Shri A. Thangavel vs Cce, Salem

(Arising out of Order-in-Appeal No. 185/2005-CE (SLM) dated 10.11.2005, passed by the Commissioner of Central Excise (Appeals), Salem).

For approval and signature

Honble Shri R. PERIASAMI, Technical Member

Shri A. Thangavel : Appellant

Vs.

CCE, Salem : Respondent

Appearance

Shri G. Natarajan, for the appellant

Ms. Indira Sisupal, AC (AR), for the respondent

CORAM

Honble Shri R. PERIASAMI, Technical Member

Date of Hearing/Decision: 24.03.2015

FINAL ORDER No. 40343 / 2015

This appeal is arising out of the order of the Commissioner (Appeals) against the rejection of refund claim.

2. The brief facts of the case are that the appellant claimed refund of Rs. 18,31,279/- under Rule 5 of the Cenvat Credit Rules, 2002, for the unutilised cenvat credit for the period 2004-05. The adjudicating authority rejected the refund claim on the ground that the appellant has not submitted the proof of documents of exports from the claimants premises and also they have not produced sufficient evidence for the same. On appeal before the Commissioner (Appeals), their appeal was rejected on the same ground. Hence the present appeal.

3. The Ld. Advocate on behalf of the appellant submits that they are manufacturers of fabrics and clear majority of the goods to the garment manufacturers under Notification No. 43/2001-CE (NT) dated 26.06.2001 as amended. As per the said notification, the manufacturer of garments has to fulfil the conditions stipulated under notification No. 43/2001 and got registered themselves before the central excise authority before procuring the goods duty free and execute a general bond. Thereafter, the jurisdictional Assistant Commissioner endorses the application under Annexure-1 of the said notification for clearance of the goods from the appellants premises. The garment manufacturer fulfils the condition of the notification and export the goods under ARE-2 under bond. Therefore, even though they are not the exporter of goods, but the goods are cleared to the garment manufacturer by following the procedure under Central Excise (Removal of Goods at Concessional rate of duty of manufacture of goods) Rules, who in turn export the finished goods. Since they are not the actual exporter there is no obligation to submit the copy of the bill of lading, shipping bills, ARE-2 form in their name. He submits that once the jurisdictional Asst. Commissioner in charge of Garment Exporter Unit issued the certificate which is similar to Chapter X procedure the goods are deemed for clearance for export ultimately by the garment manufacturer. The garment manufacturer procured the goods for appellant duty free under the notification and the finished goods were exported under bond by following ARE-2 procedure, the question of claiming draw-back by the exporter does not arise. Therefore, the cenvat credit so availed on various inputs used in the fabrics supplied to garment exporter they filed the refund claim of the unutilized cenvat credit. He submits a copy of the letter issued by the garment manufacturer to M/s. Modelama Exports, wherein they have certified that the fabrics were manufactured and exported under the shipping bills and quantity of fabrics utilised in the manufacture of garments and informed the non-claiming of duty draw-back along with details of shipping bills, No. and date of ARE-2, quantity utilised by the garment exporter. He relied on the following case laws in support of his contention.

1. SVM Textile Mills Vs. CCE, Coimbatore 2006 (199) ELT 270 (Tri.-Chen.)

2. Jain Textiles Industries Vs. CCE, Delhi-III 2009 (247) ELT 796 (Tri.-Del.)

3. Tribunals Final Order No. 40551/2013 dated 08.11.13 in the case of Pioneer Processing Vs. CCE, Salem

4. On the other hand, Ld. AR reiterated the findings of the Order-in-Original and para-4 of the Order-in-Appeal. She submits that the appellant has not fulfilled the conditions specified under the notification No. 43/2001 in terms of Rule 5 of CCR read with notification No. 11/2002 dated 01.03.2002. As they have failed to produce the copy of shipping bill, export obligation, bill of lading, therefore, they are not eligible for refund of credit unutilized. She relied upon the Apex Court judgment in the case of CC, Calcutta Vs. Indian Rayon & Industries Ltd.  2008 (229) ELT 3 (S.C.).

5. After hearing both sides and on perusal of records, the short issue to be discussed in this case is whether the appellants are eligible for refund claim of the unutilized credit under Rule5 of CCR. Both the authorities below have rejected the refund claim on the grounds that they are not the actual exporters and also they failed to produce the documents as per the notification No. 11/2002. I find that there is no dispute on the fact that the appellants cleared the goods to various garment manufacturers/exporters based on the certificate issued by the jurisdictional Asst. Commissioner of the garment manufacturer under Notification No. 43/2001. It is relevant to produce the said notification.

[2] Export under Bond  Procurement of excisable goods without payment of duty for use in manufacture of export goods Procedure  In exercise of the powers conferred by sub-rule (3) read with sub-rule (2) of rule 19 of the Central Excise (No. 2) Rules, 2001, the Central Board of Excise and Customs hereby notifies the conditions, safeguards and procedures for procurement of the excisable [goods] without payment of duty for the purpose of use in the manufacture or processing of export goods and their exportation out of India, to any country, namely:-

(i) the manufacturer or the processor intending to avail benefit of this notification shall register himself under rule 9 of the Central Excise (No.2) Rules, 2001;

The said notification clearly envisages that the manufacturer of garments intending to avail procurement of goods without payment of duty for the purpose of manufacture and their exportation out of India, subject to fulfilment of the conditions. There is also no dispute on the fact that the garment exporters are duly registered with the department and executed necessary bond and followed the procedure prescribed under the said notification. The annexure-I issued by the garment manufacturer is duly certified by the jurisdictional Asst. Commissioner for procurement of fabrics from the appellant without payment of excise duty. This confirms that the goods were supplied to the garment manufacturer under the above notification for using in the manufacture of final products and exporting the same out of India. On perusal of the copies of the letter submitted by the Ld. Advocate, I find that the jurisdictional Asst. Commissioner duly certified the application under Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 for procurement of fabrics from the appellant.

The jurisdictional Asst. Commissioner also certified that M/s. Texport Garments, Bangalore, have executed the bond under the said Rules. Therefore, clearance of the goods under the said notification by the appellants is ultimately meant for export is not under dispute. It is seen from the copy of the letter from the garment exporters i.e. M/s. Modelama Exports and M/s. Texport Garments, wherein they have certified that they have not claimed any duty draw-back and also certified that the goods were cleared under CT-2 transactions, were duly manufactured and exported and also given the list of shipping bill details. Therefore, it is evident that the goods cleared under CT-2 under the notification and were duly exported. The only question is that for claiming refund under Rule 5 read with Notification No.11/2002 in para-4. Condition No.4 of the notification stipulates that the appellant should submit the copy of shipping bill, export obligation, bill of lading, duly certified by the officer of customs. This condition is not applicable to the appellant as they have not exported directly but cleared duty free to the garment manufacturer by following the conditions under notification No. 43/2001 and also by following Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 and the garment exporter ultimately exported the goods.

6. Identical issue has been decided by this Bench in the case of SVM Textile Mills (supra) Jain Textiles Industries (supra) and Tribunals Final Order No. 40551/2013 dated 08.11.13 in the case of Pioneer Processing Vs. CCE, Salem, and allowed the refund. The relevant portion of the said order is reproduced below:-

I have considered submissions of both sides. I note that when the claim was initially filed the appellant was not asked to submit Bill of Lading numbers or shipping bill numbers and the claim was rejected purely on legal ground. After considerable passage of time it is not possible for the appellant to produce such document which did not belong to the appellant. The merits of this case has to be seen against such factual matrix. Once it is agreed in principle that refund as per provisions of Rule 5 of CENVAT Credit Rules, 2004 shall be granted, in situation where the goods are supplied to any manufacturer without payment of duty under provisions of Rule 19(2) of the Central Excise Rules, 2002 and Notification No. 43/2001, the concerned assessee can, at this point of time, be asked only to produce the procurement certificate countersigned by the Assistant Commissioner having jurisdiction over the person procuring the goods. The said Assistant Commissioner has a responsibility to ensure that the goods so procured were used in manufacture of final products and such final products were exported and no drawback was claimed on such goods. Quite often it may not be possible to establish one to one correlation between the raw material supplied and the goods exported and consequently between the raw material supplied and the Shipping Bills and ARE-2s. The raw materials get used in manufacture of different products and different products are exported under different Shipping Bills and therefore if the Assistant Commissioner having jurisdiction was not enforcing his responsibility as envisaged under Notification No. 43/2001, the assessees like the appellant cannot be penalized. It is also relevant that in this particular case, both the appellant and some of the persons procuring the goods were in the same jurisdiction but no effort was made to do any verification at the relevant time. After almost 10 years, I do not find it will serve any purpose by remanding this matter to the adjudicating authority for a second time to do any verification. Therefore, I consider it proper to order that the balance of refund should be granted to the appellant. The impugned orders of the lower authorities are set aside and the appeal is allowed with consequential relief to the appellant.

This Tribunal is consistently held that that even though the appellant is not an exporter but the goods were cleared under the notification No. 43/2001, which is intended for manufacture of garments and for export out of India, they are eligible for refund under Rule 5 of CCR. By relying this Tribunals Final Order, I hold that the appellants are eligible for refund of unutilized cenvat credit under Rule 5 of CCR. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief.

(Order pronounced and dictated in the open Court)

(R. PERIASAMI) TECHNICAL MEMBER

BB

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