Case Law Details
C.C.E. & S.T.-Vadodara-I Vs Welspun Corp Ltd (CESTAT Ahmedabad)
CESTAT Ahmedabad held that suo moto re-credit duly allowable as eligibility of cenvat credit on outward transportation has attained finality and decided in favour of the appellant.
Facts- The respondent had availed cenvat credit in respect of outward transportation which was disputed by the department by issuing a show cause notice and proposing to deny cenvat credit on outward transportation. The respondent had reversed the cenvat credit in register vide their RJ- 23A-Pt-II, entry No 2583 dated 08.12.2005 and 967 dated 15.06.2007.
Accordingly, the said suo motu credit was taken after the Tribunal allowed the cenvat credit on outward transportation. The revenue has issued show cause notice dated 10.04.2013 whereby it was proposed to disallow the cenvat credit of Rs. 59,35,233/- which was suo motu re – credited by the respondent. The proceeding of the said show cause notice was dropped by the Commissioner (Appeals) vide impugned order-in original dated 15.10.2013. Being aggrieved by the said order dated 15.10.2013, the revenue filed the present appeal
Conclusion- As regard the suo motu re-credit we are of the view that the entire proceeding was to disallow the cenvat credit on outward transportation and during the proceeding the respondent had reversed the credit when the Tribunal has allowed the credit on merit in respect of outward transportation vide Tribunal Final Order No A/416-417/WZB/AHD/2012 dated 19.03.2012. The respondent was legally entitled for re-credit as consequential relief flowing from the said Tribunal’s order. Therefore we do not see anything wrong in taking the suo moto re-credit which is clearly in compliance to the Tribunal’s order.
Held that we do not find anything wrong in respondent’s taking suo moto re-credit of cenvat credit which was reversed.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the respondent had availed cenvat credit in respect of outward transportation which was disputed by the department by issuing show cause notice dated 27.11.2007 proposing to deny of cenvat credit on outward transportation. Moreover, the respondent had reversed the cenvat credit in register vide their RJ- 23A-Pt-II, entry No 2583 dated 08.12.2005 and 967 dated 15.06.2007. The show cause notices were issued on 15.06.2007 and 27.11.2007 which were adjudicated vide Order-In-Original dated 21.02.2006and 30.09.2008 whereby the cenvat credit was denied. Being aggrieved by the said Order-In-Original the respondent filed the appeal before this Tribunal and the same was allowed vide final order no. A/416-417/WZB/AHD/2012 dated 19.03.2012 by allowing the cenvat credit on outward transportation against which the Revenue filed the appeal before the Hon’ble Supreme Court. The Hon’ble Supreme court vide order dated 17.01.2018 dismissed the Revenue’s appeal. Accordingly, the eligibility of cenvat credit on outward transportation in the respondent’s case attained finality in their favour.
1.2 In another proceeding which is related to the appeal here in respondent had taken suo-motu re-credit which was reversed during proceeding of the above case. The said suo motu credit was taken after the Tribunal allowed the cenvat credit on outward transportation in the case discussed above. The revenue has issued show cause notice dated 10.04.2013 whereby it was proposed to disallow the cenvat credit of Rs. 59,35,233/- which was suo motu re – credited by the respondent. The proceeding of the said show cause notice was dropped by the Commissioner (Appeals) vide impugned order-in original dated 15.10.2013. Being aggrieved by the said order dated 15.10.2013, the revenue filed the present appeal on two grounds:-
i. The respondent is not entitled to take suo motu re-credit.
ii. Against the Tribunal order the Revenue filed the present appeal before the Supreme Court.
2. Shri Rajesh K Agarwal, Learned Superintendent (AR) appearing on behalf of the Revenue appellant reiterates the grounds of appeal.
3. Shri Hardik Modh, Learned Counsel appearing on behalf of the Respondent submits that the respondent had reversed cenvat credit because the department has disputed the cenvat credit on outward transportation. Subsequently, the proceeding for dis-allowance of such credit was carried out and the cenvat credit was allowed by the Tribunal. Therefore, in view of the Tribunal Order, the respondent has legally and correctly re-credited cenvat credit which was also reversed.
3.1 As regard the ground that Revenue has filed the appeal before the Hon’ble Supreme Court, the Hon’ble Supreme Court has dismissed the Revenue’s appeal and therefore, the said ground does not exist.
3.2 He submits that as regard the suo motu re-credit, in the identical facts this Tribunal and High Court has passed various orders. He placed reliance on the following judgments:-
- C.E, Surat –II vs. Vardhman Acrylics Ltd – 2013 (292) ELT 558 (Tri. Ahmd)
- Shyam Textiles Mills vs. UOI – 2004 (6) TMI 590 (Guj.)
- M/S. JSW Steel (Salav) Ltd ( Earlier Known as Welspun Maxsteel Ltd) vs. C.C.E & ST – Raigad – 2022 (9) TMI 1276- CESTAT Mumbai
- Ratnamani Metals & Tubes Ltd Vs. CCE & ST – Ahmedabad- III – 2014 (35) STR 111 (Tri. Ahmd)
- Cosmo Films Ltd vs. C.C.EX & ST, Vadodara –II – 2014 (7) TMI 188 – CESTAT Ahmedabad
- Dabur India vs. C.C.E, Ghaziabad – 2016 (342) ELT 125 (Tri. All.)
4. We have carefully considered the submission made by both sides and perused the records. We find that in the present appeal revenue has challenged the suo motu re-credit taken by the respondent. As regard the challenge to Tribunal’s order which allowed the cenvat credit on outward transportation before the Hon’ble Supreme Court, since the Hon’ble Supreme Court has dismissed the Revenue’s appeal, the appeal on this ground is sustainable.
4.1. As regard the suo motu re-credit we are of the view that the entire proceeding was to disallow the cenvat credit on outward transportation and during the proceeding the respondent had reversed the credit when the Tribunal has allowed the credit on merit in respect of outward transportation vide Tribunal Final Order No A/416-417/WZB/AHD/2012 dated 19.03.2012. The respondent was legally entitled for re-credit as consequential relief flowing from the said Tribunal’s order. Therefore we do not see anything wrong in taking the suo moto re-credit which is clearly in compliance to the Tribunal’s order. This issue has been considered by this Tribunal in case of C.C.E, Surat –II vs. Vardhman Acrylics Ltd – 2013 (292) ELT 558 (Tri. Ahmd) wherein the Tribunal has taken the following view:
“5. The only issue required to be deliberated in this appeal is whether or not respondent can take Cenvat credit suo motu, when the issue of Cenvat credit on merits was decided in their favour by Commissioner (Appeals). Appellant-department has relied upon certain judgments in their grounds of appeal as well as during the course of hearing and emphasized that suo motu credit is not permissible and the same could have been taken by following the refund procedure under Section 11B of the Central Excise Act, 1944. It is observed that the earliest of the relied upon judgments is that of the Hon’ble Supreme Court in the case of Mafatlal Industries Limited. v. UOI [1997 (89) E.L.T. 247 (S.C.)] which was delivered in relation to the amendment made in 1991 to introduce the concept of unjust enrichment with respect to refund cases under Section 11B of the Central Excise Act, 1944. Section 11B of the Central Excise Act talks about refund of duties and the related amendment was introduced to the effect that claimant should establish that the burden of duty, for which refund claim is filed, is not passed on to the customers. In the present case, the issue is not regarding refund of duties but taking of admissible credit, which was earlier reversed under protest and on receipt of a favourable order from the first appellate authority. Therefore, the judgment of the Hon’ble Supreme Court in the case of Mafatlal Industries Limited (supra) was only with respect to all those refund claims where unjust enrichment has to be examined. Such refund claims will mean cash refunds or where duty is paid at the time of clearance. It is a settled law now that unjust enrichment is not applicable where refund is that of penalties or pre-deposits made in the appellate proceedings. Therefore, judgment of Hon’ble Supreme Court in the case of Mafatlal Industries Limited. case is not applicable to the facts and circumstances of this case, where the issue involved is only taking of an admissible cenvat credit on receipt of a favourable order.
6. In judgment of Oudh Sugar Mills Limited. v. CCE, Allahabad [2006 (199) E.L.T. 628 (Tri.-Del.) = 2008 (9) S.T.R. 577 (Tribunal)] relied upon by the Revenue, Cenvat credit was reversed on the basis of a letter from the department and no appeal was filed and suo motu credit was taken after the payments were made. Credit was also not reversed under protest. In the present case, not only the Cenvat credit was reversed under protest but a proper appeal was also filed on the issue before Commissioner (Appeals) on admissibility of credit. Only after getting the case decided in their favour, cenvat credit was taken by the respondent. The facts of this case are thus substantially different from the facts of Oudh Sugar Mills case (supra). Hence the same is not applicable to the facts and circumstances of this case.
7. Similarly, in the case of Vighnahar SSK Limited v. CCE, Pune (supra), it was held that refund claim was required to be filed so that the same could pass the test of unjust enrichment. In the instant case, the Cenvat credit was reversed before the issue of show cause notice. It is settled law now that once Cenvat credit taken is reversed than it is considered to be as if no credit is taken. After reversing the credit, respondents in this case agitated the issue and got the decision in their favour. Once an issue on admissibility of Cenvat credit is decided in their favour by appellate authority then the Cenvat credit becomes admissible. There is no law to deny Cenvat credit when the same is held admissible and an assessee does not require the approval of any authority to take the admissible Cenvat credit as per the Cenvat Credit Rules. This was not a situation where a refund claim was required to be filed to stand the test of unjust enrichment as per the law laid down by the Hon’ble Supreme Court in the case of Mafatlal Industries Limited. (supra). The relied upon judgments by the appellant are thus distinguishable and not applicable to the facts and circumstances of this case. It has also been held by the CESTAT, Ahmedabad Bench in the case of Bock India Pvt. Limited. v. CCE, Vadodara [2009 (241) L.T. 251 (Tri.-Ahmd.)] that Larger Bench decision of the Tribunal in the case of M/s. BDH Industries Limited v. CCE [2008 (229) E.L.T. 364 (Tribunal-LB)] is not applicable to refund of pre-deposits, on success in an appeal.
8. The Hon’ble High Court, in the case of Shyam Textile Mills & Anr v. UOI & Ors [2005 (67) RLT 488 (Guj.)] has also decided the issue in favour of the assessee as per Para 5 of this order, reproduced below :-
“5. Having heard the learned counsel for the parties, we are not in a position to appreciate as to how the respondents can find fault with the petitioner’s availing of the amount lying to their credit in the deemed credit register after having succeeded before the Commissioner (Appeals). The respondents appear to be harbouring a misconception that there has to be some provision under which the petitioner can take benefit of the refund only after seeking permission of the authority whose order has been set-aside by the Commissioner (Appeals).”
CESTAT Bench Bangalore also in the case of Ultra Tech Cement Limited. v. CCE, Tirupati [2010 (261) E.L.T. 696 (Tri.-Bang.)] has held that suo motu credit reversed during pendency of decision can be taken.
9. Based on the above observations, it is held that suo motu admissible Cenvat credit taken, after getting a favourable decision from the first appellate authority, is correct. Accordingly, the Order-in-Appeal dated 20-12-2006 is upheld and appeal filed by the Revenue is rejected.”
4.2 Similar case has been considered by the Hon’ble Gujarat High Court on the case of Shyam Textiles Mills vs. UOI – 2004 (6) TMI 590 (Guj.)wherein the Hon’ble High Court has passed the following order: –
“4. We have heard Mr Paresh M Dave, learned counsel for the petitioner and Ms DN Raval, learned Senior Standing Counsel for the respondents. The learned counsel have relied upon the submissions made in their respective pleadings and reiterated the same.
5. Having heard the learned counsel for the parties, we are not in a position to appreciate as to how the respondents can find fault with the petitioner’s availing of the amount lying to their credit in the deemed credit register after having succeeded before the Commissioner (Appeals). The respondents appear to be harbouring a misconception that there has to be some provision under which the petitioner can take benefit of the refund only after seeking permission of the authority whose order has been set aside by the Commissioner (Appeals).
6. The second ground about pendency of the appeal before the Tribunal is also untenable because the Tribunal has not granted any stay in favour of the department and against the petitioner regarding operation of the order of the Commissioner (Appeals). The impugned show cause notice is not at all tenable and is issued by the Assistant Commissioner of Central Excise, Ahmedabad-I in defiance to the order of the Commissioner (Appeals) and cannot be countenanced. The impugned show cause notice is, therefore, without any authority of law and deserves to be quashed and set aside.
7. Accordingly, this petition is allowed and the impugned show cause notice dated 16.2.2004 is quashed and set aside.
It goes without saying that ultimately if the department succeeds before the Tribunal, the petitioner will have to refund the amount. It is also clarified that we have not gone into the merits of the controversy which is the subject matter of appeal before the Tribunal.
Rule is made absolute.”
4.3 In another case of Ratnamani Metals & Tubes Ltd vs. CCE & ST – Ahmedabad- III – 2014 (35) STR 111 (Tri. Ahmd) dealing with the similar case the Tribunal has passed the following order:-
“6. In my view, the issue in the case is regarding the availment of suo motu credit by the appellant after making good the said payment by making cash payment in PLA. The lower authority has dis-allowed such credit on the ground that the appellant should have applied for refund of service tax paid by them as per the provision under Section 11B of the Central Excise Act, 1944 made applicable to service tax refunds and reliance was placed in the case of M/s. BDH Industries Ltd. (supra).
7. At the outset, it is to be recorded that there is no dispute as to the fact that appellant initially discharged the service tax liability on the goods transport agency by debit in cenvat credit, subsequently on being pointed out by the audit party paid the same in cash through PLA.
8. Based on this factual matrix, having discharged duty in cash, appellant herein had taken Cenvat credit suo motu in the books of account, I find that both the authorities have relied on Larger Bench decisions of BDH Industries case. In find that factually there is no dispute that under reverse charge mechanism appellant discharged the Service Tax liability by debit in Cenvat account. There is no dispute that the credit balance in Cenvat account during the material period was an eligible credit to appellant. In my considered view the issue in this case squarely falls within the ratio as decided by this Bench in the case of Sopariwala Exports Pvt. Ltd. [2013 (291) E.L.T. 70 (Tri.-Ahmd)] and fortified by the decisions of Hon’ble High Court of Gujarat in the case of Subramaniyan & Co. as decided in Tax Appeal No. 1151 of 2011 [2013 (296) E.L.T. A123 (Guj.)]. I also find that in a recent decision on similar issue Hon’ble High Court of Madras in the case of ICMC Corporation Ltd. [2014-TIOL-121-HC-MAD-CX = 2014 (302) E.L.T. 45 (Mad.)] held in favour of the assessee. Respectfully following the said ratio laid down by the judicial pronouncements, the impugned order is set aside and the appeal is allowed with consequential relief.”
5. In view of the above judgments and from the discussion made by us herein above, we do not find anything wrong in respondent’s taking suo moto re-credit of cenvat credit which was reversed.
6. Accordingly, there is no infirmity in the impugned order. Hence, the Revenue’s appeal is dismissed.
(Pronounced in the open court on 31.10.2023 )
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