The appellate authority should decide all appeals filed by revenue, irrespective of fact that the same may result in excess or less refund.

PJ/Case Laws/2012-13/1171

Case:-M/s LUPIN LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, LTU, MUMBAI
Citation: - 2012-TIOL-921-CESTAT-MUM
Issue: - The appellate authority should decide all appeals filed by revenue, irrespective of fact that the same may result in excess or less refund.
Brief fact: - The brief facts of the case are that the Appellants are manufacturer of excisable goods namely Medicament falling under Chapter 30 of the Central Excise Tariff Act, 1985. They had filed 16 refund claims in respect of both the units pertaining to the period August,08 to July, 09 under Rule 5 of the Cenvat Credit Rules, 2004 read with Section 11B of the Central Excise Act, 1944. They had submitted following documents:-

(i)            Application for refund CENVAT Credit under Rule 5 of the Cenvat Credit Rules, 2004;
(ii)           Statement of input credit availed and utilized for the respective months;
(iii)          Particulars of inputs used in the manufacture of final products and amount of Credit taken on
such inputs for the respective months;
(iv)          Monthly excise return in Form ER 3 for the respective months;
(v)           Self attested copies of Shipping Bills and invoices for the goods cleared for export under
Bond/Letter of Undertaking (LUT) for the respective months.
(vi)          Certificate for not claiming rebate of duty or service tax in respect of excisable material used in
the manufacture of the goods and duty drawback under Customs & Central Excise Duties Drawback Rules, 1971.

The adjudicating authority after going through all the refund claims and all the relevant documents has sanctioned the refund claims to the appellants holding that the assessee is eligible for refund to the extent of ratio of export turnover to the total turnover. These orders passed by the adjudicating authority were reviewed by the Commissioner and 6 appeals were filed by the Assistant Commissioner of Central Excise & Service Tax, LTU, Mumbai against the 16 Orders-in-Original passed by the Assistant Commissioner of Central Excise & Service Tax, LTU, Mumbai.

All these appeals filed by the Revenue were decided by the Commissioner (Appeals) vide impugned Order-in-Appeal holding that the excess refund sanctioned to the assessee are liable to be rejected and recovered from them. As regards less amount sanctioned to the assessee in 8 cases, he held that this is not the subject matter of the appeals before him.

The appellants are before us in appeal against the impugned orders.

Appellant Contention:- The appellants submits that the Commissioner (Appeals) passed these order on the basis of verification report called for by the Commissioner (Appeals) vide his letter No. LTU/MUM/C(A(-27/09/D/1015 dated 09.02.2010. In response to this letter from the Commissioner (Appeals), the Commissioner, LTU has sent a verification report on 12.05.2010 vide his letter No.LTU/MUM/CS/GLT4/Lupin/191/09/4021 dated 12.5.2010. In this report, the Commissioner, LTU has given the month-wise details of eligible refund and refund sanctioned and also showing the difference between the eligible refund and sanctioned refund. He submitted that out of 16 cases, in 8 cases there is less refund sanctioned to the appellant and in 5 cases, the excess refund was sanctioned. He submitted that this report clearly confirms that the appellants are not given any excess refund and in fact they have given less amount of refund to the tune of Rs.1,75,31,035/-. The Commissioner (Appeals) has failed to appreciate this fact of less refund sanctioned to the appellants. Appellants are legally eligible for the additional refund of this amount due to revised working especially when the original refunds in each month were given based on the running credit balance after adjusting the refund given in each month. The learned Counsel, therefore, submitted that all the sanction orders are to be taken together as refund of a particular month depends on the amount of refund sanctioned for the previous month so as to arrive at the credit balance available in each succeeding month. So if there is a reduction in the refund in one month, then this will cause to an increase in the credit balance in the succeeding month where the appellants will be eligible for more refund. He, therefore, submitted that all these subject Orders-in-Original are to be taken together to maintain the same principle of running balance in the new calculation and with the results, the appellants are eligible for additional refund of Rs.1,75,64,260/-.

In his rejoinder, learned Advocate for the appellants submitted that since the appellants have got the refund in all 16 cases, they had no grievance for going to Commissioner (Appeals) against the Orders-in-Original. When the appeals were filed by the Revenue, cross objections were filed by the appellants before the Commissioner (Appeals) and he relied on the Tribunal's decision in the case of Commissioner of Central Excise, Allahabad Vs. Bajaj Hindustan Sugar & Inds. Ltd.- 2010 (253) ELT 614 (Tri-Del) = (2010-TIOL-399-CESTAT-DEL), whereinit has been held that in cross-objections against appeal the assessee can challenge part oforder which was unfavourable to them, though they have not preferred the appeal against it.He submitted that in view of the above cited decision, the objection of the Revenue that theappellants did not challenge the Order-in-Original before the Commissioner (Appeals) does not survive. He therefore, submitted that since the impugned orders have been passed on the basis of verification report giving the month-wise details of refund sanctioned and refundeligible, they are very much entitled to the amount of refund in this case where less refund
was sanctioned to them.

Respondent contention ;- The Revenue submitted that when the appeals were filed by the Revenue before the Commissioner (Appeals), the assessee has filed the cross-objections but they have not filed any appeal against the Orders-in-Original. He submitted that in cases where the less refund was sanctioned to the appellants, they have not filed any appeal before the Commissioner (Appeals) and at this stage, they cannot claim the benefit of getting the additional refund arising out of the Commissioner (Appeals) order. He, therefore, submitted that the appeals filed by the appellants claiming additional refund need to be rejected.

Reasoning of judgement :- On going through the Rule 5 of the Cenvat Credit Rules,2004, Tribunal find that the refund of CENVAT Credit in respect of the inputs used in the manufacture of final product which is cleared for export under bond or letter of undertaking is admissible to the manufacturer subject to safeguards, conditions and limitations as specified in the Notification. The Notification No.5/2006-CE was issued by the Central Government on 14.3.2006. By reading the Rule 5 and the Notification together, it is clear that the refund of the CENVAT Credit is admissible only in respect of those inputs which have been used in the manufacture of the product exported under Bond or under letter of undertaking. Before granting any refund, the Assistant Commissioner is required to ascertain the quantity of the inputs and credit availed on those inputs which were used in the manufacture of products exported under bond or under letter of undertaking. In these cases, the original authority has sanctioned the refund based on the ratio of export turnover to the total turnover, which is contrary to the provisions of Rule 5 and the Notification issued thereunder. Therefore, all the orders passed by the Assistant Commissioner sanctioning the refund on proportionate basis are not proper and legal and were rightly challenged by Revenue before the Commissioner (Appeals).

The Tribunal find that the Commissioner (Appeals) has given finding only in those cases where excess refund was granted to the assessee on the basis of proportionate credit and he has not considered the cases where less refund were sanctioned to the assessee, though the appeals were filed by the Revenue in respect of all 16 Orders-in-Original. If the less refund was sanctioned by the Assistant Commissioner to the assessee, there is no reason to file the appeal before the Commissioner (Appeals) by the Revenue. Tribunal, therefore, hold that the appeals were filed by the Revenue before the Commissioner (Appeals) against the principle of sanctioning of refund on the basis of proportionate credit taking the ratio of export turnover to total turnover. This was not case of the Revenue to file the appeals only on those cases where the excess refund was sanctioned. In fact, whether the refund sanctioned was excess or not was based on the verification report dated 12.5.2010 sent by the Commissioner, LTU in response to the Commissioner (Appeals) letter dated 09.02.2010 after the personal hearing granted to the appellants on 21.01.2010. It is also on record that the copy of the verification report was given to the appellants by the Commissioner (Appeals) only on 14.9.2010, whereas the Order-in-Appeal was issued on 30.6.2010. With the result, the appellants were not able to make any submissions before the Commissioner (Appeals) in this regard. Tribunal, therefore, do not agree with the findings of the Commissioner (Appeals) that where the less refund has been sanctioned, that issue was not before him in the impugned appeals. The matter was remanded back to the original adjudicating authority to examine and decide the refund claims on the basis of actual use of inputs gone into the manufacture of final product exported under bond or under letter of undertaking month-wise after giving the reasonable opportunity of being heard to the appellants.

Decision: -  Appeals are allowed by way of remand.

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PJ/Case Laws/2012-13/1171

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