2022 (9) TMI 1122 - AT - Central Excise

Tribunal confirms appellant's refund entitlement under Rule 5 of Cenvat Credit Rules, 2004. Department's appeal dismissed.

The tribunal upheld the Commissioner (Appeals) order, confirming the appellant's entitlement to the refund under Rule 5 of Cenvat Credit Rules, 2004, and ... Refund of unutilized/accumulative Cenvat credit - inputs used in manufacture of goods exported under bond to a SEZ unit - quarter of April 2008 to June 2008 - Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 05/2006 dated 14.03.2006 - HELD THAT:- There is no denial to the fact that the assessee/respondent has cleared its final product to SEZ unit i.e. from DTA to SEZ and accordingly, the transaction in question admittedly was export of finally manufactured goods. The impugned refund claim along with the connected documents for the Quarter April 2008 to June 2008 was filed within the time limit of one year stipulated under Section 11B of Central Excise Act, 1944 - Since the refund claim pertains to the refund of Cenvat credit, the same was out of the bar unjust enrichment in terms of para C of provision to Section 11B(2) of Central Excise Act, 1944 - The appellant was entitled for the impugned refund. The Commissioner (Appeals) has held the order of Original Adjudicating Authority to have been beyond the scope of show cause notice, it is observed that in the show cause notice, refund claim was proposed to be rejected on the ground that the issue is dependent on the outcome of the judgment of the Hon’ble Gujarat High Court in ESSAR STEEL LTD. VERSUS UNION OF INDIA [2009 (11) TMI 141 - GUJARAT HIGH COURT], whereas, the Original Adjudicating Authority has rejected the claim not only on the said proposed ground but also on the ground that the amount of Cenvat credit availed on imports during the relevant quarter April 2008 to July 2008 was set off against the duty paid on the goods cleared during the said quarter, where after only an amount of Rs. Rs.2,16,37,636/- was available to the appellants against the refund claim of Rs.27,40,82,605/- - There is no error committed by Commissioner (Appeals) when the O.I.O has been held to have been passed on some extraneous factors which were neither proposed in the show cuase notice nor were related to the issue. The appeal of Revenue is dismissed. Issues Involved:1. Eligibility for refund under Rule 5 of Cenvat Credit Rules, 2004.2. Impact of pending litigation before the Hon'ble Gujarat High Court on the refund claim.3. Validity of the Original Adjudicating Authority's decision beyond the scope of the show cause notice.4. Compliance with Notification No. 05/2006-CE(N.T.) dated 14.03.2006.Issue-wise Detailed Analysis:1. Eligibility for Refund under Rule 5 of Cenvat Credit Rules, 2004:The appellants, engaged in the manufacture of 'Iron Ore Pellets,' filed a refund claim of Rs. 27,40,82,605/- under Rule 5 of Cenvat Credit Rules, 2004, read with Notification No. 05/2006-CE(N.T.) dated 14.03.2006, for the quarter April 2008 to June 2008. The claim was based on unutilized Cenvat credit attributable to inputs used in the manufacture of goods exported under bond to a SEZ unit. The department contested that no amount from the closing balance of Rs. 44,65,69,866/- was attributable to the Cenvat credit accumulated from clearances made for export during the specified quarter. The tribunal observed that the refund claim was within the time limit stipulated under Section 11B of the Central Excise Act, 1944, and no conditions of Notification No. 05/2006-CE(N.T.) were violated. Thus, the appellant was entitled to the refund.2. Impact of Pending Litigation before the Hon'ble Gujarat High Court on the Refund Claim:The department argued that the refund claim was premature due to the pending Special Civil Application before the Hon'ble Gujarat High Court, which questioned whether supplies to SEZ by a DTA amounted to export under the Customs Act, 1962. The tribunal noted that the issue before the Gujarat High Court was unrelated to the refund claim under Rule 5 of CCR, 2004. The Gujarat High Court had decided that movement from DTA to SEZ was not a taxable event under the Customs Act but was an export under the SEZ Act. Therefore, the pending litigation did not impede the refund claim.3. Validity of the Original Adjudicating Authority's Decision Beyond the Scope of the Show Cause Notice:The Original Adjudicating Authority rejected the refund claim on grounds beyond the scope of the show cause notice, including the calculation of available Cenvat credit. The tribunal upheld the Commissioner (Appeals) finding that the Original Adjudicating Authority's decision was based on extraneous factors not proposed in the show cause notice. The tribunal referenced the Supreme Court's rulings in Commissioner of Central Excise Nagpur Vs. Ballarpur Industries Ltd. and Commissioner of Customs, Mumbai Vs. Toyo Engineering India Limited, which emphasized that adjudicating authorities cannot invoke provisions or grounds not mentioned in the show cause notice.4. Compliance with Notification No. 05/2006-CE(N.T.) dated 14.03.2006:The tribunal confirmed that the appellant complied with all conditions of Notification No. 05/2006-CE(N.T.) dated 14.03.2006. The refund claim was filed within the stipulated time, no government dues were outstanding against the claimant, and no drawback or rebate was claimed against the export. The tribunal found no infirmity in the Commissioner (Appeals) decision, which held that the refund was wrongly rejected based on the pending litigation and the Original Adjudicating Authority's erroneous calculations.Conclusion:The tribunal upheld the Commissioner (Appeals) order, confirming the appellant's entitlement to the refund under Rule 5 of Cenvat Credit Rules, 2004, and dismissed the department's appeal. The tribunal found that the Original Adjudicating Authority had erred by considering extraneous factors and that the pending litigation before the Gujarat High Court was unrelated to the refund claim.