2018 (12) TMI 777 - AT - Central Excise

Refund of Additional Excise duty in cash - Pan Masala (Plain) without tobacco - N/N. 32/99-CE dated 08.07.99 - Held that - There is no irregularities committed by the appellant while debiting the amount on account of retrospective amendment of N/N. 32/99-CE dated 08.07.99 through Cenvat Credit Account. Refund on account of Education Cess - Held that - The purpose of N/N. 32/99-CE dated 08.07.99 was to make the entire production within North Eastern Region to be total tax free zone by that aforesaid Notification. If it is held that the appellant is not entitled for refund of AED paid, as per N/N. 32/99-CE dated 08.07.99, the same will be render Industrial Policy envisaged by the Government in effective. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Exemption and refund of Excise duty under Notification No.32/99-CE dated 08.07.99.
2. Utilization of cenvat credit before payment of duty from PLA.
3. Refund claim of additional Excise duty (AED) and Education Cess.
4. Short payment of duty and interest.
5. Retrospective amendment compliance under Finance Act, 2003.
6. Refund entitlement of AED and Education Cess.

Issue-wise Detailed Analysis:

1. Exemption and Refund of Excise Duty:
The appellant availed exemption of Excise duty under Notification No.32/99-CE dated 08.07.99 and claimed a refund of ? 4,10,84,917/- for November 2006. The lower adjudicating authority deducted ? 23,82,040/- due to non-utilization of the entire cenvat credit before duty payment from PLA. Additionally, refunds for AED and Education Cess were deemed inadmissible, resulting in a sanction of ? 3,47,35,660/- after adjustments.

2. Utilization of Cenvat Credit:
The appellant manufactured Pan Masala and Gutkha, using a common input (perfume) without maintaining separate records. The appellant argued that they utilized cenvat credit proportionately for Pan Masala and reversed an amount of ? 3,98,59,581/- through the Cenvat Credit Account. The Department's contention was that separate records should have been maintained, but neither the Cenvat Credit Rules, 2004 nor the Notification required such stipulation.

3. Refund Claim of AED and Education Cess:
The appellant contended that they were eligible for refunds under Notification No.32/99-CE, which was supported by the Tribunal's previous decisions. The Tribunal agreed that the appellant was entitled to refunds of AED and Education Cess, referencing the Supreme Court's decision in SRD Nutrients Pvt. Ltd. and Spentex Industries Ltd.

4. Short Payment of Duty and Interest:
The appellant argued there was no short payment of duty, as they utilized cenvat credit proportionately for the manufacture of Pan Masala. The Department had verified this during the refund sanctioning process. The Tribunal noted that the Department did not issue a show-cause notice under Section 11A of the Central Excise Act, 1944, making the demand for short payment unsustainable.

5. Retrospective Amendment Compliance:
The appellant paid ? 3,98,59,581/- through the Cenvat Credit Account. The Tribunal cited decisions in SCT Ltd. and Nehru Steel, affirming that payments through the Cenvat Credit Account are valid and equivalent to PLA payments. Thus, the appellant's method of debiting the amount was deemed correct.

6. Refund Entitlement of AED and Education Cess:
The Tribunal upheld the appellant's entitlement to refunds of AED and Education Cess, emphasizing the purpose of Notification No.32/99-CE to create a tax-free zone in the North Eastern Region. The Tribunal referenced the Supreme Court's interpretation in Spentex Industries Ltd., which allowed the word "OR" in the notification to be read as "AND" to fulfill the legislative intent.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal with consequential reliefs, affirming the appellant's entitlement to refunds and proper utilization of cenvat credit. The judgment emphasized adherence to legislative intent and proper interpretation of statutory provisions.

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