TMI Blog2013 (2) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the assessee can be said to have come to the conclusion that the credit has lapsed and cannot be adjusted any more and we have already taken a view that the words used “For any reason” would include the statutory provision relating to lapsing of the credit. Assessee becomes entitled to entire amount of credit of Rs. 237.7 Lakhs as refund. Adverse report by the cost auditor - held that:- There is no explanation given by the cost auditor as to the logic and rationale adopted by him. He simply says that he could not verify the figures of total purchase and modvat credit availed. If he has not found any discrepancy with regard to specific inventory codes selected by him it cannot be understood how he could not believe the figures given by the company. In case he had found discrepancy even in respect of one inventory code, adoption of an alternative method probably can be justified. - E/93/2006 - A-335/KOL/2011 - Dated:- 16-9-2011 - S/Shri B.S.V. Murthy, Ashok Jindal, JJ. REPRESENTED BY : S/Shri V. Sridharan and L. Badri Narayanan, Advocates, for the Appellant. Shri B.B. Agarwal, Commissioner (AR), for the Respondent. [Order per : B.S.V. Murthy, Member (J)]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 4,05,75,212.22 under provisions of Rule 57(ii) and impose penalty under Rule 173Q(1)(bb) and Rule 57-I(4). The order passed by the Commissioner which disallowed the credit as worked out by the cost auditor was challenged before this Tribunal and the Tribunal after considering the submissions remanded the matter to the Commissioner with the following observations vide Order No. A/16/WZB/2005-C-II, dated 31-12-2004 [2005 (183) E.L.T. 184 (Tribunal)]. 2.1 After hearing both sides and considering the matter, it is found - (a1) The cost auditor as observed in para 414 of his report allowed credit on lower of the two quantities for each input, the cost auditor compared the physical quantity in stock as on 16-3-1995 as stated in the sub-headingwise balance generated by computer system with that of the sub-headingwise balance stated in RG23 Part-I register maintained manually as reflected, in the above two reports. (a2) The appellants submit that the above approach is incorrect and claim that quantity as per any one report only should be taken. If so done, denial of Rs. 1.70 crore will not survive as the discrepancy in the two reports may be due to wrong Tariff updation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been cleared subsequently on payment of excise duty. Statutory Auditor of the company has accepted such inventory statements for as on 31st March, 1995. As per Statutory Auditor Report on record there was no material discrepancy between physical stock and book records, (the computerized statement) and valuation of stock was fair and in accordance with normally accepted accounting principle. The cost auditor report ignoring this aspect the Adjudicator not arriving at a finding thereon causes the order to be set aside for re-determination. (d) Credit of Rs. 35.54 lakhs has been disallowed on the ground set out in para 7.5 and 7.6 of cost auditor s report. On this issue it was submitted that job-worker sent to the appellants a stock balance statement lying with them, in some cases, quantity and value shown therein negative balance and in some cases nil balance. The appellants have claimed that they maintain in their computer stock lying with job workers and that is claimed to be the basis for calculation. To ascertain the correct balance with job workers, inputs in transit are also required to be considered, that could be a reason for negative balance. The whole of the Modvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production line and hence part of work in progress in appellants hand for further production. Once they are issued for production, they are shown as issue in RG-1 register relating to forgings. Hence, the said forgings appear as nil balance in RG-1. Hence, denying credit of Rs. 114.03 lakhs is not correct. (g) Mathematical or clinical precision is not expected under the circumstances in the facts of this case. The assessee in Krishnamurthy v. CIT - 1989 (176) ITR 417 (S.C.) purchased two pieces of land and granted mining lease to a private company to extract clay for a period of 10 years at a premium and royalty. The assessee, inter alia, contented that the cost of acquisition of the limited right granted under the lease cannot be determination and therefore computation provisions cannot apply at all and as such Section 45 of the Income-tax Act is not attracted. The Supreme Court rejected this contention and held as under : .The determination of the cost of the right to excavate clay in the land in terms of money may be difficult but is nonetheless of a money value and the best valuation possible must be made. Viscount Simon in Gold Coast Selection Trust Ltd. v. Humphrey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.24 4. Inputs lying with job workers 152.15 116.61 35.54 1.77 33.77 5. Inputs contained in finished goods lying in stock 269.47 236.79 32.68 32.68 0.00 6. Inputs contained in shop made forgings and springs 114.03 0.00 114.03 0.00 114.03 TOTAL 2529.83 2124.09 405.74 168.04 237.70 Thus in the result, the amount of credit of Rs. 2,37,70,000/- has been disallowed in the second round. 7. Heard both sides. 8. The ld. Counsel for the appellants made a very detailed presentation on legal grounds to show that the appellant is eligible for the entire amount of credit as worked out by them. The submissions relating to statutory provisions contained in written submission made by the ld. Counsel is reproduced below : Proviso to Rule 57F(4) provides for refund of credit relating to inputs used in final product exported under bond without payment of duty 15. Rule 57F(4) along with first proviso as it existed on 16-3-1995 is extracted below : (4) Credit of specified duty allowed in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealt with lapsing provision as on 1-3-1997. The above would apply equally for proviso to 57F(4) and 57F(4A) as it stood on 16-3-1995. 17.1 In a case where export were made prior to 1-3-1997 and refunds were applied for 1-3-1997, the Tribunal in following decisions held that refund under Rule 57F(13) would not be available since Rule 57F(17) lapsed accumulated credit : (i) Samtel India Ltd. v. CCE - 2000 (122) E.L.T. 596 (T) (page 215 to 218 of Volume III at 217-218). (ii) Samtel India Ltd. v. CCE - 2002 (146) E.L.T. 631 (T). (page 219 - 227) 17.2 Both the above decisions were overruled by Supreme Court in Samtel India Ltd. v. CCE - 2003 (155) E.L.T. 14 (S.C.) (page 221-223) holding that Rule 57F(17) cannot override vested rights. The Supreme Court relied upon the decision of Supreme Court in Eicher Motors Ltd. v. UOI - 1999 (106) E.L.T. 3 (S.C.) (page 223-224). 18. The appellants submit that the validation provisions enacted by Finance Act, 1999 (page 228-230) took care of the deficiency pointed by Supreme Court in Eicher s case namely that Rules cannot take away vested right. However, the judgment of Supreme Court in Samtel s case has not been taken care by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operation of Rule 57F(4A). This would restrict an appeal from rejection of such a determination. Limitation will see only after such a final determination and that credit will lapse. Till then, the question of filing any refund claim does not arise. The majority decision in the case of Hindustan Motors v. CCE - 1996 (87) E.L.T. 216 (T) (page 235 to 253) dealt with similar situation in para 40 (page 246), and paras 49 to 51. As per para 40 of the order : ..being a procedural requirement, it is dispensable, according to the peculiar facts and circumstance of the case, so as to avoid denial of substantive benefit to a subject. Further, in para 49-50 (page 250-251) of the above order it has been held that a condition that prevents the manufacturer from filing a refund claim within the statutory limit permissible is not in order. 20.4 In any case, the appellants in their reply dated 28-7-1998 to show cause notice vide para 28 (at page 176) had stated that the reply itself may be treated as refund claim. 20.5 Alternatively, the appellants had, vide their three letters dated 28-3-1995, 6-4-1995 and 29-4-1995 as mentioned supra, filed claims to the effect that Rs. 25.30 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intermediate product can be refunded, is not contrary to the provision of sub-rule (4A). He submits that a circular issued by the Board in 1997 which was referred by him is very relevant in this regard. Further he also relies upon the decision of the Tribunal in the case of Hindustan Motors Ltd. reported in 1996 (87) E.L.T. 216 (Tribunal) to submit that relevant date for filing the refund claim is the date on which the assessee comes to the conclusion that adjustment of cenvat credit involved in inputs used for exported goods cannot be made against the domestic clearances. According to the ld. Counsel, such a situation would emerge only when a decision is rendered taking a view that the entire credit has lapsed and cannot be used in future. According to him the words used in the rule For any reason would include lapsing of the credit also. In this case the credit of duty attributable to exported goods is more than Rs. 45.00 crores whereas the credit that would lapse because of the decision of the ld. Commissioner is only about Rs. 2.37 crores. Once the relevant date is taken as the date on which the lapse of credit occurred, in view of the fact that appellant had made an alte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it has arisen, it could not have been taken away by provisions relating to the lapse of the credit. The vested right has arisen as a result of provision of Rule that such credit can be used for domestic clearances or can be claimed as refund. The vested right of refund has already arisen and the refund claim was to be filed from the relevant date which according to the decision of the Tribunal in the case of Hindustan Motors Ltd. is the date on which assessee comes to the conclusion that no adjustment is possible. We find that paragraph 40, provisions relating to relevant date under Section 11B and paragraph 50 of the decision of the Tribunal in the case of Hindustan Motors Ltd. are relevant and hence are reproduced below : 40. I have carefully considered the pleas advanced from both sides. I agree with the contention of the learned Advocate that they had a bona fide belief of availability of the first alternative spelt out in Rule 57F(3). Their bona fides cannot be doubted because the second alternative of refund of such credit of equal benefit, if not more, was available to them at that time. Their bona fide belief gets strengthened by a decision in their favour by the origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst alternative under Rule 57F(3) at a much later date and that issue being still in dispute, cannot take the plea of denying the second alternative only on the question of limitation. As pointed out, limitation is a dispensable requirement in such circumstances. It is appropriate to mention that Revenue s Appeal against Tribunal s judgment in Kothari Chemical (supra) was dismissed by the Apex Court as reported in 1995 (78) E.L.T. 141 (Court-Room Highlights). There is no dispute about any other condition of Notification 85/87. In any case, all other conditions are also procedural and are, therefore, liable to be waived in the facts and circumstances of this case as set out above. What the revenue seeks to recover by denying the benefit of first alternative under Rule 57F(3) would have been available to the Appellants by way of refund of such credit : (B) relevant date means, - (a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods, - (i) if the goods are exported by sea or air, the date on which the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification in question which has been extracted above requires that the application for refund together with the proof of due exportation and relevant extracts of RG 23A in original are lodged with the Assistant Collector of Central Excise before the expiry of the period specified in Section 11B of the Central Excises and Salt Act, 1944. For rebate of excise duty for goods exported, the relevant date defined in Section 11B is the date of the export. But for cases covered under Rule 57F(3) the first alternative is not refund but utilisation of Credit for payment of duty on similar products cleared for home consumption. For the manufacturer to clear his similar product for home consumption there is no time-limit. Where such utilisation of Credit is not possible for any reason, then the Credit amount in question is to be adjusted as refund. In the present case, a plea has been taken that the question of refund will arise when it is finally decided that the use of the Credit in question for payment of duty on final product cleared for home consumption is not permissible. In their reply to the show cause notice before the adjudication of their case by the Assistant Collector, they had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is correct, the appellant would be entitled for refund within one year from the date of communication of the order because that will be the date on which the assessee can be said to have come to the conclusion that the credit has lapsed and cannot be adjusted any more and we have already taken a view that the words used For any reason would include the statutory provision relating to lapsing of the credit. 13. In view of the decision above, assessee becomes entitled to entire amount of credit of Rs. 237.7 Lakhs as refund as per the table given earlier and assessee can file a refund claim before the appropriate authority which in our view cannot be/should not be rejected on limitation ground. Therefore in our opinion statutory provisions do not come in the way of refund of accumulated credit attributable to goods which have been exported. 14. We would like to deal with the alternative submissions made by the ld. Counsel before we pass the order. 15. Ld. Counsel submitted that if the Tribunal takes a view that the credit lapses and no refund claim can be made, the appellant would still be entitled to an amount of Rs. 195.69 lakhs. He submitted that even though he feels that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he differential amount of modvat credit at Sl. No. 5 has been shown as Rs. 33,54,825.81 only whereas in the table submitted credit disallowed has been shown as 40.66 lakhs, this issue was discussed by the Commissioner in para 22(i) of the order wherein he had found that the credit amount claimed was not computed arithmetically correctly. Apparently, the ld. Commissioner took a view that value of the items should be taken as Rs. 40,90,005/- whereas it was more than Rs. 4.00 crores. Since the amount does not exactly tallied, we take a view that the arithmetical correctness of the amount should once again be verified and the appellants may give the details to the ld. Commissioner who may verify the correctness of the same and if there is a dispute, another adjudication order may be passed. Otherwise, by mutual agreement the arithmetical correctness can be taken as correct. 17. The next issue involved is the inputs contained in work in process lying in stock. It was submitted by the ld. Counsel that this issue was decided by the Tribunal in para (2b) of the order and Commissioner could not have readjudicated the matter which was contested by the ld. DR. In this case according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the assessee and in the absence of any logic as per costing principle to follow revised procedure by the cost auditor, we are unable to agree that the percentage of 18.69 adopted by the cost auditor has to be accepted. Accordingly we hold that credit of Rs. 41.00 Lakhs should not have been disallowed and accordingly we allow the same. 18. The last item is the credit involved on inputs contained in forgings and springs. In this case also the ld. Counsel argued that the issue had already been decided by the Tribunal while remanding the matter. He relied upon para 6(f) (ibid) for re-submission. In this case we find that in para 6(f), the Tribunal concluded that denial of credit on 114.03 is not correct. This is the final conclusion of the Tribunal and the direction was to quantify the credit admissible and other issues kept open for the appellants to contest at the de novo hearing. In the absence of an appeal against the order of the Tribunal remanding the issue by the Revenue, now it cannot be said that this issue is open for re-consideration or re-adjudication. Nevertheless we find even on merits, we are not convinced by the arguments. It was stated that appellants had n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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