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CX – Clearance under job work cannot be equated with goods cleared without payment of duty – refund of CENVAT credit reversed available in terms of s.11B(2), proviso (c) of Act: CESTAT

2019-TIOL-2119-CESTAT-BANG

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, BANGALORE
REGIONAL BENCH
COURT NO. I

Appeal No. E/21633/2017-SM

Arising out of Order-in-Appeal No. 159/2017-CT, Dated: 21.08.2017
Passed by Commissioner of Central Tax , Bangalore-II (Appeal)

Date of Hearing: 09.04.2019
Date of Decision: 09.04.2019

ALUTOP
UNIT 4 NO 169A 2ND CROSS 1ST PHASE
VASANATHANARASAPURA INDUSTRIAL AREA
KORA HOBLI, TUMKUR – 572106, KARNATAKA

Vs

COMMISSIONER OF CENTRAL TAX
BANGALORE NORTH WEST COMMISSIONERATE
2ND FLOOR, SOUTH WING, BMTC BUS STAND COMPLEX
SHIVAJI NAGAR, BANGALURU – 560051, KARNATAKA

Appellant Rep by: Shri H Y Raju, Adv.
Respondent Rep by: Dr J Harish, Jt. Commissioner AR

CORAM: S S Garg, Member (J)

CX – The assessee is engaged in activity of manufacture of metal caps and printed aluminium sheets and availed cenvat credit on inputs such as paints, varnishes, reducer and industrial gas which are used in manufacture of their final product – The assessee is also doing job work and they have reversed CENVAT credit on the quantum of inputs used for processing of job work goods in their account credit – Later on, they realized that as per Rule 3 & 4 of CCR, 2004, they need not reverse the said credit which was used for processing of job work goods as the said clearance under job work cannot be equated as goods cleared without payment of duty – Thereafter they filed refund claim under Section 11B of CEA, 1944 to claim the duty paid/reversed on inputs used for processing of job work goods – Thereafter a SCN proposing to reject the refund claim was issued to assessee and after following the due process, the original authority rejected the refund claim – In the impugned order, the Commissioner (A) has failed to consider the clause c of proviso to Section 11B(2) of CEA, 1944 which provides an exception – As per clause c proviso to Section 11B(2) of the Act, if such refund of amount of duty paid on excisable goods used as input in accordance with rule made, or any notification made under this Act, the same has to be credited to the applicant instead of Consumer Welfare Fund – It clearly emerges that in such a situation, the bar of unjust enrichment will not be applicable – In case of Dura synex Ltd., the Division Bench of the Tribunal at Mumbai have considered the identical issue – By following the ratios of said decision, this issue is no more res integra and has been settled in favour of assessee: CESTAT

Appeal allowed

Case laws cited:

Sterlite Industries Vs. CCE – 2005-TIOL-305-CESTAT-MUM-LB …Para 4.1

KG Denim Ltd. Vs. CESTAT – 2017-TIOL-1293-HC-MAD-CX…Para 4.1

CCE, Cus & ST (Appeals), Daman Vs. Amity Thermosets Pvt. Ltd. [2017(348) ELT 112 (Tri. Ahmd.)]…Para 4.1

Hawkins Cookers Ltd. Vs. CCE, Mumbai-III [2017(346) ELT 298 (Tri. Mumbai)]…Para 4.1

Opel Alloys Pvt. Ltd. Vs. CCE, Ghaziabad [2010(249) ELT 408 (Tri. Del.)]…Para 4.1

CCE,C&ST, Hyderabad Vs. Natco Pharma Ltd. [2017 TMI 159-CESTAT, Hyderabad]…Para 4.1

CC&CE, Ahmedabad Vs. Dura synex Ltd. [2003(154) ELT 422 (Tri. Mum.)]…Para 4.1

Yu Televentures Pvt. Ltd. Vs. UOI – 2017-TIOL-1468-HC-DEL-CUS…Para 4.2

Tirumala Bearings (P) Ltd. Vs. CCE&C(Appeals), Visakhapatnam [2016(355) ELT 145 (Tri. Bang.)]…Para 4.2

Gujarat State Fertilisers & Chemicals Ltd. Vs. CCE – 2014-TIOL-1599-CESTAT-AHM…Para 4.2

FINAL ORDER NO. 20350/2019

Per: S S Garg:

The present appeal is directed against the impugned order dt. 21/08/2017 passed by the Commissioner(Appeals) whereby the Commissioner(Appeals) has rejected the appeal of the appellant on the ground that the appellant in their labour bills have collected the landed cost of the inputs from their principal manufacturer, which is inclusive of the duty element and hence the refund of wrongly reversed CENVAT credit in terms of Rule 6(3) of the CENVAT Credit Rules, 2004 on the inputs consumed in provision of job worker is hit by unjust enrichment in terms of Section 11B of the Central Excise Act.

2. Briefly the facts of the present case are that the appellants are engaged in the activity of manufacture of metal caps and printed aluminium sheets and availed cenvat credit on inputs such as paints, varnishes, reducer and industrial gas which are used in the manufacture of their final product. The appellants are also doing job work and they have reversed the CENVAT credit on the quantum of inputs used for processing of job work goods for the period January 2013 to November 2013 amounting to Rs.9,12,321/- in their account credit. Later on, they realized that as per Rule 3 & 4 of Cenvat Credit Rules, 2004, they need not reverse the said credit which was used for processing of job work goods as the said clearance under job work cannot be equated as goods cleared without payment of duty. Thereafter they filed refund claim under Section 11B of the Central Excise Act, 1944 to claim the duty paid/reversed on the inputs used for processing of job work goods. Thereafter a show-cause notice dt. 16/05/2014 proposing to reject the refund claim was issued to the appellant and after following the due process, the original authority rejected the refund claim. Aggrieved by the said order, appellant filed appeal before the Commissioner(Appeals) and the Commissioner(Appeals) in the impugned order admits that the appellants are entitled to avail the CENVAT Credit of duty paid on the inputs consumed in job work but the refund claim is hit by the principles of unjust enrichment.

3. Heard both sides and perused records.

4.1. Learned counsel for the appellant submits that in the impugned order, the Commissioner(Appeals) by following the decision of the Tribunal in the case of Sterlite Industries Vs. CCE, Pune [2005(183) ELT 353 (LB)] = 2005-TIOL-305-CESTAT-MUM-LB held that they are entitled to avail the CENVAT credit in respect of the duty paid on the goods consumed in processing the goods received under Notification No.214/86-CE. But rejected the refund on the ground that the appellant in their labour bills have collected the landed cost of the inputs from their principal manufacturer, which is inclusive of duty element and hence the refund of wrongly reversed CENVAT credit is hit by unjust enrichment. He further submitted that in terms of Section 11B(2)(c) of the Act, the refund of credit of duty paid on excisabe goods used as inputs in accordance with the rules made, or any notification issued under this Act, will not be hit by unjust enrichment. In support of this submission, appellant relied upon the following decisions:-

i. KG Denim Ltd. Vs. CESTAT, Chennai [2017(7) GSTL 422 (Mad.)] = 2017-TIOL-1293-HC-MAD-CX

ii. CCE, Cus & ST (Appeals), Daman Vs. Amity Thermosets Pvt. Ltd. [2017(348) ELT 112 (Tri. Ahmd.)]

iii. Hawkins Cookers Ltd. Vs. CCE, Mumbai-III [2017(346) ELT 298 (Tri. Mumbai)]

iv. Opel Alloys Pvt. Ltd. Vs. CCE, Ghaziabad [2010(249) ELT 408 (Tri. Del.)]

v. CCE,C&ST, Hyderabad Vs. Natco Pharma Ltd. [2017 TMI 159-CESTAT, Hyderabad]

vi. CC&CE, Ahmedabad Vs. Dura synex Ltd. [2003(154) ELT 422 (Tri. Mum.)]

4.2. He further submitted that in support of their claim of refund, they have produced the Chartered Accountant certificate which has not been rebutted by the Department by producing any contrary evidence. once the said certificate has not been rebutted by the Department, the same has to be accepted in view of the following decisions:-

i. Yu Televentures Pvt. Ltd. Vs. UOI [2017(358) ELT 81 (Del.)] = 2017-TIOL-1468-HC-DEL-CUS

ii. Tirumala Bearings (P) Ltd. Vs. CCE&C(Appeals), Visakhapatnam [2016(355) ELT 145 (Tri. Bang.)]

iii. Gujarat State Fertilisers & Chemicals Ltd. Vs. CCE, Vadodara [2014(309) ELT 94 (Tri. Ahmd.)] = 2014-TIOL-1599-CESTAT-AHM

5. On the other hand, the learned AR defended the impugned order.

6.1. After considering the submissions of both sides and perusal of the material on record, I find that in the impugned order, the learned Commissioner(Appeals) has failed to consider the clause c of proviso to Section 11B(2) of the Central Excise Act, 1944 which provides an exception. As per clause c proviso to Section 11B(2) of the Act, if such refund of amount of duty paid on excisable goods used as input in accordance with rule made, or any notification made under this Act, the same has to be credited to the applicant instead of Consumer Welfare Fund. Further I find that from the ratios of the various decisions cited supra, it clearly emerges that in such a situation, the bar of unjust enrichment will not be applicable. Further I find that in the case of Dura synex Ltd. cited supra, the Division Bench of the Tribunal at Mumbai have considered the identical issue and recorded the findings in para 2, which is reproduced hereinbelow:-

2. We have heard Shri Uma Shankar, learned DR and Shri Motibhai Patel, learned Consultant. We find that the issue relates to the applicability of the bar of unjust enrichment to refund of input credit. This issue has been settled by the Tribunal in the case of CCE, Kanpur v. Kanpur Plastipack Ltd. – 2001 (127) E.L.T. 826 wherein it has been held that principle of unjust enrichment is not applicable in view of proviso (c) to sub-section (2) of Section 11B of the Central Excise Act which carves out an exception in respect of cases involving credit of duty. The Tribunal has relied upon its earlier decision in the case of CCE, Bhubaneshwar v. Brooke Bond Lipton – 1999 (107) E.L.T. 228. Following the ratio of CCE, Kanpur v. Kanpur Plastipack Ltd. cited supra we hold that there is no ground to interfere with the impugned order of the Commissioner (Appeals) and accordingly uphold the same and reject the appeal.

6.2. Further in the case of K. G. Denim Ltd. cited supra, the Hon’ble High Court of Madras in para 12.1 and 12.2 has observed as under:-

12.1 The proviso to sub-section (2) of Section 11B, on the other hand, empowers the concerned Officer to pay the amount of excise duty and interest, if any paid on such duty, as may be determined, to the applicant, in the circumstances contemplated under clauses (a) to (f), instead of crediting the amount to the Fund.

12.2 The learned counsel for the assessee has, correctly, argued that the assessee would fall under clause (c) of Section 11B of the CE Act. The said clause requires the concerned officer to refund credit of duty paid on excisable goods used as inputs in accordance with rules made or any notification issued under the CE Act. Clearly, once, determination has been made by the concerned officer with regard to what is provided in clause (c), the concerned Officer would be required to pay the amount to the applicant.

7. By following the ratios of the above cited decisions, I am of the considered view that this issue is no more res integra and has been settled in favour of the assessee and by following the same, I hold that the impugned order is not sustainable in law and therefore, the same is set aside by allowing the appeal of the appellant with consequential relief, if any.

(Operative portion of the Order was pronounced in Open Court on 09.04.2019)

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