2015 (11) TMI 666 - AT - Central Excise

Refund claim - Denial of CENVAT Credit - Capital goods - non-production of proof of exports - Held that - Issue of show-cause notice well after the submission of proof of exports under various letters written by the appellant to the department is most unfortunate. The learned Counsel states that even the 10 ARE-1s selected for random check are not related to the ARE-1s which covered export through merchant exporters. These ARE-1s actually relate to the export to the EOUs. Therefore, we find that the matter needs to be examined afresh by the adjudicating authority taking into account all documents submitted by the appellant. The adjudicating authority while deciding the case afresh must also visit various judicial pronouncements referred by the learned Counsel to the effect that it is the merchant exporter who is responsible for accountal of the goods when the goods are no longer in the control of the consigner. Even in the matter of penalty, the judgements in the case of Jay Jagdish Sugar (2004 (3) TMI 604 - CESTAT, MUMBAI) and Shagun Processors (2008 (12) TMI 111 - CESTAT AHMEDABAD) hold that the responsibility rests on the merchant exporter. The revenue has not been able to explain how Rule 20 (3) is not applicable. Rule 20 (3) states that the responsibility for payment of duty on the goods that are removed from the factory of production to a warehouse or from one warehouse to other warehouse shall be on the consignee. Even if Rule 20 (4) which casts the responsibility upon the consigner is considered it is for the Revenue to seek documents from the Superintendent in charge of the consignee as laid down in Board Circular No.851/9/2007-CX dated 30/05/2007. In the absence of any such verification, the demand of duty cannot be sustained. The time limitation for determining the refund will start from the date of finalisation of the issue of demand of duty. Further, the fact that the proof of export was available to the department before issue of show-cause notice means that the amount was forcibly recovered from them and can only be termed as deposit and can definitely not be termed as an amount deposited towards excise duty. Reliance is placed on CCE Vs. Ucal Fuel Systems Ltd. - 2011 (9) TMI 903 - Madras High Court . Therefore, refund is not hit by time bar. - Matter remanded back - Appeal disposed of.

Summary

Issues:
Non-submission of proof of export documents within six months for exports through merchant exporters, non-production of re-warehousing certificate for goods cleared to EOUs, wrong availment of Cenvat credit on capital goods, rejection of refund claim on grounds of limitation.

Analysis:

1. Non-submission of Proof of Export Documents:
The appellant contested the demand of duty amounting to Rs. 25,06,568 for non-submission of proof of exports, arguing that they had provided evidence through various letters which were ignored by the department. The Tribunal criticized the authorities for a careless approach, highlighting that a random check cannot be the basis for confirming a full duty demand. The responsibility of proving exports was emphasized to lie with the merchant exporter, as per judicial precedents cited. The case was remanded for a fresh examination considering all documents submitted.

2. Non-Production of Re-warehousing Certificate:
Regarding the absence of re-warehousing certificates for goods cleared to EOUs, the Tribunal noted the lack of explanation from the revenue on the applicability of Rule 20(3). It was emphasized that the responsibility for payment of duty lies with the consignee, and in the absence of proper verification, the demand for duty cannot be sustained. The case was directed to be re-evaluated after necessary verifications and consideration of relevant court decisions.

3. Wrong Availment of Cenvat Credit:
The appellant argued that no inquiry was conducted regarding the use of capital goods for which Cenvat credit was availed. The Tribunal highlighted the need for a detailed examination of the nature and usage of the goods, citing precedents supporting the allowance of Cenvat credit for goods used in machinery erection. The matter was referred back for reevaluation after analyzing the utilization of the goods.

4. Rejection of Refund Claim on Grounds of Limitation:
The Tribunal found the confirmation of demands in the first appeal to be erroneous, pointing out that amounts were debited without considering proof of exports submitted by the appellant. The rejection of the refund claim on the basis of limitation was deemed incorrect, emphasizing that the refund was not time-barred. The case was directed for fresh adjudication, and penalties imposed were set aside due to procedural issues.

In conclusion, the penalties were revoked, and both appeals were remanded for reevaluation by the adjudicating authority in alignment with the Tribunal's observations. The importance of proper verification, adherence to procedures, and timely decisions were highlighted for a just resolution of the case.