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An assessee is eligible to take back Cenvat credit which was paid erroneously; SCN rejecting such credit is untenable where Revenue sat over repeated requests to reverse such credit: CESTAT, Allahabad

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

REGIONAL BENCH, ALLAHABAD

COURT NO. I

Appeal Nos. E/50503-50504/2014-EX[SM]

Arising out of Order-in-Appeal No. GZB-EXCUS-000-APP-159-160-13-14, Dated: 15.10.2013

Passed by Commissioner of Central Excise and Customs (Appeals), Lucknow

Date of Hearing: 23.04.2019

Date of Decision: 23.04.2019

COMMISSIONER, CENTRAL EXCISE

GHAZIABAD

Vs

SUPERKING MANUFACTURERS (TYRE) PVT LTD

SHRI M L DHAWAN (MANAGING DIRECTOR)

(WRONGLY REGISTERED IN THE NAME OF COMPANY)

Appellant Rep by: Shri Gyanendra Kumar Tripathi, AC (AR)

Respondent Rep by: Shri V S Negi, Adv.

CORAM: Anil Choudhary, Member (J)

CX – The issue in these appeals by Revenue against the respondent company a manufacturer of tyres for auto mobiles and also against the Director Shri M.L. Dhawan is against O-I-A upholding the taking of suo-motu credit – The only ground of Revenue is that in view of ruling of Larger Bench in case of BDH Industries Ltd. – 2008-TIOL-1211-CESTAT-MUM-LB wherein this Tribunal held that all types of refunds have to be filed under Central Excise Act and Rules made thereunder and no suo-motu credit of the duty paid in excess may be taken by assessee – In BDH case, the assessee had by mistake debited an amount in excess in the PLA/Cenvat account in the month of March, 2001, and thereafter ask the permission of Department to take credit of the amount paid by mistaken – The Department however advised him to file a refund claim – The assessee have contended that the amount erroneously debited was not duty – A refund claim was filed after the year which was rejected by the Department as time barred – The Tribunal has expressed the view that amount deposited cannot be considered as duty paid on goods has to be indicated on their invoices – As the amount erroneously paid in excess does not find mention in any invoices, in that sense it should be considered as deposit and not duty and accordingly the question of time bar does not arise – The Larger Bench had taken the view with regard to the provisions of unjust enrichment as observed in their order – Whereas in the present case, there is no such dispute of unjust enrichment as assessee was allowed rebate after taking in to consideration the element of unjust enrichment – Accordingly, the facts are different and the ruling in case of BDH Industries of Larger Bench of this Tribunal is not attracted – Further, matter relates to rectification of mistake, both on the part of the assessee as well as the Department – Thus rectification has to be carried out in full – By sitting tight on the repeated request of the assessee to take back the Cenvat Credit was unjust and unfair – By way of rectification, assessee was entitled to take back the credit which they had wrongly paid and thereafter been granted rebate – Such rebate having been repaid with interest and also entailed taking back of the credit of the amount wrongly debited earlier – Thus, SCN is misconceived and an abuse of provisions of scheme of the Central Excise Act and the Rules – Accordingly, the impugned O-I-A is upheld: CESTAT

Appeals dismissed

Case law cited:

BDH Industries Ltd. vs. CCE – 2008-TIOL-1211-CESTAT-MUM-LB… Para 8

FINAL ORDER NOS. 70701-70702/2019

Per: Anil Choudhary:

The issue in these appeals by Revenue against the respondent company a manufacture of tyres for auto mobiles and also against the Director Shri M.L. Dhawan is against Order-in-Appeal upholding the taking of suo-motu credit under the facts and circumstances of this case.

2. The brief facts of the case are that the respondent company have got one unit at Industrial Area, Sahibabad, Ghaziabad and they have another unit at Baddi, HP. At the Baddi unit, appellant was enjoying area based exemption wherein their finished goods were not dutiable during the period in question. The respondents received some export order for tyres. For the purpose of export some tyres were brought from their Baddi unit to the Delhi unit for stuffing the container for export under rebate. Mistakenly as the export consignment included goods both of Baddi unit as well as the Ghaziabad unit, duty was paid on entire export including the goods brought in from the Baddi unit. The container stuffing was done under Central Excise supervision. In normal course rebate claim was filed and was granted by the Assistant Commissioner under various adjudication orders relating to the period 2008-09 to 2010-11. The last of such rebate was granted on 7 December, 2010. Subsequently Revenue could know from the documents on record that the appellant have wrongly paid duty on the goods originating from Baddi unit and claimed rebate. Accordingly, it appeared to Revenue that appellant have wrongly claimed rebate with respect to the goods of Baddi unit and on being so objected to by Revenue, vide their letter dated 13 August, 2010, addressed to the Superintendent at Ghaziabad, furnished the details of tyres received from their Baddi unit intimating that they are ready to pay back the duty which was claimed erroneously, further praying to allow them to take the credit of Central Excise Duty in their RG-23 A Part II, from which they had paid the duty earlier erroneously. It was also intimated that the amount involved Rs.13,18,771/- have been deposited vide GR-7 Challan dated 13 August, 2010, from their PLA account. The appellant further intimated to the Superintendent, Ghaziabad that they have also deposited the interest on the rebate amount amounting to Rs.1,28,166/- vide GR-7 Challan dated 16 September, 2010, vide letter of intimation dated 25 September, 2010. Thereafter, the appellant kept persuading with the Revenue by writing various letters to allow them to take back the credit but Revenue kept sitting tight over the matter. Under the circumstances vide their letter dated 28 December, 2010, they once again reiterated the request for permission to take back the credit of Rs.13,18,771/-. Further mentioning that if no communication in this regard is received within seven days they shall take the credit of the same in their RG-23, Part-II register. Thereafter, in absence of any further response from the Revenue, the respondent-assessee under intimation dated 17 March, 2011, to the Range Superintendent at Ghaziabad, informed that on the said date they have taken the credit of the said amount of Rs.13,18,771/-. In their Cenvat account vide entry number 771 dated 17 March, 2011, in RG-23A Part II. Upon taking of this credit the same was objected to by Revenue by letter dated 3 November, 2011, and in reply by letter dated 23 November, 2011, the appellant intimated that as the duty was paid by mistake and rebate was claimed, and by way of rectification they have paid back the rebate alongwith interest. Accordingly, they were also entitled to take back the credit and further there is no objection by the Revenue in spite of several letters written, the credit taken cannot be objected too.

3. Thereafter Revenue issued show cause notice dated 19 March, 2012, objecting to the taking of suo-motu credit of Rs.13,18,771/- proposing to demand the same back alongwith proposal for penalty against the respondent company and its Director Shri M.L. Dhawan.

4. The show cause notice was adjudicated on contest vide O-I-O dated 18 March, 2013, and the proposed demand confirmed alongwith penalty of equal amount against the respondent company. Further penalty of Rs.1 lakh was imposed against the Director Shri M.L. Dhawan.

5. Being aggrieved the appellant preferred appeal before learned Commissioner (Appeals) who vide the impugned order have recorded the following findings: –

“I have carefully gone through the facts on record as well as the submissions made by the appellants in the grounds of appeal. Taking into account the overall facts of the case, I take up the matter for final disposal after dispensing with the condition of pre-deposit under Section 35F of the Central Excise Act, 1944.

I observed that in the instant case the bone of contention arose when it came to the notice of the department that the appellants had been granted rebate erroneously in respect of the goods i.e., Tyres exported on payment of duty whereas, some of the goods exported were exempted under the area based exemption notification. I find that the department had sanctioned the rebate claim earlier finding it to be admissible and when it was noticed that the same was erroneously granted, the department pointed it out to the appellants on 16.07.2010. The appellants themselves worked out the erroneous rebate claim so allowed by the department and deposited the same in cash on 13.08.2010 and also requested for allowing re-credit of the amount paid from Cenvat account. Interest as applicable was also paid by the appellants on 25.09.2010. The appellants again requested the department vide letters dated 25.09.2010 and 28.12.2010 to allow re-credit of the duty paid in respect of such goods which were exempted and cleared for export on payment of duty on a plea that rebate claimed on such goods was already paid back. The appellants have put forth their case contending that the present case is a case of double payment of duty on the very same goods, once at the time of export of the goods through RG-23 A Part-II account and thereafter by payment in cash.

I observe that the appellants at the instance of the department deposited the amount of erroneous rebate in cash along with interest without any show cause notice being issued. Thereafter, in view of absence of any action on their requests to allow the re-credit of the duty already paid through Cenvat account, the appellants took re-credit of such Cenvat credit in their Cenvat account which prompted the department to not only to deny the rebate amount sanctioned and paid back by the appellants in cash but also to deny and recover the Cenvat credit taken suomotu invoking penal provision by issuing the SCN dated 19.03.2012. The issuance of demand belatedly on 19.03.2012 on the rebate amount of Rs.13,18,771/- already deposited by the appellants on 13.08.2010 cannot be justified and is not sustainable in as much as the extended period of limitation in the instant case is not invokable in view of the fact that the said erroneous rebate amount was paid back by the appellants on the instance of the department . Also the ingredients of suppression cannot be applied when once the appellants have complied with the directions of the department by depositing the erroneous rebate amount. Section 11A(2) of the Central Excise Act, 1944 provides that no SCN is required to be issued where the person who has paid the duty under clause (b) of sub-Section (1) has informed the Central Excise Officer of such payment. The Circular No. 423/56/98-CX dated 22.09.1998 also prescribes that the demand for recovery of erroneous refund has to be made under Section 11A of the Central Excise Act, 1944 within the prescribed limitation period. This also finds force from the decision of Hon’ble Tribunal in the case of Mukund Ltd. vs. CCE, Mumbai {2007 (220) ELT 226 (Tri.-Mumbai)} wherein it has been held that, ‘timely demands should be invariably raised (within six months normal period) under Section 11A of the Act in cases of refunds. It is settled law that the departmental officers cannot argue against the CBE&C Circular.’ Therefore, I find the demand for already deposited erroneous rebate amount, invoking extended period of limitation as unsustainable.

The second issue to be decided is that of suomotu credit taken by the appellants. The adjudicating authority has relied upon the Larger Bench decisions in the case of BDH Industries vs. CCE Mumbai {2008 (231) ELT 61 (Tri.-Mum)} = 2008-TIOL-1588-CESTAT-MUM. The said decision was considered by the Tribunal in the case of Ultra Tech Cement Ltd. reported in 2010 (261) ELT 0696 (Tri.) = 2009-TIOL-2101-CESTAT-BANG and it was observed that the same is not applicable to identical facts and circumstances inasmuch as facts of the case before Larger Bench were different. In the case of CEAT Ltd. {2010 (254) ELT 0349 (Tri.)}, it has been held that the assessee becomes automatically entitled to credit utilized for payment of duty on realizing that such utilization was incorrect and when the duty was subsequently paid through PLA. In the case of CEAT Ltd., the Hon’ble Tribunal distinguished the case of BDH Industries by holding that:-

“We find that the Tribunal had dealt with a different dispute in Final Order No. M/159/08/SMB/C-I, dated 9-7-2008 in the case of BDH Industries Ltd. [2008 (229) ELT 364 (Tri. – LB)] = 2008-TIOL-1211-CESTAT-MUM-LB In the said decision, the Tribunal had considered two cases:

(a) Motorola India Pvt. Ltd. [2006, (193) ELT 468 (T) = 2007 (7) STR 613 (T) = 2005 (71) RLT 334] = 2006-TIOL-168-CESTAT-BANG In this case the appellant had paid excess duty by mistake and thereafter sought permission to take credit of the amount paid by mistake. The Tribunal held that the amount involved was not duty and limitation did not apply for its refund.

(b) Comfit Sanitary Napkins (I) Pvt. Ltd. – 2004 (174) ELT 220 = 2004-TIOL-995-CESTAT-BANG .

In this case it was held that the assessed cannot suomotu take credit without applying for refund, when excess duty was paid. The conflict of views entailed the following reference to a Larger Bench of the Tribunal:-

“If an assessee avails suomotu credit of the amount of duty paid in excess by him, whether the view taken by the Tribunal in the case of Comfit Sanitary Napkins (I) Pvt. Ltd. – 2004 (174) ELT 220 = 2004-TIOL-995-CESTAT-BANG . will apply or the vies taken by the Tribunal in the case of Motorola India Pvt. Ltd. – 2006 (193) ELT 468 (Tri.) = 2007 (7) STR. 613 (Tri.) = 2005 (71) RLT 334 = 2006-TIOL-168-CESTAT-BANG will apply”.

The Tribunal answered the reference holding that all types of refund have to be filed under the Central Excise Act and Rules made thereunder and no suomotu credit of the duty paid in excess may be taken by the assessed. We find that the ration of the BDH Industries Ltd. case relates to excess duty paid and the procedure to be followed for getting back such excess duty paid. Ratio of that case does not apply to the subject case.”

The Apex Court in the case of M/s. Belapur Sugar & Allied Ind. Ltd. v. CCE, Aurangabad {1999 (108) ELT 0009 (S.C.)} has specifically held that – “Even if duty is paid under ignorance of law or otherwise, if by subsequent legislation or valid Notifications the obligation to pay the duty is withdrawn, it cannot be refused since he has already paid the duty. If duty paid is shown to be not leviable or entitled for rebate the Revenue has to refund, adjust, credit such amount to the assessee, as the case may be.” Further, the Hon’ble CESTAT in the case of Saurav Chemicals Ltd. Vs. CCE, Chandigarh {2013 (289) ELT 0351 (Tri. – Del.)} has held that –”It is seen that the appellants have raised categorical defence/plea before the original adjudicating authority for grant of recredit, in case of duty is confirmed against them. Two issues are closely linked. If the appellant is not contesting the confirmation of demand, consequent readjustment in Cenvat credit flows out of the same. If the original adjudicating authority inspite of appellants having made a request to that effect, has not considered the said plea, and has not passed any orders on the same, the Commissioner (Appeals) should have considered and passed the orders instead of rejecting the appeal on the ground that original adjudicating authority has not considered the said issue. Non-consideration of any issue raised before the original adjudicating authority reflects upon casual attitude of the adjudicating authority which is required to be mended at the appellate stage rather than endorsing the same.”

Thus, I find that dispute about the rebate of the amount in question stands settled as the appellants have already deposited the said erroneous amount of refund in cash, there is no reason to deny the re-credit. It is also seen that the appellants requested the department to allow re-credit of the Cenvat credit time and again which has not been decided till date. The denial of the credit to the appellants on the grounds that Cenvat credit cannot be taken on the basis of their letter knowing that it is not a specified document under Rule 9 of the Cenvat Credit Rules, 2004, is also not convincing in view of the fact that no speaking order has been passed by the department till date and therefore the show cause notice is neither justified nor fair.

As regards penalties impose upon, both the appellants, the same are set aside in view of the non-sustainability of the demands as discussed hereinabove. In view of the forgoing I pass the following order:-

ORDER

The appeals of the appellants are hereby allowed with consequential benefits.”

6. Being aggrieved the Revenue have filed appeals before the Tribunal against the company and its director. The appeal against director have also been wrongly registered by the Registry of this Tribunal in the name of the company itself, as is evident from the order sheet due to improper mentioning of the parties by the appellant-Revenue.

7. Heard the parties.

8. I find that the only ground of Revenue is that in view of the ruling of Larger Bench in the case of BDH Industries Ltd. vs. CCE 2008 (229) ELT 364 (Tri.- LB) = 2008-TIOL-1211-CESTAT-MUM-LB wherein this Tribunal held that all types of refunds have to be filed under Central Excise Act and Rules made thereunder and no suo-motu credit of the duty paid in excess may be taken by the assessee. In the BDH case the assessee had by mistake debited an amount of Rs.1,58,098/- in excess in the PLA/Cenvat account in the month of March, 2001, and thereafter ask the permission of Department to take credit of the amount paid by mistaken. The Department however advised him to file a refund claim. The appellant have contended that the amount erroneously debited was not duty. A refund claim was filed after the year which was rejected by the Department as time barred. The Tribunal has expressed the view that amount deposited cannot be considered as duty as duty paid on the goods has to be indicated on their invoices. As the amount erroneously paid in excess does not find mention in any invoices, in that sense it should be considered as deposit and not duty and accordingly the question of time bar does not arise.

9. I find that the Larger Bench had taken the view with regard to the provisions of unjust enrichment as observed in Para-12 of their order. Whereas in the present case I find that there is no such dispute of unjust enrichment as the appellant was allowed rebate after taking in to consideration the element of unjust enrichment. Accordingly, I hold that the facts herein are different and the ruling in the case of BDH Industries of Larger Bench of this Tribunal is not attracted. Further I find that the matter relates to rectification of mistake, both on the part of the assessee as well as the Department. Thus rectification has to be carried out in full. By sitting tight on the repeated request of the assessee to take back the Cenvat Credit was unjust and unfair under the facts and circumstances. I further find that by way of rectification, the appellant was entitled to take back the credit which they had wrongly paid and thereafter been granted rebate. Such rebate having been repaid with interest and also entailed taking back of the credit of the amount wrongly debited earlier. Thus, I find that the show cause notice is misconceived and an abuse of the provisions of the scheme of the Central Excise Act and the Rules. Accordingly, I uphold the impugned Order-in-Appeal and dismiss these appeals filed by Revenue.

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