Tantech Agro Chemicals Ltd vs Commissioner Of Central Excise

[Arising out of Order-in-Appeal No.40/2008 (P) dated 30.4.2008 passed by the Commissioner of Central Excise (Appeals), Chennai]

Tantech Agro Chemicals Ltd. Appellant

Versus

Commissioner of Central Excise, Puducherry Respondent

Appearance:

Shri P.C. Anand, Consultant For the Appellant Shr M. Rammohan Rao, DC (AR) For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing : 21.01.2015 Date of Pronouncement : 26.5.2015

FINAL ORDER No.40563/2015

1. The appellant filed appeal against the impugned order dt. 12.5.2008 passed by Commissioner (Appeals). The short issue involved in the present case relates to recovery of suo motu credit taken by the appellants.

2. Appellants are manufacturers of pesticides namely "Monocrotophos" (Technical Grade) who classified the goods under Heading 3808.10 and cleared on payment of appropriate rate or duty. Investigations were carried out by the DGCEI and offence case was registered. Five show cause notices were issued to the appellants proposing to re-classify the goods under Chapter Heading 2942.00 and also proposing to demand differential duty. The Commissioner of Central Excise in his Order No.15/2003 dt. 29.8.2003 adjudicated all the five SCNs pertaining to the period from July'96 to December'99 and dropped the proceedings initiated in the five SCNs. Consequent to the order, the appellants took suo motu recredit of amount paid by them.

3. Show cause notice dt. 18.10.2004 was issued to the appellant for recovery of credit of Rs.33,38,695/- wrongly taken on 30.11.2003 along with interest and also proposed penalty. The adjudicating authority in OIO No.7/2005 dt. 13.6.2005 confirmed recovery of the amount and also imposed penalty of Rs.10 lakhs under rule 13 of CCR. On appeal by the appellants, Commissioner (Appeals) in his OIA No.28/2006 (P) dt. 28.2.2006 remanded the case to the original authority with a direction to ascertain the fact of appellant's claim whether a refund claim was filed by the appellant or a notice under writing was submitted by the appellant before taking the re-credit and to consider the validity of the claim. The Additional Commissioner in his de novo order dt. 9.2.2007 again reconfirmed the amount with interest and also imposed a penalty of RS.10 lakhs under rule 13 of CCR. In the second round of appeal, Commissioner (Appeals) in the impugned order rejected their appeal. Both the adjudicating authority & Commissioner (Appeals) held that appellant did not produce any evidence in proof of having filed refund claim or any intimation to the department about suo motu availment of credit. Hence the present appeal.

4. Heard both sides.

5. The Ld. Consultant for the appellant submits that they have taken suo motu credit after the favourable order from the Commissioner of Central Excise. He submits that they have paid a lump sum amount- in the month of July'97 during pending proceedings by debiting cenvat credit in their RG.23A Part II and RG.23C Part-II. He further submits that payments were made under protest and they took re-credit on 30.11.2003 only after receipt of the Commissioner's order. He also submits that they have also filed refund claim under Section 11B and the Commissioner (Appeals) in his first order remanded the case to the adjudicating authority to verify the fact of filing the refund claim. He submits that they could not trace out the copy of the refund claim in their office as the entire factory and office premises were damaged by Tsunami attack in December 2004 and all their documents and records were totally washed out. He also submits that they requested the department but they also could not trace out the copy. He further submits that what was paid by them is not Excise Duty on the clearance of goods but as a lump sum deposit made in July'97 during the investigation was carried out by the DGCEI. Therefore they are eligible for suo motu credit and the case is not covered under Section 11B even though they filed refund claim and pleaded to condone the failure to intimate the department which is only a procedural lapse. He relied on the following case laws :-

(i) Ultra Tech Cement Ltd. Vs CCE Tirupati 2010 (261) ELT 696 (Tri.-Bang.)

(ii) Commissioner Vs S.Subrahmanyan & Co.

2013 (296) ELT A123 (Guj.)

(iii) Unique Structures And Tower Ltd. Vs CCE Raipur 2009 (245) ELT 268 (Tri.-Del.)

(iv) Gujarat Engineering Works Vs CCE Ahmedabad-II 2013 (292) ELT 547 (Tri.-Ahmd.)

6. On the other hand, Ld. AR on behalf of Revenue reiterated the findings of OIO and OIA and submits that appellants have paid the amount voluntarily as duty and they have not paid under protest. It is not in the nature of deposit and they themselves taken suo motu. After the Commissioner's dropping the demand proceedings, they should have preferred refund claim before the jurisdictional AC under Section 11B instead taken suo motu recredit. Further in spite of appellant's claim before Commissioner (Appeals) that their refund claim is still pending before the jurisdictional authorities he submits that during de novo proceedings they failed to produce any evidence to that effect. He relied on the following case law :-

(i) Campus Service (India) Pvt. Ltd. Vs CCE Coimbatore 2008 (9) STR 259 (Tri.-Chennai)

(ii) BDH Industries Ltd. Vs CCE(A) Mumbai 2008 (229) ELT 364 (Tri.-LB)

7. I have considered the submissions made by both sides and perused the records. The issue involved in this case is whether suo motu credit taken by the appellant after favourable order by Commissioner, without filing refund claim under Section 11B is correct or not and whether recovery of such credit ordered by the Department is valid or otherwise.

8. It is an undisputed fact that appellant was issued series of SCNs demanding differential duty on the excisable goods "Monocrotophos" (Technical Grade) manufactured and cleared by them appellant on payment of duty as pesticides under Chapter Heading 3808.10. Whereas department started investigation proceedings and sought to re-classify the goods under Chapter heading 2942.00 on the ground that technical grade pesticides are excluded from Chapter 38 of CETA. Consequent on dismissal of Revenue's appeal by the Hon'ble Supreme Court in the case of UOI Vs Pesticides Manufacturing and Formulators Associations of India  2002 (146) ELT 10 (SC), the Commissioner of Central Excise dropped the entire demand proceedings of the period from July 1996 to December 1999 vide OIO dt. 29.8.2003.

9. I find that during the pendency of proceedings the appellants paid lump sum amount of Rs.33,38,695/- in July'97 vide RG-23 Part-II and RG-23 Part-II and they took suo motu re-credit on 30.11.2003 after receipt of the above order.

10. The Department's contention for ordering recovery of the said credit is that appellants have not preferred refund claim under Section 11B and not paid duty under protest as per Rule 233B of Central Excise Rules and the claim is time-barred and the appellant failed to produce any documentary evidence of refund claim already filed before Department. On perusal of the first OIO dt. 29.8.2003 passed by Commissioner of Central Excise relating to demand of excise duty, it is pertinent to reproduce the para-2 of the said OIO as under :-

"On intelligence the officers of DGAE, Chennai and Officers of Central Excise Commissionerate, Trichy visited the assessee's factory on 09-07-97, recovered certain documents under mahazar and recorded statement of the Manager (Works). On scrutiny of the said documents and statements and upon investigation it was revealed that "Monocrotophos (Technical Grade) were cleared by the assessee on payment of duty at the following rates classifying the item as "pesticides" under sub-heading 380810 of the Schedule to the Central Excise Tariff Act, 1985.

Sl.No. Duty paid @ Period

1. 10% w.e.f. 23.7.1996

2. 8% w.e.f. 1.3.1997

It is clearly recorded from the above that officers of DGCEI visited appellant's unit on 9.7.97 and conducted search, recovered records, drawn panchanama (Mahazar) and recorded statement which is not disputed. With this background, it is relevant to see the lump sum amount paid by the appellant as brought out at para (4.4) of OIO dt. 13.6.2005 which is reproduced as under :-

"Further they have stated that they have prayed for the refund of the amounts paid during the earlier period and that they are eligible for the refund as they have paid the differential duty for the period from November 96 to July 97 under protest as seen from RG23A Part II and RG 23C PII pertaining to the month of July 97. On perusal of the RG 23C PII for the month of July 97 it is noticed that they have paid differential duty of Rs.1,22,775/-, Rs.1,51,714/-, Rs.4,544/-, Rs.31,434/-, Rs.1,62,212/- & Rs.69,300/- mentioning as differential duty under protest and the differential duty Rs.1,45,501/- without any protest. Further it is also noticed that they have paid the amount of Rs.26,51,215/- voluntarily vide Sl.No.88 dated 9.07.97 of the RG23A PII. Therefore, it is observed that the assessee have paid the amount of Rs.33,38,695/- as "differential duty" only and not as "deposit". The assessee's contention that they have always prayed for the refund of the amounts paid for earlier period is not acceptable as they have not produced any documentary evidence in this regard."

11. The adjudicating authority has clearly stated above that first six debit entries was paid under protest in July'97 and other two payments were made without any protest. It is to be seen that major amount of Rs.26,51,215/- was paid on 9.7.97. If the facts stated at para (2) of first OIO dt. 29.8.2003 and facts mentioned at para (4.4) of OIO dt. 13.6.2005 are read together, it is clearly evident that the appellant was made to pay duty on 9.7.97 by debit in RG 23 account during investigation carried out by DGCEI on 9.7.97. Therefore, it is proved beyond doubt that the lump sum amount paid by the appellant during investigation is not the duty amount calculated by the department but only deposit made by the appellants pending investigation proceedings. It cannot be construed that the appellants paid excise duty. This is supported by the Tribunal's decision in the case of Gujarat Engineering Works Vs CCE  2013 (292) ELT 547 (Tri.-Ahmd.) wherein the Tribunal by relying Hon'ble High Court of Gujarat decision held that amount deposited during investigation cannot be treated as duty to apply provisions of Section 11B. The relevant portion of order is reproduced as under :-

"7.?The first appellate authority in the impugned order has come to a conclusion that the amount of Rs. 1,00,000/- which has been deposited by the appellant is a duty worked out by the Central Excise Officers. I find from the records that the amount which has been deposited by the TR-6 challan dated 2-8-2005 was a round figure of Rs. 1,00,000/- which cannot be considered as a duty but has to be considered as a deposit as the subsequent show cause notice which was issued to the assessee, as hereinabove recorded, is for an amount of Rs. 41,81,875/-. Hence in my view, an amount of Rs. 1,00,000/- deposited by the appellant even under panchanama cannot be considered as a duty deposited worked out by the Central Excise Officers. In my view, the said amount can be at the most an amount deposited by the appellant to pursue his legal rights to the show cause notice and being heard by the higher judicial fora on the issue. I find that both the lower authorities have misdirected their findings by applying provisions of Section 11B of the Central Excise Act, 1944 and more so by applying definition of relevant date given in the explanation. I find that in the case in hand, the amount which has been sought as a refund by the appellant is not a duty which become refundable as a consequence of judgment but an amount which has been deposited by the appellant as a pre-deposit during the course of investigation. I find that Division Bench judgment of the Tribunal in the case of Motorola India Pvt. Ltd. and Toyota Kirloskar Auto Parts Pvt. Ltd. and also the decision of the coordinate bench in the case of Birla Ericsson Optical Ltd. is on the point that an amount which is deposited during investigation can be held only as a deposit and not duty.

8.?I also find that the judgment of the Honble High Court of Gujarat in the case of Shree Ram Food Industries (supra) very specifically dealt with this point that payment made by an assessee in pursuant to the direction of the lower authorities is not a voluntary payment and to be treated as a payment under protest"

The above case law is squarely applicable to the present case. As already brought out in above paragraphs, it is evident that amount deposited during investigation is clearly established. Therefore the amount deposited during investigation is only a deposit and not central excise duty.

12. Notwithstanding above, on scrutiny of the extracts of relevant pages RG23A & RG23C Part II enclosed in the appeal book, I find that appellants have clearly written at the relevant entry Sl.nos that duty debited under protest which is sufficient to hold that the payments are not voluntary in the case 2 entries the word "protest" is not mentioned obviously for the reason that the major amount was debited on 9.7.97 when investigating officers were present in their premises and made the recovery. In the de novo proceedings, the adjudicating authority had limited his findings and ordered recovery by saying that appellants failed to produce any proof of filing refund claim as directed by the Commissioner (Appeals). There is a justification in Ld. consultant's submission that Tsunami attacked the East Coast in 2004 and caused calamity of huge loss of lives and damaged of house, property. That being a case, one cannot brush aside their plea that their office was totally damaged and ravaged by Tsunami and all their records damaged. I find this bonafide reason merits consideration as why they could not produce evidence before the authorities

13. Having held that the amount paid is only a deposit during investigation, it is to state that once adjudication authority dropped the proceedings in this case the consequential benefit is automatic in so far as the deposits made by the appellant during pendency of adjudication proceedings. Therefore, the question of refund claim under Section 11B and time-bar and unjust enrichment does not arise. Both the original authority and LAA conveniently overlooked all the above vital facts and held that what is paid by them is duty not paid under protest and also held as time-barred.

14. As regards the suo motu credit availed by the appellants, as clearly discussed in detail above, the appellants took re-credit in RG23A & C on 30.11.2003 after the proceedings was dropped by the adjudicating authority vide order dt. 28.3.2003. The Commissioner in the above order not mentioning the word cannot be a valid ground for the jurisdictional authorities to deny the re-credit of deposits made by the appellants.

15. The Hon'ble Tribunal's Division Bench in the case of M/s.Ultratech Cement Ltd. Vs CCE (supra) had allowed appeal on similar issue and held suo motu availment of credit reversed during pendency of decision is valid and asking the appellant to follow refund route is incorrect and not sustainable. Further the Tribunal in the case of M/s.Unique Structure & Towers Ltd. Vs CCE (supra) held that appellant not intimating the department of taking suo motu re-credit is only technical and procedural lapse and liable to be condoned. The relevant paragraph is reproduced as under :-

"8.?I have carefully considered the submissions from both sides. This is a very strange case. There is no dispute about the fact that appellant is eligible for return of Rs. 5 lakhs made as pre-deposit in pursuance of the order of the Commissioner (Appeals). The Boards instructions envisages filing of a simple letter to enable grant of refund to the appellant. The appellant has filed letter dated 8-10-04. Instead of awaiting for cash refund, the appellant has chosen to take credit on 30-10-04 based on TR 6 challan by which the pre-deposit was earlier made. The Department has not regularised the matter even after the letter dated 4-11-04 of the party. Though the procedure adopted may be erroneous, in the peculiar facts and circumstances of the case, the question of demanding duty along with interest, treating clearances of goods paying duty using recredited amount as without payment of duty as required under - Rule 8 appears totally unwarranted. While no sanction to the procedural violation can be allowed as a matter of interpretation of the Rules, in the peculiar facts and circumstances of the case, I hold that the order of the Commissioner (Appeals) need not be upheld and the order of the original authority deserves to be restored. This view has been taken as the Department was under obligation to implement the earlier order of the Commissioner (Appeals) dated 6-10-04 which was allowed with consequential relief."

16. In view of the above Tribunal decisions, it is clearly proved that the amount paid by the appellant is only a deposit pending proceedings initiated by the department and once the said proceedings are dropped, the appellants are entitled for suo motu credit of such deposit. The only lapse of appellants is of not intimating the department of taking such re-credit by writing letter and it is only a procedural lapse and liable to be condoned. The reliance placed by the Revenue in the case of BDH Industries Ltd. (supra) is not applicable to the present case and clearly distinguishable as the issue referred to Larger Bench was on excise duty paid and taking credit suo motu whereas in the present case as already discussed above the amount paid is only deposit during investigation proceedings.

17. In view of foregoing discussions, and by following the Tribunal's decisions referred to above, I hold that the impugned order upholding the recovery of credit with interest and imposition of penalty is liable to be set aside. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief.

(Pronounced in open court on 26.5.2015)

(R. PERIASAMI) TECHNICAL MEMBER

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