Case Law Details
Mehta Metal Industries Vs Commissioner of Central Excise & Customs (CESTAT Delhi)
The issue involved in this appeal is whether the appellant assessee who is operating under ‘Compounded Levy Scheme’ is entitled pro-rata abatement/refund of duty for the period during which the machine admittedly was inoperative.
CESTAT held that there is no dispute with regard to the period during which the machine remain inoperative, and relying on the interpretation of Hon’ble Rajasthan High Court in the case of Jupiter Industries, this is the case of one machine being inoperative for part of the month after payment of Central Excise duty, has not produced any goods and therefore, duty cannot be charged under compounded levy for the whole month.
FULL TEXT OF THE CESTAT DELHI ORDER
Heard the parties.
2. The issue involved in this appeal is whether the appellant assessee who is operating under ‘Compounded Levy Scheme’ is entitled pro-rata abatement/refund of duty for the period during which the machine admittedly was inoperative.
3. Brief facts of the case are that the appellant are engaged in manufacture of Stainless Steel Cold Rolled Patta/Patti falling under chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985 and having Central Excise Registration No. AABFM5571DXM001. The appellant was operating under compound levy scheme prescribed under Notification No. 17/2007-CE dated 01.03.2007, where the appellant was required to pay Rs. 40,000/- per cold rolling machine per month. The appellant deposited Rs. 2,80,000/- for the whole month of October 2015 in respect of seven cold rolling machines, but applied for reduction (closure) of one machine from 06.10.15 to 10.15 and for another rolling machine from 15.10.15 to 31.10.15. They filed refund claim of proportionate duty amounting to Rs. 55,483/- for the period in which the machines were non operational. The adjudicating authority rejected the refund application on the ground that the appellant has not fulfilled the conditions of para 3 & 6 of the Notification No. 17/2007-CE dated 01.03.2007 and the facility of abatement on pro rata basis is not available to them under the said Notification.
4. Being aggrieved, the appellant-assessee preferred appeal before the Commissioner (Appeals) inter alia relying on the ruling of Hon’ble Rajasthan High Court in the case of CCE Jaipur vs. Jupiter Industries- 2006 (206) E.L.T. 1195 (Raj.), wherein under similar circumstances, the Hon’ble High Court framed the following question for consideration;
“whether the CEGAT can allow refund under Section 11B of Central Excise Act, when it was specifically not allowed by sub Rule 2 of Rule 96B of Central Excise Rules, 1944. The Hon’ble High Court was pleased to dismiss the appeal of revenue and answer the question in favour of the assessee observing as follows;
“23. It goes without saying that, if in any particular month, no machine is operated and no production had taken place, there cannot be any levy of excise Duty. The manufacture of goods is condition precedent for charging of excise duty without which no levy can be made. Therefore, the rule cannot be made to go beyond the scope of charging provision. On the undisputed premises that no production had taken place from the cold rolling machine which has been removed on 29th May, 1998. In other words, no production has been taken place in respect of cold rolling machine which ceased to operate before the first July, 1996, no review could have been allowed in respect of estimated production in that machine. This is the simple logic which prevailed within the Tribunal and in our opinion rightly. No contrary view can be taken from the reading of the Rules also. We are, therefore, of the opinion that the conclusion reached by the Tribunal was valid.
24. Moreover, when there is no production of any articles in relation to the machine which was not in existence, the question of passing on duty to consumers of existing goods can arise so as to require the invocation of principle of unjust enrichment to deny refund. Therefore, there is no justification for taking the view that since the tax has been paid under the special provision it is not subject to refund. Refund is a consequence of recovery of duty which is not leviable under the provisions of taxing statute of excess payment of Duty. In given circumstances, such excess collection of Duty may be refused to be refunded, if it results in unjust enrichment because passing of duty to buyers of goods. It depends on furnishing satisfactory proof by the manufacturer that such duty has been passed on to buyers. However, in case like the present where goods have not at all been manufactured and yet on estimated basis of imaginary production Duty has been demanded, the question of passing of such duty collected from the assessee to buyers of the non-existence production cannot arise.
25. We are therefore, also of the opinion that the direction of the Tribunal to refund excess amount received in respect of machine which had ceased to function during the months of July to August also does not call for any interference. Consequently, the question referred to us is answered affirmative that is to say in favour of the assessee and against the revenue there shall be no orders as to costs”.
4. The learned Commissioner (Appeals-I) was pleased to dismiss the appeal observing that in the facts of the present case, the machine did not work for few days in the month and thus, charging of duty on monthly basis at specified rate under the scheme, per machine, does not go beyond the scope of charging section as it nowhere states that duty for a month shall be charged if there is production on each day of the month. It was further observed that in the matter of M/s Jupiter Industries, there was no production for continuous period of three months and thus the facts are entirely different and not applicable in the instant case.
5. Being aggrieved, the appellant-assessee before this Tribunal. Learned Counsel Mr. Jitin Singhal, inter alia urges that under similar facts and circumstance, that the machine was not operated for part of the month, a division bench of this Tribunal in Paradise Steel Pvt Ltd. Vs. CCE & CGST, Jaipur vide final order no. 52715/2018 dated 10/07/2018, taking notice that there is no dispute with regard to the period during which the machine remain inoperative, and relying on the interpretation of Hon’ble Rajasthan High Court in the case of Jupiter Industries (supra) held that, since this is the case of one machine being inoperative for part of the month after payment of Central Excise duty, has not produced any goods and therefore, duty cannot be charged under compounded levy for the whole month. The appeal was allowed with consequential benefits.
6. Learned AR for revenue relies on the impugned order, it is further urged that the refund of pro rata duty deposited for the non working period of the machine from 06/10/2015 to 31/10/2015 is not admissible for the reason that in terms of conditions of para 3 & 6 of the Notification No. 17/2007-CE dated 01.03.2007, the facility of abatement on pro rata basis is available only to the manufacturers who commence production for the first time or who discontinues production for a continuous period of no less than three months. Since the appellant is neither applying under the scheme for the first time nor has he ceased production for a continuous period of not less than three months, therefore they do not fulfil the conditions for pro rata calculations, as stipulated under the said Notification.
7. Further reliance is placed on the ruling of the Division Bench of this Tribunal Ahm. Bench in the case of:
i. S.S. Strips Pvt Ltd. Vs C.C.E Ahmedabad-II[2018(08) TMI(546)
ii. Sethi Metals Industries Vs CCE, Ahmedabad[2013 (05) TMI(573)
8. Having considered rival contentions, I find that the issue herein is squarely covered in favour of the appellant-assessee by the ruling of Hon’ble Rajasthan High Court in the case of Jupiter Industries (supra) which have been followed by Division Bench of this Tribunal in the case of M/s Paradise Steel Ltd. (supra).
9. Accordingly, I hold that the appellant is entitled to refund for the period, the machines remained un-operative for the part of the month of pro rata basis. Accordingly, revenue is directed to grant the refund of the amount of Rs. 55,483/- from the date of deposit till the date of refund, with interest as per Rules.
(Order dictated in the open court)
