Rule 5. Refund of CENVAT Credit.

CASE STUDY

Introduction:-

Circular dated 17.08.2011 has clarified that there is no need to file appeals where the amount is less than Rs. 10 lacs before High Court. This circular was issued to reduce litigation. But the department has filed appeal where the amount was less than that. Hence the Gujarat High Court has rejected the appeal.

In the present case the assessee preferred appeal before the Commissioner (Appeals), which was allowed partially and refund of credit of Rs. 1,87,623/ was permitted and the rest of the amount was rejected. The assessee approached the Central Excise and Service Tax Appellate Tribunal against the rejection of the claim. The department also filed an appeal in respect of part refund which was allowed. The Tribunal rejected the appeal of the department and allowed the assessee's appeal. The department further went to High Court. The High Court also dismissed the appeal by the department on the ground of the said Circulars.

Commissioner, Central Excise & Customs, Ahmedabad-II v/s, M/s Rangdhara Polymers
[Tax Appeal No. 1732 of 2010 dated: 23/07/2012]

Relevant Legal Provisions:

Rule 5. Refund of CENVAT Credit.

(1) A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: Refund amount = (Export turnover of goods+ Export turnover of services) x Net CENVAT credit Total turnover

Where,-
(A) "Refund amount" means the maximum refund that is admissible;

(B) "Net CENVAT credit" means total CENVAT credit availed on inputs and input services by the manufacturer or the output service provider reduced by the amount reversed in terms of sub-rule (5C) of rule 3, during the relevant period;

(C) "Export turnover of goods" means the value of final products and intermediate products cleared during the relevant period and exported without payment of Central Excise duty under bond or letter of undertaking;

(D) "Export turnover of services" means the value of the export service calculated in the following manner, namely:-

Export turnover of services = payments received during the relevant period for export services + export services whose provision has been completed for which payment had been received in advance in any period prior to the relevant period - advances received for export services for which the provision of service has not been completed during the relevant period;

(E) "Total turnover" means sum total of the value of -

(a) all excisable goods cleared during the relevant period including exempted goods, dutiable goods and excisable goods exported;
(b) export turnover of services determined in terms of clause (D) of sub-rule (1) above and the value of all other services, during the relevant period; and
(c) all inputs removed as such under sub-rule (5) of rule 3 against an invoice, during the period for which the claim is filed.

(2) This rule shall apply to exports made on or after the 1st April, 2012:

Providedthat the refund may be claimed under this rule, as existing, prior to the commencement of the CENVAT Credit (Third Amendment) Rules, 2012, within a period of one year from such commencement:

Providedfurther that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Export of Services Rules, 2005 in respect of such tax.

Explanation 1. - For the purposes of this rule,-

(1) "export service" means a service which is provided as per the provisions of Export of Services Rules, 2005, whether the payment is received or not;

(2) "relevant period" means the period for which the claim is filed.

Explanation 2.- For the purposes of this rule, the value of services, shall be determined in the same manner as the value for the purposes of sub-rule (3) and (3A) of rule 6 is determined.".

Section 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 and interest, if any, paid on such duty had not been passed on by him to any other person :

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act :

Provided further that] the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.

(2)   If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund :

Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise]under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to –

(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant’s account current maintained with the Commissioner of Central Excise;
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;
(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
(e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
(f)   the duty of excise and interest, if any, paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify :

Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person.

(3)   Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).

(4)   Every notification under clause (f)  of the first proviso  to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.

(5)   For the removal of doubts, it is hereby declared that  any notification issued under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.

[Explanation. — For the purposes of this section, -

(A)    “refund” includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(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 on which such goods pass the frontier, or
(iii)    if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;

(b)   in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;

(c)    in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;

(d)    in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;

(e)    in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;

(ea)  in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 5A, the date of issue of such order;

(eb) in case where duty of excise is paid provisionally under this Act or the rules made there   under,  the date of adjustment of duty after the final assessment thereof;

(ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction;

(f)     in any other case, the date of payment of duty.

Brief Facts:-

The respondent assessee, M/s Rangdhara Polymers filed an application dated 3rd July 2008 under Rule 5 of the Cenvat Credit Rules, 2004 claiming refund of Rs. 4, 17, 531/- in respect of un-utilized cenvat credit balance for the goods supplied. The competent tax authority issued show cause notice dated 17th September 2008 on two grounds. Firstly that the goods supplied to 100% EOU cannot be termed as export and hence it was not allowable. Secondly, the refund is for the period for claim from April 2007 to June 2007 was time barred in view of proviso of Section 11B of the Central Excise Act, 1944. The said show cause notice culminated into the order dated 8th December 2008 of the adjudicating authority rejecting the claim. The assessee preferred appeal before the Commissioner (Appeals), which was allowed partially on first issue saying that the supply to 1005 EOU is termed as export under bond. But he did not agree on time barred issue .The refund of credit of Rs. 1,87,623/ was permitted and the rest of the amount was rejected. The assessee approached the Central Excise and Service Tax Appellate Tribunal against the rejection of the claim. The department also filed an appeal in respect of part refund which was allowed. The Tribunal rejected the appeal of the department and allowed the assessee's appeal. The department filed the appeal before Honourable Gujarat High Court.

Issue: - Issues raised in the present appeal were as follows:-

1. Whether the Department is not authorized to file appeals where the amount is less than Rs. 10 lacs as per Circular No. 390/Misc./163/2010-JC, dated 20.10.2010 and Circular No. 390/Misc./163/2010-JC dated 17.08.2011?
2. Whether tribunal committed error in interpreting Rule 5 of Central Excise Rules, 2004 and Notification No. 5 / 2006-C.E. (NT) dated 14.03.2006 by allowing refund claim for unutilized CENTVAT Credit to assessee, for the supply of material to EOU, treating it as 'deemed Export?
3. Whether tribunal is in error by interpreting Section 11B of Central Excise Act, 1944, by ignoring the one year limitation to file refund claim by concluding that Section 11B is silent on 'deemed export' and hence, limitation does not apply to the 'deemed export'?

Reasoning of the High Court:-

The High Court held that the two circulars issued by the department dated 20th October 2010 and revising Circular dated 17th August 2011 issued by the Excise Department provide monetary limit for filing appeal before the High Court. Circular dated 28.10.2010 fixed limit of Rs. 2 lacs and if the duty and penalty amount involved is below that limit, no appeal should be filed by the Department. In the circular dated 17.08.2011 that limit is increased to Rs. 10 lacs.
Further While deciding the Tax Appeal No.129 of 2011, Tax Appeal No.2070 of 2010 and Tax Appeal No.2071 of 2010 they had relied on those circulars produced by the assessee. By taking notice of the said circulars in the present appeal also and on that basis find it not necessary to go into the merits of this appeal having regard to the fact that the subject matter involved in the appeal is the refund claim of Rs. 1,87,623/-. The appellant could not dispute the contents of the circulars and the monetary limits respectively fixed therein. It is true that though the appeal was filed on 27.07.2010 and thus before the date of circular, however when it came up for consideration of this Court on 31.03.2011 at that time the circular dated 20.10.2010 was in force.
In view of the matter, they held that the appellant ought to have brought to the notice of this Court the circular dated 20.10.2010 and, if this circular had been brought to the notice of this Court, the appeal would not have been issued. It cannot be said that the Department is bound by its own circular. Since in the instant appeal the amount involved is Rs.1,87,623/- only, in view of the circular dated 20.10.2010, it is below monetary limit prescribed for preferring the appeal.
As they have recorded on being informed from the side of the Department in order in Tax Appeal No. 1294 of 2011, it may be stated that after circular dated 17.08.2011, no other circular has been issued by the Ministry of Finance, Department of Revenue Central Board of Excise and Customs, Government of India, New Delhi, authorizing the Department to file appeals where the amount is less than Rs. 10 lacs.

Decision:-The appeal of the revenue dismissed.

Conclusion:-

This is very good decision. We have seen that the department is filing appeal on every issue before the High Courts and pendency is increasing before the Courts. Hence the CBEC has taken step and fixed the limit of Rs. 10 Lakh for filing appeal before High Court. But in the instant case also, the department has filed the appeal though the limit has not been crossed. It is seen when the decision of filing of appeal of High Court was taken, there was no circular of CBEC. But at the time of filing of appeal, the circular was there. Hence there is no error on behalf of officers but the appeal is not maintainable. But this decision of CBEC will certainly reduce the litigation.

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PJ/CASE STUDY/ 2012-13/20
25 August 2012

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PJ/CASE STUDY/ 2012-13/20 25 August 2012

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PJ/CASE STUDY/ 2012-13/20
25 August 2012