2020 (5) TMI 225 - HC - Service Tax

Refund of CENVAT Credit - time limitation - Rule 5 of CENVAT Credit Rules 2004 - period prior to and from 01.04.2012 - applicability of time prescribed under Section 11B of the Central Excise Act 1944 - pivotal issue which arises for consideration would relate to refund claims made by the respective appellants under the CENVAT Credit Rules 2004 post 31.03.2012 and for the earlier period also. Hence Rule 5 of the CENVAT Credit Rules 2004 which was in force up to 31.03.2012 and the Rules made from 01.04.2012 - HELD THAT - Where any input for input service is used in the manufacture of final product which is cleared for export under Bond or letter of undertaking the Cenvat credit in respect of the same so used shall be allowed to be utilized by the manufacturer or provider of output service so used and shall allowed to be utilized by the manufacturer or provider of output service and if for any reason such adjustment is not possible the manufacturer or the provider of output service would be entitled to seek refund of such amount subject to such safeguards conditions and limitations as may be specified by the Central Government by notification. To put it differently in terms of Rule 5 of CENVAT Credit Rules 2004 when a manufacturer is exporting the final product continuously without payment of duty the CENVAT Credit on inputs-input services would be accumulating to his CENVAT Credit records. Such manufacturer would be entitled to utilize the CENVAT Credit either for payment of excise duty on final products cleared for home consumption or for export on payment of duty or for payment of service tax on output service. If these contingencies are not forthcoming for any reason then manufacturer/output service provider can seek refund as provided under Rule 5 read with relevant or extant notifications so issued. The effect of the amendment of Section 11-B on 12-5-2000 is that all claims for rebate pending on this date would be governed by a period of one year from the date of shipment and not six months. This however is subject to the rider that the claim for rebate should not be made beyond the original period of six months. On the facts of the present case since the claims for rebate were made beyond the original period of six months the respondents cannot avail of the extended period of one year on the subsequent amendment to Section 11-B - the irresistible conclusion which has to be necessarily drawn by relying in the case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA 1996 (12) TMI 50 - SUPREME COURT is to the effect that in respect of refund of claims made under Rule 5 of CENVAT Credit Rules 2004 the provisions of Section 11-B of the Central Excise Act would be squarely applicable. Even in respect of the refund claims made under the CENVAT Credit Rules 2004 insofar as it relates to service providers under the Finance Act 1994 the provisions of Central Excise Act 1944 as specified in Section 83 of the Finance Act 1994 would cover the same inasmuch as Section 11-B also finds a place in Section 83 of the Finance Act 1994. Though argument is sought to be put forward by contending that by virtue of notification dated 01.03.2006 specifying the period of limitation we are not inclined to accept the same inasmuch as Rule 5 of CENVAT Credit Rules itself clearly specifying that such refund claims would be subject to such safeguards conditions and limitations as may be specified by the Central Government by notification and the above referred notification No.5/2006 and 27/2012 clearly specifying in clause (6) and clause 3.0(b) respectively that before the expiry of the period specified in Section 11-B of the Central Excise Act 1944 it cannot be gainsaid by the appellants that provisions of Section 11-B of the Central Excise Act is not attracted to the refund claims made under CENVAT Credit Rules 2004. The substantial questions of law is answered by holding that refund applications filed under the CENVAT Credit Rules 2004 cannot be without reference to limitation or time prescribed under Section 11-B of the Central Excise Act 1944 - the question of law is answered to the effect that limitation for claiming refund of unutilized Cenvat credit should be within the period prescribed under Section 11-B of Central Excise Act. Appeal dismissed.

Summary

Issues Involved:
1. Entitlement to refund under Rule 5 of CENVAT Credit Rules, 2004 without reference to limitation.
2. Applicability of the time prescribed under Section 11B of the Central Excise Act, 1944 for claiming refund of CENVAT Credit.
3. Justification of the Tribunal in upholding rejection of refund claims filed beyond one year.
4. Determination of the "relevant date" for computation of the time limit for refund claims.
5. Tribunal's decision on the applicability of the limitation period under Section 11B of the Central Excise Act, 1944.
6. Tribunal's adherence to the law declared by the jurisdictional High Court.
7. Denial of refund claims on procedural grounds.

Issue-wise Detailed Analysis:

Issue 1 & 2: Entitlement to Refund Without Reference to Limitation and Applicability of Section 11B
The court examined whether the appellant could seek a refund under Rule 5 of CENVAT Credit Rules, 2004 without reference to the limitation period prescribed under Section 11B of the Central Excise Act, 1944. The court concluded that the refund claims must comply with the limitations set forth in Section 11B. The court emphasized that Rule 5 of the CENVAT Credit Rules, 2004, which was in force up to 31.03.2012, allowed refunds subject to safeguards, conditions, and limitations specified by the Central Government through notifications. Notifications No.5/2006 and No.27/2012 explicitly required compliance with the limitation period specified in Section 11B.

Issue 3: Justification of the Tribunal in Upholding Rejection of Refund Claims
The court upheld the Tribunal's decision to reject refund claims filed beyond the one-year limitation period. The appellant's claims were deemed time-barred as they were filed after the expiry of the period specified under Section 11B of the Central Excise Act, 1944. The court referenced the Supreme Court's ruling in UNION OF INDIA & OTHERS vs UTTAM STEEL LIMITED, which mandated strict adherence to the limitation period under Section 11B.

Issue 4: Determination of the "Relevant Date"
The court addressed the determination of the "relevant date" for computing the time limit for refund claims. It held that the "relevant date" for the computation of the time limit is the end of the quarter in which the Foreign Inward Remittance Certificates (FIRCs) are received, as per Notification No.27/2012. This interpretation aligns with the requirement to file refund claims within one year from the relevant date.

Issue 5: Tribunal's Decision on the Applicability of the Limitation Period
The court affirmed that the limitation period under Section 11B of the Central Excise Act, 1944, applies to refund claims of unutilized CENVAT credit. Despite arguments to the contrary, the court maintained that the refund claims must adhere to the one-year limitation period prescribed under Section 11B.

Issue 6: Tribunal's Adherence to Jurisdictional High Court's Law
The court found that the Tribunal's decision was consistent with the law declared by the jurisdictional High Court. The Tribunal's interpretation of the relevant date and the application of the limitation period were upheld as being in accordance with the established legal framework.

Issue 7: Denial of Refund Claims on Procedural Grounds
The court rejected the argument that the Tribunal improperly denied refund claims on procedural grounds. It reiterated that adherence to the limitation period is a substantive requirement, not merely a procedural formality. The court emphasized that the refund claims must be filed within the specified period to be considered valid.

Conclusion:
The appeals were dismissed, and the orders of the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bangalore, were affirmed. The court held that refund applications under the CENVAT Credit Rules, 2004 must comply with the limitation period prescribed under Section 11B of the Central Excise Act, 1944. The "relevant date" for computing the time limit is the end of the quarter in which FIRCs are received. The Tribunal's decisions were found to be justified and consistent with the legal requirements.