Whether time limit of section 11B applicable for refund claim under Rule 5?

Case:-M/s AFFINITY EXPRESS INDIA PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE, PUNE I

Citation:- 2014-TIOL-1035-CESTAT-MUM

Brief facts:- The brief facts of the case are that the appellants filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.5/2006 CE(NT) dated 14.3.2006 for an amount of Rs. 14,53,763/- for the period October, 2008 to December, 2008. The said refundclaim was filed on 23.12.2009. The refund claim was examined by the original authority who found that part of the refund claim was timebarred. In respect of the remaining refund claim refund of Rs. 4,96,794/- was sanctioned. It was also found that certain Cenvat Credittaken had no nexus with the output service which was exported or for some other reasons the refund claim amounting to Rs. 1,58,371/-was disallowed.

Appellant’s contentions:- Ld. Advocate for the appellants contented that Notification No.5/2006 CE(NT) dated 14.3.2006 did not specify the relevant date for computing the time limit prescribed under Sec. 11B of the Central Excise Act. Similarly. Sec. 11B of the Act though defines the relevant date in different situation, the said section does not specify the relevant date in respect of refund of Cenvat Credit under Rule 5 of the Central Credit Rules. The ld. advocate quoted case laws in support of his contention that there is no time limit for filing the refund claim under Rule 5 of the Cenvat Credit Rules. Even if the time limit is to be computed it was to be computed from the date of receipt of the money in respect of the export of service or at least from the last day of the quarter for which the refund claim pertains (refund claims under Rule 5 was to be made on quarterly basis), the time limit is only a procedural and cannot be considered as mandatory or substantive law. The case law quoted by the ld. Advocate were:-

(1) CCE Jalandhar vs. JCT Ltd - 2013 (296) ELT 426 (Tri-Del).
(2) CCE, Ahmedabad vs. Rangdhara Polymers - 2011 (264) ELT 275 (Tri.-Ahmd.) = 2010-TIOL-518-CESTAT-AHM
(3) Global Energy Food Industries vs. CCE, Ahmedabad - 2010 (262) ELT 627 (Tri.-Ahd.) = 2010 TIOL-337-CESTAT-AHM
(4) Alcomponics Sales Pvt. Ltd. vs. CCE, Noida - 2012 (279) ELT 280 (Tri.-Del.),
(5) Uttam Steel Ltd. vs. Union of India - 2003 (158) ELT 274 (Bom.);
(6) STI India Ltd. vs. Commr. of Cus & C.Ex. Indore 2009 (236) ELT 248 (M.P.);
(7) Comm. Of C.Ex & Cus, Surat-I vs. Swagat Synthetics 2008 (232) ELT 413 (Guj.) = 2008-TIOL-666-HC-AHM-CX
(8) CCE. Ex. Pune-1 vs. Eaton Industries P. Ltd - 2011 (22) STR 233 (Tri.-Mum.)
(9) Vodafone Cellular Ltd. vs. CCE, Pune. III dtd 17.1.2014
(10) Deepak Spinners Ltd. vs. Commr. of C.Ex, Indore - 2014 (302) E.L.T. 132 (Tri.-Del.) = 2014-TIOL-63-CESTAT-DEL

Respondent’s contention:- Ld. A.R. on the other hand submitted that the whole issue about the time limit was examined by the Hon'ble Madras High Court in the case of CCE, Coimbatore vs GTN Engineering (I) Ltd. - 2012 (281) ELT 185 (Mad.) = 2012-TIOL-369-HC-MAD-CX. Ld. A.R. also mentioned that the said judgment of the Hon'ble Madras High Court took into account the judgement of Madhya Pradesh High Court in the case of STI India Ltd. vs. Commissioner - 2009 (236) ELT 248 (M.P.) as also the Hon'ble Gujarat High Court judgment in the case of CCE vs Swagat Synthetics (supra). Ld. A.R. further stated that Notfn. No.5/2006-CE(NT) clearly prescribe in clause (6) that the refund claim was to be filed before the expiry of the period specified in section 11 B of the Central Excise Act, 1944. Once the Notification prescribes a condition for grant of refund, the same has to be implemented and applied. Ld. A.R. further drew attention to definition of “relevant date” in clause (B) to Explanation under Sec.11B. In the said clause it was clearly stated that in case of goods exported out of India where a refund of excise duty was available in respect of the excisable materials used in the manufacture of such goods, the date is when the goods are exported by sea or air. Ld. A.R. argued that refund of credit was relating to the tax paid on inputs or input services used in the export of services and the said relevant date will precisely fit into the scheme relating to export of services and therefore the relevant date has to be counted from the date of export. Ld. A.R. also stated that Export of Service Rules do not specify the day for the act of export but only details the condition to be satisfied so as to consider export of service. Ld. A.R. stated that if we see the definition given in Explanation to Sec.11B, even when goods do not physically leave territorial water of the country but the said definition recognizes particular situation/time as act of export. Situation/time was such after which the exporter had no control over the goods. For example, the day goods were loaded on the ship, that day was considered as the relevant date for export. Similarly, if the goods are exported by Post, it is the date of dispatch of the goods by the Post Office. Similarly in the case of export of services, even though Explanation does not detail the relevant date but the day invoice is raised or the services are exported through e-mail or any other means will be the relevant date for export.

Reasoning of judgment:- After hearing both the submissions it was held that The appellants were claiming refund of accumulated Cenvat Credit under Rule 5 of the Cenvat Credit Rules read with Notification No.5/2006-CE(NT) dated 14.3.2006. Clause (6) of the Appendix of the said Notification reads as under:-

“The application in Form A. alongwith the prescribed enclosures and the relevant extracts of the records maintained under the Central Excise Rules, 2002, CENVAT Credit Rules, 2004, or the Service Tax Rules, 1994, in original, are filed with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, before the expiry of the period specified in Section 11B of the Central Excise Act, 1944(1 of 1944).” (Emphasis supplied)

Therefore it was held that the Notification prescribes that the claim for refund has to be filed before the expiry of the period specified under Sec. 11B of the Central Excise Act.

Section 11B of the Central Excise Act deals with claim of refund/rebate of duty. Sec.11B (i) provides the limitation period of one year. Further, Clause (B) to Explanation in Sec. 11B (B) defined the ‘relevant date' from which the period of one year is to be computed. The said explanation explained relevant date for different situation. However, situations covered are for export of goods. The situation relating to export of services was not specifically covered by any of the sub-clause of Clause (b) of Explanation. However, sub clause(a) was the clause nearest to the situation relevant for the export of services. The relevant clause reads as under:-

“(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 ship or the aircraft in which such goods are loaded, leaves India, or

(ii) If the goods are exported by land, the date of dispatch of goods pass the frontier, or

(iii) If the goods are exported by post, the date of dispatch of goods by the Post Office concerned to a place outside India”

(Emphasis supplied)

It was seen from the above explanation that in case of export of goods if the claim is for refund of duty on excisable materials used in the manufacture of goods exported, it is the date when such goods are loaded on the ship or aircraft. It was also observed that Rule 5 of the Cenvat Credit Rules which provided for refund of Cenvat Credit was only relating to the Cenvat Credit accumulated due to export of final product or used in providing output service. Thus in judge’s view, a combined and harmonious reading of Rule 5, Section 11B and Notification 5/06-CE(NT) would indicate that the period of one year was to be computed from the date of export of the service. It was found that the issue had came up before the Hon'ble Madras High Court the case of GTN Engineering (I) Ltd reported in 2012 (281) ELT 185 (Mad.) = 2012-TIOL-369- HC-MAD-CX. The relevant portion of the said judgement was:-

“8. It is the contention of the learned counsel for the Appellant/Revenue that though the provisions of Section 11B of the Central Excise Act, 1944, entitles any person to claim refund of any duty of excise and interest, if any paid on such duty, by itself is not applicable to the claim of refund of CENVAT credit. To get over the same, Rule 5 of CENVAT Credit Rules. 2004, provides for such refund of CENVAT credit. By that rule, the Central Government is empowered to issue Notification for making claim for such refund. Accordingly, in terms of the said rule relevant notification was issued and Clause 6 of the Appendix contemplates that the claim could be entertained only on compliance of the period of limitation prescribed under Section 11B of the Central Excise Act. On the ground that in all these cases, claims have been made beyond the period of limitation, the Commissioner (Appeals) has rightly rejected all the six claims of the respondent. The said order has been interfered by the CESTAT by holding that as per Rule 5; no period of limitation could be prescribed in the absence of the notification by the Central Government as to the relevant date. This finding of the Tribunal is contrary to the provisions of the Act and Rules and the notification made thereunder. The learned counsel would further submit that in any case, in the absence of sufficient materials produced before the authorities, the rejection of the claim for refund is well justified and the Tribunal ought not to have remanded the matter for that reason.

9. On the other hand, the learned counsel for the respondent would submit that though the provisions of Section 11B is not strictly made applicable to the refund of CENVAT credit as it applies only for the claim of duties and interests if any, paid on such duty, in the wake of the provisions of sub-rule (5) and the notification as such, claims could be made. Nevertheless, in the absence of any notification in regard to the relevant date as defined in Section 11B(5)(B) of the Act, the rejection of the claim for refund on the ground of period of limitation is bad.

10. The learned counsel would draw our attention to the above provision defining the relevant date and contended that none of the clauses contained therein would apply for the claim for refund on CENVAT credit. In the absence of the same, the finding of the CESTAT requires no interference. As far as the other findings for remittal viz., the respondent had to produces materials, is concerned, he would submit that the respondent requested the authorities to peruse the materials, because it were voluminous and there was a default on the part of the officers in random verification of the said documents.

11. We have carefully considered the above said submissions. The relevant portion in Section 11B of the Central Excise Act 1944, reads as under:

“11B. Claim for refund of [duty and interest, if any, paid on such duty. - (1) Any person claiming refund of any [duty of excise and interest, if any, paid on such duty] may make an application for refund of such [duty and interest, if any, paid on such duty] to the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] before the expiry of [one year] [from the relevant date] [in such form and manner] as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of [duty of excise and interest, if any, paid on such duty] in relation to which such refund is claimed was collected from, or paid by him and the incidence of such [duty or interest, if any, paid on such duty] had not been passed on by him to any other person.”

12. By that provision, a claim for refund is made available in case of refund of duty and interest, if any paid on such duty and as far as that provision is concerned, there is no dispute that it is applicable only in case of duty paid and not on the CENVAT credit facilities. As already pointed out, to tide over the situation and also to make eligible for the manufacturer of the final products which is 100% export oriented, Rule 5 of the CENVAT Credit Rules, 2004. entitles for making claim for refund of CENVAT credit and the relevant portion of the said rule reads as under:

"RULE 5. Refund of CENVAT credit. - Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the, CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,

(i) Duty of excise on any final product cleared for home consumption or for export on payment of duty; or

(ii) Service tax on output service and where for any reason such adjustment is not possible, the manufacturer or provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification."

13. In terms of the said rule, the Central Government should notify as to the safeguards, conditions and limitations. Accordingly Notification No. 5/2006-C.E. (NT.), dated 4-3-2006 has issued Clause 6 appendix to the notification reads as under:

"6. The application in Form A, along with the prescribed enclosures and the relevant extracts of the records maintained under the Central Excise Rules, 2002, CENVAT Credit Rules, 2004. or the Service Tax Rules, 1994, in original are filed with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, before the expiry of the period specified in Section 11B of the Central Excise Act. 1944 (1 of1944)".

14. the said notification prescribes a period of one year, as provided under section 11B of the Central Excise Act, for the purpose of making application in Form-A along with prescribed enclosures and also the relevant extracts of the records maintained under the Central Excise Rules. 2002, Cenvat Credit Rules, 2004 or service Tax Rules, 1994 in original. That application should be filed before the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be. For the purpose of finding out as to the relevant date for the purpose of making claim for refund of CENVAT credit Rule 5 should be made applicable. It is the contention of the learned counsel for the assessee that the provision defining relevant date does not cover the claim for refund of CENVAT credit. We may point out that when a statute empowered for such claim, the said provision must be read to find out as to the relevant date. Rule 5 specifies that "where any input or input service is used in the manufactures of final product which is cleared for export under bond or letter of undertaking as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed."

15. A reading of the above rule, though there is no specific relevant date is prescribed in the notification, the relevant date must be the date on which the final products are cleared for export. If any other conclusion is arrived, it will result in disentitling any person to make a claim of refund of CENVAT credit. Admittedly, the respondent has made a claim only invoking Rule 5 of the CENVAT Credit Rules, 2004. In that view of the matter, there cannot be any difficulty for us to hold that the relevant date should be the date on which the export of the goods was made and for such goods, refund of CENVAT credit is claimed.

16. The learned counsel for the respondent would rely upon a judgment of the Gujarat High Court reported in 2008 (232) E.L.T. 413 (Guj.) = 2008-TIOL-666-HC-AHM-CX [Commissioner of Central Excise and Customs, Surat-I Vs Swagat Synthetics]. That was a case relating to sub-rule (13) of Rule 57F of Central Excise Rules, 1944, which reads as under:

"(13) Where any inputs are used in the final products which are cleared for export under bond or used in the intermediate products cleared for export in according with sub-rule (4), the credit of specified duty in respect of the inputs so used shall be allowed to be utilised by the manufacturer towards payment of duty of excise on any final products cleared for home consumption of 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 in the Official Gazette."
The said rule does not prescribe any time-limit. In the absence of such prescription as to the limitation the Gujarat High Court has held that the claim of refund could not be rejected on the ground of limitation.

17. The learned counsel would also rely upon a Judgment of Madhya Pradesh High Court at Indore reported in 2009 (236) E.L.T 248 (M.P.) [STI India Ltd. v. Commissioner of Customs and Central Excise, Indore]. In that case, though the Court has held that Clause 6 of Appendix read with Section 11B of Central Excise Act, 1944 cannot be made applicable in so far as the period of limitation is concerned when a claim for CENVAT credit is made, a reading of the said provision shows that there is no reference to Rule 5. With great respect, we are not in agreement with the said judgment as the judgment was rendered based on the rules and the notification which are procedural in nature. As we have found that but for the provision of Rule 5 r/w notification, the respondent could not have filed the application for refund, he has to satisfy the limitation clause asprovided under Section 11B of the Act.

18. In view of the above, the order of CESTAT holding that the limitation is not applicable to the facts in question to the case has to be set aside. Accordingly the same is set aside."

It was held that the Ld. Counsel for the appellants had quoted number of judgments of this tribunal and also Hon'ble High Court of Gujarat and that of Hon'ble Madhya Pradesh high Court in support of his contention. It was found that while passing the judgment in the case of GTN Engineering (I) Ltd. the Hon'ble Madras High Court took into account both the judgments and distinguished and also stated the reasons for departing. It was noted that all the judgments of this Tribunal quoted by the ld. advocate were based upon either the judgement of the Hon'ble Gujarat High Court or Hon'ble Madhya Pradesh High Court and none of the Judgments take cognizance of the aforesaid judgement of the Hon'ble Madras High Court which was the latest judgment on the subject. In view of the said position, the judge was of the view that the period of limitation of one year was required to be enforced and the relevant date for counting the said period of one year will be from date of export.

The ld. counsel for the appellant had also quoted the judgement of the Tribunal in the case of Eaton Industries Private Ltd., - 2011 (22) STR 223 (Tri-Mum) wherein this Tribunal had taken a view that in case of export of services the 'relevant date' was the date when thepayment of export was received by the assessee. This was based upon Rule 3(2) of Export of Services Rules, 2005 wherein it is providedthat the provision of any taxable service shall be treated as export of service when the payment of such service is received by the serviceprovider in convertible foreign exchange. The judge after going through the Export of Service Rules, 2005 Held that Rule 3(2) and (4) of Export of ServicesRules, 2006 reads as under:

"2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely -

(a) such service is provided from India and used outside India; and

(b) Payment for such service is received by the service provider in convertible foreign exchange.

Explanation - For the purposes of this rule "India" includes the designated areas in the continental shelf and Exclusive Economic zone of India, as declared by the Notifications of the Government of India in the Ministry of External Affairs No. SO 429 (E), dated the 18th July 1986 and SO 643(E). dated the 19" September, 1996.

4. Export without payment of service tax. - Any service, which is taxable under clause (105) of section 65 of the Act, may be exported without payment of service tax."

In Rule 3(2), clause (b) was not to be read in isolation but had to be read with the opening part of Rule 3(2). The opening part of Rule 3(2) stated that the conditions were to be satisfied to treat provision of any taxable service as export of service. One of the conditions is that the payment for such service is received in convertible foreign exchange. Such conditions are not unknown in excise and customs administration. Drawback is also subject to similar condition but it is not as if drawback is given only after receipt of payment. Even the definition of input and input services in the Cenvat Credit Rules, 2004 uses the word "used" and not "to be used", but even before such goods are used these are considered as input Another example, if goods are exported to Nepal and payment is received in rupees, rebate is not granted to exporter, even though goods are physically exported to Nepal. Similarly, here payment is expected to be in convertible foreign exchange. But this does not imply that unless payment is received, act of export of service has not taken place. Of course, if Payment for export of service is to be obtained in rupees or non-convertible foreign exchange, then it will not be treated as export of service. Further, reading of Rule 4 of the Export of Service Rules indicated that any taxable service may be exported without payment of service tax. If rule 3(2) is to be read as export will take place only after receipt of payment in convertible foreign exchange then except in case of advance payment no service can be exported without payment of service tax. Thus a harmonious reading of sub-rule (2) to Rule 3 and Rule 4 would indicate that the services are exported when (i) these are provided from India and used outside India and (ii) payment terms are in convertible foreign exchange. In the present case, the appellants were providing business auxiliary service and management consultancy services. Thus the export of service took place at the time of issuing invoice. The payment condition was only to ensure that the service provider received the payment in convertible foreign exchange so as to get the benefit of service tax. The date of receipt of such payment is not relevant for determining the time of export. In view of the above analysis, it was held that the relevant date for determining the period of limitation will be the date of export of services or the date when the invoices were raised.

Learned advocate had quoted judgment of Hon'ble Mumbai High Court in the case of Uttam Steels Ltd. (supra). This judgment was in the context of change in period of limitation from six months to one year, which was not an issue here. Ld. Advocate had quoted numerous other judgments. In view of para 7, 8 and 9 above, it was not considered necessary to discuss each of the judgments.

In addition to above, refund of Rs. 5,268/- relating to Custom House Agent services was denied on the ground that the appellants had failed to establish that these services are used in providing the output services exported and there was no supporting C.A. Certificate. The appellants explained that the said service was utilized for clearance of import consignment and the said goods were used for purpose of rendering of services. In view of this position, the appellants were entitled to the said refund. Another refund of Rs 672/- on meal coupons was disallowed on the ground that the appellants had failed to establish that these services were used in providing the output services exported. The appellants explained that the service was procured and used in relation to business and in view of the Bombay High Court's judgment in the case of CCE vs Ultratech Cement Ltd - 2010 (20) STR 577 (Bom) = 2010-TIOL-745-HC-MUM-STthey are eligible. In view of this position, the appellants were entitled to the refund of the same. A refund of Rs. 1,322/- was claimed in respect of Air Travel Agent services. The appellants explained that the overseas traveling is necessary in relation to their business and procure export order and in view of explanation given by the appellants, they were entitled for the refund of the same amount. A amount of Rs. 4,081/- was claimed in respect of courier services. The appellants explained that they had used the courier services for delivering the back-up CDs to the overseas client. In view of the explanation given, they were entitled for the refund of the same an amount of Rs. 33,213/- was claimed in respect of the services received for photocopying charges. The appellants had explained that they had used their Xerox machine for their business which was only relating to export of software services or business auxiliary service and management consultancy services. In view of the above position, the appellants were entitled for the refund of the same. An amount of Rs. 73,207/- was claimed relating to transport charges which has been denied on the ground that these cannot be, treated to be used in the export of services. The appellants had explained that a part of the amount had been recovered from their employees and therefore the said amount was to be restricted to that extent. The appellants had furnished details to the original authority and based upon the details, the original authority is directed to grant refund of service tax corresponding to the expenditure incurred by the appellants.

The appeal was allowed in the above terms.

Decision:-Appeal allowed.

Comment:- The gist of the case is that the date of export or the date of issue of invoice for export is only the relevant date and the refund claim under Rule 5 is required to be filed within a period of one year from the relevant date. This was decided in view of the recent judgement given by the Madras High Court in the case of GTN Engineering (I) Ltd which also considered the judgment of Gujarat High Court in the case of Swagat Industries and MP High Court in the case of STI. It was held that the recent decision of Madras High Court which was latest on the issue should be followed irrespective of earlier decisions that held that there is no time limit for filing refund claim under Rule 5 of the Cenvat Credit Rules, 2004.

Prepared by: Prayushi Jain

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