2019 (7) TMI 1164 - HC - Central Excise

Refund in cash of CENVAT credit - Whether cash refund is permissible in terms of clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 where an assessee is unable to utilize credit on inputs? - Whether by exercising power under Section 11B of the said Act of 1944, a refund of unutilized amount of Cenvat Credit on account of the closure of manufacturing activities can be granted? - Whether what is observed in UOI VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. 2007 (1) TMI 556 - SC ORDER can be read as a declaration of law under Article 141 of the Constitution of India? - CBIC Instruction No. 370 dated 11 th July 2018 - HELD THAT - Larger Bench of this Court in this case 2019 (6) TMI 820 - BOMBAY HIGH COURT disposed of all the three questions referred to it by Division Bench of this Court by answering the same in favour of the Revenue and against the Assessee. Dismissal/withdrawal of appeal on low tax effect - CBIC Instruction No. 370 dated 11 th July 2018 - HELD THAT - This instruction issued by CBIC is binding upon the officers of the Central Excise. The fact that no such objection was taken by the Respondent would not prevent/bar the Respondent from bringing it to the notice of the Revenue and this Court before final disposal of the Appeal. In fact, it is the obligation of the Commissioner to follow the CBIC instruction. The fact that he had not withdrawn the appeal earlier, does not bestow a right not to follow the CBIC instructions merely because no objection to the same was taken by the Respondent. It is at this stage that the appeal is being disposed of by the Division Bench in accordance with the directions/orders of the Larger Bench of this Court. Therefore, it is for the Commissioner to decide at least at this stage whether it seeks to press this appeal or not. Stand over to 30 July 2019.

Summary

Issues:
1. Challenge to the order of the Customs, Excise & Service Tax Appellate Tribunal under Section 35G of the Central Excise Act, 1944.
2. Questions of law regarding refund of CENVAT credit and cash refund.
3. Reference of questions to the Larger Bench.
4. Decision of the Larger Bench in favor of the Revenue.
5. Threshold limit for appeal as per CBIC Instruction No. 390.
6. Disposal of appeal based on CBIC instructions.

Analysis:

1. The appeal challenges the order of the Customs, Excise & Service Tax Appellate Tribunal under Section 35G of the Central Excise Act, 1944. The substantial questions of law raised include the correctness of ordering a cash refund of CENVAT credit of duty paid, the equity aspect of such refund, and the legality of refunding CENVAT credit taken on inputs as cash when the final product is duty-exempt.

2. The appeal was considered along with other appeals before the Division Bench, which referred questions to the Larger Bench regarding the permissibility of cash refund under the proviso to section 11B(2) of the Act, granting refunds due to the closure of manufacturing activities, and the applicability of a specific order of the Apex Court as a declaration of law.

3. The Larger Bench, in a decision dated 14 June 2019, answered the questions in favor of the Revenue and against the Assessee, establishing the undisputed position that the Revenue's appeal must be allowed based on this decision.

4. The Respondent pointed out that the tax effect in the present appeal falls below the threshold limit of ?50 lakhs set by CBIC Instruction No. 390, implying that the Revenue cannot pursue the appeal before the High Court based on this instruction.

5. Despite the merits being in favor of the Revenue, the Respondent argued that the CBIC instruction binds the Central Excise officers not to prosecute appeals with a tax effect below ?50 lakhs. The Court acknowledged the instruction's binding nature and adjourned the appeal to allow the Commissioner of Central Excise to decide whether to proceed with the appeal in accordance with the CBIC instructions.

6. The Court emphasized the obligation of the Commissioner to follow CBIC instructions and directed the Commissioner to file an appropriate affidavit if they believe the instruction is not applicable in this case. The appeal was adjourned for further consideration based on the Commissioner's decision.

7. The matter was scheduled for further proceedings on 30 July 2019 to determine the course of action regarding the appeal in light of the CBIC instruction and the Commissioner's decision.