2021 (8) TMI 339 - AT - Central Excise

Seeking refund of the MODVAT Credit balance available in the account on the date of surrender of the registration - rejection on the ground of time limitation - Monetising of credit balance - Difference of opinion - Majority order - HELD THAT - The issue of show cause notice, as an indispensable statutory pre-requisite for recovery either of duties or of amounts refunded in excess of entitlement and as a public declaration of intent, authorizes the assumption of jurisdiction by the empowered official. Not unnaturally, with appeal being an outcome of adjudication, the contents thereof limit the appellate hierarchy too unless superimposed by notice in exercise of such empowerment, as section 35A of Central Excise Act, 1944 does, on an appellate authority. It is not that the authority competent to dispose that claim for refund has commenced and concluded its findings at the threshold on limitation; the order records that the eligibility on merit was initially taken up and it would appear that, having noted the decision of the Hon ble High Court of Karnataka in UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. 2006 (7) TMI 9 - KARNATAKA HIGH COURT , the determination veered off on another path that, possibly, was more amenable to rejection of the claim with least controversy but leaving unarticulated the conclusion on eligibility. The impugned order has also recorded that the grounds of appeal were reiterated during the personal hearing. It is, therefore, not open to the appellant to now contend that eligibility on merit was not one of the grievances placed before the first appellate authority; to seek to curtail the jurisdiction with such a prayer is contrary to facts. Determination of eligibility on merit was, thus, within the jurisdiction conferred by the appellant on the first appellate authority. On the finding in the impugned order of ineligibility for encashment of credit in balance, which has relied upon decisions available then, the opinion of Hon ble Member (J) that the Tribunal, or any of the lower authorities, are bound to defer decision is no longer applicable as the Larger Bench of the Hon ble High Court of Bombay, in M/S. GAURI PLASTICULTURE P. LTD., BOMBAY DYEING MANUFACTURING CO. LTD., M/S. SIMPLEX MILLS CO. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, INDORE, THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI IV, THE UNION OF INDIA THROUGH THE COMMISSIONER OF CENTRAL EXCISE MUMBAI I 2019 (6) TMI 820 - BOMBAY HIGH COURT , has confirmed the ineligibility to claim refund of unutilised credit which places the final outcome beyond the pale of uncertainty and, additionally, relegates the threshold issue to that of mere academic interest with no claim for adjudicatory re-determination. Concurring with Hon ble Member (T), it is held that the finding on ineligibility for monetising of credit balance has been correctly determined and remand is not warranted. Registry is accordingly, directed to place the records herein before the designated Division Bench for the majority decision to be pronounced. Majority order - HELD THAT - In view of majority view, the appeal is rejected and dismissed.

Summary

Issues Involved:
1. Whether the refund claim was barred by limitation.
2. Whether the Commissioner (Appeals) was right in rejecting the refund claim on merits when the Assistant Commissioner had not done so.

Issue-wise Detailed Analysis:

1. Whether the refund claim was barred by limitation:

The appellants claimed a refund of the MODVAT Credit balance available in their account on the date of surrender of registration and the balance in their PLA account. The Assistant Commissioner rejected the refund claim on the basis of time bar, which was upheld by the Commissioner (Appeals). The appellants argued that they were prevented from filing the refund claim immediately after surrendering their registration due to pending proceedings advised by the range officer. They contended that their claim should not be hit by limitation as it was filed immediately after the closure of all proceedings.

The Tribunal noted that the larger bench of the tribunal in the case of Gauri Plasticulture (P) Ltd. had settled the law holding against the appellants, stating that there is no provision allowing the refund of such credit in cash. It was emphasized that the appellants were not barred by the revenue from utilizing the MODVAT Credit balance. The Tribunal concluded that the refund claim was indeed barred by limitation, as it was filed seven years after the surrender of registration, and the appellants failed to file the claim within the prescribed period.

2. Whether the Commissioner (Appeals) was right in rejecting the refund claim on merits when the Assistant Commissioner had not done so:

The appellants argued that the Commissioner (Appeals) traversed beyond the order of the Assistant Commissioner by rejecting the refund claim on merits, which was not permissible in law. The Tribunal discussed the procedural aspects under Section 11B and Section 35A of the Central Excise Act, 1944, highlighting that the claimant needs to justify the admissibility of the refund claim on all accounts, including merits, limitation, and unjust enrichment. It was noted that the Assistant Commissioner had rejected the claim on the ground of limitation without recording any findings on merits.

The Tribunal observed that the Commissioner (Appeals) has the authority to make further inquiries and pass orders confirming, modifying, or annulling the decision appealed against. However, it was concluded that the Commissioner (Appeals) was not justified in rejecting the refund claim on merits when the Assistant Commissioner had not done so. The Tribunal emphasized that the merits of the case should have been considered by the original adjudicating authority.

Separate Judgment by Member (Judicial):

Member (Judicial) disagreed with the findings of Member (Technical) regarding the refund of unutilized Cenvat Credit. It was noted that the appellants had surrendered their Central Excise registration due to discontinuation of manufacturing activities and had informed the range officer about the unutilized credit balances. The appellants claimed that their surrender application was not accepted due to pending adjudications, and they filed the refund claim only after the matters were resolved.

It was highlighted that the Assistant Commissioner had rejected the refund claim solely on the ground of limitation without addressing the merits. Member (Judicial) opined that the Commissioner (Appeals) should not have gone into the merits of the case when the original authority had not expressed any opinion on it. It was suggested that the matter should be remanded to the original adjudicating authority for reconsideration of both limitation and merits.

Majority Decision:

The majority decision, delivered by Member (Technical) and supported by the third member, concluded that the appeal should be rejected and dismissed. It was held that the determination of ineligibility for refund by the first appellate authority was within jurisdiction, and there was no need for remand. The final order upheld the rejection of the refund claim on both limitation and merits, in line with the findings of the larger bench of the tribunal and subsequent legal developments.