Local taxes & duties cannot be exported & this is the principle followed the world over under the aegis of the WTO. This basic principle cannot be violated & if the government does that by implying a limitation period not appearing in the law then it is violation of Basic Principles of Law. It is important that the exporters are treated with dignity as they are serving the nation & should not be robbed of their legitimate entitlements by manipulation. Such manipulations kills the exporters. We talk of reforms & ease of doing business as a rhetoric & there are no real reforms.
Now, we directly focus on the point of law as appearing in the case {Commissioner of Central Excise versus GTN Engineering (I) Ltd.; 2012 (281) E.L.T. 185 (Mad.)}.
The relevant extracts from the decision are reproduced & discussed below:
Quote:
2. As to the question whether the claim for refund of the CENVAT credit facilities should be made before the expiry of the period of one year from the relevant date is of much importance, as we are informed that there is no decision of this Court on the issue, we are inclined to consider the relevant provisions in detail.
11. We have carefully considered the above said submissions. The relevant portion in Section 11B of the Central Excise Act, 1944, reads as under:
“11B. Claim for refund of [duty and interest, if any, paid on such duty]- (1) Any person claiming refund of any [duty of excise and interest, if any, paid on such duty] may make an application for refund of such [duty and interest, if any, paid on such duty] to the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] before the expiry of [one year] [from the relevant date] [in such form and manner] as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of [duty of excise and interest, if any, paid on such duty] in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such [duty or interest, if any, paid on such duty] had not been passed on by him to any other person.”
12. By that provision, a claim for refund is made available in case of refund of duty and interest, if any paid on such duty and as far as that provision is concerned, there is no dispute that it is applicable only in case of duty paid and not on the CENVAT credit facilities.1 As already pointed out, to tide over the situation and also to make eligible for the manufacturer of the final products which is 100% export oriented, Rule 5 of the CENVAT Credit Rules, 2004, entitles for making claim for refund of CENVAT credit and the relevant portion of the said rule reads as under:
“RULE 5. Refund of CENVAT credit:- where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the, CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,
(i) duty or excise on any final product cleared for home consumption or for export on payment of duty; or
(ii) service tax on output service and where for any reason such adjustment is not possible, the manufacturer or provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification.”
13. In terms of the said rule, the Central Government should notify as to the safeguards, conditions and limitations. Accordingly, Notification No. 5/2006-CE(N.T.) dated 14.03.2006 has issued. Clause 6 appendix to the notification reads as under:
“6. The application in Form A, along with the prescribed enclosures and the relevant extracts of the records maintained under the Central Excise Rules, 2002, CENVAT Credit Rules, 2004, or the Service Tax Rules, 1994, in original are filed with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, before the expiry of the period specified in Section 11B of the Central Excise Act, 1944 (1 of 1944)”
14. The said notification prescribes a period of one year, as provided under section 11B of the Central Excise Act, for the purpose of making application in Form-A along with prescribed enclosures and also the relevant extracts of the records maintained under the Central Excise Rules, 2002, Cenvat Credit Rules 2004 or Service Tax Rules, 1994 in original.2 That application should be filed before the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be. For the purpose of finding out as to the relevant date for the purpose of making claim for refund of CENVAT credit, Rule 5 should be made applicable. It is the contention of the learned counsel for the assessee that the provision defining relevant date does not cover the claim for refund of CENVAT credit. We may point out that when a statute empowered for such claim, the said provision must be read to find out as to the relevant date. Rule 5 specifies that “where any input or input service is used in the manufactures of final product which is cleared for export under bond or letter of undertaking as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed.”
15. A reading of the above rule, though there is no specific relevant date is prescribed in the notification, the relevant date must be the date on which the final products are cleared for export.3 If any other conclusion is arrived, it will result in disentitling any person to make a claim of refund of CENVAT Credit. Admittedly, the respondent has made a claim only invoking Rule 5 of the CENVAT Credit Rules 2004. In that view of the matter, there cannot be any difficulty for us to hold that the relevant date should be the date on which the export of the goods was made and for such goods, refund of CENVAT credit is claimed.
Unquote:
1, 2 & 3 Emphasis supplied.
Please see 1 & the learned judges of the Honourable High Court have themselves unambiguously acknowledged that there is no dispute that it is (read S 11B) applicable only in case of duty paid and not on the CENVAT credit facilities (read refund of accumulated Cenvat credit). Please mind that this is the determination made by the honourable judges themselves based on the plain reading of the S 11B in terms of the law. Once, this is concluded then there is no way that this interpretation can be modified/altered/manipulated or interpreted in a different manner merely by way of reference in a Notification. The cardinal principle that statute should be interpreted in such a way as to avoid absurdity cannot be ignored.
Now, please see 2 the notification does not prescribe the limitation period of 1 year & the learned judges of the honourable High Court have themselves unambiguously acknowledged that S 11B is not applicable in case of the CENVAT credit facilities (read refund of accumulated Cenvat credit) then how the limitation period of 1 year is implied or made applicable. How could a simple reference to S 11B in a clause in the notification 5/2006-CE(N.T.) dated 14.03.2006 could impose a limitation period of 1 year (when it is determined & accepted unambiguously that S 11B is not applicable in case of the CENVAT credit facilities (read refund of accumulated Cenvat credit). How could this magic happen? Is it not violative of one of the basic tenets of law that nothing can be read into the law which does not appear therein? Secondly, even if there is any ambiguity then too should the benefit of doubt be not given to the exporter then why this principle is not being followed rigorously?
Now, please see 3 & once again the learned judges of the Honourable High Court Judges failed to follow another basic tenet of the law i.e. the law should not lead to absurdity. The simple point of law is that the accumulated Cenvat credit refund applications are to be made on quarterly basis as specifically provided for in the Notification & therefore the relevant date cannot be the date on which the final products are cleared for export because this will conflict with the period (quarterly) of application specifically mentioned in the notification. Therefore, this absurdity cannot be acceptable & allowed to prevail. Any interpretation that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency has to be rejected.
To be precise & brief, in this first part, I would like to just take the liberty of mentioning that
S 11B is not an omnibus provision. In the second part, I will deal with all the reasons to conclude that how & why the determination is bad in law & needs to be set aside to ensure justice for the exporters. I consulted my English teacher & asked him about the magic of English language but then I was told that it is blatant manipulation. I am compelled to agree with the guidance of my English teacher & hence this article for restoration of justice! It is the bounden duty of the policymakers to administer justice & they cannot remain meek spectators. The ground reality is that the GTN decision is being considered as Gospel truth & summary rejections becoming order of the day & nothing can be worse than this in terms of the administration of justice. The prayer is only that the exporters should not be killed by the inefficient & manipulative Indian bureaucracy. It is also a humble & sincere most submission that this is not to bring down the dignity of any court but the burden of the conscience to raise voice against the injustice. The bureaucracy did not specify the limitation in the notification because they very well knew that it is ultra vires of the S 11B of the CEA, 1944 but the honourable HC failed to see through the game. It does not bother the conscience of the thick-skinned bureaucrats, but the burden disturbs my sleep & therefore put forth in public domain. If any policymaker feels the other way, please let me know & I will respond.
(Above are personal view of Author and he can be reached at [email protected]. Taxguru.in do not subscribe to the views of Author)
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