2011 (6) TMI 559 - HC - Central Excise

Whether the appellant was eligible for refund of the amount paid on HSD oil - CESTAT noted that under Explanation 1 to Rule 2(k) of the Cenvat Credit Rules 2004 (the Rules) HSD oil was not to be treated as an input for any purpose whatsoever. Since the period in question was from 1-11-2004 to 21-10-2005 the CESTAT held that the appellant was neither entitled to credit nor for refund - According to the learned Counsel EOUs were entitled to claim refund on the excise duty of HSD oil purchased by them in terms of Circular dated 23-9-2004 Held that - contention now urged was not even raised before the CESTAT. Under Section 35G(6) of the Act it is only on a question being raised before the CESTAT and thereafter if the CESTAT does not determine the said issue or wrongly determines the said issue by reason of a decision of such question of law as referred to under Section 35G(1) of the Act would an appeal lie to the High Court. Ordinarily the power under Section 35G of the Act ought not to be exercised where such a question has not even been raised before the CESTAT. no reason therefore to interfere with the order of the CESTAT. Central Excise Appeal is therefore dismissed

Summary

Issues:
1. Eligibility for refund of duty paid on High Speed Diesel (HSD) oil by a 100% Export Oriented Unit (EOU).
2. Interpretation of Rule 2(k) of the Cenvat Credit Rules, 2004 regarding the treatment of HSD oil as an input.
3. Claiming refund under Section 11B of the Central Excise Act, 1944.
4. Applicability of Section 35G(6) of the Act in raising new issues before the High Court.

Analysis:

Issue 1: The appellant, a 100% EOU, submitted a refund claim for duty paid on HSD oil. The Assistant Commissioner granted partial refund, which was later set aside by the Commissioner (Appeals). The appellant appealed to the CESTAT, which ultimately rejected the claim for refund.

Issue 2: The CESTAT examined whether the appellant was eligible for refund of the duty paid on HSD oil. It was noted that under Explanation 1 to Rule 2(k) of the Cenvat Credit Rules, 2004, HSD oil was not considered an input for any purpose during the relevant period. Consequently, the appellant was deemed ineligible for credit or refund.

Issue 3: The appellant argued that despite ineligibility for credit under Rule 2(k), they were entitled to a refund under Section 11B of the Act. The appellant claimed that EOUs could seek a refund on excise duty for HSD oil purchased, citing a Circular dated 23-9-2004. However, the High Court found that this argument was not raised before the CESTAT and thus could not be considered under Section 35G(6) of the Act.

Issue 4: The High Court clarified the scope of Section 35G(6) of the Act, emphasizing that the power of the High Court is to determine an "issue" that was either not addressed or wrongly decided by the CESTAT. The Court noted that the new argument regarding refund eligibility was not raised before the CESTAT and therefore could not be entertained by the High Court. Consequently, the appeal was dismissed, upholding the decision of the CESTAT.

In conclusion, the High Court dismissed the Central Excise Appeal, emphasizing that issues not raised before the CESTAT cannot be considered under Section 35G(6) of the Act. The appellant's claim for refund on duty paid for HSD oil was rejected based on the interpretation of relevant rules and regulations.