relation to the finished goods exported by them. Neither of the lower authorities has chosen to examine these particulars independently before rejecting the Cost Accountants report. Therefore, we hold that the Cost Accountants report could have been rejected only after giving cogent and valid reasons.
8. In the result, we take the view that the orders of the lower authorities cannot be sustained. We set aside these orders and allow the appeal by way of remand directing the original authority to pass fresh speaking order of adjudication of the refund claim filed by the party. For dealing with the refund claim on merits, it is incumbent on the authorities to check whether the appellants had reversed Modvat credit on actual basis correctly. If it is found that they had reversed excess credit, their refund claim shall be considered on that basis. It goes without saying that the claimant shall be given a reasonable opportunity of being heard. In case the Assistant Commissioner does not agree with the Cost Accountants report, reasons should be spelt out and indicated to the appellant for making his submissions. Further, we observe that the pendency of Writ Petition relating to Nashik factory before the Honble High Court of Delhi would not stand in the way of the original authority proceeding to adjudicate the refund claim in terms of our order inasmuch as the limited prayer of the party before the Honble High Court is to quash the formula laid down in Circular dated 10.1.97.
9. The appeal stands allowed by way of remand.
(Dictated and pronounced in Court)
(K.K. Agarwal) (P.G. Chacko) Member (Technical) Member (Judicial)
Vks/