Whether refund of abatement amount is allowed when the machine was inoperative?

CASE STUDY
M/s Rajnikant Motibhai Patel OIA No.1036 (CRM) CE/JDR/2018 dated 19.09.2018
Prepared By: Pushpa Choudhary

Introduction: M/s Rajnikant Motibhai Patel, Old Dhan Mandi, Gandhi Chowk, Kota(hereinafter referred to as the ‘assessee’ also) are engaged in the manufacture of Unmanufactured Tobacco falling under Chapter Heading no. 24 of Central Excise Tariff Act,1985 and are having Central Excise Registration No. ABSPB8030CXM001.The assessee vide letter dated 01.05.2017 requested for abatement of Rs. 33,61,833/- on the ground that their one manufactured Tobacco Packing Machine remained close from 08.04.2017 to 30.04.2017 in the month of April,2017. A Show Cause Notice was issued to the appellant alleging that the appellant has never paid full duty for any month through cash deposits; instead the duty was paid through cash deposit plus through taking abatement. Section 11 B of Central Excise Act,1944 clearly provided that refund claimed should be of Duty of Excise and Interest paid on such Duty however in the instant case the amount claimed for the refund is neither duty or interest nor it was deposited in cash. Moreover, it was also not the remaining amount of cash deposited, it was only in balance of abated amount of the abatement already allowed under the various earlier abatement orders.
Relevant Legal Provisions:

Abatement order no. 08/2017(Abatement) dated 09.05.2017
Notification No. 07/2017-CE dated 02.02.2017
Section 11B of Central Excise Act,1944
Section 142(3) & 142(4) of CGST Act,2017
Rule 10 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines Rules, 2010
Sectioned 35, 35A and 35C of Central Excise Act-1944- Rules 11 and 173B of Central Excise Rules 1944.

Issue Involved: Whether refund of abatement amount is allowed when the machine was inoperative?

Brief Facts: M/s Rajnikant Motibhai Patel (hereinafter referred to as appellant) are manufacturer of Chewing Tobacco and Unmanufactured Tobacco falling under Chapter Heading No. 24 of the Central Excise Tariff, 1985. Appellant are holder of Central Excise Registration no. ABSPB8030CXM001. The appellant had filed rebate claim of Rs. 22,63,226/- under section 11B of the Central Excise Act, 1944 for the non-operation of machine during the period from 16.05.2017 to 31.05.2017. Ashow cause notice having no. as V (11B) 18/110/Refund/17/6723-24 Dated 12.10.2017 was issued to them proposing to reject the rebate claim to the extent of Rs. 22,63,226/- filed by them on the ground that they are entitled to refund only to the extent of central excise duty paid in cash and that refund of duty paid by way of abatement is not admissible.
The appellant replied to aforesaid show cause notice vide their letter dated 16.10.2017. The submissions of the appellant were not adhered to and the impugned order in original no. 28/R/KOTA-H/2017 dated 17.10.2017 was passed for rejecting the rebate claim of the appellant amounting to Rs. 21,35,226/-.Aggrieved by the impugned order in original rejecting the rebate claim, the appellant prefer to file this appeal.

Assessee’s Contention:

The appellant submit that the impugned order has rejected the contentions put forth by the appellant that the payments made through abatement is nothing but Central Excise Duty and consistency in decision is required to be maintained by the adjudicating authority. It is alleged that in the instant case, the appellant has paid duty by depositing through cash and through abatement which is not duty deposited through cash as envisaged in Rule 10 of the Chewing Tobacco and Manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. It is also alleged that from plain reading of Rule 10 of Chewing Tobacco and Manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, it transpires that if factory has not produced notified goods during any continuous period of 15 days or more, then duty calculated on proportionate basis shall be abated for such period. Here such abatement though is duty is not duty of excise deposited which become eligible for refund as envisaged as per section 11B of the Central Excise Act, 1944. It is contended that Rule 10 of Chewing Tobacco and Manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 clearly mentions abatement and not refund of duty. In this regard, the appellant submits that the discharge of duty by way of abatement cannot be reason to deny refund of central excise duty because abatement is nothing but duty itself. The appellant submits that when there is no differentiation in Law as regards duty paid by way of abatement and that paid by way of cash, denial of refund claim on absurd grounds is not at all tenable. Hence, the impugned order in original is not at all sustainable and deserves to be set aside.

The impugned order has further contended that the appellant has never paid full duty for any month through cash deposits, instead the duty was paid through cash deposit plus through taking abatement but section 11B of the Central Excise Act, 1944 clearly provides that the refund claimed should be of duty of excise and interest paid on such duty. It is contended that section 11B speaks about duty or interest paid only but in the instant case, the refund claim includes abated amount also and that cannot be treated as duty deposited. In this respect, the appellant submit that the duty paid by way of abatement order is also considered as excise duty and is squarely eligible for refund under section 11B of the Central Excise Act, 1944. In this regard, the provisions contained in Rule 10 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines Rules, 2010 are worth noting:-

Rule 10 Abatement in case of non-production of goods:-In case a factory did not produce the notified goods during any continuous period of fifteen days or more, the duty calculated on a proportionate basis shall be abated in respect of such period provided the manufacturer of such goods files an intimation to this effect with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise, at least three working days prior to the commencement of the said period, who on receipt of such intimation shall direct for sealing of all the packing machines available in the factory for the said period under the physical supervision of Superintendent of Central Excise, in the manner that the packing machines so sealed cannot be operated during the said period.

The appellant submit that the language of the Rule 10 as produced above clearly states that the duty calculated on proportionate basis shall be abated. This clearly reflects that the Central Excise Duty liability discharged by way of abatement order is nothing but Central Excise Duty and is duly covered by the provisions of section 11B of the Central Excise Act, 1944. As such, the allegation of the impugned order in original that duty paid by way of abatement is not duty so as to be eligible for refund under section 11B of the Central Excise Act, 1944 is not at all tenable and deserves to be quashed.

The appellant further submit that they have been granted refund claims in cash for the duty paid by them by way of abatement regularly for the prior periods and not such allegation was raised for the refund claims for the prior months. As such, the revenue authorities cannot change their stand all of sudden. They submit that the discharge of central excise duty liability by way of abatement has been accepted by the learned adjudicating authorities for the prior period but now, at the time of sanction of refund claim, it is contended that the amount paid by way of abatement is not duty so as to be covered by provisions of section 11B of the Central Excise Act, 1944. The appellant submit that when the assessment of duty has been not challenged, the refund claim filed by them cannot be withheld. In a similar case of M/s Flock India, department finalized the assessment of goods but when assessee went for refund, objection was raised that the assessment of goods was not proper. In this case of COLLECTOR OF CENTRAL EXCISE, KANPUR VERSUS FLOCK (INDIA) PVT. LTD. [2000 (120) E.L.T. 285 (S.C.)], it was held that where any assessment is finalized by any Central Excise officer and that assessment is not challenged by the Revenue, later on the refund/rebate cannot be challenged on the grounds that the assessment is not proper. The verdicts of Hon’ble Supreme Court are produced as follows for your ready reference:-

“Order - Appealable order - Finality - Non-challenge of an appealable order - Effect - Where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order - Sections 35, 35A and 35C of Central Excise Act, 1944 - Rules 11 and 173B of Central Excise Rules, 1944……”
The analysis of this decision makes it clear that this case is equally applicable in the present case also. At the time of making the payment of central excise duty by way of abatement, no objection was raised by the department; but at the time of refund application, the questions have been raised on the validity of amount paid by way of abatement to be considered as duty. This is not justified as central excise duty paid by way of abatement has been accepted. Thus, nature of amount paid by way of abatement cannot be questioned now at the time of filing the refund. Hence, the impugned order in original rejecting the refund claim is not at all sustainable and should be set aside.

The appellant further submit that the adjudicating authority is required to maintain consistency in the decisions taken by it and it cannot change its stand on its sweet will. In this regard, they submit that 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, department was granting refund of duty paid by the appellant during the period of non-operation of machines irrespective of the fact that the duty was paid by way of abatement order prior to May, 2017. However, all of sudden, refund claim is being objected on absurd grounds which is not at all proper and inconsistent with the stand taken by them earlier. Such an inconsistent approach is not tenable in view of the above cited decisions and the impugned order in original is liable to be set aside.

The appellant further submit that the facility of abatement has been extended by the government so that unnecessary formalities and paperwork is avoided. However, the revenue authorities are objecting the refund of duty paid by way of abatement for absurd grounds and without any legal backing. The appellant submit that as far as it is clear that there was no production of goods during the period from 15.05.2017 to 31.05.2017, the refund claim filed by them cannot be denied for reason that part of the duty was paid by utilizing abatement order. The appellant submit that if the refund claim filed by them is rejected on the grounds that abatement is not covered by section 11B of the Central Excise Act, 1944, it will be great hardship to them. As such, the impugned order in original should be set aside and the refund claim should be allowed.

The appellant further submits that the above cited submissions were made in the reply to the show cause notice filed by them but the said submissions have not been distinguished with proper reasoning. As such, the impugned order in original turns out to be a non-reasoned and non-speaking order which is not tenable in the eyes of law in light of the decision given by the Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE VERSUS SRIKUMAR AGENCIES [2008 (232) E.L.T. 577 (S.C.)]:-

“Appellate Tribunal’s order - Non-speaking order - Facts not analysed in detail in impugned order by Tribunal - Disposal of appeals by mere reference to decisions not proper way to deal with appeals - Applicability of decision cited by Revenue not considered - Appeals involving different goods - CESTAT ought to have examined cases individually and articles involved - Manner of disposal not proper - Impugned order set aside - Question referred to Larger Bench of Supreme Court not answered as matter remitted to CESTAT for fresh decision by appropriate Bench - Section 35C of Central Excise Act, 1944. - By clubbing all the cases together and without analyzing the special features of each case disposing of the appeals in the manner done was not proper. [para 6]”
In light of the above decision, the impugned order not discussing the submissions of the appellant is not sustainable which leads to passing of non-speaking order which is not justified as held by the Supreme Court of India. In view of this decision, the impugned order is not tenable and is liable to be set aside and the appeal should be allowed.

Respondent’s Contention and Reasoning: The Respondent submit that the allegation of the impugned order in original that duty paid by way of abatement is not duty so as to be eligible for refund under section 11B of Central Excise Act,1944. At the time of making the payment of central excise duty by the way of abatement, no objection was raised on the validity of amount paid by way of abatement to be considered as duty. This is not justified as central excise duty paid by way of abatement has been accepted earlier. Thus, the nature of amount paid by way of abatement cannot be questioned now at the time of filing the Refund. However, the revenue authorities are objecting the refund of duty paid by way of abatement for the absurd grounds and without any legal backing. There is no dispute that there was no production of goods during the period from 15.05.2017 to 31.05.2017, the refund claimed filed by them cannot be denied for the reason that part of duty was paid by utilizing abatement order. Therefore, the duty paid by way of abatement is duty so as to eligible for refund under section 11B of the Central Excise Act, 1944.
Conclusion: Appeal Allowed.
Comment: According to Rule 10 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines Rules, 2010, in case factory did not produce the notified goods during continuous period of 15 days or more then duty shall be calculated on a proportionate basis which shall be abated in respect of such period. And also the duty paid by abatement is also considered as Excise Duty and eligible for the refund according to section 11B of the Central Excise Act 1944,

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02 February 2019

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PJ/Case Study/2018-19/146
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