2023 (9) TMI 452 - AT - Central Excise

Recovery of alleged excess grant of rebate - in terms of Notification No.02/2011-CE dated 01.03.2011, Excise Duty in excess of 5% was exempted whereas the appellants paid duty at the rate of 10% - HELD THAT - A conjoint reading of the provisions of Section 5 and the notification cited above reveals that the impugned goods are partially exempted; a manufacturer has no choice to pay duty when it is wholly exempted; however, when the item is partially exempted and that there is no prescription that the manufacturer shall not pay duty at the higher rate. Further, as submitted by the learned Counsel for the appellant, Notification No.19/2004 provides for the payment of rebate of duty paid and not the duty payable . Therefore, it is found that there is no reason as to why the contention of the appellants should not be accepted - the issue of availability of choice, of not opting for an exemption notification, to the manufacturer has been decided by the Tribunal in many cases. Tribunal in the case of BOMBAY DYEING MANUFACTURING CO. LTD. VERSUS CCE., MUMBAI-IV 2000 (6) TMI 98 - CEGAT, MUMBAI held that It is settled law that an exemption has to be claimed and that the burden of proving that he falls within the exemption falls upon the person who claims it. In such cases therefore we must independently of our earlier reasoning come to the conclusion that there is always an element of choice in availing of an exemption notification. As far as availability of rebate is concerned, the notification providing for rebate talks of duty paid rather than duty payable and as such a manufacturer-exporter has a choice to pay the duty as per the basic rate or after availing the partial exemption and rebate shall be granted on the duty paid . We find that this issue was settled by the Tribunal in the case of AJANTA MANUFACTURING LTD. VERSUS COMMISSIONER OF C. EX. CUS., RAJKOT 2009 (4) TMI 655 - CESTAT, AHMEDABAD which was upheld by the Hon ble Supreme Court in COMMISSIONER VERSUS AJANTA MANUFACTURING LTD. 2011 (4) TMI 1394 - SC ORDER - Tribunal observed that The very fact that no provision has been made in Section 5A while amending the same to prohibit manufacturer from paying duty in case of unconditional partial exemption at higher rate, the appellant cannot be found fault with for having paid higher rate of duty. Further it is to be observed that having advised the appellant to reclassify the product under a different heading holding the same ineligible for a partial exemption, the departmental officers should not have rejected the refund claim. Thus, the appellants are eligible for the rebate of the duty paid irrespective of the fact as to whether a partial exemption was applicable to the impugned goods. The appellants further contended that the Department has not appealed against the rebate order and no higher authority has set aside the same; therefore, the rebate alleged to have been erroneously granted cannot be demanded by way of a show-cause notice issued under Section 11A of the Central Excise Act, 1944. We find that the Tribunal in the case of SHREE NATH INDUSTRIES VERSUS C.C.E., JAMMU 2018 (5) TMI 195 - CESTAT CHANDIGARH held that In this case, it is the case of the Revenue itself that they were not required to pay duty, therefore, the excess amount paid by the appellant is merely a deposit not a duty. Hence, the provisions of Section 11A of the Act, is not applicable to the case. In that circumstances, the appellant is not required to pay the excess refund claimed by them. The appellants have already paid duty at the rate of 10%. In case, they are to pay back the additional 5% rebate, Department requires to credit the excess 5% duty paid into CENVAT account. Since, CENVAT account is no more in existence; it is a foregone conclusion that the refund, if any, requires to be paid in cash - no purpose will be served if the rebate, alleged to have claimed and sanctioned in excess, is recovered and the 5% of excess duty paid is refunded by way of cash refund. Such an act would be not only revenue neutral but would be a futile academic exercise. Appeal allowed.

Summary

Issues Involved:

1. Rebate of duty paid without availing the available exemption.
2. Recovery of alleged excess rebate and CENVAT credit refund.
3. Applicability of Section 35B of the Central Excise Act, 1944.
4. Payment of rebate in cash versus credit in the CENVAT account.
5. Finality of the order sanctioning rebate and its implications.

Summary:

Rebate of Duty Paid Without Availing Exemption:
The appellants, engaged in manufacturing household articles, paid duty at 10% and claimed a rebate under Rule 18 of the Central Excise Rules, 2002. The Department argued that the appellants should have availed the exemption under Notification No. 02/2011-CE, which capped the duty at 5%. The appellants contended that the rebate should be granted on the "duty paid" rather than the "duty payable," citing several case laws supporting their stance.

Recovery of Alleged Excess Rebate and CENVAT Credit Refund:
The Department issued show-cause notices to recover the alleged excess rebate and CENVAT credit refund. The adjudicating authority upheld the show-cause notice regarding the rebate but allowed the refund of CENVAT credit. The appellants argued that the rebate order had attained finality and could not be challenged by the Department without being set aside by a higher authority.

Applicability of Section 35B of the Central Excise Act, 1944:
The Department raised a preliminary objection regarding the Tribunal's jurisdiction under Section 35B of the Central Excise Act, 1944. The appellants countered that the appeal was valid as it was against an order passed by the Commissioner of Central Excise.

Payment of Rebate in Cash Versus Credit in the CENVAT Account:
The appellants argued that rebate should be given in cash, especially with the advent of the GST regime, which rendered the CENVAT account obsolete. They relied on various circulars and case laws to support their claim.

Finality of the Order Sanctioning Rebate:
The appellants contended that the order sanctioning the rebate had attained finality and could not be contested by the Department through a show-cause notice under Section 11A of the Central Excise Act, 1944. The Tribunal agreed, noting that the Department had not refunded the excess duty paid, making the recovery of the alleged excess rebate redundant and a futile exercise.

Conclusion:
The Tribunal found that the appellants were eligible for the rebate of the "duty paid" and not the "duty payable." The impugned order was set aside, and the appeal was allowed, emphasizing that the Department could not recover the alleged excess rebate without refunding the excess duty paid. The judgment was pronounced on 08/09/2023.