The issue involved in this case is whether the assessee who pays Excise duty on the basis of Compounded levy scheme (Operative machine hours) is liable to pay the duty of excise when Such machine is inoperative.

PJ/Case Study/2018-19/

CASE STUDY
M/S PARADISE STEELS (Final order no. 52715/2018 Dated 10.07.2018
Prepared By: Adit Gupta

Introduction: :- The compendious of the case is that , M/s Paradise Steels Pvt Ltd. (Hereinafter referred to as the appellant) is holder of Excise registration no. AAACP8067FXM001 and is engaged in manufacture of Stainless Steel Cold Rolled Patta/Patti. The appellant is operating under compounded levy scheme vide Notification No. 17/2007-CE dated 01.03.2007. Appellant had applied for refund of RS. 37419/- in respect of closure of one cold rolling machine during the period from 03.05.2016 to 31.05.2016.A show cause notice no. V (Rfd) 18/JDR/135/2016/7091 dated 28.07.2016 was issued to the appellant alleging that the refund claim filed the appellant would not be refundable as the provision of pro rata calculation of Central Excise Duty under Compound levy scheme under Notification no. 17/2007 because it is contended that said provision is applicable when the assessee has opted for compounded levy scheme for the first time which is not their case. Moreover, the doctrine of unjust enrichment as enshrined under section 12 B of the Central Excise Act, 1944 read with section 11B is applicable in their case because no evidence has been furnished by them to rebut this presumption that the burden of duty paid by them has not been passed on.
The appellant filed reply to the show cause notice vide letter having reference as PJ/SCN/P-85/16-17/1900 dated 03.08.2016. However, the submissions made by the appellant in their reply to the show cause notice were not adhered to by the learned adjudicating authority and impugned order in original no. 204/2016-R dated 04.07.2016 was passed thereby rejecting the refund claim filed by the appellant.
Aggrieved by the impugned order in original (hereinafter referred as order) rejecting their refund claim, the appellant filed this appeal. Thus vide order in appeal it was held that that the principle of unjust enrichment which was said to be incorporated is not applicable in the present case and therefore, the appeal should be allowed by sanctioning the refund claim.

Relevant Legal Provisions:

Chapter Heading 72 of the first schedule to Central Excise Tariff Act, 1985 (5 of 1986)
Notification No. 17/2007-CE dated 01.03.2007 issued under Rule 15 of Central Excise Rules, 2002.
Section 11B of the Central Excise Act, 1944.

Issue Involved: The issue involved in this case is whether the assessee who pays Excise duty on the basis of Compounded levy scheme (Operative machine hours) is liable to pay the duty of excise when Such machine is inoperative.

Brief Facts:M/s Paradise Steels Pvt Ltd. (Hereinafter referred to as the appellant) is holder of Excise registration no. AAACP8067FXM001 and is engaged in manufacture of Stainless Steel Cold Rolled Patta/Patti. The appellant is operating under compounded levy scheme vide Notification No. 17/2007-CE dated 01.03.2007. A show cause notice no. V (Rfd) 18/JDR/135/2016/7091 dated 28.07.2016 was issued to the appellant alleging that the refund claim filed the appellant would not be refundable. It was alleged that the provision of pro rata calculation of Central Excise Duty under Compound levy scheme under Notification no. 17/2007 is not applicable to the assessee as it is contended that said provision is applicable when the assessee has opted for compounded levy scheme for the first time which is not their case. Moreover, the doctrine of unjust enrichment as enshrined under section 12 B of the Central Excise Act, 1944 read with section 11B is applicable in their case because no evidence has been furnished by the assessee to rebut this presumption that the burden of duty paid by the assessee has not been passed on. The appellant filed reply to the show cause notice vide letter dated 03.08.2016 .Personal hearing for the case was convened on 10.07.2018 which was attended by their authorized representative, Pradeep Jain wherein the submissions made in their reply were reiterated.

Assessee’s Contention:

The appellant submit that the Order-In-Original passed by the learned Assistant Commissioner is wholly and totally erroneous and is liable to be set aside.

The appellant submits that the impugned order is denying the refund of excise duty relating to the period when no manufacture of excisable goods was carried on. This is in contradiction to charging section 3 of the Central Excise Act, 1944 which says that duty is leviable ON THE MANUFACTURE OF EXCISABLE GOODS. This section reads as follows:-

“(1) There shall be levied and collected in such manner as may be prescribed,-
(a) a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods which are produced or manufactured in India, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as, and at the rates, set forth in the said Second Schedule.
It is submitted that a perusal of the above Section clearly provides that excise duty will be leviable on excisable goods which are produced or manufactured. The words to be taken into consideration are “produced or manufactured”. The excise duty is thus leviable only on production or manufacture.
It is submitted that Notification No. 17/2007-CE dated 1.3.2007 has been issued under the provisions of Rule 15 of the Central Excise Rules, 2002. The said Rule reads as under:
15. Special procedure for payment of duty.-
(1) The Central Government may, by notification, specify the goods in respect of which an assessee shall have the option to pay the duty of excise on the basis of such factors as may be relevant to production of such goods and at such rate as may be specified in the said notification, subject to such limitations and conditions, including those relating to interest or penalty, as may be specified in such notification.
(2) The Central Government may also specify by notification the manner of making an application for availing of the special procedure for payment of duty, the abatement, if any, that may be allowed on account of closure of a factory during any period, and any other matter incidental thereto.
It is submitted that Rule 15 provides for special procedure for payment of duty onthebasis of such factors as may be relevant to production of such goods. This notification gives an option to the manufacturer of stainless steel pattis/pattas or aluminium circles which are subjected to the process of cold rolling, whereby he can pay the excise duty on the basis of no. of cold rolling machines installed for cold rolling of these goods.
It is submitted the Notification No. 17/2007-CE which is issued under Rule 15 of the Central Excise Rules, 2002 which are in turn issued under the provisions of the Central Excise Act, 1944. Thus, the Notification No. 17/2007-CE is to be construed in accordance with the provisions of the Statute i.e. the Central Excise Act, 1944 under which the same was issued. Under no circumstances the provisions of Notification can be construed in the manner which is against the Central Excise Act. So, any interpretation that makes this notification ultra vires to the Central Excise Act is not sustainable.

In continuation to above it is submitted that the impugned order is rejecting the refund on the grounds that there is no provision in this notification which grants refund of duty relating to the period when the cold rolling machine was not installed. If this contention is accepted, it would mean that duty was correctly paid for the period when no cold rolling machine was installed. Hence duty stands paid for the period when no manufacture took place as no cold rolling machine was installed. This interpretation is obviously going beyond the provisions of section 3(1) of the Central Excise Act, 1944. Such an interpretation is not sustainable. It has been held by hon’ble Orissa High Court that any action, rule or notification which is ultra vires the statute is not sustainable. It has been decided in the following case:-
ARYAN ISPAT AND POWER PVT LTD VS UOI [2012 (281) E.L.T. 15 (Orissa)]

Central Excise - Deterrent Action - Rule 12 AA of the CCR and Rule 12CC of CER and Notification No. 32/2006-CENT not valid prior to 08.05.2010: Finance Act, 2010 introduced an amendment to Section 37 of the Central Excise Act authorizing to make Rules to provide for withdrawal of facilities or imposition of restrictions in case of evasion of duty or misuse of Cenvat Credit. Central Government has made the Rules 12CC of the CE Rules, 2002 and Rule 12AA of the CC Rules, 2004 in the year 2006 without any authority of law which power was vested in the Central Government in the year 2010 by inserting clause ( xiiia ) in sub-section 2 of Section 37 and therefore, the two Rules are ultra vires the Central Excise Act, 1944. Consequently, notification No.32 /2006-CE (NT) dated 30.12.2006 issued in pursuance of Rule 12CC of the CE Rules, 2002 and Rule 12AA of the CC Rules, 2004 is not sustainable in law. :ORISSA HIGH COURT;
In the above decision, it was held that any rule, provision, clause or notification which is ultra vires the Central Excise Act, 1944 is not sustainable. In the instant case also, if the contention of the impugned order is accepted that there is no provision in the said notification regarding the refund of duty erroneously paid for the period when no manufacture was done, it makes the said notification ultra vires to the Central Excise Act, 1944. Thus, in the light of above decision, the impugned order is not tenable and is liable to be quashed.

The appellant submit that in the impugned order, the learned Assistant Commissioner has given a finding that as per the provisions of para 6 (1) of Notification No. 17/2007-CE dated 01.03.2007 as amended, the assessee was required to cease production for a continuous period of not less than 3 months, if he opts for working under the special procedure for compound levy scheme prescribed in the said Notification for getting the benefit of pro-rata calculation for a particular month. It was held that the appellant had not ceased the production for the required period as prescribed in said Notification. It was further held that the appellant has also not commenced production for the first time and so the pro-rata duty calculation would not be applicable to him.

In this regard, the appellant submit that the learned Assistant Commissioner has been only reading the Para (6) of the Notification in isolation from the other provisions. It is submitted that the provisions of Para (6) are to be read harmoniously with the provisions of the Central Excise Act, 1944. It is submitted that when the excise duty is leviable only on manufacturing activity then as there was no manufacture of goods, no excise duty could be levied. Therefore, when the machine was not operated for 29 days, there was no manufacture of goods and therefore, the excise duty was not payable by the appellant. The learned Assistant Commissioner cannot be allowed to interpret the provisions to reach a different interpretation from the intention of the Government.

It is submitted that Para 6 of the said Notification only provides that provisions regarding new factories and closed factories resuming production after having ceased production for a continuous period of not less than 3 months. However, it has not been stated therein that in case, the closed factory resumes production in a period less than 3 months then the excise duty was payable even when there was no production. It is submitted that neither it can be implied from the said Para 6 that the excise duty will be levied for machinery which is dismantled and which was not operated. Therefore, the finding given by the learned Assistant Commissioner is not sustainable and is liable to be set aside.

In continuation to the above, the notification no. 17/2007-CE was implemented for the convenience of certain community of manufacturers. Para 6(1) of this notification was intended to align with the section 3(1) of Central Excise Act, 1944 which says that duty is leviable on the manufacture of excisable goods. This para was introduced for those manufacturers who commence the production in mid of the month or cease the production before the month ends. The intention of framing this provision was that the duty should not be charged for the period when machine is not installed and manufacture does not takes place. Further, the notifications are issued for the benefit of the manufacturers and these should be read harmoniously with the provisions of the Central Excise Act, 1944. While interpreting these notifications intention of the law makers should be kept in mind. While enacting this para, the intention of law makers was quite simple that duty should not be paid for the period when the machine is not installed. But the interpretation taken by the learned adjudicating authority is defeating this intention of legislation. Such an interpretation is not sustainable in the light of following decision:-
BALWANT SINGH VERSUS JAGDISH SINGH [2010 (262) E.L.T. 50 (S.C.)]:-

Interpretation of statutes - Legislative intention - Provisions of statute including every word to be given full effect keeping legislative intent in mind to ensure achieving projected object - No provision treatable as enacted purposelessly - Court not to give interpretation to provisions to render them ineffective or odious. [para 14]

COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS RALSON INDIA LTD. [2006 (202) E.L.T. 759 (P & H)]

Interpretation of statute - Question whether a statutory provision is mandatory or directory depends upon intent of Legislature, and not language in which the intent is couched - Literal construction which makes a particular provision manifestly absurd or leads to anomalous results, to be avoided. [para 9]
The analysis of this decision makes it clear that the intention of the law makers is to be kept in mind while interpreting any provision. But the interpretation taken by the learned Deputy Commissioner is defeating this intention, thus it is not sustainable in the light of above decision and hence is liable to be quashed.

The appellant further submit that the learned Assistant Commissioner has held that the assessee was required to cease production for a continuous period of atleast 3 months for claiming the refund of pro-data duty under the provisions of Para (6). In this regard, it is submitted that this interpretation is not sustainable as this is defeating the ultimate purpose of enacting this para. The language of this notification should be harmoniously interpreted and refund on pro-rata basis should be allowed as the duty was wrongly paid for the period when the machinery was not installed. This is what the Central Excise Act, 1944 says and thus correctly interpreted by the appellant while filing the refund claim. But this is not accepted by the department. It is further submitted that the learned Assistant Commissioner has rejected the refund claim of appellant by taking literal interpretation of said para and by setting aside the charging section of Central Excise Act, 1944. This is not sustainable in the light of following decisions:-
ISPAT INDUSTRIES LTD. VERSUS COMMISSIONER OF CUSTOMS, MUMBAI[2006 (202) E.L.T. 561 (S.C.)]

Interpretation of statute -If two interpretations of a rule possible one of which would uphold its validity while the other which would invalidate it, the former should be preferred.[paras 26, 29]

Interpretation of statute - Rule 9(2) of Customs (Valuation) Rules, 1988 - Gunpradhan principle is fully applicable - Rule 9(2) ibid is subservient to Section 14 of Customs Act, 1962, hence,to be interpreted in such a way as to make it in accordance with main object that is contained in Section 14 ibid - Object of Section 14 ibid is ‘primary’ whereas conditions in Rule 9(2) ibid are ‘accessories’. [para 36]

Interpretation of statute - Rules of interpretation - Mimansa principles of interpretation - Any system which solves difficulty to be used - In certain situations Maxwell’s principles more appropriate and in others, Mimansa principles more suitable. - “It is deeply regrettable that in our Courts of law, lawyers quote Maxwell and Craies but nobody refers to the Mimansa principles of interpretation [paras 31, 32]

In the above decision, hon’ble Supreme Court has laid down that the contents of the Central Excise Act, 1944 will always have precedence over the rules or notifications. Thus, where there is any conflict between the Act and rules, Act will prevail. In the same way, if the language of any notification is contradictory to the Act under which it is issued, the interpretation given in the Act will be effective. In the given case also, the Act is clear and unambiguous so far as it says that the excise duty is leviable on the MANUFACTURE of excisable goods. However, the language of notification as interpreted by impugned order is suggesting that the excise duty will be payable even if the machine was dismantled and no manufacture was undertaken. In the light of above referred decision, the language of Act will have precedence and therefore the refund is allowable to the appellant. The impugned order is thus liable to be set aside.

It is further submitted that while interpreting any statute, it should be kept in mind that the interpretation should be such that it is in assertion of the other provisions. The approach of literal construction should not be applied blindly to every case and interpretation should be such that all the provisions are given such a meaning that is aligning with the purpose of enacting that provision. Reliance is placed upon following cases:-
BRITISH AIRWAYS PLC VS UNION OF INDIA [2002 (139) ELT 6 (S.C.)]:-

“8.While interpreting a statute the court should try to sustain its validity and give such meaning to the provisions which advance the object sought to be achieved by the enactment. The court cannot approach the enactment with a view to pick holes or to search for defects of drafting which make its working impossible. It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well-known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the court to make such construction of a statute which shall suppress the mischief and advance the remedy. While interpreting a statute the courts are required to keep in mind the consequences which are likely to flow upon the intended interpretation.”

COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS RALSON INDIA LTD. [2006 (202) E.L.T. 759 (P & H)]

Interpretation of statute - Question whether a statutory provision is mandatory or directory depends upon intent of Legislature, and not language in which the intent is couched - Literal construction which makes a particular provision manifestly absurd or leads to anomalous results, to be avoided. [para 9]

CCE, MUMBAI -V VS M/S GTC INDUSTRIES LTD [2008-TIOL-1634-CESTAT-MUM-LB.]-

“It is well settled that every clause of the Statute should be construed with reference to the context in which it is issued. A bare mechanical interpretation of words and application of legislative intent is devoid of concept and purpose will reduce most of the remedial and beneficial legislations to futility. To be literal in meaning is to see the skin and miss the soul.
The legislature never wastes its words or says anything in vain and a construction which attributes redundancy to legislation will not be accepted, as has been observed by the Supreme Court in the case of Union of India vs. Hansoli Devi 2002 7 SCC 273”
In the above cases, it is held that the provision should be construed in such a way that it is in affirmation to the context in which it was issued. If various interpretations are possible, the principle of harmonious construction should be applied. In the given case, the interpretation taken by impugned order is different than that taken by the appellant. Therefore, extending the ratio of these decisions, the principle of harmonious interpretation should be applied and impugned order should be set aside.

In continuation, the appellant further submit that they had placed reliance on the judgment given in case of JUPITER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2001 (137) E.L.T. 1018] wherein it was held that the refund to be paid for the period during which the machine was not in operation. The Tribunal was of the opinion that in case of discontinuance of the machine, there is no bar as per rules or in section 11B prohibiting the refund of excess duty paid by an assessee working under the Special procedure rules. The verdicts of same as reproduced as under:-

Production capacity based duty - Compounded levy - Cold rolling machine - Payment of duty after dismantling of machine and discontinuance of production not contemplated by Rules 96ZB and 96ZB(2) of Central Excise Rules, 1944. - Sub-rule (2) of Rule 96ZB laid down the method of calculation of sum payable. These rules, in no way stipulate that any sum at the compounded rate is payable towards duty for a machine which is not in existence with the manufacturer. Nor do they say that no refund claim can be made with regard to excess payment made. Central Excise refund claims are made in terms of Section 11B of the Central Excise Act. That section laid down that any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector and that, if the Asstt. Collector is satisfied that all or any part of the duty of excise paid by the applicant is refundable, he make an order accordingly. It is clear from Rule 96ZA that Pattas/Patties manufacturers can opt for the special procedure. Rule 96ZB stipulates that duty liability can be discharged by payment of certain sum. Sub-Rule (2) of Rule 96ZB deals with calculation. None of these rules contemplate payment of duty after a machine has been dismantled and production of the machine discontinued. [para 4]
Refund of excess duty paid on the basis of production capacity - Special procedure rules for compounded levy of duty and Section 11B of Central Excise Act, 1944 do not bar refund of excess duty paid by assessee working under those Rules. [para 4]
It is worth noting that the above referred decision has also been upheld by the Hon’ble jurisdictional Rajasthan High Court being reported as COLLECTOR OF CENTRAL EXCISE, JAIPUR-II VS. JUPITER INDUSTRIES [2006 (206) ELT 1195 (RAJ.)] wherein it was affirmed that:-
Production capacity based duty - Stainless steel pattas - No duty is leviable for period when machine is not installed/operated - It is especially so as levy of excise duty cannot go beyond charging provision and manufacture of goods is a condition precedent - Chapter E-VI of erstwhile Central Excise Rules, 1944 - Erstwhile Section 3A of Central Excise Act, 1944.
Refund - Unjust enrichment - Applicability of - When there is no production in relation to machine which is not in existence, there is no question of passing of duty to consumers and this principle is not applicable - Section 11B of Central Excise Act, 1944. [para 24]

It is pertinent to note that the appellant had placed reliance on the above mentioned decision delivered by the Delhi Tribunal and further confirmed by the Hon’ble Rajasthan High Court which is their jurisdictional High Court in their reply to the show cause notice. It was submitted that the said judgment clearly provided that no rules stipulates that any sum of duty is payable under the compounded levy scheme for the machine which is not in existence with the manufacturer. Nor these rules debar the right of refund on excess payment made neither contemplate payment of duty when machine has been inoperative and production of the machine discontinued. However, the learned Adjudicating Authority has not taken into consideration the said judgment and passed the impugned order rejecting their refund claim. No valid and justifiable reasons have been given for not applying the ratio of this judgment and it has been simply stated that the decision was delivered in the context of old provisions of compound levy scheme. In this regard, the appellant submits that the contention that the ratio of the decision given in the case of Jupiter Industries is not applicable as it was rendered in the context of old provisions of compounded levy scheme is totally erroneous. This is for the reason that there has been no substantial change in the provisions of compounded levy scheme since its inception. The provisions of compounded levy scheme given under Rule 96ZA to 96ZGG of the erstwhile Central Excise Rules, 1944 is pari materia compounded levy scheme introduced vide notification no. 34/2001-C.E. dated 28.06.2001 and 17/2007-CE dated 01.03.2007. This is also substantiated by decision given by the Hon’ble Delhi Tribunal discussed in subsequent paragraphs in the case of Acme Industries. Moreover, while placing reliance on a case, what is required to be observed is the ratio or analogy of the case rather than its factual aspects. The appellant submits that although the decision pertains to old provisions of compounded levy scheme but the crux of the case is that even in cases where duty is paid under compounded levy scheme, no duty is payable if the machine was not installed/operated and there was no production. This is for the reason that the central excise duty is leviable on manufacture of goods and when there is no manufacture of goods, the question of paying duty does not arise. Consequently, if duty is being paid by mistake for the machines that were not operated by the assessee for production of goods, the said duty is liable to be refunded to them. Therefore, the impugned order in original rejecting the reliance placed by the appellant on the decision of Rajasthan High Court on absurd reasons is totally illegal and deserves to be quashed.

The impugned order in original also rejects the reliance placed by the appellant on other decisions on the ground that the said cases were accepted by the department on monetary basis. In this regard, the appellant submits that such a contention is also baseless because as per the Circular no.F.No. 390/Misc./163/2010-JC dated 17.08.2011, it is clarified that although monetary limits are specified for filing appeals by the revenue department but where the constitutional validity of the provisions of the Act or the Rules is under challenge, the appeals may be filed irrespective of the amount involved. Accordingly, if the revenue department did not accept the decision given by the Commissioner Appeals on the basis of the Rajasthan High Court decision of Jupiter Industries, the revenue department could have filed appeal against the same as the revenue department doubted the legality of granting refund in case of non-operation of machines under compounded levy scheme. However, this was not done and neither department filed appeal against the Rajasthan High Court decision to the Supreme Court. Furthermore, in this context, it is worth noting that the above cited circular has been recently amended vide Circular no. 390/Misc./163/2010-JC dated 17.12.2015 wherein the monetary limits were enhanced and it was further clarified that appeals may be filed irrespective of the amount involved in case of classification and refund issues which are of legal and or recurring nature. Therefore, the contention that the legal point regarding grant of refund of duty in cases when machines were not operated during a part of the month was accepted due to monetary limit does not hold good and the impugned order in original deserves to be set aside.
In continuation to the above, the appellant wishes to place reliance on the decision given by the Hon’ble Delhi Tribunal in the case of ACME INDUSTRIES VERSUS COMMISSIONER OF C.EX., JAIPUR-II [2011 (269) E.L.T. 523 (TRI.-DEL)] wherein it was held that:-

Production capacity based duty - Compounded levy scheme - Cold Rolling Machines - Dismantling of - For period when machine is not operated or has been dismantled, it is not in existence - Since there is no production, there is no question of charging any Central Excise Duty in respect of that machine - In this regard, Rajasthan High Court decision in Jupiter Industries [2006 (206) E.L.T. 1195 (Raj.)], that no duty is leviable in such cases, given under Rules 96ZA to 96ZGG of erstwhile Central Excise Rules, 1944, found to be applicable, to Scheme under Notification No. 34/2001-C.E., as both schemes were pari materia - Implication of paras 3(1) and 4(1) of Notification ibid that for dismantled machines, duty has to be paid for preceding three months as it was linked with maximum number of machines installed during that period, found to be immaterial as first para thereof prescribes payment of duty on basis of installed machines.[paras 4, 5, 6]
The analysis of the ratio laid down by the above cited decision clearly reflects that the decision of Rajasthan High Court in the case of Jupiter Industries, although pertaining to old provisions of compounded levy scheme is squarely applicable to the subsequent notifications issued for compounded levy scheme also. Moreover, what is important is the ratio of the decision rather the circumstances under which the decision was pronounced. The crux of the decision was that when there was no production due to non-operation of machine, no excise duty could be levied and collected. Furthermore, if any excise duty was paid for period during which machine was not operated, the same was required to be refunded back to the assessee.

Aligning with the above, reliance is also placed on the favourable decisions passed by the Commissioner (Appeals), Jaipur in case of a number of assessees pertaining to Jodhpur Commissionerate:-

NAME OF PARTY	SHOW CAUSE NOTICE NO.	ORDER IN ORIGINAL NO.	ORDER IN APPEAL NO.
Virat Metal Industries	V(Rfd)18/22/2010/5873 dated 12.4.2010	96/2010-R dated 17.05.2010	53(CB)CE/JPR-II/2011 dated 22.02.2011
Paradise Steels Pvt. Ltd.	V(Rfd)18/128/10/12752 dated 29.07.2010	185/2010-R dated 31.8.2010	58(CB)CE/JPR-II/2011 dated 24.02.2011
Ganga Steels	V(Rfd) 18/238/2011/17637 dated 29.12.2011	20/2012-R dated 07.02.2012	53 (RDN) CE/JPR-II/2012 dated 08.10.2012
Mehta Udyog	V(Rfd) 18/126/2011/9686 dated 11.07.2011	156/2011-R dated 25.07.2011	51 (RDN) CE/JPR-II/2012 dated 05.10.2012
Oswal Steels	V (Rfd) 18/122/2011/9680 dated 11.07.2011	155/2011-R dated 25.07.2011	52 (RDN) CE/JPR-II/2012 dated 08.10.2012
Lakshmi Pipe Industries	V(Rfd) 18/124/2011/9684 dated 11.07.2011	154/2011-R dated 25.07.2011	54 (RDN) CE/JPR-II/2012 dated 08.10.2012

It is submitted that the above decisions passed by your good honour are clear indicator of the fact that the appellant is entitled to claim refund of duty paid for the period during which machine was not in operation. As such, the impugned order in original that is passed ignoring the ratio of the above cited decisions is not at all sustainable and deserves to be quashed.

Aligning with the above, the appellant also wishes to place reliance on some of the latest order in originals passed by the learned adjudicating authority wherein the refund during the period of non-operation of machines was sanctioned to the assessees in Jodhpur Commissionerate. The said decisions are listed as follows:-

ARIHANT METALS- OIO NO. 203/2013-R DATED 25.09.2013
ARIHANT METALS- OIO NO. 204/2013-R DATED 25.09.2013
ARIHANT STEELS-OIO NO. 205/2013-R DATED 25.09.2013
ARIHANT METALS-OIO NO. 143/2015-R DATED 15.09.2015

The appellant submit that the above mentioned decisions are only few instances wherein the refund claim for duty paid during non-operation of machines was being sanctioned to the assessees and apart from the above decisions, there are number of decisions that upheld the same view. Moreover, the refund claims already granted have been reviewed and no appeal has been filed by the revenue department which indicates that the revenue department has accepted the eligibility of refund claim in such cases and these decisions have attained finality. It is submitted that when the refund claims already sanctioned to different assessees in the same Jodhpur Commissionerate have not been challenged in appeal, the denial of refund claim to the appellant is arbitrary and discriminatory. This leads to situation of ad-hoc grant of refund to some assessees which is against the government policy and discrimination amongst similarly placed assessees. The appellant submits that the rejection of refund claim filed by them on absurd ground tantamounts to discrimination which is not permissible as per Article 14 of the Constitution of India. Such a discriminatory approach is not justified in the light of decision of hon’ble Calcutta High Court in the case of FITWELL FASTNER (INDIA) PVT. LTD. VERSUS COLLECTOR OF CUSTOMS [1993 (68) E.L.T. 50 (CAL.)]. In this case it is held that the discrimination between two assessees is unfair and improper and violative of Article 14 of Constitution of India. There cannot be discrimination between the assessee who are similarly placed and Department cannot take a different stand for different assessee. Reliance is placed on the following case laws:-

DAMODAR J. MALPANI V. CCE [2002 (146) ELT 483 (SC)]
MALLUR SIDDESWARE SPINNING MILLS (P) LTD. VS. CCE [2004 (166) ELT 154 (SC)]
QUINN INDIA LTD. VS. CCE [2006 (198) ELT 326 (SC)]
SPL SIDDHARTHA LTD. VS CCE [2006 (204) ELT 135 (TRI.-DEL.)]
JAYASWALS NECO LTD. VS. CCE [2006 (195) ELT 142 (SC)]
FITWELL FASTNER (INDIA) PVT. LTD. VS CC [1993 (68) ELT 50 (CAL.)]
CCE VS. AMAR BITUMEN & ALLIED PRODUCTS PVT. LTD. [2006 (202)ELT 213(SC)]
INDIAN OIL CORPORATION LTD. VS CCE [2006 (202) ELT 37 (SC)]
U.O.I. & OTHERS VS. KAUMUDINI NARAYAN DALAL & ANOTHER [2001 (10) SCC 231]
CCE VS. TATA ENGINEERING & LOCOMOTIVES CO. LTD. [2003(158) ELT 130 (SC)]
BIRLA CORPORATION LTD. VS. CCE [2005 (186) ELT 266 (SC)]

Similar views has been held by the Hon’ble CESTAT in the case of COLLECTOR OF CENTRAL EXCISE, BANGLORE AND OTHERS VERSUS UNITED GLASS AND OTHERS [1987 (31) ELT 786 (Tribunal)] as follows:-

“Excise is an indirect tax, uniformity in valuation and assessment of the goods ought to be ensured so that different manufacturers producing similar goods in the country are not discriminated. With this object in view, it has been the practice of the Tribunal to respectfully follow the Judgment delivered by a High Court on particular issue so long as there is no contrary Judgment by another High court on the same issue. [para 10]”

In the light of above decisions, no discrimination is required to be made between the assessees placed under similar circumstances. As such, when refund of excise duty during the period of non-operation of machines is being granted by the Jodhpur Commissionerate to some of the assessees, the same cannot be denied to them now. Therefore, the impugned order in original issued for denial of refund claim filed by them is discriminatory and is liable to be set aside in the light of above decisions.

In light of the above submissions, it is submitted that the revenue department is following inconsistent approach while granting refund claims. The issue as regards refund of proportionate duty paid for non-operation of cold rolling machine was considered for the prior periods and finally, it was concluded by the learned Commissioner Appeals that the refund is admissible in view of the Rajasthan High Court decision in the case of Jupiter Industries. Thereafter, the refund claims filed by the assessees were being granted to them following the ratio of the decision of the Rajasthan High Court which is the jurisdictional High Court. However, subsequently, all of sudden, the same issue is being again litigated by the revenue department which is not at all permissible. The department is not following the principle of consistency. It is a set rule of every law that consistency should be maintained by the departmental officers under same facts and circumstances. It has been held by the hon’ble Supreme Court that where the facts and circumstances are identical, the consistency should be maintained while deciding the case. It has been decided in the following cases:-
GOVERNMENT OF ANDHRA PRADESH & OTHRS V/S A. P. JAISWAL & ORS [2001 AIR SCW 101]:-

“Consistency is the cornerstone of the administration of justice. It is consistency which creates confidence in the system and this consistency can never be achieved without respect to the rule of finality. It is with a view to achieve consistency in judicial pronouncements, the Courts have evolved the rule of precedents, principle of stare decisis etc. These rules and principles are based on public policy and if these are not followed by Courts then there will be chaos in the administration of justice……”

COMMISSIONER OF C. EX., VADODARA V/S ADARSH RE-ROLLING MILLS [2002 (143) ELT 533 (TRI. - LB)] :-

“Certainty about law and uniformity in its implementation are central in ensuring rule of law. Therein lies the necessity to follow precedent and subordination of adjudicating authorities to their appellant authorities. Uniformity in tax administration is even more important than legal correctness.”
Thus, in the light of above decisions, it is clear that the uniformity in the decisions under similar facts and circumstances is the essence of administration of justice. In the instant case, the revenue department is re-opening and re-agitating the settled issues which is against the principle of uniformity and consistency. As such, the impugned order in original rejecting the refund claim inspite of clear cut judicial pronouncement of jurisdictional High Court is not at all tenable and is liable to be quashed.

The appellant further submit that the impugned order has been passed contrary to the precedent already laid down by the jurisdictional High Court which is binding on the lower authorities. In this regard, the appellant had in their show cause notice relied upon the decision given in UNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD 1991 (55) E.L.T. 433 (S.C.) wherein it was held that Revenue officers are bound by the decisions of the appellate authorities .The verdict is reproduced as below:

“Strictures passed by Bombay High Court against two Assistant Collectors (for flouting of Collector Appeals’ order on classification based on a Tribunal judgment against which department had gone in appeal to Supreme Court) upheld by Supreme Court - Department directed to pay utmost regard to judicial discipline and give effect to orders of higher appellate authorities which are binding on them. “

It was accordingly submitted that decisions given by the High Court/ Appellate authorities are binding on all lower formation if the order is not challenged further. In the present case, the decisions quoted above are applicable to the appellant because these decisions have not been further appealed to higher judicial forum. Moreover, the pronouncement of Rajasthan High Court in the case of Jupiter Industries has achieved finality and so refund cannot be rejected on the ground that decision of that case is not applicable to the appellant. The revenue authorities are not allowed to take different stand in the same case. Accordingly, the ignorance of the ratio laid down by the Rajasthan High Court is against the principle of judicial discipline. In this regard, it is pertinent to note the recent decision of Gujarat High Court in the case of E.I. DUPONT INDIA PVT. LTD. VERSUS UNION OF INDIA [2014 (305) E.L.T. 282 (GUJ)] wherein it was held that:-

Writ Petition - Existence of alternative remedy - Precedent - Binding decision of jurisdictional High Court not followed by adjudicating authority - High Court to interfere with impugned order in exercise of power under Article 226 of Constitution of India despite alternative remedy being available to petitioner.
Contempt of Court - Law declared by High Court - Strictures against adjudicating authority - Law laid down by jurisdictional High Court not followed - Wilful disregard of law laid down by High Court, prima facie, amounts to Civil contempt as defined in Section 2(2b) of Contempt of Courts Act, 1971 - Binding decision of higher appellate authorities/Courts not permitted to be ignored under the guise of interests of revenue - However, Contempt proceedings to be dropped in view of unconditional apology tendered by relevant officer and absence of any mala fide - Article 226 of Constitution of India. [2012 (276) E.L.T. 9 (Guj.); 2007 (216)E.L.T.678 (Bom.); 1991 (55)E.L.T.433 (S.C.) relied on]. [paras 5, 5.1, 5.2, 5.3, 5.4, 5.5]
Adjudication - Precedent - Binding decisions of higher appellate authorities/Courts on identical questions of law repeatedly ignored by lower authorities despite clear and specific and authoritative pronouncements to this effect by higher authorities/Courts - C.B.E. & C. directed to issue a detailed circular to all adjudicating authorities as to binding effect of orders passed by higher appellate authorities/Courts. [2013 (298)E.L.T.451 (Guj.); 2007 (210) E.L.T. 678 (Bom.); 1991 (55) E.L.T. 733 (S.C.) relied on]. [paras 6.1, 6.2]
In light of the above decision, it is crystal clear that the adjudicating authorities are required to unreservedly follow the decisions of jurisdictional High Court and if they fail to do so, it amounts to contempt of court and may lead to issuance of strictures against the adjudicating authority. It is submitted that the impugned order in original passed in utter disregard of the decision of the Rajasthan High Court in the case of Jupiter Industries amounts to disregard of the judicial disciple and the same merits to be set aside.

The impugned order has not discussed the aspect of unjust enrichment. In this regard, they reiterate that they have not passed on the incidence of duty paid by them under Compounded Levy Scheme as the refund of duty which is being sought pertains to the period when there was no production and they need not explain that when there was no manufacture and consequently no clearance, the question of passing on the burden of duty paid by them does not arise at all. They submit that the refund claim under consideration pertains to duty paid under special procedure where the duty is mandatorily required to be paid in advance on the basis of number of machines being operated. However, the refund claim filed by them pertains to the period when 2 cold rolling machines were not operated and consequently there was no manufacture of goods from the said 2 machines. Accordingly, when there was no production and no clearance of goods from the said 2 machines, they cannot pass on the burden of duty paid by them and the duty paid has been solely borne by them. In this regard, they reiterate that they have placed reliance on the judgment of the Hon’ble High Court in the case of COLLECTOR OF CENTRAL EXCISE, JAIPUR-II VS JUPITER INDUSTRIES [2006 (206) E.L.T. 1195 (Raj.)] wherein the Hon’ble High Court has held as follows:-

Refund-unjust enrichment-Applicability of-When there is no production in relation to machine which is not in existence, there is no question of passing of duty to consumers and this principle is not applicable-Section 11B of the Central Excise Act, 1944. [Para 24].
In light of the above cited decision, it is crystal clear that the principle of unjust enrichment is not applicable in the present case and therefore, the appeal is allowed by sanctioning the refund claim.

Decision: Appeal Allowed
Conclusion:- On the basis of these submissions made by the appellant it is crystal clear the impugned Order is not viable and it is thus quashed and the appeal is allowed. The direction of the tribunal to refund excess amount received in respect of machine which had ceased to function during the month of July to August also does not call for any interference. Thus the assessee is eligible to claim the Refund of RS. 37,419/-.

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PJ/Case Study/2018-19/131
29 September 2018

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PJ/Case Study/2018-19/131 29 September 2018

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PJ/Case Study/2018-19/131
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