Case Law Details
Solara Active Pharma Sciences Ltd. Vs Commissioner of CGST (CESTAT Mumbai)
Undisputedly in the present case appellant had filed a refund claim with the jurisdictional Assistant Commissioner claiming refund of Rs 8,59,420/- on 09.02.2017. The refund claim was adjudged in favour of appellants by the said authority vide order dated 05.05.2017 to the extent of Rs 8,47,496/-, but instead of allowing the refund in cash, the refund was allowed by the Assistant Commissioner in the CENVAT Credit account of the appellants. As per the order of the Assistant Commissioner, appellants availed the CENVAT Credit in their book of accounts on 24.05.2017, having taken the credit in their book of accounts the entire issue was settled and the position whereby appellants had paid certain amounts from their credit account as per the direction of the officers, restored back.
However appellant suo motto on 01.06.2017 reversed the credit taken in their book of accounts on 24.05.2017, without any directive or prompting by the jurisdictional authorities as they proposed filing of appeal against the order dated 05.05.2017. Along with the synopsis dated 28.10.2021 filed by the appellant and received in registry on 01.11.2021, appellants have filed a detailed date chart leading to the present appeal.
In the synopsis dated 16.02.2022 filed by the Appellant, received in registry on 17.02.2022, Appellant counsel has specifically stated, “Without prejudice to the facts and circumstances that in the present case, the cash refund sought was made under section 11 B of CEA and not under Rule 5 of CCR {Specific facts and grounds for cash refund have been explained in the ground of appeal} in the grounds of appeal. In the following case laws it has been consistently held that EOU’s are also entitled to cash refund under Rule 5 of CCR, 2004.” I do not dispute that EOU’s can claim cash refund in terms of Rule 5 of CCR, 2004. In fact Rule 5 is only for the cash refund of the accumulated credit on account of goods exported under bond or letter of undertaking. Admittedly the present case is not in respect of any claim made for the refund of accumulated credit as per Rule 5, but is claim made under Section 11B for the duty erroneously paid under protest as per the direction of the departmental officers from the CENVAT account. It was also not the case that when the order for refund was made i.e. 05.05.2017 and when they had taken the credit they could not have utilized the same on account of closure of business etc. They were ongoing concern and were in position to avail the said credit. Further on introduction of the Good and Service Tax they were even permitted to carry forward the said credit to that regime. In my view appellants have by reversing the credit and filing the appeal subsequent to introduction created an instrument just to en-cash the CENVAT credit by resorting to Section 142 (6) (a) of the CGST Act. Such instruments should not be allowed.
In my view the appeal filed by the appellant before the Commissioner (Appeal) is nothing but a colorable device created by the appellant to claim the benefit which was not due. All could have been avoided and appellant could have carried forward the Cenvat Credit availed by them in their book of accounts on 24.05.2017 as per the order dated 05.05.2017 to the GST regime. But it is also settled principle in law that nobody should be allowed the benefit of his own wrongs.
Since it is the submission of the appellant that the present refund claim has been filed by them under Section 11B, the issue of admissibility of interest needs to be adjudicated in terms of Section 11BB. Since both the authorities have considered the request as per section 11 BB and thereafter rejected the claim to interest in my view appeal should fail on this account also.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal is directed against order in appeal No PVNS/206/APPEALS THANE/TR/2018-19/4766 dated 13.08.2018 of the Commissioner (Appeals) GST and Central Excise, Thane. By the impugned order, the Commissioner (Appeals) has held as follows:
“8.1 The appellant’s plea that since this appeal was filed prior to introduction of GST relevant provisions under GST law provide for payment of refund in cash is not acceptable as the Refund claim was filed before introduction of GST and the impugned order in original has also allowed the refund claim before the introduction of GST. Only appeal with Commissioner (Appeal) is filed after introduction of GST i.e. on 13.07.2017. Being refund itself was allowed before the introduction of GST, provisions of Section 142(3) of the Central Goods and Service Tax Act, 2017, will be not applicable to the instant case of the appellant and appellant is not entitled for the cash refund as requested. Hence, I agree with adjudicating authority, as regards to sanction of Refund of Rs. 8,47,496/- by way of credit in their cenvat account. Held accordingly.
8.2 The appellant has also relied upon the case law of 2010 (259) ELT. 713(Tri-Del) CCE, Jalandhar V/s. Kochar Sung-Up Acrylic Ltd. The above judgement is not applicable in this case as the facts are different from the present case. I agree with the findings of the adjudicating authority. Held accordingly.
I observe that the appellant has contended in the appeal memo that in the instant case interest is admissible from the date of payment of duty.
9.1 [ have gone through the provisions of Section 11BB of the Central Excise Act, 1944 which states that the interest is chargeable when refund is not made within three months from the date of receipt of application. The adjudicating authority has therefore rightly held that the appellant is not eligible for interest on the said refund amount as the period of three months from the date of filing of refund has not yet expired. The appellant has also relied upon the case law of Swastik Metals V/s. Union of India 1990(49)ELT.45(Raj) The above case law is not applicable to the present case as the same has been dissented by the Hon’ble High Court of Gujarat. I agree with the findings of the adjudicating authority. Held accordingly.
In view of the above, the impugned order is upheld and appeal filed by the appellant is rejected.”
2.1 Appellant is an 100% Export Oriented Unit. They filed a refund claim for Rs.8,47,496/- on 09.02.2017, in relation to duty deposited by them under protest. The protest and the show cause notice issued to them in respect of this duty deposited under protest was adjudicated the Superintendent, vide his Order-In Original No. 11/Supdt./2016 dtd. 30.12.2016 dropping the demand notice.
2.2 The refund claim was considered by the jurisdictional by the original authority and adjudicated in favour of the appellant vide his order dated 05.05.2017 stating as follows:
“10. Further, in the instant case, the claimant has asked for cash refund along with interest from the date of deposit in terms of Section 11BB of Central Excise Act, 1944, However, I find that the amount of refund claimed had been initially paid through Cenvat Credit Account and therefore, it would suffice if the same is allowed as refund by way of credit in the claimant Cenvat Credit Account. And regards the Interest under Section 11BB of Central Excise Act, 1944, the claimant is not eligible for Interest on the refund amount, since as per Section 11BB the interest is chargeable when refund is not made within three months from the date of receipt of application. In view of the above provisions, 1 find that, the claimant is not eligible for interest on the said refund amount as the period of three months from the date of filing of refund claim has not yet expired.
In view of the above findings. I Pass the following order:
ORDER
I hereby sanction the refund claim of Rs.8,47,496/- (Rupees Eight lakh forty seven thousand four hundred ninety six only) claimed by the claimants, as per Section 11B of the Central Excise Act, 1944. by way of credit in their Cenvat Credit Account.”
2.3 Aggrieved by the order of the Assistant Commissioner, appellants preferred the appeal before the Commissioner (Appeals) which was rejected by the impugned order and hence this appeal.
3.1 I have heard Shri V Ravindran, Advocate for the Appellant and Shri Sanjay Hasija, Superintendent, Authorized Representative for the revenue.
3.2 Arguing for the appellants learned counsel submits-
> The denial of refund claim in cash to them by the impugned order is contrary to the provisions of Section 142 (3) and 142 (6) (a) of Central Goods and Service Tax, Act, 2017.
> Section 2 (10) of the said Act defines the “ ‘Appointed day’ to mean the date on which the provisions of this Act shall come into force.”
> In following decisions the issue has been adjudicated in the favour of appellants:
-
- Toshiba Machine (Chennai) P Ltd [2019 (27) GSTL 216 (T-Chennai)
- Veer O Metals Pvt Ltd [2021 (4) TMI 117 (CESTAT Bangalore)
> Interest in the present case is admissible from the date of deposit
-
- Soorajmull Baijnath Industries Pvt Ltd. [2021 (8) TMI 1131 (CESTAT Chandigarh)]
- Ebiz Com Pvt Ltd [2016 (9) TMI 1274 (Allahabad High Court)]
> The refund claim in the present case has been filed under Section 11B of the Central Excise Act, 1944 and not under Rule 5 of the CENVAT Credit Rules, 2004. In following decisions it has been held that the EOU are also entitled to cash refund:
-
- Continental Engines Ltd. [2018 (361) ELT 411 (Raj)]
- Incopac Parts Pvt. Ltd. [2018 (362) ELT 904 (Tri. Del)]
- Wave Mechanics Pvt. Ltd. [2019 (370) ELT 291 (Tri.Bang)].
- Everyday Health (India) Pvt. Ltd. [2019 (370) ELT 846 (Tri.Mum)]
- Veer-O-Metals Pvt. Ltd. [2021 (51) GSTL 315 (Tri. Bang.)]
- TCG Lifesciences Ltd. [2021 (375) ELT 284 (Tri. Kolkata)]
- Ucal Fuel Systems Ltd. [2014 (306) ELT 26 (Mad.)]
- Suvidhe Ltd. [1996 (82) ELT 177 (Bom)]
3.3 Learned Authorized Representative while reiterating the findings recorded in the impugned order submitted relying on the following decisions that the appeal needs to be dismissed:
> Century Pulp and Paper [2010 (254) ELT 469 (T-Del)]
> Unitem Seamless Tubular P Ltd. [2019 (28) GSTL 244 (T-Hyd)}
> Gauri Plasticulture Pvt Ltd. {2019-TIOL-1806-HC-Mum-CX] > Ratnami Metals & Tubes Ltd [2019 (366) ELT 139 9T-Ahmd)]
> Om Refoils Ltd [2018 (361) ELT 98 (P&H)]
> Servo Packaging Ltd [2020 (373) ELT 550 (T-Chennai)
> BHEL 2020 (41) GSTL 465 (T-Hyd)]
4.1 I have considered the impugned order along with the submissions made in appeal, in the two written synopsis filed by the appellant and during the course of arguments.
4.4 The only issue for my consideration in this appeal is whether the appellant can be given the benefit of Section 142 (3) of the Central Good and Service Tax Act, 2017, and allowed the refund claim in cash.
4.5 Undisputedly in the present case appellant had filed a refund claim with the jurisdictional Assistant Commissioner claiming refund of Rs 8,59,420/- on 09.02.2017. The refund claim was adjudged in favour of appellants by the said authority vide order dated 05.05.2017 to the extent of Rs 8,47,496/-, but instead of allowing the refund in cash, the refund was allowed by the Assistant Commissioner in the CENVAT Credit account of the appellants. As per the order of the Assistant Commissioner, appellants availed the CENVAT Credit in their book of accounts on 24.05.2017, having taken the credit in their book of accounts the entire issue was settled and the position whereby appellants had paid certain amounts from their credit account as per the direction of the officers, restored back.
4.6 However appellant suo motto on 01.06.2017 reversed the credit taken in their book of accounts on 24.05.2017, without any directive or prompting by the jurisdictional authorities as they proposed filing of appeal against the order dated 05.05.2017. Along with the synopsis dated 28.10.2021 filed by the appellant and received in registry on 01.11.2021, appellants have filed a detailed date chart leading to the present appeal. The date chart is reproduced below:
4.7 From the date chart as filed by the Appellant it is observed that appeal was filed by the appellant on 11.07.2017.
4.8 Section 142 (3) and (6)(a) of the Central Goods and Service Tax Act, 2017 provided as follows:
(3) Every claim for refund filed by any person before , on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 (1 of 1944):
Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:
Provided further that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.
(6) (a) Every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 (1 of 1944) and the amount rejected, if any, shall not be admissible as input tax credit under this Act:
4.9 Before we consider the above provisions we take note of Section 1 & Section 2 (10) of the said Act, and notification No 1/2017-Central Tax dated 19.06.2017 which are reproduced below:
Section 1. Short title, extent and commencement.-
This Act may be called the Central Goods and Services Tax Act, 2017.
It extends to the whole of India 1[****]2
It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
Section 2. Definitions.-
In this Act, unless the context otherwise requires,-
(10) “appointed day” means the date on which the provisions of this Act shall come into force;
Notification No 1/2017-Central Tax dated 19.06.2017
G.S.R. …..(E).— In exercise of the powers conferred by subsection (3) of section 1 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government hereby appoints the 22nd day of June, 2017, as the date on which the provisions of sections 1, 2, 3, 4, 5, 10, 22, 23, 24, 25, 26, 27, 28, 29, 30, 139, 146 and 164 of the said Act shall come into force.
4.10 Above make it clear that appointed date for the implementation of CGST Act, was notified as 22.06.2017. The appeal in the present case has been filed by the appellant before the Commissioner (Appeals) on 11.07.2017. Thus the finding of the Commissioner (Appeal) in para 8.1 and 8.2 of the impugned order cannot be faulted with.
4.11 In the synopsis dated 16.02.2022 filed by the Appellant, received in registry on 17.02.2022, Appellant counsel has specifically stated, “Without prejudice to the facts and circumstances that in the present case, the cash refund sought was made under section 11 B of CEA and not under Rule 5 of CCR {Specific facts and grounds for cash refund have been explained in the ground of appeal} in the grounds of appeal. In the following case laws it has been consistently held that EOU’s are also entitled to cash refund under Rule 5 of CCR, 2004.” I do not dispute that EOU’s can claim cash refund in terms of Rule 5 of CCR, 2004. In fact Rule 5 is only for the cash refund of the accumulated credit on account of goods exported under bond or letter of undertaking. Admittedly the present case is not in respect of any claim made for the refund of accumulated credit as per Rule 5, but is claim made under Section 11B for the duty erroneously paid under protest as per the direction of the departmental officers from the CENVAT account. It was also not the case that when the order for refund was made i.e. 05.05.2017 and when they had taken the credit they could not have utilized the same on account of closure of business etc. They were ongoing concern and were in position to avail the said credit. Further on introduction of the Good and Service Tax they were even permitted to carry forward the said credit to that regime. In my view appellants have by reversing the credit and filing the appeal subsequent to introduction created an instrument just to en-cash the CENVAT credit by resorting to Section 142 (6) (a) of the CGST Act. Such instruments should not be allowed, Hon’ble Justice O Chinappa Reddy has in case of Mcdowell [1985 SCC (3) 280] (a bench of five Hon’ble Justices) specifically cautioned against such instruments stating as follows:
“We think that time has come for us to depart from the Westminister principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah, J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare state like ours. Next there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation. Then there is “the large hidden loss” to the community (as pointed out by Master Sheatcraft in 18 Modern Law Review 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on one side and the tax-gatherer and his perhaps not so skilful, advisers on the other side. Then again there is the ‘sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it’. Last but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless good citizens from those of the ‘artful dodgers’. It may, indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said, “Taxes are what we pay for civilized society. I like to pay taxes. With them I buy civilization.” But, surely, it is high time for the judiciary in India too to part its ways from the principle of Westminister and the alluring logic of tax avoidance. We now live In a welfare state whose financial needs, if backed by the law, have to be respected and met. We must recognize that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that It stands on no less moral plane than honest payment of taxation. In our view, the proper way to construe a taking statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally, or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. A hint of this approach is to be found in the judgment of Desai, J. in Wood Polymer Ltd. v. Bengal Hotels Limited (40 Company Cases, 597) where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax.
It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of ’emerging’ techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction.”
Agreeing with Hon’ble Justice O Chinappa Reddy, Hon’ble Justice Rangnath Misra recording the majority view observed as follows:
A further contention was advanced by Mr. Sorabji as his last submission that it is open to every one to so arrange his affairs as to reduce the brunt of taxation to the minimum and such a process does not constitute tax evasion; nor does it carry any ignominy. In support of this submission he relied on the observations of Shah, J. speaking for this Court in Commissioner of Income-tax v. Raman and Co.,( [1968] 67 I.T.R. 11) where it was said:
“The law does not oblige a trader to make the maximum profit that he. can out of his trading transactions. Income which accrues to a trader is taxable in his hands: income which he could have, but has not earned, is not made taxable as income accrues to him. Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income tax Act. Legislative injunction in taxing statutes may not except on peril of penalty, by violated, but may lawfully be circumvented.”
Support was also sought from the observations of the same learned Judge (as he then was) in the case of Commissioner of Income tax Gujarat II v. B.M. Kharwar.( [1969] 72 I.T.R. 603.) After quoting a passage from the judgment of the Privy Council in the case of Bank of Chettinad Ltd. v. Commissioner of Income tax ([1940] 8 I.T.R. 522.) this Court stated:
“The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a trans action. If the parties have chosen to conceal by a device the legal relation, it open to the taxing authorities to unravel the device and to determine the true character of the relationship But the legal effect of a transaction cannot be displaced by probing into the substance of the transaction.
In Jiyajeerao Cotton Mills Ltd. v. Commissioner of Income tax and Excise Profits Tax Bombay ([1958] 34 I.T.R. 888.) this Court observed:
“Every person is entitled so to arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not a sham or make-believe,…”
The Gujarat High Court in the case of Commissioner of Income tax v. Sakarlal Balabhai ([1968] 69 I.T.R. 186) said:
“Tax avoidance postulates that the assessee is in receipt of amount which is really and in truth his income liable to tax but on which he avoids payment of tax by some artifice or device.
Such artifice or device may apparently show the income as accruing to another person, at the same time making it available for use and enjoyment to the assessee as in a case falling within section 44D or mask the true character of the income by disguising it as a capital receipt as in a case falling within section 44E or assume diverse other forms …. But there must be some artifice or device enabling the assessee to avoid payment of tax on what is really and in truth his income. If the assessee parts with his income producing asset, so that the right to receive income arising from the asset which theretofore belonged to the assessee is transferred to and vested in some other person, there is no avoidance of tax liability: no part of the income from the asset goes into the hands of the assessee in the shape of income or under any guise.-‘ This decision has been affirmed by this Court in Commissioner of Income-tax v. Sakarlal Balabhai.([1972] 86 I.T.R. 2) We may also recall the observations of Viscount Simon in Latilla v. I. R. (25 T.C. 107.) “Of recent years much ingenuity has been expended in certain quarters in attempting to device methods of deposition of income by which those who were prepared to adopt them might enjoy the benefits of residence in this country while receiving the equivalent of such incomes, without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that, however elaborate and artificial such methods may be, those who adopt them are “entitled” to do so. There is, of course, no doubt that they are within their legal rights, but that is no reason why their efforts, or those of the professional gentlemen who assist them in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship. On the contrary one result of such methods, if they succeed, is of course to increase pro tento the load of tax on the shoulders of the great body of good citizens who do not desire, or do not know how, to adopt these manoeuvres. Another consequence is that the Legislature has made amendments to our Income Tax Code which aim at nullifying the affectiveness of such schemes.”
Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.
On this aspect one of us, Chinnappa Reddy, J. has proposed separate and detailed opinion with which we agree.”
4.12 In my view the appeal filed by the appellant before the Commissioner (Appeal) is nothing but a colorable device created by the appellant to claim the benefit which was not due. All could have been avoided and appellant could have carried forward the Cenvat Credit availed by them in their book of accounts on 24.05.2017 as per the order dated 05.05.2017 to the GST regime. But it is also settled principle in law that nobody should be allowed the benefit of his own wrongs. Reference is made to the observations of Hon’ble Apex Court in the case of Devendra Kumar [(2013) 9 SCC 363]
“23. More so, if the initial action is not in consonance with law, the subsequent conduct of a party cannot sanctify the same. “Subla Fundamento cedit opus”- a foundation being removed, the superstructure falls. A person having done wrong cannot take advantage of his own wrong and plead bar of any law to frustrate the lawful trial by a competent Court. In such a case the legal maxim Nullus Commodum Capere Potest De Injuria Sua Propria applies. The persons violating the law cannot be permitted to urge that their offence cannot be subjected to inquiry, trial or investigation. (Vide: Union of India v. Maj. Gen. Madan Lal Yadav, AIR 1996 SC 1340; and Lily Thomas v. Union of India & Ors., AIR 2000 SC 1650).
Nor can a person claim any right arising out of his own wrong doing. (Juri Ex Injuria Non Oritur).”
4.13 Since it is the submission of the appellant that the present refund claim has been filed by them under Section 11B, the issue of admissibility of interest needs to be adjudicated in terms of Section 11BB. Since both the authorities have considered the request as per section 11 BB and thereafter rejected the claim to interest in my view appeal should fail on this account also.
4.14 Appellant has in his synopsis referred to a number of case laws which in my view are not relevant to the controversy in hand, so I am not taking them for discussion individually.
5.1 Appeal is dismissed.
(Order pronounced in the open court)
