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TMI Blog2024 (4) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of exemption Notification No. 31/2004- CE - issue decided in the case of COMMISSIONER OF C. EX., BANGALORE-II VERSUS GOKALDAS INTIMATE WEAR [ 2011 (4) TMI 1123 - KARNATAKA HIGH COURT ] upheld by the Hon ble Supreme Court in COMMISSIONER VERSUS GOKALDAS INTIMATE WEAR [ 2016 (3) TMI 1391 - SC ORDER ], it is settled law that the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004 shall not apply in respect of the exemption notification which was issue prior to insertion of Rule 11(3). Therefore, in the present case also, the refund claim cannot be rejected by invoking Rule 11(3) of Cenvat Credit Rules, 2004 - decided in favour of appellant. Rejection on the ground that the refund claim for the same amount was rejected in the past - HELD THAT:- The appellant had filed the refund claim under altogether different provision i.e. Rule 5 and notification issued thereunder. The refund claim was rejected for non compliance of the condition of Rule 5 and notification thereof. Once the refund claim was rejected under Rule 5, the accumulated Cenvat credit of ADE (TTA) stands restored in the appellant s Cenvat account and the same can be utilized in future but in the present case since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was denied invoking the Rule 11 (3) of Cenvat Credit Rules, 2004 which was introduced with effect from 01.03.2007 vide Notification No. 10/2007 CE (NT) dated 01.03.2007 whereas the goods were exempted from Additional Duties of Excise (Textiles and Textile Articles) ADE (TTA) vide Notification No. 31/2004- CE dated 09.07.2004. Therefore, the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004 is not applicable retrospectively when the additional duties of excise was exempted under Notification No. 31/2004-CE. Accordingly, the Cenvat credit on ADE shall not lapse. In support, he placed reliance on the following judgments:- (a) CCEx, Bangalore- II vs. Gokaldas Intimate Wear [2011 (70) ELT 351 (Kar.)] upheld by Hon ble Supreme Court reported at - 2020(374) E.L.T. A41 (S.C.). (b) Ramco International vs. CCEx, Jalandhar [2014 (304) ELT 434) (Tri.- Delhi)], 2.1 He further submits that pursuant to the CGST Amendment Act, 2018 Education cess, Secondary Higher Education cess and duty levied under ADE(TTA) levied under the erstwhile regime were not transferred to the CGST regime as transitional credit and therefore, remained unutilised under the erstwhile regime. Since, the same were unuti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of Excise ADE (TTA) was lapsed in terms of Rule 11 (3) of Cenvat Credit Rules, 2004. (ii) The refund claim for the same amount was rejected in the past. 4.1 As regard the first ground we find that the appellant availed the exemption from ADE (TTA) in respect of their finished product vide Notification No. 31/2004 dated 09.07.2004 at that time Rule 11 (3) of Cenvat Credit Rules, 2004 was not in force whereas the same came into force on 01.03.2007 vide Notification No. 10/2007 CE (NT), therefore, the provisions of Rule 11 (3) cannot be applied retrospectively in respect of exemption Notification No. 31/2004- CE. This issue has been considered in the following judgment:- (a) CCEx, Bangalore- II vs. Gokaldas Intimate Wear -2011 (270) ELT 351 (Kar.) This appeal is preferred against the order passed by the Tribunal which held that the assessee is not liable to reverse the cenvat credit in respect of the inputs which were purchased prior to 1-8-2004, the day from which an exemption was granted, from payment of excise duty in respect of final products. 2. The assessee are the manufacturers of readymade garments. They availed Cenvat credit and cleared the finished products on payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law does not provide for the same. Therefore, the authorities taking advantage of the notification exempting the final product cannot claim reversal of cenvat credit either in respect of final product which have come into existence on the date of the notification or on the inputs stored in the godown or the work in progress and finished products. Therefore, the judgment in the aforesaid case squarely applies to the case on hand and the Tribunal was justified in granting benefit. 5. It was pointed out to us that in the year 2008 (sic) sub-rule (3) was inserted by a Notification No. 10/2007 with effect from 1-3-2007, which reads as under :- (3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if, - (i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under section 5A of the Act; or (ii) the said final product has been exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore and for the reasons stated in the said judgment, these appeals fail and are accordingly dismissed. No costs. The Karnataka High Court in its impugned order had held that Cenvat credit availed on inputs till the date of amendment of Cenvat Credit Rules, 2004 on 1-3-2007 was available. Till this date, assessee was entitled to benefit, of the Cenvat credit in respect of inputs contained in the work in progress and semi-finished products. Since amendment in CCR restricting availment of credit is prospective in nature and period involved anterior to 1-3-2007, there was no need to reverse the credit. High Court relied on its earlier judgment in 2011 (268) E.L.T. 49 (Kar.) for this decision. 4.3 In the case of Ramco International vs. CCE, Jalandhar - 2014 (304) ELT 434 (Tri.-Delhi), the similar issue was decided by this Tribunal wherein the following order was passed:- All the three appeals are being disposed of by a common order as they arise out of the same impugned order of the Commissioner (Appeals) vide which, he has upheld the confirmation of demands by holding that the appellants are liable to reverse the earned CENVAT credit when their final product became exempted. 2. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(2) is not applicable. In fact, I find that the provisions were subsequently changed in the new CENVAT Credit Rules, 2002, with the introduction of Rule 11(3), with effect from 1-3-2007. In terms of the said Rule 11(3)(ii), where the final product become exempted absolutely under Section 5A of the Act, the quantum of CENVAT credit lying in his balance credit shall lapse and shall not be available for utilisation for payment of duty on any other product whether cleared for home consumption or for export. The said mandate of law was effective with effect from 1-3-2007, i.e., after the period involved in the present appeals. 5. In view of the above, I set aside the impugned order and allow all the three appeals with consequential relief to the appellants. 4.4 From the above judgments one of which i.e. in the case of Gokaldas Intimate Wear upheld by the Hon ble Supreme Court, it is settled law that the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004 shall not apply in respect of the exemption notification which was issue prior to insertion of Rule 11(3). Therefore, in the present case also, the refund claim cannot be rejected by invoking Rule 11(3) of Cenvat Credit Rules, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and Higher Education Cess after the introduction of GST. It is pertinent to reproduce the said findings of the Division Bench which is contained in paras 4 5 which is reproduced herein below : 4. We have carefully gone through the rival arguments. There is no dispute that on 1-7-2017, the cesses credit validly stood in the accounts of the assessee and very much utilizable under the existing provisions. The appellants could not carry over the same under the GST regime. Thus the appellants were in a position where they could not utilize the same. We agree with Learned Counsel of the appellant that the credits earned were a vested right in terms of the Hon ble Apex Court judgment in Eicher Motors case and will not extinguish with the change of law unless there was a specific provision which would debar such refund. It is also not rebutted by the revenue that the appellants had earned these credits and could not utilize the same due to substantial physical or deemed exports where no Central Excise duty was payable and under the existing provisions, had the appellants chosen to do so they could have availed refunds/rebates under the existing provisions. There is no provision in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would prevail over the decision of the Single Member. Further, I find that the decision of the Hon ble Madras High Court in the case of Sutherland Global Services Pvt. Ltd. is not applicable in the present case because the said decision was on the issue whether cess can be transitioned into GST or not? Whereas the issue in the present case is whether unutilized Cenvat credit of Education Cess and Secondary and Higher Education Cess could be claimed as refund under Section 11B of the Central Excise Act, 1944? Therefore, in view of the contradictory decisions of various High Courts, this Tribunal is bound to follow the decision of the jurisdictional High Court and the jurisdictional High Court has held in the case of Slovak India Trading Company (cited supra) which has been relied upon by the Division Bench of the Delhi Tribunal in the case of Bharat Heavy Electricals Ltd. has categorically held that refund can be granted of the cesses viz. Education Cess and Higher Education Cess which could not be transitioned into GST. As far as time-bar aspect is concerned, the findings in the impugned order regarding time-bar is beyond the show cause notice as well as Order-in-Original and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rabad, 2002 (147) E.L.T. 457 (Tri. - Del.) (2) Shree Prakash Textiles (Guj.) Ltd. v. CCE, Ahmedabad, 2004 (169) E.L.T. 162 (Tri. - Mumbai) (3) CCE, Ahmedabad v. Babu Textile Industries, 2003 (158) E.L.T. 215 (Tri. - Mumbai); and (4) CCE, Ahmedabad v. Arcoy Industries, 2004 (170) E.L.T. 507 (Tri. - Mumbai). of the Tribunal in which it has been held that the assessee is entitled to refund of the amount deposited if the assessee has gone out of the Modvat Scheme or their unit is closed. Aggrieved against the order of the Tribunal, Revenue filed C.E.A. No. 5/2006 in the High Court of Karnataka at Bangalore. The High Court by its impugned order has affirmed the order of the Tribunal and dismissed C.E.A. No. 5/2006 filed by the Revenue. Learned ASG appearing for the Union of India fairly concedes that those decisions of the Tribunal, which were relied upon by the Tribunal, have not been appealed against. In view of the concession made by the Learned ASG, this special leave petition is dismissed. 15. It is, therefore, clear from the aforesaid decision rendered in Slovak India Trading by the Tribunal, the Karnataka High Court and the Supreme Court that refund has to be granted when either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench in the case of Steel Strips cited by the Learned Departmental Representative could not be applicable in view of the contradictory decisions of High Courts on the same issue. (Emphasis supplied) 17. In Schlumberger Asia Services, the Tribunal followed the aforesaid decision of the Tribunal in Bharat Heavy Electricals. 18. In Kirloskar Toyota, the Tribunal while examining whether refund claim of accumulated balance of unutilised credit of cess available in the books, can be refunded under Section 11B of the Central Excise Act, 1944 [the Excise Act] and held, in view of the aforesaid Division Bench decision of the Tribunal in Bharat Heavy Electricals, as also the decisions of the Supreme Court and the Karnataka High Court in Slovak India Trading that an assessee is entitled to refund of unutilised credit of cess after the introduction of GST. The relevant observations of the Tribunal are as follows : 6. After considering the submissions of both the parties and perusal of the material on record as well as various judgments relied upon by both the parties cited supra, I find that in the present case the appellant has filed the refund claim of accumulated balance of unutilized cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess can be transitioned into GST or not? Whereas the issue in the present case is whether unutilized Cenvat credit of Education Cess and Secondary and Higher Education Cess could be claimed as refund under Section 11B of the Central Excise Act, 1944? Therefore, in view of the contradictory decisions of various High Courts, this Tribunal is bound to follow the decision of the jurisdictional High Court and the jurisdictional High Court has held in the case of Slovak India Trading Company (cited supra) which has been relied upon by the Division Bench of the Delhi Tribunal in the case of Bharat Heavy Electricals Ltd. has categorically held that refund can be granted of the cesses viz. Education Cess and Higher Education Cess which could not be transitioned into GST. As far as time-bar aspect is concerned, the findings in the impugned order regarding time-bar is beyond the show cause notice as well as Order-in-Original and the same is not sustainable in law. Hence, by following the ratios of the Division Bench of Delhi Tribunal in Bharat Heavy Electricals Ltd. and jurisdictional High Court in Slovak India Trading Co. Pvt. Ltd., I allow the appeal of the appellant. (Emphasis supplied) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has, however, placed reliance upon the decision of a Learned Member of the Tribunal in Bharat Heavy Electricals Ltd., wherein it has been held as follows : Learned Departmental Representative draws 4. the attention of the Bench to the judgment of the Larger Bench of the Hon ble High Court of Bombay in the case of Gauri Plasticulture Pvt. Ltd. [2019-TIOL-1248-HC-MUM-CX-LB] on this issue in which questions framed by the Hon ble Larger Bench were as follows : (a) Whether cash refund is permissible in terms of clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 where an assessee is unable to utilize credit on inputs? (b) Whether by exercising power under Section 11B of the said Act of 1944, a refund of unutilised amount of Cenvat credit on account of the closure of manufacturing activities can be granted? (c) Whether what is observed in the order dated 25th January, 2007 passed by the Apex Court in Petition for Special Leave to Appeal (Civil) No. CC 467 of 2007 (Union of India v. Slovak India Trading Company Pvt. Ltd.) can be read as a declaration of law under Article 141 of the Constitution of India? and they were answered as follows : 40. As a result of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take Cenvat credit in respect of the inputs, immediately on their arrival in his factory or premises as provided in Rule 4 of the Cenvat Credit Rules, 2004. Hence, it is the Cenvat Credit Rules, 2004, which bestows upon an assessee, a right to claim credit of duty or cess paid on its inputs or input services. Such right accrues, fructifies and crystallizes on the date of procurement of the goods or services, but the same is available only to the extent of availing credit of such tax, in accordance with the existing conditions and provisions prevailing on that date. 24. In other words, Cenvat credit lying in an assessee s account creates an infallible and indefeasible right, which in the present case is indispensable and undeniable; however, to the extent of making payment of the corresponding cess, if any, payable on or after that date, as categorically stipulated in 1st and 2nd proviso to Rule 3(7)(b) of the Cenvat Credit Rules, 2004. 25. Since the Cenvat Credit Rules, the repository of rights of an assessee to avail credit of the duty or other sums paid on inputs does not entail or even envisage refund of such credit in cash and encashment cannot be claimed as a matter of course. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of service tax leviable on telecommunication services. The submissions of the petitioner was that the unutilized amount of cess, after it was exempted w.e.f. 1-3-2015, should be permitted to be utilized for payment of tax on excisable goods and taxable services as it was subsumed in the Central Excise duty which had been raised in 2015. The High Court rejected this contention. 26. In the present case, the plea of the appellant is not for adjustment of the credit on cess amount against payment of excise duty or service tax, but it is for refund of credit accumulated on account of payment of tax on cess. This decision would, therefore, not help the respondent. 27. Learned Authorised Representative also placed reliance upon the notification dated 7-12-2015 issued by CBE C to contend that a policy decision had been taken not to allow utilisation of accumulated credit of cess, after cess had been phased out and it is reproduced below : Discussion Decision The conference after discussion and briefing from the officers from the Board noted that it was Government conscious policy decision to withdraw the Education Cess and Secondary and Higher Education Cess. It is a policy decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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