Case Law Details
Pidilite Industries Ltd Vs Commissioner of Central Excise (CESTAT Mumbai)
Introduction: In a recent decision by the CESTAT Mumbai in the case of Pidilite Industries Ltd, issues surrounding the rejection of a refund claim for CENVAT credit came to the forefront. The case, related to the refund of accumulated credit on exports, questioned the time limitation and the justification for the inability to utilize the credit.
Detailed Analysis: The case of M/s Pidilite Industries Ltd revolved around a refund claim of ₹44,03,076 related to accumulated CENVAT credit. This credit pertained to exports carried out from April 2011 to June 2012. The rejection of the refund claim was based on two primary grounds. The first ground was that the claim was filed beyond the period of limitation of one year from the date of exports. The second ground stated that there was no justification provided for the inability to utilize the credit.
The appellant, a manufacturer of excisable goods engaged in both domestic and international trade, had availed CENVAT credit on inputs and input services used in the manufacturing process. The claim for refund was made under Rule 5 of the CENVAT Credit Rules, 2004. However, this claim was rejected by the original authority, and the subsequent appeal with the Commissioner of Central Excise (Appeals-II), Mumbai met a similar fate.
The argument put forth by the appellant was that the claim adhered to the conditions outlined in notification no. 5/2006-CE (NT) dated 14th March 2006. They contended that the sanctioning authority could not impose restrictions not specified in the notification. It was also pointed out that the lower authorities had erroneously relied on a decision by the Hon’ble High Court of Madras in Commissioner of Central Excise, Coimbatore v. GTN Engineering (I) Ltd [2012 (281) ELT 185 (Mad.)]. The appellant’s case was supported by the decision of the Tribunal in Commissioner of Central Excise & Customs, Surat-I v. Swagat Synthetics [2008 (232) ELT 413 (Guj.)].
On the other hand, the Authorized Representative argued that the relevant date for refund as per Section 11B of the Central Excise Act, 1944, must be adhered to in all refund cases. Reference was made to the decision of the Tribunal in Rangdhara Polymers v. Commissioner of Central Excise, Ahmedabad-II [2022 (379) ELT 382 (Tri.-Ahmd)]. The Authorized Representative also relied on the decision of the Hon’ble High Court of Madras in re GTN Engineering (I) Ltd.
The CESTAT Mumbai held that while Section 11B of the Central Excise Act, 1944 stipulates the relevant date for the purpose of refund, the CENVAT Credit Rules, 2004 did not prescribe any time limit. The prescription in notification 5/2006-CE(NT) dated 14th March 2006 does refer to Section 11B but does not specify any time limitation. It was further noted that this notification must be in harmony with the CENVAT credit procedure. The consolidation of claims per quarter, as stipulated by the notification, essentially pushes the relevant date to the occurrence of either the date of export or the date of repatriation of export proceeds, whichever is later. Therefore, the rejection of the claim based on a time limitation was deemed erroneous.
Regarding the second ground of denial – the inability to justify the non-utilization of the CENVAT credit – the CESTAT emphasized that there were no such conditions in the notification or in Rule 5 of the CENVAT Credit Rules, 2004. The conditions for availing the scheme were not designed to segregate such non-utilized credits other than proportionality with exports, which was not in dispute. The conditions imposed on the refund claim were restricted to the reversal of the credit to be monetized, as a principal requirement. Therefore, the refund sanctioning authority could not impose any condition not contemplated by the prescribed notification.
The CESTAT Mumbai held that the entitlement for a refund should not have been dismissed without a proper examination of the merits. Consequently, they set aside the impugned order and remanded the matter to the original authority for a fresh decision.
Conclusion: The CESTAT Mumbai’s decision in the case of Pidilite Industries Ltd sheds light on significant aspects of refund claims for CENVAT credit. It underscores the importance of adhering to the relevant date but emphasizes that time limitations should be in harmony with the overall scheme and procedure. Additionally, the ruling underscores that the sanctioning authority cannot impose conditions beyond what is specified in the relevant notification, ensuring a fair and just evaluation of refund claims in line with the law and regulations.
FULL TEXT OF THE CESTAT MUMBAI ORDER
In this appeal of M/s Pidilite Industries Ltd, relating to rejection of claim for refund of ₹ 44,03,076/- being the accumulated credit in CENVAT credit account pertaining to exports effected from April 2011 to June 2012, disputes the two grounds relied upon by the lower authorities, viz., the filing of claim beyond the period of limitation of one year from the date of exports and that no justification of inability to utilize the said credit was brought on record.
2. The appellant, a manufacturer of excisable goods, had undertaken exports too and, having availed CENVAT credit on ‘inputs’ and ‘input services’ procured for manufacture thereof, sought refund thereof under rule 5 of CENVAT Credit Rules, 2004, which the original authority had rejected on the grounds supra and their appeal thereafter was disposed off by Commissioner of Central Excise (Appeals-II), Mumbai in order1 upholding the rejection.
3. According to Learned Counsel for the appellant, the claim was in accord with the prescription in notification no. 5/2006-CE (NT) dated 14th March 2006, issued in pursuance of empowerment for notifying safeguards, conditions and limitations, and that it was not open to the sanctioning authority to impose restrictions not specified therein. According to Learned Counsel, the lower authorities had erroneously relied upon the decision of the Hon’ble High Court of Madras in Commissioner of Central Excise, Coimbatore v. GTN Engineering (I) Ltd [2012 (281) ELT 185 (Mad.)]. He further placed reliance on the decision of the Tribunal in Commissioner of Central Excise & Customs, Surat-I v. Swagat Synthetics [2008(232) ELT 413 (Guj.)].
4. According to Learned Authorised Representative, it is abundantly clear from the decision of the Tribunal in Rangdhara Polymers v. Commissioner of Central Excise, Ahmedabad- II [2022 (379) ELT 382 (Tri.-Ahmd)], that ‘relevant date’ under section 11B of Central Excise Act, 1944 would have to be complied with in all cases of refund. He also placed reliance on the decision of the Hon’ble High Court of Madras in re GTN Engineering (I) Ltd.
5. Rule 5 of CENVAT Credit Rules, 2004 is a self-contained scheme framed for erasing the burden of tax/duties devolving on manufactured goods owing to discharge of liability by suppliers of inputs and input services is not borne by the overseas buyer. In terms of the said rule, it is the right of every exporter to monetize such accumulated CENVAT credit attributable to the exported goods and while no conditions other than shipment of goods is qualification for eligibility, the empowerment of the Central Government to prescribe safeguards, conditions and limitations detailed certain conditions and qualification in notification no. 5/2006-CE (NT) dated 14th March 2006. Doubtlessly, those prescriptions should be adhered to, but, considering the nature and purpose of the safeguards compliance is to be scrutinized in accordance the spirit of rule 5 of
6. We find that the lower authorities have not disputed the factum, or quantity, of goods exported. Rule 5 of CENVAT Credit Rules, 2004 does not prescribe any time-limit therein nor is there any reference to any provision of Central Excise Act, 1944 imposing any such limitation. Nonetheless, the prescription in notification 5/2006-CE(NT) dated 14th March 2006 refers to section 11B of Central Excise Act, 1944 but, in the absence of such specification in the statute, it is necessary to read down adherence to section 11B of Central Excise Act, 1944 as within the framework of monetization therein. In the said scheme, Central Government has prescribed that claims are to be consolidated for each quarter which, by itself, erases applicability of date of export as the relevant date. The decisions of the Tribunal that have been relied upon by both sides pertain to the period prior to such limitation having been incorporated by notification. Any limitation prescribed by the said notification would have to be in harmony with the procedure therein and the consolidation of claims per quarter as well as insistence on repatriation of export proceeds would naturally push the relevant date to the occurrence of either and whichever is later. An erroneous conclusion has been drawn from the decision of the Hon’ble High Court of Madras in re GTN Engineering (I) Ltd which had merely examined correctness of the decision of the Tribunal in concluding that there was no limitation in applying for such refund and the Hon’ble High Court of Madras had, in fact, held that
‘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. 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.’
with the ‘date of export’ taken as benchmark only in the facts and circumstances and, that too, with the observation that, in the absence of such liberal reading of the limitation, no exporter would be entitled to the scheme itself. Furthermore, in the said decision the remand direction of the Tribunal, insofar as it related to the bar of limitation, was approved by the Hon’ble High Court.
7. It is settled law that relevant date for the purpose of section 11B of Central Excise Act, 1944 would be the date of export/date on which the application could have been preferred/ date on which the last of the repatriation for the export of that quarter was received. This aspect has not been examined by the lower authorities.
8. The claim has also been held liable to be rejected for not having justified the inability to utilize the CENVAT credit towards domestic clearance. We do not find any such condition in the said notification or, for that matter, in rule 5 of CENVAT Credit Rules, 2004. The eligibility for availment of the scheme, though elaborating upon the non-utilization of accumulated CENVAT credit, has not designed a mechanism for such segregation save proportionality with exports which is not in dispute. It is in these circumstances though the application for refund is required to reverse the credit proposed to be monetized as a principal condition for application and is sanctioned in proportion to the total credit as set out in paragraph 5 of the impugned notification. In these circumstances, it is not open to the refund sanctioning authority to impose any condition which is not contemplated by the prescribed notification.
9. Such entitlement for claim of refund has not been examined and, having been disposed off at the threshold, lacks scrutiny on merits. It is necessary for the application for refund to be restored to the original authority for determination of the amount of refund eligible in accordance with the said notification. To enable that, we set aside the impugned order and remand the matter to the original authority for fresh decision.
(Order pronounced in the open court on 11/10/2023)
Notes
1 [order-in-appeal no. US/93/RGD/2013 dated 28th March 2013]
