EXCISE Appeal No. 10345 of 2021-SM
[Arising out of Order-in-Original/Appeal No CCESA-SRT-APPEAL-PS-207-2020-21 dated
26.03.2021 passed by Commissioner of Central Excise, Customs and Service Tax-DAMAN]
USV Private Limited
VERSUS
Commissioner of Central Excise & ST, Daman
APPEARANCE :
Shri H.D. Dave, Advocate for the Appellant
Shri Vijay G Iyengar, Assistant Commissioner (AR) for the Revenue.
CORAM:
HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
DATE OF HEARING : 02.02.2023
DATE OF DECISION: 06.02.2023
FINAL ORDER NO. A/10198 / 2023
RAMESH NAIR :
The issue involved in the present case is whether the appellant is
entitled for cash refund against the accumulated and unutilized Cenvat credit
of Education Cess and Secondary and Higher Education Cess.
Shri H.D. Dave, learned Counsel appearing on behalf of the appellant
submits that the Revenue has denied refund on two counts, first, the Cenvat
credit of Education Cess and Secondary and Higher Education Cess is not
admissible and second, the refund is time-barred. He submits that this issue
is no longer res-integra as various high courts have decided the issue in
favour of the assessee. He relied upon the following decisions:-2
Excise Appeal Nos. 10345 of 2021-SM
(a) Slovak India Trading Company Private Limited vs. CCE Bangalore –
2006 (205) ELT 956 (Tri.Bang). This decision of the Tribunal is
confirmed by Hon’ble Karnataka High Court reported at – 2006(201)
ELT 559 (KAR) and by Hon’ble Supreme Court reported as -2008 (223)
ELT A170 (SC).
(b) Surekha Project vs. Union of India – 2019 (367) ELT 789 (Gau.)
(c) Shalu Synthetic Private Limited vs. CC & SD Vapi – 2017 (346) ELT
413 (Tri-Ahmd)
(d) CIRCOR Flow Technology India Private Limited vs. CC CGST & CE
Coimbatore –2022 (59) GSTL 63 (Tri. Chennai)
(e) Luvkhush Textile vs. CCE, Jaipur – 2017 (353) ELT 417 (RAJ)
(f) Welcure Drugs & Pharmaceuticals limited vs. CCE Jaipur – 2018
(15) GSTL 257 (RAJ)
(g) Toshiba Machine Private Limited vs. CCT Chennai – 2019 (27)
GSTL 216 (Tri. Chennai)
Shri Vijay G Iyengar, learned Assistant Commissioner (AR) appearing
on behalf of the Revenue reiterates the findings of the impugned order.
I have carefully considered the submissions made by both the sides
and perused the record. I find that the question to be decided is, first,
whether the appellant is entitled for the refund of Cenvat credit of education
cess and higher education cess and consequently entitled for cash refund in
case if unable to utilize the said Cenvat credit under GST regime and
second, whether the refund is time-barred. I find that the appellant have
heavily relied upon various High Court decisions according to which refund
was allowed considering Rule 5 of Cenvat Credit Rules, 2004. It is not
disputed that the appellant are not in a position to utilize Cenvat credit of
Education Cess and Secondary and Higher Education Cess due to
introduction of GST with effect from 01.07.2017. 3
Excise Appeal Nos. 10345 of 2021-SM
As regards the admissibility of Cenvat credit of Education Cess and
Secondary and Higher Education Cess, Rule 3 clearly provides the Cenvat
credit to be allowed in respect of Education Cess and Secondary and Higher
Education Cess for ease of reference, Rule 3 of Cenvat Credit Rules is
reproduced below:-
Rule 3. CENVAT credit. –
(1) A manufacturer or producer of final products or a provider of taxable service shall be
allowed to take credit (hereinafter referred to as the CENVAT credit) of –
(i)
the duty of excise specified in the First Schedule to the Excise Tariff Act,
leviable under the Excise Act;
(ii)
the duty of excise specified in the Second Schedule to the Excise Tariff Act,
leviable under the Excise Act;
(iii)
the additional duty of excise leviable under section 3 of the Additional
Duties of Excise (Textile and Textile Articles) Act,1978 ( 40 of 1978);
(iv)
the additional duty of excise leviable under section 3 of the Additional
Duties of Excise (Goods of Special Importance) Act, 1957 ( 58 of 1957);
(v)
the National Calamity Contingent duty leviable under section 136 of the
Finance Act, 2001 (14 of 2001);
(vi)
the Education Cess on excisable goods leviable under section 91 read with
section 93 of the Finance (No.2) Act, 2004 (23 of 2004);
(via)
the Secondary and Higher Education Cess on excisable goods leviable under
section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
(vii)
the additional duty leviable under section 3 of the Customs Tariff Act,
equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v)
(vi) and (via);
(viia)
the additional duty leviable under sub-section (5) of section 3 of the
Customs Tariff Act,
Provided that a provider of taxable service shall not be eligible to take credit of such
additional duty;
(viii)
the additional duty of excise leviable under section 157 of the Finance Act,
2003 (32 of 2003);
(ix)
the service tax leviable under section 66 of the Finance Act;
(x)
the Education Cess on taxable services leviable under section 91 read with
section 95 of the Finance (No.2) Act, 2004 (23 of 2004); and
(xa)
the Secondary and Higher Education Cess on taxable services leviable under
section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and
(xi)
the additional duty of excise leviable under section 85 of Finance Act, 2005
(18 of 2005 )
From the above Rule, under clause (vi) and (via), the credit of Education
Cess and Secondary and Higher Education Cess is clearly allowed.
Therefore, the appellant is legally entitled for Cenvat of Education Cess and 4
Excise Appeal Nos. 10345 of 2021-SM
Secondary and Higher Education Cess. Hence, on this count refund cannot
be denied.
As regards limitation, in the judgments cited by the learned Counsel,
the Hon’ble High Court also considered limitation and held that in case of
refund of accumulated unutilized credit, limitation shall not apply. Relevant
judgments are reproduced below:-
(a) Slovak India Trading Company Pvt. Limited (Karnataka High
Court)(supra):
“4. Admitted facts would reveal of a claim of cash refund and admitted facts would
reveal of rejection at the hands of the Assistant Commissioner and also the appellate
authority. The Tribunal has chosen to allow the claim application on the ground that
refund cannot be rejected when the assessee goes out of Modvat scheme or when the
Company is closed. The argument is that there is no provision for refund in terms of
Rule 5 of Cenvat Credit Rules, 2002. Rule 5 reads as under:
“Rule 5. Refund of CENVAT Credit: When any inputs are used in the final products
which are cleared for export under bond or letter of undertaking, as the case may be, or
used in the intermediate products cleared for export, the CENVAT credit in respect of
the inputs so used shall be allowed to be utilized by the manufacturer towards payment
of duty of excise on any final products cleared for home consumption or for export on
payment of duty and where for any reason such adjustment is not possible, the
manufacturer shall be allowed refund of such amount subject to such safeguards,
conditions and limitations as may be specified by the Central Government by
notification:
Provided that no refund of credit shall be allowed if the manufacturer avails of
drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995,
or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty.”
- There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a
manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no
manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for
the purpose of rejection as rightly ruled by the Tribunal. The Tribunal has noticed that
various case laws in which similar claims were allowed. The Tribunal, in our view, is fully
justified in ordering refund particularly in the light of the closure of the factory and in
the light of the assessee coming out of the Modvat Scheme. In these circumstances, we
answer all the three questions as framed in para 17 against the Revenue and in favour
of the assessee.
- Ordered accordingly. No costs.”
The above decision of Hon’ble Karnataka High Court has been upheld
by the Hon’ble Supreme Court reported at 2008 (223) ELT A170 (SC).5
Excise Appeal Nos. 10345 of 2021-SM
(b) In the case of Shalu Synthetics Private Limited (supra) this
Tribunal relying upon the above cited judgment of Hon’ble Karnataka
High Court in the case of Slovak India Trading Company Pvt. Limited
passed the following decision :
“10. The above said two judgments of the Hon’ble High Courts squarely cover the
issue in favour of the appellant. It is to be noted that as against the above-said
judgments of the Hon’ble High Courts, the ld. Departmental Representative seeks to rely
upon the decision of this Bench in the case of M/s. Jai Elastics Pvt. Ltd. (supra). I have
perused the said order produced by the ld. Departmental Representative and note that
the said order of the Tribunal relies on the decision of the Larger Bench of the Tribunal
in the case of Steel Strips v. CCE, Ludhiana (supra). With utmost respect to the Bench, I
find that the judgment of the Hon’ble High Court of Karnataka in the case of Union of
India v. Slovak India Trading Co. Pvt. Ltd. (supra) was cited before the Larger Bench and
it was taken note of, but no reasonings have been recorded as to why the said judgment
of the Hon’ble High Court of Karnataka was not applicable in the similar/identical
situations. In my view, the judgments of the Hon’ble High Court of Bombay and
Karnataka will have to be followed by the Tribunal in an identical/similar situation. In
the case in hand, I find that the issue involved is identical to the issue which was before
the Hon’ble High Court of Bombay and Karnataka.
- In view of foregoing, judicial discipline requires that the Tribunal follows the
decisions of the Hon’ble High Court in preference of the Larger Bench order; I set aside
the impugned order and allow the appeal filed by the appellant with consequential
relief.”
(c) Considering the ratio of judgment by Hon’ble Karnataka High
Court in the case of Slovak India Trading Company Pvt. Limited the
Hon’ble Rajasthan High Court in the case of Luvkush Textiles passed
the following decision :
“10. In view of the fact that after the cristilization of the claim on account of the
Cenvet credit in favour of the assessee, assessee was entitled for the refund of Rs.
63,001/- from the Revenue which is not in dispute. It is also a fact that manufacturing
unit of assessee had been closed and the concern of the assessee is not in production
any more. Therefore, in view of Rule 5 which is reproduced as under :-
“Rule 5. Refund of CENVAT credit. – Where any inputs are used in the final products
which are cleared for export under bond or letter of undertaking, as the case may be, or
used in the intermediate products cleared for export, the Cenvat credit in respect of the
inputs so used shall be allowed to be utilized by the manufacturer towards payment of
duty of excise on any final products cleared for home consumption or for export on
payment of duty and where for any reason such adjustment is not possible, the
manufacturer shall be allowed refund of such amount subject to such safeguards, 6
Excise Appeal Nos. 10345 of 2021-SM
conditions and limitations as may be specified by the Central Government by
notification:
Provided that no refund of credit shall be allowed if the manufacturer avails of
drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995,
or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty.”
- As far as the provisions under Rule 5 is concerned the words used are that
“manufacturer shall be allowed refund of such amount subject to such safeguards”. The
provision, therefore, only speaks about a refund of amount and, therefore, clearly does
not prohibit for payment of a refund amount in any form including cash.
- The assessee is entitled for refund amount which is due to him after the proper
adjudication of its claim scheme and the only question which remains for consideration
is that when the manufacturing unit of the assessee is closed, the benefit which is
otherwise available to him is required to be paid and the Revenue cannot deny the
benefit of the same.
- In Commissioner of Central Excise, Ranchi v. Ashok Arc, the High Court of
Jharkhand 2006 (193) E.L.T. 399 (Jhar.) = 2007 (7) S.T.R. 365 (Jhar.) has held as under :-
- In this petition, the Revenue has raised the following question for reference :
“Whether the learned Tribunal has gravely erred in allowing the Appeal and
directing the authority to refund the pre-deposit amount in cash when the same
has been deposited through RG 23A Pt.-II i.e. MODVAT account and under the
provisions of Central Excise Rules, 1944 no such refund in cash is permissible?
- On hearing the parties, we find that the aforesaid issue was raised by the
Revenue before the CEGA Tribunal, which answered the same in favour of the
respondent by the impugned order dated 30th April, 2002. The stand of the
learned Counsel for the Revenue that the amount should have been adjusted in
RG-23A Part-II account can not be accepted, there being no such RG-23 Part-II
account available in respect of the finished goods. Similar issue was decided by
Andhra Pradesh High Court in the case of Deccan Sales Corporation, as noticed by
the CEGA Tribunal and, in fact, no credit account is being maintained by the
respondent on account of raising of exemption limit. As the respondent will not
be in a position to utilise the credit, the CEGA Tribunal has rightly held that the
Revenue should refund the amount to the respondent in cash. There being no
substantial question of law, raised for reference, we are not inclined to ask the
Tribunal to refer any issue.”
- Similarly the Karnataka High Court in the case of the Union of India (UOI)
represented by the Commissioner of Central Excise v. Slovak India Trading Company
Private Limited has held as under :-
- Admitted facts would reveal of a claim of cash refund and admitted facts would
reveal of rejection at the hands of the Assistant Commissioner and also the appellate
authority. The Tribunal has chosen to allow the claim application on the ground that
refund cannot be rejected when the assessee goes out of Modvat scheme or when the
Company is closed. The argument is that there is no provision for refund in terms of Rule
5 of Cenvat Credit Rules, 2002. Rule 5 reads as under?
Rule 5. Refund of CENVAT Credit. – When any inputs are used in the final products which
are cleared for export under bond or letter of undertaking, as the case may be, or used in
the intermediate products cleared for export, the CENVAT credit in respect of the inputs
so used shall be allowed to be utilized by the manufacturer towards payment of duty of 7
Excise Appeal Nos. 10345 of 2021-SM
excise on any final products cleared for home consumption or for export on payment of
duty and where for any reason such adjustment is not possible, the manufacturer shall
be allowed refund of such amount subject to such safeguards, conditions and limitations
as may be specified by the Central Government by notification :
Provided that no refund of credit shall be allowed if the manufacturer avails of drawback
allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims a
rebate of duty under the Central Excise Rules, 2002, in respect of such duty.
- There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a
manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no
manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for
the purpose of rejection as rightly ruled by the Tribunal. The Tribunal has noticed various
case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified
in ordering refund particularly in the light of the closure of the factory and in the light of
the assessee coming out of the Modvat Scheme. In these circumstances, we answer all
the three questions as framed in para 17 against the Revenue and in favour of the
assessee.
- The order of the Karnataka High Court has further been confirmed by the Hon’ble
Supreme Court in the SLP mentioned in the above paragraph. Taking into consideration,
the Rule 5 of the Cenvat Credit Rules, 2002, we are of the view that the Tribunal was not
correct while relying upon the judgment of the Larger Bench in Gauri Plasticulture (P)
Ltd. as Rule 5 in no way prohibits the payment of the refund amount in cash and more
particularly when after a proper adjudication of matter an amount of Rs. 63,001/- is said
to have been sanctioned in favour of assessee (appellant) and the factum of their
manufacturing unit having been closed, we are of the considered opinion that the
present appeal deserves acceptance, the same is, therefore, allowed. The refund
amount due to the appellant is required to be paid in cash by the Revenue. The
respondents are directed to pay the same within a period of two months from today.
- Accordingly, the question is answered in favour of assessee and against the
Revenue.”
(d) The Rajasthan High Court considering the issue in the case of
Welcure Drugs & Pharmaceuticals Limited (supra) passed the following
judgment:-
“9. We have heard counsel for the parties.
- Before proceeding with the matter, it will not be out of place to reproduce Rule 5
of the Central Excise Act which reads as under :
“Rule 5. Refund of CENVAT credit. – Where any inputs are used in the final products
which are cleared for export under bond or letter of undertaking, as the case may be, or
used in the intermediate products cleared for export, the CENVAT credit in respect of
the inputs so used shall be allowed to be utilized by the manufacturer towards payment
of duty of excise on any final products cleared for home consumption or for export on
payment of duty and where for any reason such adjustment is not possible, the
manufacturer shall be allowed refund of such amount subject to such safeguards,
conditions and limitations as may be specified by the Central Government by
notification :8
Excise Appeal Nos. 10345 of 2021-SM
Provided that no refund of credit shall be allowed if the manufacturer avails of
drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995,
or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty.”
- In our considered opinion, in view of the observations made by the Karnataka High
Court in Slovak India Trading Co.’s case (supra) and also in Collector of Central Excise,
Pune’s case (supra) by the Supreme Court, which reads as under :
- It is clear from these Rules, as we read them, that a manufacturer obtains credit
for the excise duty paid on raw material to be used by him in the production of an
excisable product immediately it makes the requisite declaration and obtains an
acknowledgement thereof. It is entitled to use the credit at any time thereafter when
making payment of excise duty on the excisable product. There is no provision in the
Rules which provides for a reversal of the credit by the excise authorities except where
it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised,
has to be paid for. We are here really concerned with credit that has been validly
taken, and its benefit is available to the manufacturer without any limitation in time or
otherwise unless the manufacturer itself chooses not to use the raw material in its
excisable product. The credit is, ther efore, indefeasible. It should also be noted that
there is no co-relation of the raw material and the final product; that is to say, it is not
as if credit can be taken only on a final product that is manufactured out of the
particular raw material to which the credit is related. The credit may be taken against
the excise duty on a final product manufactured on the very day that it becomes
available.
- It is therefore, that in the case of Eicher Motors Ltd. v. Union of India – [1999 (106)
E.L.T. 3] this Court said that a credit under the Modvat scheme was “as good as paid”.
- Four different High Courts have also taken the view against which the SLP was
preferred and earlier also the Tribunal granted refund against which the SLP was not
preferred. In that view of the matter, the principle of estoppel applies as once the
department has accepted the view taken by the Tribunal it will not be appropriate to
challenge the same by choosing the present assessee.
- In our considered opinion, the judicial discipline is required to be maintained. The
Tribunal cannot distinguish the High Court judgments. They are bound by the High Court
judgments even jurisdictional High Court and at the most they can refer it back prior to
distinguish on facts but no authority has been made. Full Bench decision of the Tribunal
has to be followed.
- Hence, we answer the issue in favour of assessee against the department.
- The appeal is allowed. The view of Karnataka High Court which has been confirmed
by the Supreme Court is required to be approved and the same is approved.”
In view of the above judgments, it is observed that the issue is no
longer res-integra. Accordingly the appellant is entitled for cash refund of 9
Excise Appeal Nos. 10345 of 2021-SM
accumulated and unutilized Cenvat credit of Education Cess and Secondary
and Higher Education Cess. The impugned order is set-aside and the appeal
is allowed with consequential relief.
(Pronounced in the open court on 06.02.2023)
(Ramesh Nair)
Member (Judicial)
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