2014 (5) TMI 173 - HC - Central Excise

Duty demand - Whether in view of the undisputed facts that concentrates were initially cleared on payment of duty and the fact that said concentrates were received back in the factory premises and thereafter reprocessed with the existing in-process quantity of concentrates and declared on payment of duty again, the requirement of Rule 173L were fully satisfied and consequently rejection of refund claim was absolutely arbitrary, void and unjustified - Held that - From the orders passed by the Commissioner (Appeals-II) and CESTAT, it is abundantly clear that despite being aware of the requirements of Rule 173L of the Rules for the purpose of claiming refund, first the appellant claimed Modvat credit, then reversed the same and is claiming the declaration submitted for claiming Modvat credit to be sufficient compliance of provisions of Rule 173L. Further, the basic requirement of submitting Form D-3 was never complied with by the appellant and, as such, in fact the process of seeking of refund under Rule 173L was not even properly initiated by the appellant, as such, having failed to satisfy the conditions of Rule 173L, the appellant s refund claim was rightly rejected. In that case to avail of the concessional rate of octroi, importers were required to make declaration in prescribed form to the effect that the goods imported shall not be used for any other purpose for sale or otherwise, etc. Thus an incentive was sought to be given to such entrepreneurs by such concession if the raw material which is imported is also utilised in the industrial undertaking without selling or disposing of otherwise. This being the object, a verification at the relevant time by the octroi authorities becomes very much necessary before a concession could be given. Since the company in that case which had imported the goods within the Municipal Limit had failed to fulfil the obligation of filing the requisite declaration, the Supreme Court held that it cannot turn-around and ask the authorities to make verification of record. The Supreme Court further observed that the verification at the time when the raw material was there is entirely different from a verification at a belated stage after it has ceased to be there. The Supreme Court further observed that the failure to file the necessary declaration would disentitle the company from claiming any such concession - Decided against assessee.

Summary

Issues Involved:
1. Compliance with Rule 173L requirements for refund.
2. Mandatory nature of conditions under Rules 173L(2) and 173L(3).
3. Exercise of the Commissioner's power to relax procedural requirements under Rule 173L(4).

Issue-wise Detailed Analysis:

1. Compliance with Rule 173L Requirements for Refund:
The appellant initially cleared concentrates on payment of duty, which were later returned to the factory due to not meeting technical requirements. The appellant took Modvat credit but later reversed it upon the department's instruction and subsequently filed a refund claim under Rule 173L. The Assistant Commissioner, Commissioner (Appeals-II), and CESTAT all rejected the refund claim. The Commissioner (Appeals-II) noted that while the appellant met some substantive requirements, such as informing the department and filing Modvat declarations, they failed to comply with other mandatory conditions, like maintaining detailed accounts and completing processes within six months. The CESTAT upheld this decision, emphasizing the appellant's failure to follow the prescribed procedure and maintain necessary records.

2. Mandatory Nature of Conditions under Rules 173L(2) and 173L(3):
The court examined whether the conditions prescribed under Rules 173L(2) and 173L(3) are mandatory. Rule 173L(2) requires maintaining a detailed account of returned goods and the processes they undergo. Rule 173L(3) stipulates that no refund shall be paid until these processes are completed and an account is rendered to the Commissioner's satisfaction within six months. The appellant argued that due to the nature of the goods, it was not possible to follow these rules strictly and sought relaxation. However, the court found that the appellant did not comply with these mandatory conditions and did not seek relaxation at the appropriate time, thus justifying the rejection of the refund claim.

3. Exercise of the Commissioner's Power to Relax Procedural Requirements under Rule 173L(4):
The appellant contended that the Commissioner should have relaxed the procedural requirements under Rule 173L(4) due to the technical impossibility of compliance. Rule 173L(4) allows the Commissioner to relax provisions for admitting a refund claim if reasons are recorded in writing. However, the appellant never formally applied for such relaxation. The court held that it was not the Commissioner's duty to invoke relaxation powers sua sponte without a request from the appellant. The court also referenced the Supreme Court's decision in Indian Aluminium Co. Ltd. v. Thane Municipal Corporation, emphasizing the necessity of fulfilling procedural obligations to claim concessions or refunds.

Conclusion:
The court concluded that the appellant failed to comply with the mandatory provisions of Rule 173L and did not seek timely relaxation of these provisions. The concurrent decisions of the lower authorities were upheld, and both substantial questions of law were answered against the appellant. Consequently, the appeal was dismissed.