M/S. M.M. Forgings Ltd vs Cce, Tiruchirappalli

(Arising out of Order-in-Appeal No. 47/2003 dated 31.1.2003 passed by the Commissioner of Central Excise, Tiruchirappalli)

M/s. M.M. Forgings Ltd. Appellant

Vs.

CCE, Tiruchirappalli Respondent

Appearance

Shri S. Muthuvenkataraman, Advocate for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent

CORAM

Honble Shri R. Periasami, Technical Member Honble Shri P. K. Choudhary, Judicial Member

Date of Hearing / Decision: 22.06.2015

Final Order No. 40676 / 2015

Per R. Periasami

Appellant preferred appeal against Order-in-Appeal dated 28.11.2003 passed by Commissioner (Appeals).

2. The brief facts of the case are that the adjudicating authority had sanctioned refund of Rs.74,99,199/- by way three Orders-in-Original dated 23.11.2001, 8.2.2002 and 6.5.2002 under Rule 57AC(7) of Central Excise Rules, 1944 and Rule 5 of CENVAT Credit Rules being unutilized credit accumulated on account of exports. After sanctioning the refund, the adjudicating authority issued three show-cause notices dated 21.11.2002, 3.1.2003 and 3.1.2003 demanding recovery of erroneous refund under section 11A of Central Excise Act, 1944 and confirmed the demand of Rs.74,99,199/- and also imposed penalty of Rs. 1,00,000/- under section 11AC of Central Excise Act, 1944 by common Order-in-Original No. 109 to 111/2003 dated 10.9.2003. Commissioner (Appeals) upheld the adjudication order. Hence, appellants have come in appeal before this Tribunal.

3. Learned counsel submits that the Department has sanctioned refund under Rule 57AC(7) of Central Excise Rules, 1944 and Rule 5 of CENVAT Credit Rules, 2002 being unutilized amount of credit accumulate towards their export. He submits that the refund orders were not reviewed by the Department nor any appeal filed against the said orders. Instead the adjudicating authority issued show-cause notices for recovery of refund. He further submits that as per clause 3 of Appendix to Notification No. 35/2000-CE(NT) dated 28.4.2000 stipulates the time limit as six months for recovery of erroneous refund. But the notices were issued beyond six months. When the notification stipulates the time limit for recovery of refund the time limit specified under section 11A is not applicable. He relied on the following decisions:-

(a) CCE, Hyderabad Vs Sunder Steels Ltd.  2005 (181) ELT 154 (SC)

(b) Rourkela Steel Plant Vs. CCE, Bhubaneswar - 2008 (227) ELT 522 (Tri.  LB)

(c) CCE, Jaipur Vs. Raghuvar (India) Ltd.  2000 (118) ELT 311 (SC)

(d) Shasun Chemicals & Drugs Ltd. Vs. Collector of Customs, Madras  1998 (98) ELT 79

He submits that in the case of Shasun Chemicals (supra) this Tribunal has held that the limitation prescribed under Notification No. 85/87 dated 1.3.1987 is only applicable and the extended period of limitation under section 11A is not applicable.

4. On the other hand learned AR for Revenue reiterates the findings of the impugned order and submits that the provisions of section 11A is applicable as show-cause notices were issued for demanding erroneous refund granted under section 11A and the show-cause notices were not issued under Notification. He further submits that if time limit specified under notification is taken no recovery can be made beyond the period of five years and extended period cannot be invoked in any refund. Therefore, section 11A provision overrides the notification.

5. After hearing both sides and careful consideration of the records, we find that the limited issue in this case is whether notices issued by adjudicating authority for demanding erroneous refund is hit by limitation specified under notification No. 35/2000 or whether general limitation for extended period is covered under section 11A of Central Excise Act, 1944.

6. On perusal of the records, we find that the adjudicating authority had sanctioned refund of Rs.74,99,199/- by three different orders-in-original. We find that all the refunds were sanctioned under Rule 57AC(7) of Central Excise Rules, 1944 and Rule 5 of CENVAT Credit Rules, 2002 as being unutilized credit accumulated on account of exports. As regards the appellants contention that Notification 35/2000-CE (NT) dated 1.3.2000 is specific and self-contained, for the sake of easy reference, clause 3 of Appendix to the said Notification is reproduced below:-

3. The manufacturer undertakes to refund to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, on demand being made, within six months of the date of payment, any refund erroneously paid to him.

As seen from the above, it is clear that the demand of erroneous refund made under this notification shall be within six months from the date of refund. We also find that the adjudicating authority has sanctioned the refund but there is nothing on record to show that the said order has been reviewed whereas we find that the adjudicating authority again issued show-cause notices for recovery of erroneous refund on his own under section 11A.

7. We also find that the issue has already been decided by this Tribunal in the case of Shasun Chemicals & Drugs (supra) and by the Honble Supreme Court in the case of CCE Vs. Raghuvar (India) Ltd. (supra) wherein it categorically held that when there is a limitation provided under the notification, the period mentioned under section 11A is not applicable. Para 13 of the Honble Supreme Courts order reads as under:-

13.?Any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed therefor. It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. Section 11A is not an omnibus provision which provides any period of limitation for all or any and every kind of action to be taken under the Act or the Rules but will be attracted only to cases where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded. The section also provides for an extended period on certain contingencies and situations. The situation on hand and the one which has to be dealt with under Rule 57-I, as it stood unamended, does not fall under any one of those contingencies provided for in Section 11A of the Act.

Part AA of the Rules in which Rule 57-I is found included provides a special scheme for earning credit and adjustment of duty paid on excisable goods used as inputs in the manufacture of what is referred to as final product, and thereby enable the manufacturer to utilize the credit so allowed towards payment of duty of excise leviable on the final products, in the manner and subject to the terms and conditions stipulated therein. The manufacturer, in this case while removing the final product manufactured has adjusted against payment of excise duty on such final product a part or portion of the credit earned by him under the special scheme and what is sought to be really and in substance done is to inform the manufacturer that the adjustment he purported to have made was with an amount not legitimately or factually earned by or due to him. For this purpose, the irregularity and impropriety committed by the manufacturer in maintaining the accounts and the error in the calculation of the credit said to have been earned by him is pointed out, and the manufacturer is only directed to reverse the credit so wrongly and undeservedly made by readjustment and if need be, to recover the amount equivalent to such credit wrongly availed of and disallowed by the proper officer.

The recovery of credit availed of and utilized in utter breach of the faith and mutual trust and confidence which is the raison detre for the proper and successful working of the Modvat scheme and that too in gross violation of the mandatory requirements necessarily to be fulfilled before ever claiming or availing of such benefits cannot be said to be the same as the demand for payment to be made under Section 11A of the Act of any excise duty not levied or paid or has been short-levied or short-paid. They fall into two distinct and different categories altogether with basic as well as substantial differences to distinguish them from each other. As a matter of fact, Rule 57-I envisages disallowance of the credit and consequential adjustment in the credit account or the amount-current maintained by the manufacturer and if only any such adjustments are not possible proceed to recover the amount equivalent to the credit illegally availed of. Consequently, the situation postulated to be dealt with under Rule 57-I cannot be said to involve a case of manufacture and removal of excisable goods without subjecting such goods to levy or payment of the various nature and category enumerated in Section 11A of the Act on its own terms will have no application or operation to cases covered under Rule 57-I of the Rules.

8. The ratio of this Tribunal order and the Honble Apex Courts judgment are clearly applicable to the facts of the present case and there is no dispute on the fact that the refund was sanctioned under Rule 5 of CENVAT Credit Rules, 2002 in terms of Notification No. 35/2000. Therefore, when such notification clearly stipulates time limit for recovery of erroneous refund the adjudicating authority ought to have demanded erroneous refund within six months, instead the notices were issued beyond six months by invoking section 11A.

9. Respectfully following the decision of the Honble Apex Court and this Tribunal, the demand of erroneous refund is hit by limitation. Accordingly, the appeal is allowed.

(Dictated and pronounced in open court)

(P.K. CHOUDHARY) (R. PERIASAMI) Judicial Member Tehnical Member

Rex

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