Hindustan Aegis LPG Ltd. Vs Commissioner of Excise (CESTAT Mumbai)
In Hindustan Aegis LPG Limited v. Commissioner of Excise, Mumbai-II [APPEAL No. E/51/2008 dated October 12, 2018], Hindustan Aegis LPG Limited (Appellant) had filed a refund claim of Modified Value Added Tax (MODVAT) which was rejected by the Assistant Commissioner In Order-In Original (OIO) on the ground of limitation. Further, appeal filed by the Appellant against the OIO was again rejected by the Commissioner (Appeals) by upholding the OIO on ground of limitation as well as on merit.
Aggrieved by the same, the Appellant has filed the current appeal in CESTAT, Mumbai agains2t the Order-in-Appeal No. SRK/384/MII/2007 dated October 10, 2007 (“OIA”) on the ground that the Commissioner (Appeals) by rejecting the refund on merit alongside limitation, has traversed beyond the OIO and that it is impermissible since Assistant Commissioner in OIO did not record his views on merits.
Due to difference of opinion amongst the judicial members and technical members, the matter was referred to a third member.
The Hon’ble CESTAT, Mumbai noted that the Assistant Commissioner did not conclude the order on the sole ground of limitation, but OIO provides that the same was initially also taken up on merit and having relied on the judgment of Union Of India V. Slovak India Trading Company [2006 (201) ELT 559 Kar], that it was preferred to take the less controversial ground but leaving the claim unexpressed on the conclusion for eligibility. Thus, the Appellant at a later stage cannot contend that eligibility on merit was not an issue which was dealt by the Assistant Commissioner
Therefore, the Commissioner (Appeals) did not exceed its jurisdiction. The appeal was thereby rejected and dismissed.
FULL TEXT OF THE CESTAT JUDGEMENT
1. This appeal is filed against the order-in-appeal No.SRK/384/M-II/2007 dated 10/10/2007 passed by the Commissioner of Central Excise (Appeals), Mumbai.
2. The case is with reference to the refund claim filed by the appellants claiming refund of the MODVAT Credit balance available in their account on the date of surrender of the registration. They had also claimed the refund of PLA balance. The refund claims have been considered by the lower authorities and the Assistant Commissioner rejected the refund claim on the basis of time bar. In appeal, the Commissioner (Appeals) considered the submissions and rejected the refund claims for merits as well as on limitation. In fact, he upheld the order of the Assistant Commissioner.
3. We have heard Shri. Vipin Kumar Jain, learned Counsel on behalf of the appellants and Shri. Anil Choudhary, learned Assistant Commissioner (AR), on behalf of the Revenue.
3.1 Arguing on behalf of Appellant learned counsel submitted that:
i. the appellants are challenging the order of the Commissioner (Appeals) both on merits and limitation. Both the authorities have failed to appreciate they were deprived from filing the refund claim 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 revenue learned AR submits that:
(i) refund claim is not admissible to the appellant vis-à-vis the Modvat balance lying in balance on the date of surrender. This view has been confirmed by the Larger Bench of this Tribunal.
(ii) there is nothing on record to show that the appellants were prevented from filing the refund claim immediately on surrender of their registration. The only correspondence produced shows that surrender was taken on record and the appellant were advised to settle all the arrears and pending dues. Since there was no barring from the side of department, appellant could have filed their claim when so ever they desired. Even otherwise appellants were the best judge to decide on filling the refund claim. Law of limitation do not permit, such failures and any remedy sought and admissible should have been claimed within the prescribed period of limitation. Since refund claim has been filed much beyond the prescribed period of limitation the same needs to be rejected on this account. Thus Assistant Commissioner has rightly rejected the refund claim on limitation. The order of Commissioner (Appeal) upholding such rejection on limitation cannot be faulted with.
4. We have considered the averments made in the appeal and during the course of arguments.
5. The issues which need to be considered by us are as follows:
a) Whether the refund claim was bar by limitation.
b) Whether the Commissioner (Appeals) was right in rejecting the refund claim on merits also when the Assistant Commissioner has not done so.
5.1 On the issue of refund of balance MODVAT credit at the time of surrender of registration, the larger bench of tribunal has settled the law holding against the appellants in the case of Gauri Pisiculture [2006 (202) ELT 199 (T-LB)]. In the said decision tribunal larger bench has held as follows:
“8. Detailed reading of the above judgments, leads in to the fact that wherever the assessee was unable to utilize the credit on account of objection raised by the Department or actions taken by them by way of initiation of proceedings or paid duty out of modvat account at the Department’s insistence, and for that reason, he had to pay duty in cash or out of the PLA, they would be entitled to refund of that credit in cash, on the dispute being ultimately settled in their favour. In the decisions holding that such refund 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 have been in a position to use the same towards payment 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 same account from where it was debited i.e. RG-23A Part II account. However, if an assessee is not able to use the credit on account of any reasons, whatsoever (which may be closure of his factory or final products being exempted, etc.) the refund becomes admissible in cash or by way of credit entry in PLA to the extent duty paid in cash or out of PLA during the relevant period.
9. On the same basic principles of equity, justice and good conscience, if such refund in cash makes the assessee enrich because during the period when the dispute was pending, they had not paid any duty in cash and as such, the debit entry in Modvat account would have made no difference, as the credit would have been lying unutilized only in the account, such credit, cannot be refunded in cash.
10. In view of the foregoing discussions, we hold that if denial of credit has compelled an assessee to pay duty out of PLA, the refund of the same would be admissible in cash to the extent of payment of duty in cash during that period. However, if no cash payments towards duty were made through PLA and the credit would have remained unutilized in the account books, such credit cannot be allowed by way of cash.
11. By applying the above ratio of law as arrived at by this Bench to the fact of the instant case, we find that the debit entry in credit account was made by the appellants on 23 -112000, the Central Excise registration was surrendered by them in September 2000, i.e. before making of debit entry in RG-23 account. As such, even if the amounts towards duty would not have been debited by them in the said account, the same would have been remained unutilized. As such, on the success of their appeal before the Commissioner (Appeals), they cannot claim the refund of the same in cash, inasmuch as on account of such debit entry, they have not discharged any duty out of PLA. If the said refund is granted to the appellants by way of cash, the same would amount to making him unjustifiable enrich. It is well settled principles of law that what cannot be done directly should not be allowed to be done indirectly. On surrendering of their licence, the appellants was not allowed to claim the refund of the unutilized credit in the Modvat account, the same would have lapsed. As such, utilization of the same towards payment of disputed demand of duty, after surrendering of their registration, has not led to a situation where the assessee was compelled not to use the credit for regular clearances and had to make payment from 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 registration could have been made.
5.4 Appellants have contended that by rejecting the refund claim on merits Commissioner (Appeal) has gone beyond the orders of the Assistant Commissioner, which is not permissible in law.
6. We find that the appellants have filed the appeals before the Commissioner (Appeals) in a matter of refund claim filed by them under Section 11B. Section 11B of the Central Excise Act, in contradistinction to Section 11A provides for the claimant to file the claim seeking the refund of amounts due to him. While making such a claim, claimant needs to justify the admissibility of refund claimed by him on all accounts i.e. merits, limitation and unjust enrichment. On the basis of claim made, Assistant Commissioner allows the refund claim or rejects the same while recording the reasons for such a rejection. The refund claim could have been rejected on any one or more than one ground, but once rejected the same is rejected and it is deemed that Assistant Commissioner has applied his mind to all the aspects of the refund claim.
6.1 In the appeal to appellate authority appellant challenging the order of the Assistant Commissioner rejecting the refund claim challenges the order of rejection and not the ground of rejection. He has to establish before the Appellate authority that his claim is admissible to him on all the three grounds for which he has filed this refund claim. Thus the boundaries for the processing of refund claim has to be drawn by the claimant and not the authority deciding the refund claim.
6.2 In case of Section 11A, the first documents, whereby proceedings are initiated is the show cause notice. In this manner department/investigating authority states its the ground for said proceedings. Thus in all the proceedings after the issuance of show cause notice department is bound within the four boundaries laid down by the show cause notice. Thus distinction make the proceedings undertaken in terms of section 11B different from the proceedings under Section 11A.
6.3 While rejecting or admitting the refund claim by any authority all the three grounds forming the basis of refund claim have to be considered by the Assistant Commissioner and if the refund claim has been rejected on time bar even without mentioning a merits, the refund claim has been rejected in which merits and all other things have been considered. Thus in 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 proposed order.
Provided further that where the Commissioner (Appeals) is of opinion that any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, no order requiring the appellant to pay any duty not levied or paid, short-levied or short-paid or erroneously refunded shall be passed unless the appellant is given notice within the time-limit specified in Section11A to show cause against the proposed order.”
6.5 The Commissioner (Appeals) was authorized to make any further inquiries in an appeal filed before him and then passed an order either. Modifying the order confirmed or annulling the order of the earlier authorities. If on making such an inquiry, the Commissioner (Appeals) is satisfied that refund claim is not admissible on merits. Thus, his order cannot be questioned in view of specific provisions in Section 35A (3). In case of MIL India [2007 (188) ELT 210 (SC)], Hon’ble Supreme Court has specifically held.
“4……….. In fact, the power of remand by the Commissioner (A) has been taken away by amending Section 35A with effect from 11 -52001 under the Finance Bill, 2001. Under the Notes to clause 122 of the said Bill it is stated that clause 122 seeks to amend Section 35A as to withdraw the powers of the Commissioner (A) to remand matters back to the adjudicating authority for fresh consideration. Therefore, the Commissioner (A) continues to exercise the powers of the adjudicating authority in the matters of assessment. Under Section 35B any person aggrieved by the order of the Commissioner as an adjudicating authority is entitled to move the Tribunal in appeal. Section 35B indicates that the decision of order passed by the Commissioner (A) shall be treated as an order of an adjudicating authority. In the circumstances the High Court had erred in holding that the assessee was not entitled to agitate the question of dutiability in appeal before the Tribunal. ”
6.6 To support their arguments on limitation, appellants have shown certain correspondences/ letters written by the range officer to them when they surrendered the registration certificate. On the basis of the said letter they claim that they were not allowed to file the refund claim. 9.2 They have enclosed a copy of the surrender letter available at page 26 of the paper book. By the said letter they have stated the manufacturing 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 Rs 1,52,45,465/- in RG23C Part II Register is Rs 8004/- and the balance in PLA Register is Rs 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 note that if there is any other Government dues arises in future, you will be liable to pay the same to the Government.” The said letter nowhere advises or bars the appellant from filing a refund claim filed if they deem fit. The said letter only arises that this surrender letter would have been accepted your registration would be cancelled only after all the dues against the appellants are settled.
7.1 Next letter available on page 79, is the letter forwarding the refund claim to the Assistant Commissioner on 9th November 2006. The said letter has been received in the office of Assistant Commissioner on 13th November 2006 is clearly after seven years from the date of closure of manufacturing activities and surrender of registration. It is also the first claim for the refund filed for the amounts mentioned in the said claim. Letter on page 26 do not refer to the claim any refund. Secondly no refund was being claimed thereafter. That be so, appellants have filed the refund claim which is after seven years of surrender of registration is clearly barred by limitation. Even if it is admitted without accepting that the letter on page 29, did not allow the appellants from proceeding to file the refund claim then also refund claim will be hit by limitation, because it is for the claimant to make the refund claim within time and not the department to ensure or advice the claimant when to file the refund claim.
7.2 Since the appellants heave themselves chosen to file the refund claim in time and manner most appropriate they are responsible for the consequences and cannot shift the burden of their negligence to anyone else. For this argument reference is made to para 22 of the Supreme Court decision in case of Mafatlal Industries [1997 (89) ELT 247 (SC)]-
“22.There is as yet a third and an equally important category. It is this : a manufacturer (let us call him “X”) pays duty either without protest or after registering his protest. It may also be a case where he disputes the levy and fights it out up to first Appellate or second Appellate/Revisional level and gives up the fight, being unsuccessful therein. It may also be a case where he approaches the High Court too, remains unsuccessful and gives up the fight. He pays the duty demanded or it is recovered from him, as the case may be. In other words, so far as `X’ in concerned, the levy of duty becomes final 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 and then pleads that he has discovered the mistake of law when the High Court has declared the law. The fact is that such claims have been entertained both in writ petitions and suits until now, purporting to follow the law declared in Kanhaiyalal, and are being allowed and decreed, sometimes even with interest. The Union of India says that this can never be. It says, a manufacturer must fight his own battle and only if he succeeds therein, can he claim refund. He cannot take advantage of success of another manufacturer and that no suit or writ is maintainable by him for refund on the ground of alleged discovery of mistake of law on the declaration of law by this Court or a High Court (or a Tribunal or any other authority under the Act) in the case of another person. The Union of India denies that such a person can plead payment of duty under a mistake of law within the meaning of Section 72 of the Contract Act. It also denies that such a writ petition or a suit can be filed within three years of such “discovery of mistake of law”.
7.3 In result the refund claim in respect of the refund of unutilized MODVAT Credit should fail on the ground of limitation.
8. Another issue with regards to refund of certain amount from PLA. Since the amount lying in balance in PLA is the money available with the appellant, it cannot be said to be hit by limitation because it was the money available in the hands of the appellants itself and they could have claimed the refund of the same at any time. Accordingly, in respect of refund for the balance lying in PLA, the order of the lower authorities to be upheld.
9. In view of the above discussion and relying on the decision, the Larger Bench of Tribunal in the case of Gauri Plasticulture (P) Ltd., reported in 2006 (202) ELT 199 (Tri-LB), the order of the lower authority is upheld except for the refund of PLA amount. The appeal is disposed of in above terms.
(Pronounced and dictated in Court)
