Commissioner Of Central Excise, Pune ... vs Bora Agro Foods

(Arising out Order-in-Appeal No. PUN-EXCUS-003-APP-069-14-15 dated 16.09.2014passed by the Commissioner of Central Excise (Appeals), Pune III)

For approval and signature: Honble Mr. P.K. Jain, Member (Technical)

1. Whether Press Reporters may be allowed to see No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy Yes of the Order?

4. Whether Order is to be circulated to the Departmental Yes authorities?

Commissioner of Central Excise, Pune III Appellant

Vs.

Bora Agro Foods Respondent

Appearance:

Shri V.K. Shastri, AC (AR) for the appellant None for the respondent

CORAM:

Honble Mr. P.K. Jain, Member (Technical)

Date of hearing : 06.02.2015 Date of decision : 06.02.2015

O R D E R No:..

Per: P.K. Jain:

The brief facts of the case are that the respondents are 100% EOU and availing Cenvat credit facilities. They filed a refund claim under Rule 5 of CENVAT Credit Rules, 2004 for the period July 2012 to September 2012. The said claim was rejected on the ground that the respondent is not satisfying the clause 2(h) of Notification 27/12-CE(NT) dated 18.06.2012. The respondent filed appeal before the Commissioner (Appeals) who after going through the facts of the case allowed the refund claim (though in part). Revenue is in appeal against the said decision of the Commissioner (Appeals). The main ground of appeal is that the appellant is not satisfying the conditions prescribed under clause 2(h) of Notification 27/12-CE(NT). Revenues contention is that the said condition is mandatory condition and in view of the Hon'ble Supreme Court decision in the case of Mangalore Chemicals & Fertilisers Ltd. 1991 (55) ELT 437 (SC) the claim is required to be rejected.

2. The ld. AR reiterated the grounds of appeal. None appeared on behalf of the respondent.

3. We have gone through the impugned order. The relevant portion of the impugned order is reproduced as under:-

13. Facts of this case are that the entire refund claim was rejected only on the ground that the Appellant had not debited the amount claimed as refund in their CENVAT Credit Account at the time of submitting the refund claim as required under clause (h) of Para 2.0 of Notification No. 27/2012 CE(N.T.) dated 18.06.2012. It is not disputed that the Appellant had submitted all relevant export documents with necessary proof of export; that the refund claim was submitted in time. I find that it is established from records that the amount of refund claim (Rs.21,94,913/-) was debited in CENVAT Account on 01-07-2013; that the same was done on the day of filing of the refund claim (01.07.2013), but had not been reflected in the ER-2 Return for July 2013 filed by the Appellant; that thus it is also a fact that the debit of refund claim amount was done in the CENVAT Credit account of the Appellant before issuance of the Show Cause Notice dated 25-09-2013. Further, in the present case, the facts of export of goods and consequent accumulation of CENVAT Credit on account of export of goods without payment of duty are not disputed. It is also not disputed that except the alleged violation of the condition contained in clause 2(h) of Para 2.0 of the Notification No. 27/201 2-CE(N.T.), the Appellant had fulfilled all the conditions and limitations of Notification No. 27/2012-CE(N.T.). Further, the value of Export Turnover is not disputed, and refund amount was not more than the balance lying in CENVAT account at the end of quarter for which refund claim was made or the balance lying at the time of filing the refund.

14.  

However, the undisputed factual position is also that the Appellant had failed to reflect the said debit of refund claim amount in their ER-2 Return for July 2013, even though it is established from records that they had debited the said amount in their CENVAT credit account on 01.07.2013, i.e. on the day of filing the refund claim. In any case, the Appellant had debited the same before the issuance of Show Cause Notice on 25-09-2013 and much before the issuance of the Order-in-Original dated 06-02-2014. I have also noticed that this requirement of clause (h) of Para 2.0 of Notification No. 27/2012-CE(N.T.) was not there in the earlier Notification No. 5/2006-CE(N.T.) dated 14.03.2006, which is the predecessor Notification of the Notification No. 27/2012-CE(N.T.) dated 18-06-2012, which is applicable to the exports made on or after 1st April, 2012. Though, the present refund claim is in respect of the quarter July to September, 2012, but it is first such refund claim of the Appellant under Rule 5 of the CCR, in respect of their CENVAT Credit accumulated on account of exports. Thus, not only the procedural lapse of not reflecting the said debit in ER-2 Return for July 2013 had happened during the period of transition from the earlier Notification No. 5/2006-CE(N.T.) to the new Notification No. 27/2012-CE(N.T.), but also it has to be seen in light of the factual position of this case that this refund claim under Rule 5 of the CCR was first refund claim of the Appellant and they had indeed debited the said amount of Rs. 21,94,913/- in their CENVAT Credit account on 01.07.2013, which is also the date of filing of the impugned refund claim.

Further, the said debit was reflected by the Appellant in the ER-2 Return for August 2013. On this ground, a constructive approach appears proper in view of the eventual debit of the amount on 01-07-2013 by the Appellant in their CENVAT credit account, which is established from records. I have also noticed that the purpose of this debiting of CENVAT credit amount of which refund is claimed, is that the said amount remains frozen and cannot be utilized by the exporter when his refund claim is under process. In their words, the Notification stipulates that exporter-assessee shall not utilize that amount for any purpose till his refund claim is under process. The sub-clause (i) of Para 2.0 of Notification No. 27/2012-CE(N.T.) reads as under:

"(i) In case the amount of refund sanctioned is less than the amount of refund claimed, then the claimant may take back, the credit of the difference between the amount claimed and amount sanctioned."

This provision, which permits suo moto taking of CENVAT credit of the portion whose refund has not been sanctioned, makes it absolutely clear that the debiting of the amount, of which refund is claimed, at the time of filing the refund claim is only a procedural requirement to safeguard the interest of revenue. Once the exporter who has claim the refund, demonstrates that he has complied with the said requirement and the interests of revenue are safeguarded, a minor deviation of delay in debiting the said amount (which actually has not really happened in the present case, as the date of debit and the date of filing refund claim is same, i.e. 01.07.2013) or the delay in reflecting the said amount in the monthly ER-2 Return, can be condoned. Accordingly, I conclude that this requirement of sub-clause (h) of Para 2.0 of Notification No. 27/2012-CE(N.T.) is only a procedural requirement which is directory in nature. In the present case, even the said requirement stands fulfilled, by the debit of CENVAT credit account made by the Appellant on 01-07-2013. Thus, I find that the decision of rejection of impugned refund claim by Ld. Respondent by treating the said requirement as having not been fulfilled, is not correct.

15. It is settled law that the conditions of a Notification which are mandatory are required to be essentially fulfilled. The non-fulfillment of requirements which are directory, i.e. the requirements to complete the procedure, can be condoned if mandatory requirements have been fulfilled. The Hon'ble Supreme Court, in the case of CCE, New Delhi Vs. Had Chand Shri Gopal & Others etc. 2010 (260) E.L.T. 3 (S.C.), at Para 22-24.. had held as under:

"24. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed.

Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine.

On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential."

The above decision of Hon'ble Supreme Court squarely covers the issue involved in the present case and is binding on me. It fully supports my conclusion in Para 14 above. In this case it is clear that the Ld. Respondent had rejected Appellant's claim only on the ground that the Appellant had not debited the amount claimed as refund in their CENVAT Credit Account at the time of submitting the refund claim, despite the Appellant having debited it on the same day (01.07.2013) and much before the issuance of the Show Cause Notice and much before the passing of the Order-in-Original. As concluded hereinabove, the said defect had been rectified by the Appellant suo moto, even before the issuance of the Show Cause Notice. Further, the Ld. Respondent has ignored the provisions of clauses (i) and (g) of Para 3.0 of Notification No. 27/2012-CE(NT) which prescribe the correct method for sanction of refund claim. Therefore, I conclude that the findings of the Ld. Adjudicating Authority are not maintainable in the eyes of law and the refund is admissible to the Appellant as all the mandatory conditions relating to refund of CENVAT credit under Rule 5 of the CCR read with Notification No. 27/2012-CE(N.T.) have been fulfilled.

4. I find that in the appeal, none of the findings of the Commissioner (Appeals) mentioned above has been disputed except stating that condition under clause 2(h) is mandatory. In my view the finding of the Commissioner that the appellant has debited the amount in the Cenvat credit account on 01.07.2003 i.e. on the date of filing of the refund claim satisfied the said condition. The fact that the details of the same have not been reflected in the ER-2 or in the application filed will not make any difference. In any case, all the information was provided to the Revenue before the decision of the case and there is no possibility of any manipulation etc. In view of the said decision, I do not find any infirmity in the order passed by the Commissioner (Appeals) and accordingly, appeal filed by the revenue is dismissed.

(Operative part pronounced in Court)

(P.K. Jain) Member (Technical)

//SR

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