The Commissioner, Central Excise vs Chiripal Industries Ltd

[Arising out of OIA No 97/2009 (Ahd-I)/CE/ID/Commr(A) Dated 27.5.2009, Passed by The Commissioner, Central Excise (Appeals), Ahmedabad I]

The Commissioner, Central Excise, Appellant (s) Ahmedabad

Vs

Chiripal Industries Ltd Respondent (s)

Represented by:

For Revenue : Shri J Nagori (Authorised Representative) For Assessee : Shri P P Jadeja (Consultant)

For approval and signature :

Mr. P.K. Das, Hon.ble Member (Judicial)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon.ble Member (Judicial)

Date of Hearing / Decision : 7/1/2015

ORDER No. A/10143 / 2015 dtd 7/1/2015

Per : Mr. P.K. Das;

The relevant facts of the case, in brief, are that the respondents were engaged in the manufacture of Polyester Partially Oriented Filament Yarn (POY), Polyester Fully Drawn Filament Yarn (FDY) falling under heading No 5402.42 of the Central Excise Tariff Act 1985. Show Cause Notices were issued proposing demand of National Calamity Contingent Duty (NCCD) of Rs 31,93,212.00 for the period April 2006 to December 2006 on the ground that NCCD was not duty of Excise and not covered under Notification No 67/95-CE and liable to pay duty on POY and FDY for captively used in the manufacture of exempted final product. The respondent contested the demand of duty in respect of both the Show Cause Notice, as well as they paid the amount under protest from their Cenvat account. The Adjudicating Authority confirmed the demand of duty. By OIA No 28 to 29/2008(Ahd-1)CE/ID/Commr(A) dtd 29.3.2008 the Commissioner (Appeals) set aside the adjudication order and allowed the appeal with consequential reliefs.

2. As per order of the Commissioner (Appeals) in April 2008, the respondent had re-credited the said amount of Rs 31,91,212/- in the Cenvat account. Show Cause Notice dtd 4.9.2008 was issued proposing the cenvat credit to the tune of Rs 31,93,212/- taken suo moto of NCCD paid on captive consumption stage during the period April 2006 to December 2006 should not be disallowed as provided under Section 11B of the Central Excise Tariff Act 1944 alongwith interest and penalty. The Adjudicating Authority disallowed the Cenvat Credit of Rs 31,93,212/- alongwith interest and imposed a penalty of Rs 30,000/- on the respondent. By the impugned order the Commissioner (Appeals) set aside the adjudication order and allowed the appeal filed by the respondent. Hence, Revenue filed this appeal against the impugned order.

3. The Learned Authorised Representative for the Revenue submits that the respondent is not eligible to take suo moto re-credit in their Cenvat account. He submits that the respondent should have filed refund claim under Section 11B of the Central Excise Act 1944. The issue has already been decided in favour of the Revenue by the Larger Bench of the Tribunal in the case of BHD Industries vs CCE(A) Mumbai - 2008(229)ELT.364 (Tri.LB). He further submits that the Commissioner (Appeals) while passing the order had failed to consider the issue involved in this case and otherwise he has gone on merit, which was not disputed by the Department. It is submitted that there is no provisions for taking any suo moto cenvat credit. It is submitted that the Honble Supreme Court in the case of UOI vs Solar Pesticides Pvt Ltd  2000(116)ELT.401(SC) has held that unjust enrichment is applicable even in the captive consumption.

4. On the other hand, the Learned Consultant for the respondent submits that the respondent had re-credited the amount in their cenvat account on the basis of the order of the Commissioner (Appeals), where the appeals were allowed with consequential relief. It is submitted that the respondents had reversed cenvat credit under protest and again taken suo moto credit. It is a case of deposit during the proceedings and therefore unjust enrichment would not be applicable. He submits on the identical situation the Honble Gujarat High Court in the case of Shyam Textile Mills vs UOI as reported in 2005(100) ECC 524 held that no refund claim is required for availing consequential benefit of the order. He also filed written submission alongwith copy of various case laws.

5. After hearing both the sides and on perusal of records, it is seen that the Show Cause Notices were issued proposing demand of NCCD of Rs 31,93,212/- for the period from April 2006 to December 2006 on the ground that the respondents had not paid NCCD for the captive consumption. The respondents contested the demand of duty and also paid amount under protest from cenvat account. The Adjudicating Authority confirmed the demand of NCCD which was set aside by the Commissioner (Appeals). It is contended that the Commissioner (Appeals) allowed the appeal with consequential relief. The respondent re-credited the said amount to their cenvat account as a consequential relief, arising out of the order of the Commissioner (Appeals).

6. The Honble Gujarat High Court in the case of Shyam Textile Mills (supra) on the identical situation quashed the show cause notice and allowed the petition filed by the petitioner. In that case, the Commissioner (Appeals) set aside the Adjudication order and allowed the appeal of the assessee after giving a findings in favour of the assessee that the assessee was entitled to get refund of the amount claimed. Under the circumstances, the assessee acted upon the said order of the Commissioner (Appeals) re-credited the amount of refund in its deemed credit register. A Show Cause Notice was issued to the assessee to show cause as to why the credit availed and utilised by the assessee should not be disallowed and recovered with interest and penalty, which was challenged before the Honble High Court. The stand taken by the revenue is that merely on the basis of the order of the appellate authority, the assessee could not have suo moto utilised the amount lying in the register. There is also no provisions for such suo moto refund. The Honble High Court quashed and set aside the show cause notice. The relevant portion of the said decision is reproduced below:

 Having heard the learned counsel for the parties, we are not in a position to appreciate as to how the respondents can find fault with the petitioners availing of the amount lying to their credit in the deemed credit register after having succeeded before the Commissioner (Appeals). The respondents appear to be harbouring in misconception that there has to be some provision under which the petitioner can take benefit of the refund only after seeking permission of the authority whose order has been set aside by the Commissioner (appeals)

7. In the present case, I find that earlier, a proceeding was initiated on the ground that they have not paid NCCD on captive consumption and the respondent reversed the amount from cenvat account under protest. The Commissioner (Appeal), set aside the adjudication order and allowed the appeal with consequential relief. So, the respondents took suo moto credit on the basis of the order of the Commissioner (Appeals). In the case of Commissioner of Central Excise vs. Vardhman Acrylic Ltd  2013(292)ELT.578 (Tri. Ahmd). Division Bench of the Tribunal on the identical issue following the decision of the Honble Gujarat High Court in the case of Shyam Textile Mills (supra) and other decisions rejected the appeal filed by the Revenue. The relevant portion of the said decision is reproduced below :

 The only issue required to be deliberated in this appeal is whether or not respondent can take Cenvat credit suo motu, when the issue of Cenvat credit on merits was decided in their favour by Commissioner (Appeals). Appellant-department has relied upon certain judgments in their grounds of appeal as well as during the course of hearing and emphasized that suo motu credit is not permissible and the same could have been taken by following the refund procedure under Section 11B of the Central Excise Act, 1944. It is observed that the earliest of the relied upon judgments is that of the Honble Supreme Court in the case of Mafatlal Industries Limited. v. UOI [1997 (89) E.L.T. 247 (S.C.)] which was delivered in relation to the amendment made in 1991 to introduce the concept of unjust enrichment with respect to refund cases under Section 11B of the Central Excise Act, 1944. Section 11B of the Central Excise Act talks about refund of duties and the related amendment was introduced to the effect that claimant should establish that the burden of duty, for which refund claim is filed, is not passed on to the customers. In the present case, the issue is not regarding refund of duties but taking of admissible credit, which was earlier reversed under protest and on receipt of a favourable order from the first appellate authority. Therefore, the judgment of the Honble Supreme Court in the case of Mafatlal Industries Limited (supra) was only with respect to all those refund claims where unjust enrichment has to be examined. Such refund claims will mean cash refunds or where duty is paid at the time of clearance. It is a settled law now that unjust enrichment is not applicable where refund is that of penalties or pre-deposits made in the appellate proceedings. Therefore, judgment of Honble Supreme Court in the case of Mafatlal Industries Limited. case is not applicable to the facts and circumstances of this case, where the issue involved is only taking of an admissible cenvat credit on receipt of a favourable order. 

8. The case laws relied upon by the Learned Authorised Representative is not applicable in the facts and circumstances of the present case. The Learned Authorised Representative for Revenue strongly relied upon the decisions of the Larger Bench in the case of BDH Industries Ltd (Supra). I find that the Division Bench of the Tribunal in the case of Vardhman Acrylic Ltd (Supra) had already considered the decisions of the Larger Bench of the Tribunal and the decision of the Honble Supreme Court. The decision of the Division Bench on the identical issue is binding in the Single Member Bench. The Learned Authorised Representative attempted to distinguish the decision of the Honble Gujarat High Court in the case of Shree Shyam Textile Mills (supra) in so far as the said case was related to deemed credit. In my view, there is no much difference as the deemed credit register and cenvat account, both are under Cenvat Credit Rules.

9. In view of the above discussions, I upheld the order passed by the Commissioner (Appeal). The appeal filed by the Revenue is rejected.

(Dictated and pronounced in the Court)

(P.K. Das) Member (Judicial)

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