2021 (2) TMI 303 - HC - Central Excise

Refund of countervailing duty - Payment of CVD on return / re-import of goods - entitlement to take credit amount of CVD paid by them on return of the goods under Rule 16 of the Central Excise Rules, 2002 - Section 11B of the Central Excise Act - HELD THAT - It is the Respondent's case that credit of CVD in this case is not admissible as the imported goods are clearly finished goods and cannot be input under the Cenvat Credit Rules, 2004. The appellant while pleading refund of Cenvat Credit under section 11B of C.E.A, 1944 read with Rule 16 of C.E.R, 2002, has neither categorically stated as to what happened to the goods after receipt in the factory, nor enclosed any document as are required to be furnished in terms of section 11B, to establish that the amount of duty of excise and interest paid by him had not been passed on by him to any other person. Evidently, the appellant received the finished goods on re-importation after paying additional duty before the Customs authorities at Kolkata. As such, finished goods were not within the meaning of inputs',as per Rules 3, 4 and 7 of Cenvat Credit Rules, 2004. They were not brought to the factory for being remade, refined, re-conditioned or for any other reason in terms of Rule 16 of C.E.R, 2002. The analysis of the relevant provisions under Section 11B of C.E.A, 1944, Rule 16, 18 and 19 of C.E.R., 2002 and Rule 2, 3, 4, 7 of Cenvat Credit Rules, 2004, discussed above, leave no room of doubt that the receipt of finished goods upon re- importation in the factory of the appellant, as claimed, were not in the form of inputs / raw materials for use in the process of manufacture. As such finished goods were not brought into the factory for being re-made, refined, re-conditioned or for any other reason. If such goods were not inputs or raw materials upon which the assessee was entitled to claim Cenvat Credit upon payment of additional duty (CVD) under Customs Tariff Act, 1975, the assessee could not have claimed refund thereof from the Central Excise Authorities invoking Section 11B of C.E.A, 1944 read with Rule 16 of C.E.R, 2002. The application for refund of countervailing duty is maintainable under section 11B of Central Excise Act, provided it satisfies the conditions prescribed under Cenvat Credit Rules, 2004 as being treated as inputs and under Rule 16 of CER 2002 such goods / inputs have been brought into the factory for being re-made, refined, re-conditioned or for any other reason by the assessee - In the facts of the present case, since return of the finished goods in the factory of the appellant could not qualify as inputs and neither were such goods brought into the factory for re-conditioning, re-making and re- packaging, therefore claim of refund before the Central Excise authorities of additional duty (CVD) was rightly held to be not maintainable. The appellant assessee had not able to establish through accompanying documents and other evidence that such duty has not been passed on by him to any other person, as required under section 11B of Central Excise Act, 1944. Any refund of countervailing duty under section 11B of Central Excise Act, 1944 is maintainable only if the conditions prescribed under Cenvat Credit Rules, 2004 for treating it as inputs are fulfilled and such goods satisfy the conditions prescribed under Rule 16 of C.E.R, 2002. The application for refund of countervailing duty by the appellant under section 11B of Central Excise Act, 1944 was not maintainable - appeal dismissed.

Summary

Issues Involved:
1. Maintainability of an application for refund of countervailing duty (CVD) under Section 11B of the Central Excise Act.
2. Legality and factual correctness of the order passed by the learned CESTAT.

Detailed Analysis:

Issue 1: Maintainability of an Application for Refund of Countervailing Duty under Section 11B of the Central Excise Act

The appellant company, engaged in manufacturing excisable goods, exported dinner sets to a buyer in Tehran. The goods were returned as the buyer could not clear them from customs. On re-importation, the appellant paid countervailing duty (CVD) and sought a refund of this amount, claiming entitlement under Rule 16 of the Central Excise Rules, 2002. The Assistant Commissioner sanctioned the refund, but this decision was overturned by the Commissioner (Appeals), which was further affirmed by the CESTAT.

The appellant argued that CVD is equivalent to Central Excise Duty, making them eligible for Cenvat Credit under Rule 16 of the Central Excise Rules, 2002. They contended that Rule 3(vii) of the Cenvat Credit Rules, 2004 allows Cenvat Credit on CVD, and a harmonious reading with Rule 16 supports their claim. They relied on judicial precedents, including the Delhi High Court's decision in Commissioner of Central Excise, Delhi-I and the Punjab & Haryana High Court's decision in Commissioner of C. Ex, Gurgaon, which recognized CVD as excise duty eligible for Cenvat Credit.

The respondent (Revenue) countered that CVD is a customs duty governed by the Customs Act, and the refund claim should be filed with Customs authorities, not Central Excise authorities. They argued that the goods were fully finished and not brought for re-conditioning, refining, or remaking, making Rule 16 inapplicable. They emphasized that the appellant did not provide necessary documentation to prove that the duty incidence was not passed on to another person, as required under Section 11B.

The court analyzed the relevant statutory provisions, including Section 11B of the Central Excise Act, Rule 16 of the Central Excise Rules, 2002, and the Cenvat Credit Rules, 2004. It noted that CVD is an additional duty equal to excise duty on like articles manufactured in India, intended to protect domestic manufacturers. However, for a refund under Section 11B, the goods must qualify as inputs used in manufacturing, which was not the case here as the goods were fully finished.

The court concluded that the application for refund of CVD under Section 11B is maintainable only if the goods qualify as inputs under the Cenvat Credit Rules and are brought into the factory for re-making, refining, or re-conditioning under Rule 16. Since the appellant's goods did not meet these criteria, the refund claim was not maintainable.

Issue 2: Legality and Factual Correctness of the Order Passed by Learned CESTAT

The appellant challenged the CESTAT's order affirming the Commissioner (Appeals)'s decision to deny the refund. They argued that the CESTAT failed to appreciate that CVD is equivalent to excise duty, making them eligible for Cenvat Credit. They contended that denying the refund would result in double taxation.

The respondent maintained that the CESTAT correctly interpreted the law, emphasizing that CVD is a customs duty, and the refund claim should be filed with Customs authorities. They reiterated that the goods were finished products and not eligible for Cenvat Credit as inputs.

The court upheld the CESTAT's order, agreeing that the appellant's goods did not qualify as inputs and were not brought for re-conditioning or remaking, making Rule 16 inapplicable. It noted that the appellant failed to provide necessary documentation to support their refund claim under Section 11B.

The court dismissed the appeal, affirming that the CESTAT's order was legally and factually correct. The appellant's claim for a refund of CVD was not maintainable under the Central Excise Act, as the conditions for treating the goods as inputs and for re-making or re-conditioning were not met.

Conclusion:

The court concluded that an application for refund of countervailing duty under Section 11B of the Central Excise Act is maintainable only if the goods qualify as inputs under the Cenvat Credit Rules and are brought into the factory for re-making, refining, or re-conditioning under Rule 16. In this case, the appellant's goods did not meet these criteria, and the refund claim was not maintainable. The CESTAT's order denying the refund was upheld as legally and factually correct. The appeal was dismissed without any order as to costs.