2018 (10) TMI 1064 - HC - Central Excise

Court rejects claim for cash refund of Education Cess, citing statutory provisions and CENVAT Credit Rules.

Banswara Syntex Ltd. Versus The Commissioner, Central Excise & Service Tax

The court affirmed the lower authorities' decisions and dismissed the appeal, ruling that the appellant could not claim cash refund or encashment of the ... Refund/encashment of unutilized CENVAT credit account - Section 11B of the Act of 1944 - rejection of refund on the ground that statutory provisions neither provide for sanction of refund in cash nor do they permit an assessee to utilize the accumulated CENVAT credit of Education Cess and Secondary & Higher Secondary Education Cess paid on inputs or input services against payment of excise duty etc. Held that:- An assessee is required to pay duty provided in the Schedule I and Schedule II to the Central Excise & Tariff Act and he can claim refund of such duty by making an application under Section 11 B of the Act of 1944, if the same has been erroneously paid or illegally recovered subject; of course, to the procedure and conditions contained therein - The Act of 1944 does not contain any provision for refund of the Excise Duty or other levies payable under the Act, until and unless the same are proved to have been erroneously paid or recovered with a further proof that its burden has not been passed on to the customers. CENVAT credit lying in an assessee’s account creates an infallible and indefeasible right, which in the present case is indispensable and undeniable; however, to the extent of making payment of the corresponding cess, if any, payable on or after that date, as categorically stipulated in 1st and 2nd proviso to Rule 3 (7) (b) of the CENVAT Credit Rules, 2004. Since the CENVAT Credit Rules, the repository of rights of an assessee to avail credit of the duty or other sums paid on inputs does not entail or even envisage refund of such credit in cash and encashment cannot be claimed as a matter of course. It can also not be asserted that an assessee is entitled to or has an ingrained or vested right to claim refund of Education Cess and Secondary and Higher Secondary Education Cess or any other duty paid in accordance with the law dehors the CENVAT Credit Rules, 2004. Tribunal has committed no error of law in holding that the appellant cannot claim cash refund or encashment of the unutilized and unavailed amount of Education Cess and Secondary and Higher Secondary Education Cess, lying in its credit - appeal dismissed - decided against appellant. Issues Involved:1. Rejection of request for encashment of CENVAT credit.2. Interpretation of statutory provisions under the Central Excise Act, 1944 and CENVAT Credit Rules, 2004.3. Applicability of Section 11B of the Central Excise Act, 1944 for refund claims.4. Analysis of relevant case law (SRD Nutrients Private Limited Vs. Commissioner of Central Excise, Guwahati).Issue-wise Detailed Analysis:1. Rejection of Request for Encashment of CENVAT Credit:The appellant, a manufacturer of Cotton Yarn, Fabrics, Synthetic Filament Yarn, faced rejection of their request for encashment of the amount lying in their CENVAT credit account by the authorities below. The appellant had an accumulated balance of Rs. 7,08,993/- in its CENVAT credit account, which became unutilizable after the Central Government exempted the levy of Education Cess and Secondary and Higher Secondary Education Cess via notifications No.14/2015 and 15/2015 issued on 1.3.2015. The adjudicating authority, appellate authority, and the Tribunal all rejected the appellant's claim for refund, stating that there is no statutory provision allowing for such refund in cash.2. Interpretation of Statutory Provisions:The court analyzed the relevant statutory provisions, including Section 11B of the Central Excise Act, 1944, Rule 8 of the Central Excise Rules, 2002, and Rule 3 of the CENVAT Credit Rules, 2004. Section 11B provides for the refund of duty of excise if erroneously or wrongly paid, subject to conditions. Rule 8(2) of the Central Excise Rules allows payment of duty from the CENVAT credit account. Rule 3 of the CENVAT Credit Rules permits a manufacturer to take credit of excise duty, education cess, and other levies paid on inputs or input services.3. Applicability of Section 11B for Refund Claims:The court noted that Section 11B of the Act of 1944 provides for refund of excise duty if erroneously or wrongly paid, subject to conditions that the burden has not been passed on to the customer. However, the Act does not contain any provision for refund of excise duty or other levies unless proved to be erroneously paid or recovered. The court emphasized that the CENVAT Credit Rules, 2004, do not provide for refund or encashment of CENVAT credit except in cases of export of final products or where the duty is exempt or subject to nil rate of duty.4. Analysis of Relevant Case Law:The appellant relied on the judgment of the Supreme Court in SRD Nutrients Private Limited Vs. Commissioner of Central Excise, Guwahati. However, the court found that this judgment does not bear on the issue at hand as the facts and questions posed were different. The Supreme Court's judgment merely established that Education Cess and Secondary and Higher Secondary Education Cess are part of excise duty, a position not disputed by the authorities in the present case.Conclusion:The court concluded that the Tribunal committed no error of law in holding that the appellant cannot claim cash refund or encashment of the unutilized amount of Education Cess and Secondary and Higher Secondary Education Cess lying in its credit. The appeal was dismissed, affirming the decisions of the lower authorities and the Tribunal.