TMI Blog2023 (2) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. Assuming that the petitioner would have nothing else to further add, it is a serious violation of principles of natural justice, if the authority which heard the matter is different than the one which actually adjudicates. - Matter restored back. Petition allowed. - R/SPECIAL CIVIL APPLICATION NO. 9678 of 2021 - - - Dated:- 21-2-2023 - HONOURABLE THE CHIEF JUSTICE MS. JUSTICE SONIA GOKANI And HONOURABLE MS. JUSTICE NISHA M. THAKORE MR KARANKUMAR J SUKAWALA(10263) FOR THE PETITIONER(S) NO. 1,2 MR MUKUND KUMAR CHOUHAN(10259) FOR THE PETITIONER(S) NO. 1,2 MR NIKUNT K RAVAL(5558) FOR THE RESPONDENT(S) NO. 3,4 NOTICE SERVED BY DS FOR THE RESPONDENT(S) NO. 1,2 JUDGMENT (PER : HONOURABLE THE CHIEF JUSTICE MS. JUSTICE SONIA GOKANI) 1. This is a petition preferred by the petitioner who has two factories one at Kim, District Surat and second at Masat, Silvassa. The petitioner is engaged in the business of manufacture of polyester yarn, falling under chapter 5402 of Central Excise Tariff Act, 1985. Both the factories of petitioner had separate Central Excise Registration number. The factories of the petitioner were running prior to the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provided the books of accounts are kept separately. 2.2. A show cause notice was issued dated 22.04.2009 for utilization of the sum of Rs. 99,929/- out of the lapsed credit. According to the petitioner, on 31.03.2010, the Finished Goods were exported from Masat, Silvassa factory on payment of duty under Notification 29/2004-CE on dated 09.07.2004 and filed rebate claim with department. 2.3. On 08.04.2011, a show cause notice was issued by the Joint Assistant Commissioner to reject rebate claim for the Masat, Silvassa factory. On 27.02.2012, the Joint Assistant Commissioner issued the order-in-original and rejected rebate claim for Masat, Silvassa, factory. On 08.11.2012, the Commissioner (Appeals) rejected the appeal against order of Joint Assistant Commissioner for rebate claim of Masat, Silvassa factory. 2.4. The petitioner shifted the factory from Masat, Silvassa to Kim, Surat along with plant machinery and stock and also transferred balance amount of CENVAT Credit Rs. 1,58,73,511/-. Therefore a show cause notice was issued on 01.11.2013 by the Assistant Commissioner since the CENVAT Credit lying in the record of Masat, Silvassa factory was transferred to the CENVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of CENVAT credit amount from Masat, Silvassa to Kim, Surat is legally correct. 2.11. On 04.11.2020, the petitioner requested Principal Commissioner (RA) to pass the order because personal hearing was completed long ago. On 03.12.2020 a personal hearing letter was supplied to the petitioner by the Principal Commissioner (RA) showing that the personal hearing was provided to the Commissioner only and not to the petitioner. 2.12. On 21.01.2021, the Principal Commissioner (RA) passed ex-parte order and rejected the appeals. The objections were raised by the petitioner by letter dated 31.03.2021 for exparte order when authority changed after conducting personal hearing. The petitioner never waived his right before the new authority. The Principal Commissioner (RA) wrote letter dated 08.04.2021 to the petitioner and stated that personal hearing was provided and copy of personal hearing also was supplied, however, it was petitioner who had vide letter dated 09.09.2019 and again vide letter dated 04.11.2020 and 10.11.2020 has requested to pass order. Therefore, has waived for personal hearing. 2.13. The petitioner, therefore, has approached this Court aggrieved by the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading and nowhere it is provided that the balance credit is required to be reversed, but, it does state that the CENVAT credit can be availed on inputs used for production of dutiable finished goods and credit can be utilized to pay the duty. 5.2. It is further contended that secondly Rule 11(3) of CENVAT Credit Rules, 2004 provides that the manufacturer opts for exemption from whole of the duty of excise leviable on the final product manufactured and produced by him under a notification issued under Section 5A or the said final product has been exempted absolutely under Section 5A and after deducting the said amount from balance of CENVAT credit, if any lying in his credit, the balance shall lapse and shall not be allowed to be utilized for payment of duty. 5.3. The goods were conditionally exempted of the petitioner under Notification No.30/2004, which would apply only to the cases of absolute exemption, according to the respondent, is not correct. Sub-rules (1) and (2) of Rule 11(3) shall need to be read together and the provision of sub-rule (2) shall also apply to sub-rule (1) where manufacturer opts for exemption from whole of the duty of excise leviable on the said fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the record as on 01.03.2007, the said balance of CENVAT credit automatically would lapse and cannot be allowed for utilization or introduction of provisons of Rule 11(3) of CCR. 5.8. It is contended further that the petitioner had paid the Central Excise Duty of Rs.3,14,598/- on the goods exported from the unutilized credit accumulated while opting for NIL rate of duty under Notification No.30/2004 dated 09.07.2004 instead of paying Central Excise Duty under Notification No.29/2004 from fresh credit. It appears that the petitioner had utilized the credit for payment of duty on goods exported, which had already lapsed after opting of exemption under notification. It was held that payment of duty made through lapsed credit cannot be treated as payment of duty and hence, rebate of duty was not admissible. 5.9. The petitioner was served the show cause notice by the Assistant Commissioner, Central Excise and Customs Division- II, Vapi (at Silvassa) on 08.04.2011 which was further upheld by the Order-in-Original dated 27.02.2012 passed by the Assistant Commissioner, Central Excise and Customs, Division-II, Silvassa, Order-in-Appeal dated 08.11.2012 by the Commissioner (Appeals), C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted goods in terms of Notification No.30/2004-CE. The intention of legislature for providing the credit on input was that the said credit would be utilized for payment of Central Excise Duty on finished goods in order to reduce the cascading effect of duty. Thus, the double benefit to the unit i.e. nonpayment of Central Excise Duty on finished goods and encashment of accumulated credit of input used in the manufacture of exempted goods through the rebate of the duty is not permissible in terms of scheme of CENVAT credit particularly under provision of Rule 11 (3)(2) of CCR. 5.13. It is the say of the respondent that rebate under Rule 18 can only be granted of Excise Duty paid on the goods exported. It has relied on the judgment of Bombay High Court in case of Union of India vs. Rainbow Silks [2011 (274) ELT 510 (Bombay)] to urge further that the CENVAT credit balance available in the account was to lapse at the time of opting for complete exemption on their final product. The respondent unit has chosen not to adhere to the requirement of the Rules and continued to retain a large amount of such CENVAT credit. Therefore, it is open to the manufacturer to pay the duties through CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ENVAT credit. The petitioner had also received the rebate for export of goods prior to the period of dispute in show cause notice. The Principal Commissioner (RA) passed the order dated 21.01.2021 without providing the opportunity of personal hearing. Hence, the adjudication process was in gross violation of principle of natural justice. Further, the petitioner was unable to submit the fresh order dated 29.09.2020 passed by the Commissioner in his favour and CENVAT credit was allowed by this order after first hearing was held on 17.09.2019. The respondent No.2 passed the order dated 21.01.2021 without following the principle of natural justice, which is required to be set aside and remanded back with the direction to pass fresh order by following the principle of natural justice. 7. This Court has heard extensively the learned counsels on both the sides, who along the line of their pleadings, argued extensively. 8. The revisional order of the office of Principal Commissioner (RA) and Ex-Officio Additional Secretary to the Government of India if is looked at, this is a Revision Application under Section 35 (EE) of the Central Excise Act against the Order-in-Appeal dated 08.11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rebate claim for export in the month of July, 2010 under Rule 18 of the Central Excise Rules. 9. It emerges that the petitioner had taken fresh credit of duty paid on raw material by taking credit of the duty in RG 23A Part-II at the time of purchase of input (POY) from the period 11.03.2010 to 31.03.2010 for production of the final exported goods texturised yarn. For so doing, they utilized the fresh CENVAT credit from 11.03.2010 to 31.03.2010. For debiting duty at the time of removal of goods from the factory for export, it was apparent from RG 23A Part-II for the month of March, 2010 and April, 2010 and the record spoke for itself. According to the revisional authority, the allegation of the department that applicant had utilized the accumulated CENVAT credit of Rs.1 Crore lying balance in RG 23A Part-II on 01.03.2010, is not sustainable. 9.1. The applicant physically exported the goods under ARE- 1 on payment of duty under Notification No.29/2004. It was his case that final remittance had been received by the applicant and in such circumstances, the rebate claim should not be held up by the department and for the delay period of sanction of rebate claim, interest should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce amount in such eventuality of CENVAT credit cannot lapse hence, the serious challenge is made to the show cause notice. 9.3. As the plant from Silvassa along with stock and plant and machinery shifted to Kim plant and also transfered CENVAT credit of Rs.1,58,73,511/- during the month of November, 2012 under Rule 10 of the CENVAT Credit Rules and the CENVAT credit was legally earned by the petitioner of the Silvassa unit and transferred to Kim unit, according to it, the accumulated amount of CENVAT credit can be utilized by the applicant and there is no need to maintain a balance of Rs.2,92,22,736/- as stated in the impugned show cause notice. The provisions of 11 (3)(ii) of the CENVAT Credit Rules, as urged by the petitioner, would apply when the final product is absolutely exempt whereas the applicant s product - texturised yarn/ Grey fabrics are not absolutely exempted. Under Section 5A of the Central Excise Act, the goods are liable to duty at the rate given under Notification No.29/2004- CE therefore, the provisions of 11(3)(ii) is not applicable in their case and therefore, it is exported under the payment of duty. 10. We notice that after detailed examination of sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 5A of the Act, and after deducting the said amount from the balance of Cenvat credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service; whether provided in India or exported. The sub-rule (3)(i) (ii) of Rule 11 of Cenvat Credit Rules, 2004 clearly stipulates that if a manufacturer opts for exemption from whole of duty of excise leviable on the said final product under a Notification issued under Section 5A of the Act or the said final product has been exempted absolutely under Section 5A of the said Act, he shall be required to pay an amount equivalent to the Cenvat credit taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in the stock and after deducting the said amount from the balance of Cenvat credit, if any lying in his credit, the balance if any still remaining shall lapse and shall not be allowed to be utilized for pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, they were bound to follow the sub-rule (3) of Rule 11 of the Cenvat Credit Rules, 2004 which they failed to do. 10.3. It has distinguished the decision relied upon by the petitioner on its different set of facts:- 15. In view of the forgoing discussion Government holds that as the Applicant had opted for benefit of exemption Notification No.30/2004 CE continuously for the years onwards after 09.07.2004, the Cenvat Credit Balance carried forward in their Cenvat accounts lapsed after insertion of sub-rule (3) of Rule 11 of Cenvat Credit Rules, 2004 w.e.f. 01.03.2007 since the Applicant availed total exemption on all their final products during the aforesaid period and as such the duty paid from such lapsed Cenvat Credit on the said exported goods at a much later date is not a payment of duty and therefore their rebate claims were rightly held inadmissible by the Commissioner(Appeals). 10.4. These all depend entirely on the interpretation of subrules 3(i) and (ii) of Rule 11 of the CENVAT Credit Rules which obligates the manufacturer to pay an amount equivalent to the CENVAT credit taken by him in respect of inputs received for use in the manufacture of the final produc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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