2009 (6) TMI 163 - HC - Central Excise

Refund of additional excise duty (T&TA) - Whether Tribunal was right in law in holding that Boards Circular No. 701/17/2003-CX., dated 12-3-2003 allows refund of unutilized credit of Additional duty of Excise (Goods of Special Importance) on export of the finished goods even if such finished goods are not subjected to levy of the said additional duty when circular ibid not retrospective - As far as the circular dated 22-3-2007 extending the applicability of the earlier circular dated 12-3-2003 to the AED (T&TA) is concerned, it also clearly indicates that the second circular was in nature of clarification and it was clarified that the clarification given by the Central Board by earlier circular dated 12-3-2003 would be applicable to AED (T&TA) also. - Circulars would be applicable to all the pending cases without any exception. Beneficial circulars to be applied retrospectively refund is admissible

Summary

Issues Involved:
1. Whether the Tribunal was right in law in holding that "Board's Circular No. 701/17/2003-CX., dated 12-3-2003 allows refund of unutilized credit of Additional duty of Excise (Goods of Special Importance) on export of the finished goods even if such finished goods are not subjected to levy of the said additional duty."

Issue-wise Detailed Analysis:

1. Tribunal's Interpretation of Board's Circular No. 701/17/2003-CX:
The core issue revolves around the interpretation of Circular No. 701/17/2003-CX, dated 12-3-2003, and its applicability to the refund of unutilized credit of Additional Duty of Excise (Goods of Special Importance) (AED (GSI)) on exported finished goods. The Tribunal held that this circular allows such refunds even if the finished goods are not subjected to the said additional duty.

2. Background and Facts:
The respondent, engaged in the manufacture of decotised man-made/chemile fabrics, exported almost all its final products and sought refunds for both basic excise duty and additional excise duty on inputs. The Assistant Commissioner granted a refund for the basic excise duty but denied it for the additional excise duty. The Commissioner (Appeals) reversed this decision, allowing the refund for additional excise duty as well, which was upheld by the Tribunal.

3. Legal Provisions and Notifications:
Initially, the MODVAT system was introduced to avoid double payment of duty on inputs used in manufacturing final products. Rule 57A of the Central Excise Rules, 1944, and subsequent notifications controlled the availability and utilization of credit. Rule 57F(12) and 57F(13) specifically dealt with the utilization and refund of credit, including provisions for refund if adjustment was not possible.

4. Respondent's Entitlement to Refund:
The respondent argued that they were entitled to a refund of the total credit for both basic and additional excise duties paid on inputs used for exported final products. The Revenue contended that refunds should only cover the basic duty, not the additional excise duty. The Tribunal, however, did not accept the Revenue's contention, relying on Circular No. 701/17/2003-CX.

5. Circular No. 701/17/2003-CX and Its Applicability:
The circular clarified that refunds of AED (GSI) should be allowed under Rule 5 of the Cenvat Credit Rules, 2002, regardless of whether the duty was levied on the final products. The Tribunal extended this interpretation to cover AED (T&TA) as well, based on a subsequent circular dated 22-3-2007, which explicitly stated that the earlier circular would apply to AED (T&TA).

6. Retrospective Application of Circulars:
The Revenue argued that these circulars could not be applied retrospectively. However, the Court found that the language of the circulars, particularly the phrase "pending cases, if any, may be decided accordingly," indicated a retrospective application. The Court emphasized that beneficial circulars should be applied retrospectively, as established in previous Supreme Court rulings.

7. Binding Nature of Circulars:
The Court reiterated that circulars issued by the Board are binding on departmental authorities, as established in the Supreme Court's ruling in Paper Products Ltd. The Revenue failed to demonstrate that the circulars were inconsistent with statutory provisions.

8. Conclusion:
The Court concluded that the respondent was entitled to a refund of AED (T&TA) based on the clarificatory nature of the circulars dated 12-3-2003 and 22-3-2007. The Tribunal's decision to uphold the refund was justified, and the appeals by the Revenue were dismissed.

Judgment:
All three appeals were dismissed, and no order as to costs was made.