Whether cash refund is allowed of demand paid earlier from CENVAT account?

PJ/Case Law/2014-15/2332

Case:-M/s SREE KADERI AMBAL STEELS LTD Vs CCE, MADURAI

Citation:-2014-TIOL-1777-CESTAT-MAD

Brief facts:-The relevant facts of the case in brief are that the appellants were engaged in the manufacture of Bars and Rods of Iron and Steel articles, classifiable under Chapter 72 of the CETA, 1985. They availed MODVAT credit on the inputs namely MS Ingots and Billets under Rule 57A of the erstwhile Central Excise Rules, 1944. They cleared the ingots cut end pieces to their sister unit for converting them into ingots by melting without payment of duty under Rule 57F(3) of the erstwhile Rules, 1944 during the period from August 1995 to October 1995.

Show-cause notice was issued proposing demand of duty of Rs.2,61,818/-, which was confirmed by the adjudicating authority vide Order-in-Original No. 25/1996 dated 27.3.1996. The appellant filed appeal before the Commissioner (Appeals) and also reversed the said amount from their RG23A Part - II account under protest. Commissioner (Appeals) allowed the appeal filed by the appellant vide Order-in-Appeal No. 128/98 dated 28.9.1998. Revenue filed appeal before the Tribunal against the Order-in-Appeal dated 28.9.1998. The Tribunal vide Final Order dated 31.8.2000 remanded the matter to the original authority. In denovo proceedings, the adjudicating authority vide Order-in-Original No. 128/2000 dated 19.12.2000 dropped the demand of duty.

In the meantime, the appellant filed refund claim consequent to Order-in-Appeal dated 28.9.1998. The Assistant Commissioner of Central Excise vide Order-in-Original No. 26/99 dated 30.3.99 rejected the refund claim on the ground of unjust enrichment. The appellant filed appeal before Commissioner (Appeals), which was rejected vide Order-in-Appeal No. 207/2003 dated 2.6.2003. The appellant filed appeal before this Tribunal and this Tribunal by Final Order No. 27/2004 dated 1.1.2004 remanded this matter to the adjudicating authority to examine the claim of refund. In denovo proceedings, the adjudicating authority by Order-in-Original No. 19A/2004 dated 7.6.2004 sanctioned the refund claim of Rs.2,61,818/- in cash, as the appellant's factory had already been closed down. Revenue filed appeal before the Commissioner (Appeals). By the impugned order, the Commissioner (Appeals) allowed the appeal filed by the Revenue. Hence the appellant has filed this appeal before the Tribunal.

Appellant’s contentions:-The learned counsel on behalf of the appellant submits that the appellant paid an amount of Rs.2,61,818/- for the purpose of filing appeal before the Commissioner (Appeals) under Section 35B of the Central Excise Act, 1944. He submits that the appellant's factory was closed down on 14.2.2001. It is submitted that the amount of Rs.2,61,818/- was paid from the CENVAT account. Thereafter, the appellant paid duty from PLA for the subsequent clearances and therefore the adjudicating authority rightly sanctioned the refund claim in cash. He relied upon the decision of the Hon'ble Karnataka High Court in the case of Union of India Vs. Slovak India Trading Co. Pvt. Ltd. - 2006 (201) ELT 559 (Kar.) = 2006-TIOL-469-HC-KAR-CXwhich was upheld by the Hon'ble Supreme Court as reported in 2008 (223) ELT A170 (SC). He also relied on the following decisions of the Tribunal:-

(a) CCE Vs. Kochar Sung - Up Acrylic Ltd. - 2010 (259) ELT 713 = 2010-TIOL-1822- CESTAT-DEL

(b) CCE Vs. S.K. Sacks Pvt. Ltd. - 2010 (261) ELT 560

Respondent’s contentions:-The learned AR on behalf of Revenue submits that the Larger Bench of the Tribunal in the case of Gauri Plasticulture (P) Ltd. Vs. CCE - 2006 (202) ELT 199 (Tri. - LB) = 2006-TIOL-1121-CESTAT-MUM-LB held that refund in cash paid from CENVAT account would not be eligible. He also relied upon the decision of the Tribunal in the case of Lavkush Textiles Vs. CCE - 2012 (282) ELT 545. He further submits that the appellant had not placed any evidence that after reversal of the credit they have paid duty from the PLA for the subsequent clearances.

Reasoning of judgment:-The Hon’ble Tribunal find that in the instant case, there was a demand of duty of RS.2,61,818/- which was confirmed by Order-in-Original No. 25/96 dated 27.3.1996. The appellant paid the said amount through the CENVAT account for the purpose of filing appeal before the Commissioner (Appeals). It is seen that there are several rounds of litigation on merit as well as on refund claim. Ultimately, the adjudicating authority sanctioned the refund claim and as the appellant's factory was already closed, it was directed to pay in cash and the amount has already been paid to them in cash. Revenue filed appeal before Commissioner (Appeals) on the ground that such refund has to be ordered by way of credit in RG23A Part - II account.

They find that the Larger Bench of the Tribunal in the case of Gauri Plasticulture (P) Ltd. (supra) observed that if no cash payments towards duty were made through PLA and the credit would have remained unutilized in the said CENVAT account, such credit cannot be allowed by way of cash. The Tribunal in the case of Kochar Sung-Up Acrylic Ltd. (supra), after considering the Larger Bench decision has observed that when the duty was paid through CENVAT account and the unit was functioning and by the time the matter was decided by the Tribunal in favour of the assessee which resulted in refund and the refund was sanctioned and the unit had closed down. The registration certificate had been surrendered, the assessee is eligible for cash refund. The same view was taken by the Tribunal in the Slovak India Trading Co. Pvt. Ltd. (supra).

In their considered view, the adjudicating authority should have examined as to whether after payment of this duty from the CENVAT account, the appellant paid duty from their PLA account as decided in the case of Kochar Sung-up Acrylic Ltd. (supra) and Slovak India Trading Co. Pvt. Ltd. (supra). The learned AR strongly relied on the decision of Lavkush Textiles (supra). In that case, the appellants after debiting the amount from the CENVAT account they have not paid any amount from their PLA account and therefore the Tribunal observed that they are not entitled for refund of CENVAT credit in cash. Hence the said case law is not applicable to the present case.

In view of the above discussion, the impugned order passed by the Commissioner (Appeals) is set aside and the order passed by the adjudicating authority is restored subject to verification of subsequent payment of duty from PLA as discussed above. The appeal filed by the appellant is disposed of in the above terms.

Decision:- Appeal disposed of.

Comment:-The analogy of the case is that if a manufacturer earlier paid demand from Cenvat credit and later on won the case, then the cash refund of the same is allowed only if the factory is closed as well as subsequent duty has been paid from PLA. If the credit is allowed now then it will be of no use to manufacturer as the factory is closed.

Also, conversion of cenvat in cash is not allowed by this method. The tribunal held that if on subsequent clearance of goods, the duty is paid in cash by manufacturer then it is implied that this cenvat will not remain unutilised with him. This implied that if this demand was not paid from Cenvat then he must have utilised the same for his duty payment and there should not be any cash outflow. Seeing the same, the tribunal allowed the cash payment of this amount subject to verification of fact that whether the manufacturer has paid duty in cash on subsequent clearances.

But there are number of litigations in this matter and every time remand. Litigation has its cost also. Although the manufacturer was able to get the refund but he must have paid the same amount to the advocates fighting his case. Can the matter not decided in first instance when it is covered by number of decisions?

Prepared by:- Monika Tak

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PJ/Case Law/2014-15/2332

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