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TMI Blog2009 (4) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... -99. The lower authority has held that the appellant had not utilized the whole of Cenvat credit available to them on the last day of the month under consideration, before payment of duty from PLA and therefore, he deducted an amount of Rs. 1,55,202/- from the said claim. He has further held that the refund claim of Additional Excise Duty of Rs. 49,30,832.32 and Education Cess of Rs. 11,39,911.23 were not admissible and thus sanctioned the refund of Rs. 5,19,09,827/- only and did not grant interest on delayed refund. 2. The appellant contends that : A. - The impugned Order is patently against law, contrary to the facts on record, unjust, erroneous and passed with complete non-application of mind. The same merits to be quashed on this ground alone. B. - The impugned Order as far as it relates to the non-allowing of interest for delayed payment is patently against law, non-speaking and has been passed in flagrant violation of the principles of natural justice. The applicants are therefore, entitled for the amount of interest on delayed payment in terms of Section 11BB of the Central Excise Act. C. - The adjudicating authority has committed a grave error in deducting an amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh, this judgment was rendered in the context of Notification No. 56/2002-C.E. which provides exemption to units located in Jammu and Kashmir, it does not make any difference as the provisions of Notification No. 32/99-C.E. and 56/2002-C.E. are almost identical. In the said notification similar conditions that the manufacturer has to first utilize the CENVAT credit and thereafter pay duty from PLA exists. The CESTAT was dealing with identical matter and held in clear terms that the entire situation was revenue neutral. The finding of the CESTAT in Paras 3 and 4 of their final order are relevant which are reproduced below : "3. For better appreciation of the reasoning adopted by the Commissioner (Appeals) we reproduce the relevant paragraph :- "In the present instance the purpose of the policy of the Govt. is to refund the duty paid in cash and merely not following one of the condition does not debar the appellants from the benefit. Moreover, when the appellants have exhausted the Cenvat credit in subsequent months. To quote a few instances observe that during the months of May, 05, Dec, 06, January, 07 and March 07 the balance with the Cenvat account was NIL, and during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould also make it clear that the Education Cess was treated as duty of excise and the same has been levied and collected under the provisions of Central Excise Act or any other law for the time being in force. A perusal of the notification No. 32/99-C.E. would reveal that it gives exemption from the payment of duty of excise or additional duty of excise. Therefore, it is wholly erroneous on the part of the Assistant Commissioner to have rendered finding that AED, Education Cess and Secondary and Higher Education Cess were out of purview of the Notification No. 32/99-C.E., dated 8-7-99. D-2. The question as to whether additional duty of excise or Education Cess is duties of excise have come up for consideration before the CBEC, CESTAT and various High Courts. It has been unequally held by these authorities/courts that additional excise duty and Education Cess are nothing but duties of excise. D-3. This issue specifically came up before the CBEC in respect of interpretation of Rule 13 of Central Excise Rules, 1944, Rule 19 of Central Excise Rules, 2001 and Rule 19 of Central Excise Rules, 2002. These rules provide exemption from payment of excise duty to goods which are exported. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und claim. It is well settled law that the departmental officers are bound by the circulars issued by the CBEC. In this regard reliance is placed on the constitutional Bench judgment of the Supreme Court rendered in the case of Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, reported in 2002 (139) E.L.T. 3 (S.C.) and Union of India v. Arviva Industries (I) Ltd, reported in 2007 (209) E.L.T. 5 (S.C.) = 2008 (10) S.T.R. 534 (S.C.). Further while interpreting Notification No. 56/2002-C.E. the CESTAT in the case of Cyrus Surfactants Pvt. Ltd. v. Commissioner of Central Excise, Jammu, reported in 2007 (215) E.L.T. 55 (Tri.-Del.) has held in clear terms that Education Cess was in the nature of piggy back duty which would not operate in respect of excise duty exempted under the relevant law. In this regard paras 6 to 9 of the judgment rendered by the CESTAT is relevant which is reproduced below : "6. Levy and collection of excise duty is provided for in Chapter II of the Central Excise Act, 1944. The expressions "Duty, Duties, Duty of Excise and Duties of Excise" are required to be construed by including a reference to Central Value Added Tax, as provided in Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Ministry of Finance, there would be no occasion to calculate Education Cess in the nature of excise duty under Section 93 of the Finance Act, 2004. There is no need to provide any scheme of exemption from Education Cess in the nature of excise duty, because if the excise duty in respect of which it is required to be calculated is itself exempted, automatically, no question of levy of the said Education Cess in the nature of excise duty can ever arise. There was, therefore, no need to incorporate the provisions of Chapter VI of Finance Act, 2004 in the said Notification. The reasoning of the Commissioner (Appeals) that because Education Cess in the nature of excise duty which can be levied and collected under Section 93 did not find place in the said Notification which referred to only the aforesaid three Acts proceeds on an erroneous footing, in view of the fact that there is no separate scheme of exemption from Education Cess in the nature of excise duty contemplated in the provisions of Chapter VI of the Finance Act, 2004 nor does such requirement flow from any of the three Acts in respect of which duty exemption has been granted under the said Notification. 7. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter, the provisions of Section 11-B of the Central Excise Act, 1944 would not apply in the case of these Notifications." 7.1 We may also incidentally refer to the clarification issued by letter dated 10th August, 2004 by the Ministry of Finance on the question, whether the goods that are fully exempted from excise duty/customs duty, would be subjected to Education Cess. It was clarified in answer to issue no. 2 that if the goods are fully exempted from excise duty and are chargeable to NIL duty, there is no collection of duty and, therefore, no Education Cess would be leviable on such clearances. 7.2 Therefore, once the entitlement to exemption of the duty of excise or additional duty of excise, which would otherwise be payable under the three Acts named in the Notification, is established by following the manner indicated in paragraph 2 for ascertaining the extent exemption, there cannot arise any question of imposing Education Cess in the nature of excise duty under Section 93. 8. The ground for rejecting the claim for refund of Education Cess in the nature of excise duty paid at the rate of 2% on the portion of excise duties which were exempted, given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 93 of the Finance Act, 2004 in the said Notification would have led to an anomalous situation as indicated above. It would also to be noticed that the "refund" contemplated in paragraph 2 of the Notification in the context of statement of duty paid in cash, has no relevance with any Education Cess in the nature of excise duty, because the provisions of the Notification, including the manner of giving effect to the exemption contained thereunder, were devised only in the context of the excise duties which otherwise would have been payable under the said three Acts, but for such exemption. It cannot, therefore, be said that Education Cess cannot be refunded because there was no provision for its refund in paragraph 2 of the said Notification. It became refundable because the exemption became operative. 9. For the foregoing reasons, it is evident that when the exempted amount of duty was required to be refunded for operationalising the exemption, Education Cess, which was in the nature of piggy back duty on the excise duties under the said three Acts, was also required to be refunded, because it was not at all leviable, in view of the entitlement to exemption worked out un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 93, 94 and 95 on respective taxes was the levy for the purpose of Union and was to be utilized by the Union to fulfill the commitment of the Central Government to provide and finance universalized quality of basic education, as has been given out under Section 91 of the Act. 15. The very fact that the surcharge is collected as part of levy under three different enactments goes to show that scheme of levy of Education Cess was by way of collecting special funds for the purpose of Government project towards providing and financing universalized quality of basic education by enhancing the burden of Central Excise Duty, Customs Duty, and Service Tax by way of charging surcharge to be collected for the purpose of Union. But, it was made clear that in respect of all the three taxes, the surcharge collected along with the tax will bear the same character of respective taxes to which surcharge was appended and was to be governed by the respective enactments under which Education Cess in the form of surcharge is levied & collected. 16. Apparently, when at the time of collection, surcharge has taken the character of parent levy, whatever may be the object behind it, it becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een different if the Education Cess would have been collected not as surcharge but as an independent levy and matter would have been left to be considered independently for the purpose of providing rebate in respect thereof. The Notification dated 6-9-2004 had included the definition of Excise Duty only in consonance with the meaning of Excise Duty as was existing on the date Notification was issued, even if Explanation would not have been there the term Duty of Excise in ordinary circumstance would have included the surcharge levied as Education Cess in terms of Section 93 of the Act of 2004. 20. In view thereof, we have no hesitation to hold that impugned orders of Central Government as revisional authority and appellate order of Commissioner (Appeals) are patently erroneous and deserve to be quashed. 21. Accordingly, writ petition is allowed, impugned orders are set aside to the extent the petitioner has been denied the claim to rebate on surcharge on Excise Duty appropriated by Union of India as Education Cess for funding Universalised quality basic education programme but was paid by the petitioner only as Duty of Excise w.e.f. 9-7-2004 to 5-9-2004. There is no contention ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... references to the expressions 'duty', 'duties, 'duty of excise' and 'duties of excise' shall be construed to include a reference to 'Central Value Added Tax (CENVAT)'. Having regard to the above statutory provisions and also having regard to the fact that the petitioner had paid excise duty as well as Education Cess thereon from out of the petitioner's CENVAT Account, when the petitioner is found entitled to refund of excise duty and the actual refund of the excise duty amount is also given to the petitioner, agreeing with the decision of the Rajasthan High Court in Banswara Syntex Ltd. reported in 2007 (216) E.L.T. 16 (Raj.), we see no reason why the amount on Education Cess paid from out of the CENVAT Credit Account should not be refunded to the petitioner and credited in the same account. The stand of the Department that Education Cess was required to be paid only from PLA Account and not from the CENVAT Credit Account, is not required to be examined in the facts of the present case, because the refund of Education Cess is being directed to be made to the same account from which the Education Cess was paid by the petitioner. 6. We accordingly allow this petition. Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of CENVAT Credit Rules the department was of the view that since additional duty excise, Education Cess were not duties of excise, hence, the same cannot be utilized for payment of basic excise duty. The CESTAT in the undernoted cases has held in clear terms that additional excise duty, Education Cess were nothing but basic excise duty and can be utilized for payment of basic excise duty. (i) 2007 (207) E.L.T. 673 (Tri.-Del.) = 2008 (11) S.T.R. 93 (Tribunal) - in the case of Sun Pharmaceutical Industries v. Commissioner of Cehtral Excise, Jammu wherein in Para-8 in this judgment the CESTAT has held as under: "Para-8 A careful perusal of sub-rule, 7(b) makes it clear that the limitation placed in that sub-rule, is in regard to the utilization of Cenvat credit obtained through education cess paid on inputs. That sub-rule has no application at all in regard to utilization of credit of "basic excise duty". Provision relating to utilization of basic excise duty credit is to be found in sub-rule (4) of Rule 3 of Cenvat Credit Rules. That sub-rule places no limitation at all on utilization of the basic excise duty credit. Therefore, the finding in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,22,09,485.52 646 @@6% 12,96,547.01 67/2003-C.E. (N.T.) dated 12-9-2003 TOTAL 5,19,09,827.00 56,95,127.30 F. The aforesaid calculation chart of interest has been submitted by the appellant before the Assistant Commissioner, Central Excise, Jorhat vide Letter No. KPL/JOR/2008-2009 dated 24-2-2009. G. In terms of Section 11BB the Computation of three months is from the date of receipt of application in this case the refund application was filed on 7-1-2007 and 5-2-2007. Hence, the time limit for the purpose of computing the period for charging interest has to be counted on the expiry of three months from the date of Application. H. When an application is filed, it is filed in terms of sub-section (1) of Section 11B and Notification No. 32/99-C.E., dated 8-7-1999. The Order on the application is to be passed for refunding the amount in terms of sub-section (2) of the Section 11B. The fact whether the Order is passed by the Assistant Commissioner or in terms of the explanation is considered to have been passed by the CEGAT, would not alter the date of receipt of application under sub-section (1). Hence the impugned Order in not granting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board Circular Nos. 130/41/95-CX, dated 30-5-1995 and 398/31/98-CX., dated 2-6-1996. (v) 2004 (167) E.L.T. 365 (Tri.-Del.) - Kelvinator of India v. Commissioner of Central Excise, Jaipur . Interest on refund - Delay in sanctioning refund - If assessee not submitting material or evidence to prove that incidence of duty had not been passed by them to any other person, nothing prevented Revenue to either return their return claim as unsubstantiated or reject their claim within time limit specified in Central Excise Act, 1944 - Show cause notice rejecting refund claim on ground of unjust enrichment itself issued after more than 8 months or receipt of refund claim - Period taken in adjudication and final disposal by Commissioner (Appeals) delays sanction of refund for which assessee cannot be penalized as refund held to be payable to them under Section 11B(2) ibid - Only delay attributable to assessee is in submission of certificates - Interest granted from date of receipt of applications till date of refund of duty from which period taken by them in submitting required certificates, deducted - Section 11B ibid. [Para 4]. L. The present appeal has been filed by the appellant on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unded within 3 months from the date of receipt of application under sub-section (1) of that Section, there shall be paid to that applicant interest at such rate (not below than five per cen.) and not exceeding thirty per cent per annum as fixed from time to time by the Central Government by Notification in the Official Gazette), on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty. Explanation to the above provisions is relevant for the present case. The Explanation reads as follows :- "Explanation: - Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal or any Court against an order of the (Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, under Sub-Section (2) of Section 11B, the order passed by the Commissioner (Appeals), Appellate Tribunal or, as the case may be, by the court shall be deemed to be an order passed under the said sub-section (2) for the purposes of this section]." N. We would like to rely on the decision in the case of Government of India v. B.P.M. Industries Limited, reported in 2001 (128) E.L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turers, but is basically designed to give effect to the exemption. In other words, the mechanism has been adopted to operationalize the exemption envisaged in the notifications. In view of this aspect of the matter, the provisions of Section 11B of the Central Excise Act, 1944 would not apply in the case of these notifications. 5. It is also found that Section 11BB of the CE Act, 1944 is related to Section 11B of the Central Excise Act, 1944 and hence the claim of the appellant for interest on refund from the date of application is not sustainable in the present case. 6. Further, in respect of their claim regarding interest on refund, the appellant has cited some case laws decided by the Hon'ble High Courts/CESTAT. On going through all the cited Judgments/orders, I find that the decisions cited by the appellant is of earlier dates to the case law decided by the Hon'ble Apex Court in the case of CCE, Hyderabad v. I.T.C. Ltd. [2005 (179) E.L.T. 15 (S.C.)]. The Hon'ble Apex Court in their judgment has laid the principle of payment of interest on delayed refund from 3 months after final disposal of the dispute between the parties and it has also been held by the Hon'ble Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. They further submit that this issue specifically came up before the CBEC in respect of interpretation of Rule 13 of Central Excise Rules, 1944, Rule 19 of Central Excise Rules, 2001 and Rule 19 of Central Excise Rules, 2002. These rules provide exemption from payment of excise duty to goods which are exported. The issue before the CBEC was as to whether additional duty of excise, Special Additional Excise duty, Education Cess, National Calamity Contingent duty (NCCD) was duties of excise or not. The Board has directed that duties of excise would include the following: (a) the Central Excise (Basic) duty; (b) the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957); (c) the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978); (d) the Additional Duties of Excise as levied vide Section 111 of the Finance Act, 1998 (21 of 1998) as amended by Section 167 of the Finance Act, 2003 (32 of 2003); (e) the Additional Duties of Excise as levied vide Section 133 of the Finance Act, 1999 (27 of 1999) as amended by Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Act, 1957 by different Finance Acts. History behind this scheme is that manufacturers suggested to Government that multiple level taxes and duties should be avoided. Levy and collection of all taxes at one stage by single authority will be convenient for payment and administration. Hence, by agreement between Central and State Governments, it was decided by selecting some items where additional duty will be collected instead of Sales Tax and such additional duty will be distributed among various States. Revenue from this duty is distributed among State Governments on basis of percentage prescribed. The goods covered under Additional Duties of Excise are same as 'declared goods' under Central Sales Tax Act. The CST Act imposes restrictions on power of State Government to levy sales tax on 'declared goods'. The 'Additional Duty' is in addition to excise duty. 13. I find that Notification No. 32/99-C.E., dated 8-7-99 (as amended) prescribes exemption to specified goods manufactured by units located in specified areas of North-Eastern States. Such exemption is from so much of duty of excise or additional duty of excise, as the case may be, leviable thereon. The connecting word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een levied as duty of excise. The appellant submits that in this regard kind attention is invited to Sections 91 to 93 of the Finance Act, 2004. A perusal of Sections 91 and 93 of the Finance Act, 2004 would make it clear that the Education Cess has been treated as duty of excise and the same has been levied and collected under the provisions of Central Excise Act or any other law for the time being in force. Perusal of the Notification No. 32/99-C.E. would reveal that it gives exemption from the payment of duty of excise or additional duty of excise. Therefore, it is wholly erroneous on the part of the Assistant Commissioner to have rendered finding that Education Cess is out of purview of the Notification No. 32/99-C.E., dated 8-7-99. 17. The appellant further submits that the question as to whether Education Cess is duty of excise have come up for consideration before the CBEC, Hon'ble CESTAT and various High Courts. It has been unequivocally held by these authorities/courts that Education cess is nothing but duty of excise. It is also submitted that the Board has directed that duties of excise would include the Education Cess as levied and collected under Section 91 read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry clear from Section 93(1) of the Finance Act, 2005 that the Education Cess on excisable goods is a duty of excise and it is also clear from sub-section (3) of the said Section 93 that the provisions of refund under the Central Excise Act, 1944/rules made thereunder is applicable to Education Cess also. 20. Hon'ble CESTAT, Delhi Bench in the case of Cyrus Surfactants Pvt. Ltd. v. Commissioner of Central Excise, Jammu, [2007 (215) E.L.T. 55 (Tri.-Del.)] has held as below. Education Cess - Refund claim of Education Cess - Area based exemption - Whether goods fully exempted from excise duty would be subject to Education Cess - Held: Education Cess was in nature of piggy back duty, which would not operate in respect of excise duty exempted under the relevant law - Once entitlement to exemption of duty of excise or additional duty of excise, which would otherwise be payable under the three Acts named in Notification No. 56/2002-C.E., is established, no question of imposing Education Cess arises in nature of excise duty under Section 93 of Finance Act, 2004 - Education Cess not to be refunded as no express provision for its return in Notification ibid, not sustainable. 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 32/99-C.E. provides that CENVAT credit available is to be first utilized and the balance amount is to be paid from PLA. Therefore, the unutilized CENVAT credit balance of Rs. 1,55,202.00 is deductible from the refundable amount. 27. On the point, the appellant submits that no doubt the notification provides that a manufacturer should first utilize whole of the Cenvat credit available to him on the last day of the month under consideration for payment of duty on goods cleared during such month and pays only the balance amount in cash, but the fact remains that it is practically impossible to exhaust the whole amount of Cenvat credit during the month. When a manufacturer is paying crores of rupees from PLA in a single month, there is every possibility that some amount will remain unutilized in the Cenvat account. Compared to the quantum of duty paid by the appellants in a month, the amount of Cenvat credit lying in the Cenvat credit was insignificant. Therefore, taking a too narrow view of the matter is misplaced. In any view of the matter, this amount stood utilized in the next month and the amount of refund would go down by the same amount in the next month. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring gutkha (falling under Chapter 24 of CETA) also which is not covered under exemption notification, in addition to pan masala (falling under Chapter 21 of CETA, 1985), and the restrictions is related to the extent of Cenvat credit against the final product which is eligible for exemption under the Notification 32/99-C.E. (pan masala only), the balance of credit became available. 29. On examination, I find that in the Notification, as initially issued, there was no restriction or direction regarding use of Cenvat credit availed. Vide Notification No. 61/2002, dt. 23-12-2002, a clause was added in the Notification as follows:- "Provided that such refund shall not exceed the amount of duty paid less the amount of Cenvat Credit availed of, in respect of the duty paid on the inputs used in or relation to the manufacture of goods cleared under this Notification." Further, Vide Notification No. 6/2001 dated 6-3-2001, Gutkha falling under Chapter 24 was excluded from the purview of Notification No. 32/99. Thus the appellant was clearing only Pan Masala falling under Chapter 21 under Notification No. 32/99 and the restriction introduced by the Notification dtd. 23-12-2002 was op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of the policy of the Govt. is to refund the duty paid in cash and the condition to follow is to utilize whole of the CENVAT credit available to him on the last day of the month under consideration. This condition is prescribed where all the goods produced by the manufacturer are eligible for exemption under the notification. As in the instant case the appellant manufactures other items also which is not covered under the notification for the exemption so the notification does not debar the appellant from the benefit even in absence of fulfilment of that condition. Due to the credit of duty on inputs on two different finished goods it is always possible that some credit on inputs for non-exempted finished goods becomes unutilized at the end of the month. The contention of the appellant that no assessee will like to block their money by way of payment of the duty by Account Current and get it refunded afterwards when they are having option to debit the duty by balance of Credit Account is also common sense and convincing. Moreover, the Cenvat credit may be exhausted in subsequent months and then it is revenue neutral. 32. Also, in view of the case law decided by the Hon'ble ..... 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