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TMI Blog2020 (1) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... equivalent to the amount of duty paid by the manufacturer, other than the amount paid by utilisation of cenvat credit under the Cenvat Credit Rules. As per the impugned order Ishaan, by a letter dated 04.07.2002 informed the jurisdictional Assistant Commissioner, the prescribed authority under Notification No. 32/99-CE, that their factory located in the specified area and had started commercial production with effect from 22.03.2002 and requested sanction of eligibility certificate and that the Assistant Commissioner by an order dated 27.09.2002 held that Ishaan is eligible for exemption under the said notification by way of refund of duty paid from account current on the products allowed to be manufactured and cleared; accordingly an amount of 10,21,26,696/- was refunded to Ishaan during the period from October 2002 to December 2004 for clearances claimed to have been during March 2002 to November 2004 - By the impugned order the Revenue has sought to recover an amount of 8,92,62,243/- out of the said refunded amount in terms of Section 11A(2) of the Act, pursuant to a show cause notice issued under the Proviso to Section 11A of the Act, as amount wrongly refunded under the said N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (vi) upon Rajib Kumar Lalwani (Noticee No. 7 - SCN dt. 28.02.2006) and (vii) ₹ 50,000/- upon Baijnath Agarwal (Noticee No. 8 - SCN dt. 28.02.2006) under Rule 26 CCR 2002. The Commissioner dropped the proceedings initiated under SCNs dated 29.08.2006, 17.08.2006, 15.06.2006, 16.04.2006, 16.04.2006 & 28.11.2007 against the respective show cause noticees therein, being different units of Manaksia Ltd. situated at various places in the country. But while dropping the proceedings against Manaksia Ltd., Anjar, Kutch, Gujarat, initiated by SCN dated 28.11.2007, the Commissioner appropriated a sum of ₹ 2,37,57,760/-, deposited by it under protest during investigation, towards the above duty demand confirmed against Ishaan. 2. Being aggrieved by the impugned orders, to the extent it is against them both the respective assessees, their officers and the Revenue have preferred the instant appeals. 3. The issues in the present appeals relate to availability of benefit under exemption Notification No. 32/99-CE dated July 8, 1999 (as amended and in force during the period March 2002 to November 2004) [in short, "the said notification"] and correctness or otherwise of ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Manaksia which purchased the goods from Ishaan therefore availed cenvat credit of the duty paid on the goods received by them and utilised the same in the manufacture of final products in their respective factories. (v) On the ground that Ishaan had been misusing the benefit under the said notification by not actually manufacturing any excisable goods in its factory and by resorting to over-invoicing of the products claimed to have been manufactured and cleared from the said factory with intention of passing irregular cenvat credit to its customers, being the various units of Manaksia Ltd., all of whom together with Ishaan were so associated that they had interest directly or indirectly in the business of each other, thereby enabling the said customers to evade central excise duty by way of availment of excess and irregular cenvat credit and to avail undue benefit in terms of Notification No. 39/2001- CE dated July 31, 2001, the officers of DGCEI searched the factory premises and offices of Ishaan as well as the residences of directors and the factory premises of Manaksia Ltd. situated at different places in the country and effected seizures and recorded statements of several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45,67,825.70 has been made and confirmed on the ground that this amount has been wrongly refunded under the said notification, in proceeding under Section 11A(1) of CEA'44. This is impermissible, as held by the jurisdictional High Court of Gauhati in the case of Commissioner of Central Excise, Shillong Vs. Jellalpore Tea Estate, 2011 (268) ELT 14 (Gau), the condition precedent laid down not being satisfied. This decision has been followed by CESTAT, Kolkata, in the case of Adhunik Meghalaya Steel Pvt. Ltd. Vs. Commissioner of Central Excise, Shillong, 2013 (294) ELT 292 (T). Both the above decisions have been accepted by the Revenue. (ii) It has been held in the impugned order that there was no "manufacture" by Ishaan in its factory of the specified machinery/structures etc. and, consequently, demands have been made as erroneously granted refund under the said notification. It has been held in the impugned order that no duty was payable on the said goods and consequently no refund was due or allowable as per the said notification. On this basis the show cause notice proposed and the impugned order has confirmed that the amount refunded is liable to be recovered in terms of the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification are inapplicable. This excess amount, if any, which was refunded cannot be said to be erroneous or wrong refund of any duty payable or paid by Ishaan as per provisions of the Act nor can it be said that there has been any evasion of such "duty" by Ishaan. Therefore, there can be no invocation of the provisions of Section 11A of the Act in respect of this amount also and there can be no proceedings thereunder for recovery of any "duty of central excise", erroneously refunded. (v) In support of the above reliance has been placed upon: (a) Hyderabad Industries Ltd. Vs. Union of India, 1995 (78) ELT 641 (SC), paragraphs 6 and 7 (b) Moti Laminates Pvt. Ltd. Vs. Collector of Central Excise, 1995 (76) ELT 241 (SC) (c) Union of India Vs. Ahmedabad Electricity Co. Ltd., 2003 (158) ELT 3 (SC), paragraphs 13 and 14 (d) CCE Vs. Wimco Ltd., 2007 (217) ELT 3 (SC) (e) Grasim Industries Ltd. Vs. Union of India, 2011 (273) ELT 10 (SC). (vi) The demand for recovery of alleged wrongly availed cenvat credit of ₹ 53,05,582/- by Ishaan in respect of input materials which had been used in the final products which were cleared without being manufactured in its factory is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules. Hence, this demand is also contrary to Rule 16 of the said Rules and thus unsustainable. (viii) Without prejudice, even otherwise, the findings of the Commissioner in the impugned order are contrary to law, contrary to records, misconceived, erroneous and thus untenable and unsustainable. This is evident from the detailed submissions contained in the reply to the show cause notice filed by Ishaan and the submissions made before the Commissioner at the time of hearing, supported by voluminous documentary evidence forming a part of the reply, none of which has neither been referred to nor considered in the impugned order, thus rendering the impugned order illegal, invalid and unsustainable. (ix) There is thus no legally sustainable demand of duty from Ishaan in the instant case. Hence, the demand of interest confirmed by the impugned order under Section 11AB of the Act is also illegal, invalid and bad. Consequently, the appropriation of ₹ 1,70,00,000/- deposited by Ishaan is illegal, invalid and bad. Further, there being no contravention by Ishaan of any provision of the Act or the rules framed thereunder, there can be no imposition of penalty upon it and the penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause noticees covered by the show cause notice dated February 28, 2006, dropped the proceedings under show cause notices dated 29.08.2006, 17.08.2006, 15.06.2006, 16.04.2006, 16.04.2006 & 28.11.2007 issued by DGCEI to the different units of Manaksia Ltd. at Guwahati, Haldia, Howrah, Medak (AP) [two units] and Anjar, Kutch (Guj.) [covered by CBEC Order Nos. 3/2008-CE dated April 2, 2008, 06/2009-CE dated October 26, 2009 and 03/2012-CE dated February 22, 2012, detailed in para 1.3 of the impugned order], following the decision of the Tribunal in Manaksia Ltd. Vs. CCE, Rajkot, 2008 (232) ELT 497 (T) and judgment of the Gujarat High Court affirming the same [CCE&C Vs. Manaksia Ltd., 2010-TIOL-852-HC-AHM-CX] and the Board's Circular No. 766/82/2003-CX dated December 15, 2003. There is no infirmity in the findings of the Commissioner in this regard and in his dropping of the proceedings against the said 6 units of Manaksia Ltd. and the contrary contentions on behalf of the Revenue in its appeals, being Appeal Nos. E/76094/2014 to E/76099/2014, have no merit or substance and the said appeals are to be dismissed. (b) The issues involved also stand settled by the decisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder proceedings initiated against the said company in terms of another show cause notice dated February 28, 2006, in erroneous exercise of powers under Section 11 of the Act. (b) Having dropped the proceedings initiated against it under show cause notice dated November 28, 2007 the Commissioner should have directed, as consequential relief, refund of the sum of ₹ 2,37,57,760/- deposited by Manaksia Ltd., Anjar [appellant in Appeal No. E/76155/2014] in the course of investigation and has erred in not doing so. The Commissioner has no right, authority or jurisdiction either under the Act, including Section 11 thereof to appropriate the said sum against the demand of duty confirmed in proceedings under a different show cause notice issued against another assessee/person (Ishaan). There is no sanction for this under Section 11 of the Act. The reason given is also not supported by Section 11 of the Act nor satisfies the requirement of the said provision. (c) Even assuming though denying that Manaksia, Anjar and Ishaan are inter-connected undertakings and/or had during the relevant period mutual interest in the business of each other, it does not and cannot lead to the conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grounds contained in the Review Order dated 09.07.2014 of the Committee of Chief Commissioners and the grounds of appeal contained in the respective appeal petitions filed by the Revenue pursuant to the said Review Order against the findings of the Commissioner and dropping of the proceedings. 7. In his rejoinder the Learned Senior Advocate, Dr. Samir Chakraborty, has submitted as under: (i) In so far as the reliance on the part of the Revenue on the decision of the Hon'ble Supreme Court in Grasim Industries Ltd. Vs. Commissioner of Central Excise (supra), para 13, it is submitted that the said decision of the Hon'ble Supreme Court is clearly distinguishable. It, in no manner whatsoever, renders inapplicable the decision of the Hon'ble Gauhati High Court in Commissioner of Central Excise, Shillong Vs. Jellalpore Tea Estate (supra). In Grasim's case (supra) there was no dispute that what was being sought to be recovered by a proceeding under Section 11A of the Act was "duty of excise", which was erroneously refunded according to the Department. In the instant case, however, it is the specific finding of the Commissioner and contention of the Revenue that there was no "manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order). In its reply to the show cause notice, Ishaan had demonstrated and had established the fact that the said goods had in fact been manufactured and cleared in accordance with the provisions of the Act and the rules framed thereunder during the material period by Ishaan. Voluminous documents of approximately 2569 pages enclosed with the said reply, conclusively and unequivocally demonstrated the correctness of the submissions made in this respect by Ishaan in its reply to the show cause notice. The said documents also established that the procured or purported nature of the statements of some selected job workers, leaving aside the large majority thereof who had been involved in the manufacture of the subject goods, and that they were, on the face of relevant materials on record, incorrect and no credence could be given thereto nor any reliance placed thereon and the Commissioner had erred in relying upon them. Significantly, there is no reference in the impugned order to the said submissions of Ishaan and the documentary evidences in support thereof. The Learned AR also is conveniently silent thereon. It was also demonstrated by Ishaan that the purported verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id, other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2001. (b) The Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, after such verification, as may be deemed necessary, shall refund the amount of duty paid, other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2001 during the month under consideration to the manufacturer by the 15th of the next month. (c) If there is likely to be any delay in the verification, the Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, shall refund the amount on provisional basis by the 15th of the next month to the month under consideration, and thereafter may adjust the amount of refund by such amount as may be necessary in the subsequent refunds admissible to the manufacturer." 10. As per the impugned order Ishaan, by a letter dated 04.07.2002 informed the jurisdictional Assistant Commissioner, the prescribed authority under Notification No. 32/99-CE, that their factory located in the specified area and had started commercial production with effect from 22.03.2002 and requested sanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of duty nor was there any issue relating to the valuation of any excisable goods. Ex-facie, therefore, Section 11A of the Act was inapplicable to the facts of the case. 13. That apart, the Assistant Commissioner of Central Excise, Silchar had passed a final order in favour of the assessee on 29.4.2002 and admittedly, this order was revisable under Section 35E of the Act. For reasons best known to the Commissioner of Central Excise, Shillong no action was taken to have the order of the Assistant Commissioner revised or set aside. Having failed to avail of the statutory remedy available under the Act, the Revenue sought to circumvent the law (as it were) by taking recourse to Section 11A of the Act. In our opinion, this was clearly impermissible inasmuch as what is required to be done in a manner prescribed by law, ought to be done in that manner only or not at all. 14. Insofar as the present case is concerned, the prescription of law required that the order of the Assistant Commissioner passed on 29.4.2002 could be challenged only by resorting to Section 35E of the Act. The Revenue could not initiate collateral proceedings to set aside the order dated 30.4.2002 by resort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edent for invoking Section 11A of the Act has not and/or cannot be said to have been satisfied. This has been made clear by the Apex Court consistently. In Hyderabad Industries Ltd. Vs. Union of India, 1995 (78) ELT 641 (SC), the Hon'ble Supreme Court, following its earlier decision in Moti Laminates Pvt. Ltd. Vs. CCE, 1995 (76) ELT 241 (SC), observed and held as under: "6. In Moti Laminates Pvt. Ltd. Vs. Collector of Central Excise, 1995 (76) ELT 241 (SC) this Court said: 6. The duty of excise is leviable under Entry 84 of List I of the VIIth Schedule on goods manufactured or produced. That is why the charge under Section 3 of the Act is on all, 'excisable goods', 'produced or manufactured'. The expression "excisable goods' has been defined by clause (d) of Section 2 to mean, 'goods' specified in the Schedule. The scheme in the Schedule is to divide the goods in two broad categories - one, for which rates are mentioned under different entry and other the residuary. By this method all goods are excisable either under the specific or the residuary entry. The word 'goods' has not been defined in the Act. But it has to be understood in the sense it has been used in Entry 84 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries Ltd. Vs. Union of India, 2011 (273) ELT 10 (SC). 11.5 In the present case, since according to the show cause notice and the impugned order themselves there was no manufacture of the subject goods, there can be no levy and hence no requirement to make payment of any duty of central excise payable in respect of subject machineries under the Act. Consequently, the question of any recovery of "duties of excise" not levied or not paid or short levied or short paid or erroneously refunded in terms of Section 11A(1) of the Act also does not arise. 11.6 The decision of the Hon'ble Supreme Court in the case of Grasim Industries Ltd. Vs. CCE, 2011 (271) ELT 164 (SC) relied upon on behalf of the Revenue is distinguishable and is inapplicable to the present case. In para 13 of the judgment it has been specifically observed by the Hon'ble Supreme Court that if according to the Department "duty of excise" has been erroneously refunded to a party, Section 11A is applicable without there being any question of the Department filing any appeal against the refund order. The significant part of the said observation of the Supreme Court is the phrase "duty of excise". When there was no "manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of Manaksia, Anjar that there is no sanction under Section 11 of the Act for recovery of a sum of money due from a person from another person, a separate legal entity, unless the said sum in the hand of the said other person is owed or due to or on account of or payable to the person against whom the duty has been confirmed. The finding of the Commissioner is contrary to Section 11 of the Act and hence untenable. Consequently, the appropriation of the said sum of ₹ 2,37,57,760/- belonging to Manaksia, Anjar, which sum of money is neither owed to or due to nor is on account of or belonging to Ishaan, but is its exclusive property is unsustainable. In any event, since the demand against Ishaan is unsustainable for the reasons stated above, even otherwise this appropriation is invalid and untenable. 11.13 (a) The appeals filed by the Department are against the impugned order of the Commissioner in so far as it has dropped the proceedings against the 6 units of Manaksia Ltd., which were initiated by different show cause notices and in respect of which the Board by orders appointed the Commissioner of Central Excise, Shillong that the relevant facts and issue invol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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