Eastman Exports Global Clothing P. Ltd vs Commissioner Of Central Excise

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI

Appeal Nos.E/194/2008 & E/320/2008

[Arising out of Order-in-Appeal No.1/2008-CE dt. 10.1.2008 & Order-in-Appeal No.53/2008-CE dt. 31.3.2008 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Coimbatore]

Eastman Exports Global Clothing P. Ltd. Appellant

Versus

Commissioner of Central Excise, Coimbatore Respondent

Appearance:

Shri Barish Bindhumadhavan, Advocate For the Appellant

Shri L.Paneerselvam, AC (AR) For the Respondent

CORAM :

Honble Shri D.N. Panda, Judicial Member Honble Shri R. Periasami, Technical Member

Date of Hearing/Decision : 10.3.2015

FINAL ORDER No.40269-40270/2015

Per D.N. Panda

Ld. counsel submits that appellant was a manufacturer of garments and also was exporter thereof for the period March 2006 to July 2006. While carrying out manufacturing activity and exporting, it has availed taxable services. To avail so, service tax has been paid on the respective services. Accordingly, it was entitled to cenvat credit of such service tax. But such credit not being possible to be utilised that was accumulated. Therefore, appellant claimed refund of Rs.67,85,179/- of such accumulated credit under Rule 5 of Cenvat Credit Rules, 2004. This claim involved in Appeal No.E/320/2008 pertains to the month of July 2006. Similar such claim of Rs.69,24,938/- involved in Appeal No.E/194/2008 pertained to the month of June 2006. Two different returns for these period were filed separately showing the claim. But Revenue disallowed the claim on the following grounds :-

(a) The appellant claimed drawback as well as refund of cenvat credit unutilized. Therefore refund is not permissible.

(b) The unutilised credit relating to the period prior to June 2006 is not admissible for refund.

(c) The appellant having exported the goods under drawback claim, no bond was executed.

(d) Some of the cenvat credits were availed on the basis of debit note.

2. It is explained by learned counsel that it is a fact that although service tax paid was eligible for drawback claim, there was no law earlier for such claim. Drawback on such service tax was allowed with effect from 13.7.2006 and relevant rule was amended to allow drawback of service tax paid. When the rule was not permitting drawback on service tax, appellant has not at all claimed the drawback thereon. That can be established if the authority verify entire record relating to exports. The drawback claims for the above periods not being made, execution of any bond does not arise. Therefore, the allegation of export of goods without execution of bond does not sustain nor the allegation of drawback claim sustains.

3. It is explained on behalf of appellant that accumulated credit which have not been utilized that was carried forward in the respective ARE-1 returns and disclosed to the Department. Carried forward of credits are genuine as well as verifiable. Therefore, following the decision of the Hon'ble Bombay High Court in the case of CST Mumbai Vs WNS Global Service (P) Ltd.  2011 (22) STR 609 (Bom.), there cannot be denial of carried forward credits to be refunded as it was not possible to be utilized in view of the status of the appellant as an exporter manufacturer. He further submits that when Rule 5 has not made any provision prohibiting carried forward credits to be refunded that does not take away right of the appellant to the refund since taxes are not exported but goods are only exported.

4. Appellant's last submission is that all the invoices relating to availing of services being verifiable from record showing payment of service tax those were not at all debit notes. Necessary particulars of paying service tax being verifiable from record, appellant is not disentitled to the credit thereof. Refund thereof when falls under Rule 5 of CCR 2004 there cannot be any denial thereto.

5. Revenue on the other hand submits that appellant made double claim once in June 2006 and in July 2006 of different amounts. Therefore, only one claim can be entertained if that is admissible. Secondly, appellant failed to produce claim of drawback. Thirdly there cannot be carry forward of cenvat credit. Fourthly, debit notes disentitled the appellant to the refund of cenvat credit.

6. Heard both sides and perused the records.

7. So far as the claim of drawback is concerned, there is no material evidence on record to appreciate that export of the appellant were supported by drawback claim. There was no enquiry done with the customs authority. Learned counsel in all fairness states that if any enquiry is done no material showing the export under drawback claim can be discovered by Revenue. Therefore, as an abundant caution, the Authority for his satisfaction may cause verification from the Customs authorities as to whether export was made by the appellant under drawback scheme. If there was claim of drawback of service tax and such drawback has been paid, refund of cenvat credit of service tax shall not be allowed. It may be stated that when the drawback on service tax was not extended before 13.7.2006, claim thereof cannot be presumed.

8. When there is no provision to disallow refund of the cenvat credit pertaining to service tax remaining unutilized and carried forward, the Hon'ble High Court of Bombay has held in the aforesaid judgement that in the absence of any distinction in Rule 5 prior to 13.2.2006, appellant cannot be disentitled to claim of refund thereof. Therefore entire carried forward credit remaining unutilized should be refunded.

9. So far as the allegation of repetitive claim is concerned, record does show any material as to repetitive claim of this cenvat credit made by appellant. If the appellant had made double claim, the authority should have brought in clear terms as to the amount whether claimed for the self-same period. There were two claims pending before the authority but that is not the case of repetitive claim. Therefore, the allegation of double claim is ruled out.

10. So far as the execution bond for export is concerned, we have answered in preceding para that when the exports were not covered by drawback claim of service tax, there shall be no requirement of bond. If the authority finds that the exports were made under drawback claim of service tax, then execution of bond shall receive his consideration.

11. The allegation of Revenue that the drawback claim of service tax was made under debit notes does not appear to be sound when learned counsel says that in all fairness, it is left open to the adjudicating authority to examine the invoices relating to service tax paid to ascertain whether those were debit notes or real invoices. Considering the proposition of appellant fair, the authority if chooses to examine the invoices may specifically scrutunise the claim and record his finding in the de novo adjudication. Without any finding, he shall not pass blanket order stating that the invoices were not present and the claim was made through debit notes.

12. In view of answering to the issues as above, we expect that the appellant shall get fair opportunity of hearing before the adjudicating authority on its claim within 2 months of making an application to fix the date of hearing. Exports being encouraged to earn foreign exchange, the authority shall not delay but shall pass appropriate order expeditiously.

13. In the result, both the appeals are remanded with the direction above to learned adjudicating authority to pass appropriate order.

(Dictated and pronounced in open court)

(R. PERIASAMI) (D.N. PANDA) TECHNICAL MEMBER JUDICIAL MEMBER

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