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TMI Blog2021 (8) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... DIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. [ 2006 (7) TMI 9 - KARNATAKA HIGH COURT] , the determination veered off on another path that, possibly, was more amenable to rejection of the claim with least controversy but leaving unarticulated the conclusion on eligibility. The impugned order has also recorded that the grounds of appeal were reiterated during the personal hearing. It is, therefore, not open to the appellant to now contend that eligibility on merit was not one of the grievances placed before the first appellate authority; to seek to curtail the jurisdiction with such a prayer is contrary to facts. Determination of eligibility on merit was, thus, within the jurisdiction conferred by the appellant on the first appellate authority. On the finding in the impugned order of ineligibility for encashment of credit in balance, which has relied upon decisions available then, the opinion of Hon ble Member (J) that the Tribunal, or any of the lower authorities, are bound to defer decision is no longer applicable as the Larger Bench of the Hon ble High Court of Bombay, in M/S. GAURI PLASTICULTURE P. LTD., BOMBAY DYEING MANUFACTURING CO. LTD., M/S. SIMPLEX MILLS CO. LTD. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately after the surrender of the registration. When they surrendered their registration, the range officer advised them that their surrender will be accepted only after closure of proceedings. ii. Since they filed the refund claims immediately after closure of all proceedings their claim should not be hit by limitation. iii. On merits Assistant Commissioner has not recorded any findings on contrary he records that concerned range officer has in his verification report found the claim in order. The Commissioner (Appeals) has rejected the refund claim on merits and has thus traversed beyond the order of Adjudicating Authority. Such approach of Commissioner (Appeals) is not permissible in law, as the order of Assistant Commissioner do not record his view on the merit of the case. iv. On merits of the case they have submitted that this larger bench Tribunal has in the case of Gauri Plasticulture (P) Ltd., taken a view that such refund claim of MODVAT balance is not admissible. This order of tribunal has been appealed before the High Court. The matter has been referred to Larger Bench taking into account the conflicting decisions on the issue. 3.2 Arguing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash is not possible, it has been observed that there is no provision allowing refund of such credit in cash. However, we are not in agreement with the above proposition for the simple reason that there is also express no bar in the modvat Rules to that extent. We have to keep in mind that it is not the refund of unutilized credit, but the credit which has been used for payment of duty at the insistence of the revenue or has been reversed because the Department was of the view that the same is not available for utilization. This is a simple and basic principle of equity, justice and good conscience. Had the Department not prevented the assessee from utilizing the credit otherwise available to him, they would havebeeninapositionto usethesametowardspayment of duty on their final product, which obligation they had to discharge from their PLA account. As such, on the success of their claim subsequently, if the assessee is maintaining Modvat credit and is in a position to use the same for future clearances, it should be normally be credited back in the sameaccount fromwhereit was debited i.e. RG-23A Part II account. However, if an assessee is not able to use the credit on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PLA. As such, in this case we find that the refund in cash is not to be allowed. 5.2 It is not the case of the appellant that they were at any time barred by the revenue from utilizing the MODVAT Credit balance available in their MODVAT account on the date of surrender of registration. Thus by applying the logic laid down by the larger bench we do not find any merit in the refund claim filed by the appellants claiming refund of the balance in their MODVAT account. 5.3 It is a settled law that MODVAT Credit, has been allowed as procedural requirement for payment of duty on the finished products manufactured and cleared by the appellants. In no case it is refund of the duty paid on inputs for any other purpose other than payment of duty on finished products manufactured and cleared by the assessee. Only exception that has been allowed is only in case where the refund could have been allowed in case when the finished goods are exported under bond or letter of undertaking. This exception has been carved out in rules itself. At the relevant time there was no provision under which such a claim for refund of MODVAT Credit of the balance lying on the date of surrender of registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal appellant challenges the order of the Assistant Commissioner will have to satisfy the Appellate Authority with regards to admissibility of the refund claim. 6.4 Appellate Authority while deciding on the appeal will be required to apply his mind to the all the grounds leading to such refund claim and then decide upon the appeal. He cannot adjudicate such an appeal and allow the refund just by setting aside the order of the Assistant Commissioner which may have rejected the refund claim on one of the grounds. This is more crucial as the power to remand the matter s was specifically withdrawn from the Commissioner (Appeal) and in Section 35A (3) of the Central Excise Act, 1944 specifically provided: The Commissioner (Appeals) shall after making such further inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against: Provided that an order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the amount of refund shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities undertaken by them at the said registered premises shall come to close with effect from 21st December 1999. In the said letter they have also disclosed the credits available in their MODVAT and PLA account. The said para of their letter is reproduced below: The credit of duty lying unutilized in the RG23A Pt-II Register after reversing MODVAT on above stock is ₹ 1,52,45,465/- in RG23C Part II Register is ₹ 8004/- and the balance in PLA Register is ₹ 15,224/-.This is for your information and necessary action. While the said letter is disclosing the balances available in various account it do not show any intention of filing the refund claim in respect of them. Even otherwise the refund claims are to be filed with the office of Assistant Commissioner and not the range officer. 7. On page 29 is the letter of range officer stating that The registration certificate surrendered by you has been kept on the records of this office. You are requested to note that registration certificate held by you for manufacturing activities will not be treated as cancelled , since Government dues are outstanding against you. Further you are also requested to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and his claim that the duty is not leviable is finally rejected. But it so happens that sometime later - may be one year, five years, ten years, twenty years or even fifty years - the Supreme Court holds, in the case of some other manufacturer that the levy of that kind is not exigible in law. (We must reiterate - we are not speaking of a case where a provision of the Act whereunder the duty is struck down as unconstitutional.We are speaking of a case involving interpretation of the provisions of the Act, Rules and Notification.) The question is whether `X can claim refund of the duty paid by him on the ground that he has discovered the mistake of law when the Supreme Court has declared the law in the case of another manufacturer and whether he can say that he will be entitled to file a suit or a writ petition for refund of the duty paid by him within three years of such discovery of mistake? Instances of this nature can be multiplied. It may not be a decision of the Supreme Court that lead `X to discover his mistake; it may be a decision of the High Court. It may also be a case where `X fights up to first appellate or second appellate stage, gives up the fight, pays the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brother has detailed the facts in his order, but to elaborate further factual position, which is required to be taken into consideration, I would like to refer to some of the further facts. 11. The appellants, who are engaged in the manufacture of petroleum gases were availing the benefit of Cenvat Credit of duty paid on various inputs, which were being utilised by them in the manufacture of their final products and the credit so earned was being utilised for payment of duties. The appellant filed a letter dated 21/12/1999 to their jurisdictional Range Superintendent of Central Excise surrendering their Central Excise registration on the ground that the management has decided to discontinue the activities of their manufacture at the registered premises. They also gave the details of RG-1 register as also the RG-23A Part II. The said letter was responded by their Range Superintendent on 22/12/1999 itself. It was intimated to the assessee that registration certificate surrendered by them has been kept in the records and they are requested to note that the registration certificate held by them for manufacturing activities will not be treated as cancelled, since the Government due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted vide the same letter, they filed a refund of the pending unutilised Cenvat Credit. 13. It is seen that against the said refund application filed by the appellant no show-cause notice was issued to the appellants proposing to deny the same specifying the grounds on which Revenue intends to deny the refund. The refund application was taken up directly by the Assistant Commissioner for adjudication. No doubt a personal hearing was granted to the appellant before rejection, during which the appellant relied upon the Hon ble High Court decision in the case of UOI Vs. Slovak India Trading Co. Pvt. Ltd., reported in2 006 (201) ELT 559 (Kar). 14. However, the Assistant Commissioner vide his order dated 04/04/2007 rejected the refund claim by observing as under: I find that the assessee had surrendered their Registration Certificate on 21/12/99 to Range Superintendent, in charge of the factory and informed that they have stopped manufacturing activity w.e.f 21/12/99. As per the then existing Central Excise Rules, 1944 they had reversed the modvat credit on the inputs lying in balance. The instant refund is in respect of unutilized balance of Modvat Credit and balance in PLA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority has not expressed any opinion on the merits of the case, it is not even clear as to whether he has agreed with the assessee on merits or not. We have also seen the appeal filed by the assessee before the Commissioner (Appeals) wherein the rejection of refund claim has not been challenged on merits. Obviously, when there is no rejection on merits, it is neither possible nor practicable for the assessee to challenge the order on merits. In such a scenario, it was not open for the Commissioner (Appeals) to go to the merits of the case and to reject the refund claim on merits. To further clarify my views, it is observed that when the Assistant Commissioner is rejecting the appeal on limitation it may be that he has agreed on merits of the case. Further, the original adjudicating authority has also observed that the verification of the claim made by the assessee, by the Superintendent has been found to be in order. In fact the Assistant Commissioner also seeks a clarification as to whether the Karnataka High Court decision have been accepted by the Revenue or not, it was found that the Hon ble Supreme Court has dismissed the petition filed by the department for Special Leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of December, 1999 written by the Superintendent has not debarred the assessee to file the refund claim are being differed by him inasmuch as the cause of action would arise only when the assessee becomes a non-excisable unit. In the absence of acceptance of their registration certificate surrendered, the assessee unit continued to remain an excisable units and it is beyond imagination that an excisable unit would file a refund claim relatable to unutilised Cenvat Credit. According to me, the refund of unutilised excess credit would arise only when the appellant s registration certificate gets surrendered with due acceptance of the same by the Central Excise authorities inasmuch as the refund is of unutilized accumulated Cenvat Credit at the time of surrender of licence and stopping of their manufacturing activity. As such, I am of the view that the limitation aspect is not to be considered by treating the date of filing of application for surrender of the licence as the relevant date. In my view it needs to be reconsidered as to when the appellant s registration surrender application was accepted by the Revenue either directly or by referring to the completion of the adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, I deem it fit to set aside the impugned order and remand the matter to the adjudicating authority for fresh decision on limitation as also on merits, in the light of the observations made as above, instead of rejecting the appeal on both the issues. (Pronounced and dictated in Court) (Archana Wadhwa) Member (Judicial) DIFFERENCE OF OPINION Whether the appeal has to be rejected in toto as held by the learned Member (Technical) or the matter has to be remanded to the original adjudicating authority for fresh decision as observed by the learned Member (Judicial). (Dictated in Court) (Sanjiv Srivastava) Member (Technical) (Archana Wadhwa) ORDER ON DIFFERENCE OF OPINION INTERIM ORDER NO. 5/2021 DATE OF HEARING: 19/03/2021 DATE OF DECISION: 16/07/2021 PER: C J MATHEW 25. This reference assigned by Hon ble President, in exercise of power conferred under section 129C(5) of Customs Act, 1962 read with section 35D of Central Excise Act, 1944, is occasioned by difference of opinion that hampered final disposal of appeal filed by M/s Hindustan Aegis LPG Ltd impugning the order of Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original authority that claim failed to overcome the bar of limitation at the threshold of the process. That the impugned order has decided on limitation and, despite absence of finding thereon in the order of the original authority, on eligibility is not a point of divergence. Likewise, of the two strands of refund, the entitlement to reimbursement of balance in account current is also not a point of divergence. However, the final decision falters beyond this consensus. 28. Hon ble Member (Judicial) is of the opinion that the relevant date adopted by the two lower authorities warrants a fresh ascertainment in the light of the circumstances in which the intimation of closure was kept pending by the jurisdictional authorities in apposition to the view of Hon ble Member (Technical) that pendency of de-registration did not preclude adherence to the stipulation in section 11B of Central Excise Act, 1944 by filing claim for refund within the deadline from the date of intimation. Furthermore, it was opined by Hon ble Member (Judicial), while nullifying determination of ineligibility by the first appellate authority for having exceeded jurisdiction in rendering a finding on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of failure of justice. This would create an anomaly and cause prejudice to the Revenue as it would bring an end to the litigation without adjudicating on the demand raised by the show cause notice. Therefore, only just and proper order in such a case would be the order of remand to adjudicate the matter de novo after giving due hearing to the assessee. Thus, we are of the view that power to remand the matter back in appropriate cases is inbuilt in Section 35A(3) of the Central Excise Act, 1944. it would be appropriate to resolve the jurisdictional competence first as Hon ble Member (J) and Hon ble Member (T) are in agreement that the original authority had not decided on the merit of eligibility for refund. Furthermore, should the legality and propriety of that determination be validated by majority, re-consideration of relevant date by the original authority would be obviated. On proceeding accordingly, three material facts may be identified as relevant at this stage. 31. First, the rejection of the claim for refund had not been preceded by notice enumerating the grounds for proposed disallowance. Learned Authorized Representative did make reference to the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had a controversial backdrop with some decisions of the Tribunal, drawing upon the judgement of the Hon ble High Court of Karnataka in Union of India v. Slovak Trading Company [2006 (201) ELT 559 (Kar)], allowing disbursement while others, holding otherwise, prompted references to Larger Benches of the Tribunal culminating in Gauri Plasticulture Pvt Ltd [2006 (202) ELT 199 (Tri-LB)] and in Steel Strips Ltd v. Commissioner of Central Excise, Ludhiana [2011 (269) ELT 257 (Tri-LB)] disapproving of such refunds in general and the legality of one of these viewpoints has since been decided by a Larger Bench of the Hon ble High Court of Bombay in order dated 14th June 2019 in Gauri Plasticulture P Ltd and ors v. Commissioner of Central Excise, Indore and ors [2019- TIOL-1248-HC-MUM-CX-LB]. The consequence to this proceeding, and outcome of this appeal, ceases to be a matter of conjecture. 32. It is on this canvas and the statutory remedy in SECTION 35. Appeals to Commissioner (Appeals). - (1) Any person aggrieved by any decision or order passed under this Act by a Central Excise Officer, lower in rank than a Principal Commissioner of Central Excise or Commissioner of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pond to allegation of short-payment or non-payment of duties. In Commissioner of Central Excise, Nagpur v. Ballarpur Industries Ltd [2007 (215) ELT 489 (SC)], with the finding that 21 . However, it is made clear that Rule 7 of the Valuation Rules, 1975 will not be invoked and applied to the facts of this case as it has not been mentioned in the second and the third show cause notices. It is well settled that the show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest. If there is no invocation of Rule 7 of the Valuation Rules 1975 in the show cause notice, it would not be open to the Commissioner to invoke the said rule. the significance of show cause notice as the portal for adjudicatory, and appellate, proceedings has been unambiguously pronounced by the Hon ble Supreme Court. 33. The issue of show cause notice, as an indispensable statutory pre-requisite for recovery either of duties or of amounts refunded in excess of entitlement and as a public declaration of intent, authorizes the assumption of jurisdiction by the empowered official. Not unnaturally, with appeal being an outcome of adjudication, the contents thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above. In other words, in the absence of an appeal or cross-objections by the Department against the Appellate Assistant Commissioner's order the Appellate Tribunal will have no jurisdiction or power to enhance the assessment. Further, to accept the construction placed by the counsel for the appellant on sub-section (4)(a)(i) would be really rendering sub-section (2) of section 39 otiose, for if in an appeal preferred by the assessee against the Appellate Assistant Commissioner's order the tribunal would have the power to enhance the assessment, a provision for cross- objections by the Department was really unnecessary. Having regard to the entire scheme of section 39, therefore, it is clear that on a true and proper construction of sub-section (4)(a)(i) of section 39 the Tribunal has no jurisdiction or power to enhance the assessment in the absence of an appeal or cross- objections by the Department. 6. It is true that the two Bombay decisions reported in [1945] 13 ITR 272 (Bom) and [1957] 31 ITR 844 (Bom) (supra) on which the High Court has relied `have been rendered in relation to section 33(4) of Indian Income Tax Act, 1922 but in our view the said provisions of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority, in favour of the assessee, has reached finality. 20. In such circumstances, there cannot be any order, by the appellate authority, adversely affecting the interest of the assessee, in the appeal filed by the assessee. Thus, the directions of the appellate authority, in Appeal No. 23/2013(P), dated 3-12-2013, Paragraphs 14(iv) to (vi), are certainly beyond the scope of the appeal, and thus, as rightly contended by the learned counsel for the appellant that the appellate authority has exceeded in his jurisdiction, in exercise of powers, under Section 35A of the Central Excise Act, 1944. In TANSI Fabrication Works v. Joint Commissioner of CGST Central Excise, Tirunelveli [2018 (17) GSTL 429 (Chennai)], it was held that 12. There is yet another point in favour of the writ petitioner, as rightly pointed out by the Learned Counsel for the petitioner, namely, the point of limitation. The petitioner is a Government undertaking. It is not in dispute that as and when the petitioner crossed the exemption limit in a given year, it began to pay excise duties. All these transactions have been periodically cleared and are well known to the Authorities. It can be nobod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction is that which is conferred by the appellant as elaborated by the Hon ble High Court of Madras in Rajaram Johra v. Commissioner of Customs, Chennai [2019 (365) ELT 424 (Mad.)] thus 9. A reading of Section 129B(1) would show that the Tribunal has to give the parties to an appeal an opportunity of being heard and after affording the same, pass orders as it thinks fit affirming, modifying and annulling the decision or order appealed against. What has to be borne in mind is that the appeal, which was heard by the Tribunal, was an appeal filed by the appellant herein and not an appeal of the Department nor a cross-objection of the Department in terms of sub-section (4) of Section 129A. Therefore, in an appeal filed by the assessee, the Tribunal could have passed an order as it thinks fit, affirming, modifying or annulling the decision or order appealed against and the order appealed against in the instance case is the order passed by the Commissioner (Appeals) dated 29-4-2009 and not the Order-in-Original dated 11-1-1994. 10. More or less a similar question came up for consideration in the case of Servo Packaging Ltd. v. CESTAT, 2016 (340) ELT 6 (MAD.) and one of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is solely on the contents of the order impugned before the first appellate authority with Hon ble Member (Judicial) acknowledging only the explicit finding and Hon ble Member (Technical) reading down implied findings and there is, owing to congruity in their concurrence with Learned Counsel about lack of finding on merit in the order of original authority, underlying agreement that the appellate authority is confined to the determination by the original authority. Before weighing in with one or the other of these viewpoints, perusal of the order of the original authority and the proceedings before the first appellate authority may throw light on the adherence thereto. 37. It is not that the authority competent to dispose that claim for refund has commenced and concluded its findings at the threshold on limitation; the order records that the eligibility on merit was initially taken up and it would appear that, having noted the decision of the Hon ble High Court of Karnataka in re Slovak Trading Company, the determination veered off on another path that, possibly, was more amenable to rejection of the claim with least controversy but leaving unarticulated the conclusion on elig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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