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2015 (7) TMI 459 - CESTAT CHENNAI

2015 (7) TMI 459 - CESTAT CHENNAI - TMI - Cash refund of pre deposit made by making debit in CENVAT Credit register - Exemption under Notification No.30/2004-CE dt. 9.7.2004 - textile yarn - Denial of refund claim - Held that:- both pre-deposit and the subsequent voluntary payment of the demand was paid through debit in cenvat credit. The appellant s main plea for refund in cash is that as they cannot utilize the credit and they are availing full exemption. They relied Tribunal s decision in the .....

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y the appellant, I find that the said order was reviewed and appealed by Revenue before Hon’ble Hon’ble High Court of Bombay wherein the High court considering substantial question of law had duly admitted Revenue appeal reported in [2014 (6) TMI 897 - BOMBAY HIGH COURT], therefore, the said decision is not applicable to the facts of the present case.

Appellant neither closed their unit nor their registration is cancelled and they are fully viable and functioning and producing Denim f .....

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ept.), E/601/2010 (By Dept.), E/589/2009 (by Assessee) - Dated:- 26-6-2015 - Hon ble Shri R. Periasami, Technical Member,J. For the Petitioner : Shri K.P. Muralidharan, AC (AR) For the Respondent : Shri K.S. Venkatagiri, Advocate (AR) ORDER All the three appeals relate to sanction of refund. Therefore, all are taken up together. Appeal No.E/498/2009 and E/601/2009 are filed by the Revenue and E/589/2009 is filed by the assessee. 2. Revenue appeals relate to sanction of refund in cash of the pre- .....

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ED and AED(GSI) on the finished products. The adjudicating authority confirmed the demand of reversal credit of ₹ 36,06,472/-. On appeal before Tribunal, the Tribunal ordered pre-deposit of ₹ 10 lakhs vide Stay Order No.365/2005 dt. 11.3.2005 [2005 (192) ELT 599 (Tri.-Chennai)]. In the meanwhile, the appellants opted to avail exemption under Notification No.30/2004-CE dt. 9.7.2004 on their textile products after reversing the credit on inputs in stock, inputs in process and finished .....

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g the remaining cenvat credit balance available with them. The Tribunal in their Final Order No.1337/2007 dt. 8.10.2007 [2008 (222) ELT 464 (Tri.-Che.)] accepted the department s stand on merits but set aside the order of the lower authority on the ground of limitation. Consequent to the order of the Tribunal, appellant filed a refund claim of the entire amount of ₹ 30,60,023/- [pre-deposit of ₹ 10 lakhs + voluntary payment of ₹ 20,60,023/- both made through debit in Cenvat acc .....

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for exemption under the above notification. Both assessee and Revenue filed appeals before Commissioner (Appeals), the Assessee's appeal against rejection of refund of ₹ 20,60,023/- and the Revenue's appeal against sanction of refund of ₹ 10 lakhs in cash. Commissioner (Appeals) in his OIA No.104/2009 dt. 29.7.2009 rejected the assessee s appeal and vide OIA No.101/09 dt. 29.7.09 rejected Revenue s appeal. Hence both assessee and Revenue s appeal in Appeal No.E/498/2009 and .....

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appeal was rejected by the Commissioner (Appeals) vide OIA No.101/09 dt. 29.7.09 and the Revenue also field appeal against the said order before the Tribunal on 28.8.2009 and the appeal was pending before Tribunal. During the pendency of Revenue appeal before Tribunal, the Addl. Commissioner of Central Excise proceeded to adjudicate the protective SCN dt.23.6.2009 and again confirmed the amount of ₹ 10 lakhs as erroneous refund sanctioned in his OIO No.27/2009 (ADC) dt. 30.9.2009. Against .....

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appeal in E/601/09 and in E/498/09. As regards the assessee s appeal on the rejection of refund claim of ₹ 20,60,023/, he submits that the consequential refund was rejected on the ground that cenvat credit lapsed w.e.f. 1.3.2007 in view of amendment to Rule 11 of CCR 2004 wherein sub rule (3) of Rule 11 was inserted. He submits that sub-rule (3) of Rule 11 was introduced only w.e.f. 1.3.2007. and it cannot apply retrospectively for the period prior to 9.7.2004 and also submits that this r .....

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n the textile products subject to conditions that no cenvat credit is taken on the inputs or capital goods. In this regard, he relied on Board s circular No.845/3/2007-CX. Dt. 1.2.07 wherein the Board clarified that non-availment of credit on the inputs is a pre-condition for availing the exemption under this notification. He also relied Board s circular dt. 8.11.07. He submits that it is a conditional notification and it cannot be said that the goods were exempted absolutely. He further submits .....

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(296) ELT 198 (ii) Venu International - 2014 (312) ELT 859 (G.O.I.) (iii) Inter Globe Services - 2011 (272) ELT 476 (G.O.I) (iv) JAI Corp. Ltd. - 2014 (312) ELT 961 (G.O.I) 8. On the Revenue appeals, he submits that they have rightly debited cenvat credit of ₹ 10 lakhs towards pre-deposit from the balance of unutilized credit available with them as on 9.7.2004. Tribunal also accepted as compliance the pre-deposit made through debit in cenvat account. In view of Tribunal s final order, the .....

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accumulation of credit is not only on account of exports. Since they have stopped availing the credit as the goods were fully exempted refund should be allowed in cash. He relied on the following cases laws :- (i) CCE Vs Ashok Arc. 2006 (192) ELT 399 (ii) CCE Ranchi Vs Ashok Arc. 2006 (193) ELT ELT 399 (Jhar.) (iii) Raymond Ltd. Vs CCE Mum. III 2011 (274) ELT 513 (Tri.-Mum.) 9. On the other hand, Ld. A.R. reiterated the impugned order and grounds of appeal (GOA) of Revenue appeals. He submits t .....

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the credit which was otherwise lapsed. This is a clear violation of Rule 11 (3) (ii). Once the credit is lapsed the appellant ordering payment of pre-deposit by using said credit is also not correct. Again the appellant paid ₹ 20 lakhs on their own and utilised the credit which was otherwise lapsed on 9.7.2004 . He submits that as on 9.7.2004 appellants had balance of ₹ 50,88,792/- of which they have reversed ₹ 20,28,769/- which are credit attributable to inputs and inputs in s .....

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4/09 dt. 29.7.09. He also submits that appellant s payment by debiting cenvat credit cannot be refunded in cash as there is no provision in CCR to refund the amount in cash except in the case of Rule 5, refund of unutilized credit is allowed by way of cash refund where the unutilised credit is on account of exports. Whereas the appellant filed refund claim amount deposited by way of debiting the unutilized credit. The adjudicating authority instead of allowing the refund of pre-deposit by way of .....

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t s unit is neither closed or defunct where the cenvat credit balance cannot be utilized for any other purpose. He relied on following case laws :- (i) Commissioner Vs Raymond Ltd. 2013 (30) STR J118 (Bom.) (ii) Steel Strips Vs CCE Ludhiana 2011 (269) ELT 257 (Tri.-LB) (iii) Spentex Industries Ltd. Vs CCE Indore 2010 (253) ELT 225 (Tri.-Del.) 10. I have carefully considered the submissions of both sides and also examined the grounds of appeal made in the Revenue appeals. At the outset, I find th .....

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e the demand on the ground of limitation. The Deputy Commissioner of Central Excise in his order dt. 21.11.2008 had sanctioned the refund of pre-deposit of ₹ 10 lakhs (paid through cenvat credit) in cash and rejected the amount of ₹ 20,60,023/- voluntarily paid by them. LAA had rejected both assessee's and Revenue's appeals. Therefore both the Revenue and assessee's appeals arose out of D.C.'s order dt.21.11.2008. 11. On perusal of the impugned order, I find both the .....

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the credit on inputs lying in stock, inputs in process and inputs contained in the final products lying in stock and balance credit amount available in cenvat credit account shall lapse and shall not be utilised for payment of duty. 12. The main issues in all these appeals are two-fold (i) whether the credit balance lying in the cenvat account as on 9.7.2004, the date of appellants opting for full exemption under Notfn 30/2004 shall lapse or available to the appellant-assessee for payment of du .....

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otification. For easy reference, the notification No.30/2004-CE dt. 9.7.2004 is reproduced as under :- "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 7/2003-Central Excise dated t .....

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n the corresponding entry in column (2) of the said Table, from whole of the duty of excise leviable thereon under the said Central Excise Act : Provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the CENVAT Credit Rules, 2002, - Table S. No. Chapter or heading No. or sub-heading No. Description of goods (1) (2) (3) 1. .... .... 2. .... .... 3. 52.04, 5205.11, 5205.19, 5 .....

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l they still had the balance credit in their account which is pertaining to the finished goods already cleared prior to 9.7.2004. On a plain reading of the notification No.30/04, it is evident that there is no such pre-condition envisaged in the notification that the credit remaining in balance as on the date of opting for full exemption shall lapse. Whereas the LA relied the transitional provision stipulated in Rule11 of CCR 2004 as amended and concluded that credit shall lapse. The sub-rule (3 .....

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ch manufacturer or provider of output service under these rules, and be allowed to be utilized in accordance with these rules. ... (3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, 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 stock, if, - (i) he opts for exemption from whole of the duty of .....

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export, or for payment of service tax on any output service, whether provided in India or exported." 13. The above sub-rule (3) was inserted in Rule 11 w.e.f. 1.3.2007 and prior to this amendment, the sub rule (1) of Rule11 was relevant and this stipulates that any amount of credit earned by a manufacturer availed under CCR 2002 as existed prior to the date of 10.9.2004 and remaining unutilizsed on that day shall be allowed as cenvat credit and they are allowed to utilize the said credit wh .....

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e credit balance remaining in their cenvat account as on 9.7.2004 shall lapse is not justified, and valid and not in accordance with the Rules as existed during the relevant period. Further, it is evident that the credit lying in balance in the cenvat account is related to inputs which were utilized in the final products and already cleared on payment of duty. Therefore, in the absence of any specific provision in Notification No.30/04 or any other provision prior to 1.3.2007, there is no lapse .....

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ipulates that this exemption shall not apply to the goods in respect of which credit of duty on the inputs or capital goods has been taken under CCR. Therefore, it is evident that the Notification No.30/2004 is a conditional one and cannot be considered as absolute exemption and Clause(ii) of sub rule(3) of Rule 11 is applicable only if the final product is exempted absolutely. Therefore, the sub-rule (3) of Rule 11 is not applicable in appellant s case and the cenvat credit balance lying unutil .....

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e original authority is valid or otherwise. The Revenue contended that the said refund cannot be allowed in cash as there is no such provision in CCR or in any other rules. I find that both pre-deposit and the subsequent voluntary payment of the demand was paid through debit in cenvat credit. The appellant s main plea for refund in cash is that as they cannot utilize the credit and they are availing full exemption. They relied Tribunal s decision in the case of Raymond Ltd. Vs CCE (supra) and th .....

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gh Court of Bombay wherein the High court considering substantial question of law had duly admitted Revenue appeal reported in 2013 (30) STR J118 (Bom.), therefore, the said decision is not applicable to the facts of the present case. 16. In this regard, the Tribunal s Larger Bench decision in the case Steel Strips Vs CCE Ludhiana (supra) the Tribunal categorically held that except in the case of exports where express provisions for grant of cash refund of unutilized credit is provided, no refun .....

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nt to make refund in other cases that is permissible. Refund results in outflow from treasury, which needs sanction of law and an order of refund for such purpose is sine qua non. Law has only recognized the event of export of goods for refund of Modvat credit as has been rightly pleaded by Revenue and present reference is neither the case of otherwise due of the refund nor the case of exported goods. Similarly absence of express grant in statute does not imply ipso facto entitlement to refund. .....

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ese concepts, the present reference is bound to be answered in favour of Revenue and it is answered accordingly." The ratio of above Larger Bench decision is squarely applicable to the present case. The Tribunal in the above case has distinguished the Larger Bench decision in the case of Gauri Plasticulture Pvt. Ltd. 2006 (202) ELT 199 (Tri-LB). Therefore, there is merit in the Revenue s appeal against the granting of refund in cash by the original authority. In the present case, the appell .....

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