TaxTMI 
TaxTMI 
2013 (3) TMI 602
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....r of the Tribunal in so far as question No. 1 regarding demand of Rs. 1,19,51,387/- made by notice dated 19-4-1996 is concerned and remit the case back to the Tribunal for a fresh consideration in accordance with law. Counsel for the department has rightly not challenged the question No. 2 since the leave was restricted to question No. 1 only. The findings recorded by the Tribunal on question No. 2 has attained finality." 2. As is seen the matter was remanded by Hon'ble Supreme Court for fresh consideration in accordance with the law and for a deeper consideration of issue involved. We have, accordingly, heard Shri V. Sridharan, learned advocate appearing for the appellant and Shri Sameer Chitkara, learned SDR appearing for the Revenue. 3. The appellants are engaged in the manufacture of cold rolled sheets of steel falling under Chapter 72 and majority of their production was being exported. During the relevant period, two different schemes in terms of Import-Export Policy were in vogue. The assessee could obtain advance licences viz. Quantity Based Advance Licences (hereinafter referred to as QABAL) and Value Based Advance Licences (hereinafter referred to as VABAL....
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....hey should be permitted to re-credit the said entry. Subsequently, vide their letter dated 23-12-1995, the above request was reiterated. Inasmuch as the appellants had re-credited the above amount originally debited by them in their RG-23A Part II vide Notification dated 12-8-1995, they were directed by Assistant Commissioner to deposit the above amount. 6. In the above background, show cause notice dated 19-4-1996 was issued to them, proposing to disallow the said Modvat credit on the ground that the appellant has availed the same without producing original duty paying document and as such has contravened provisions of Rule 57A read with Rule 57G of Central Excise Rules. Accordingly, notice proposed to recover the said credit allegedly wrongly availed by the appellant in terms of Rule 57-I of Central Excise Rules and also imposition of penalty. The said notice culminated into an order passed by Assistant Commissioner confirming the demand and also imposing penalty. In the said adjudication order, the Assistant Commissioner observed that the appellant had initially obtained the advance licences under VABAL and the input i.e. HR coil were imported under value based advance l....
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....hat the impugned order of the Assistant Commissioner has travelled beyond the scope of the show cause notice and has confirmed the demand on an altogether new basis, which is not permissible. A document, which is not relied upon in the show cause notice, cannot be taken into note during the course of adjudication and the demand could not have been confirmed on an altogether different ground, not alleged in the notice. As such, it stands strongly submitted before us that reliance on the above clarification was not in accordance with the settled provisions of the jurisprudence. As such, impugned order is illegal, being violative of principles of natural justice. 9. Though, we agree with the above contention of the learned advocate that the impugned order has made an altogether different new case, which was not the basis of the show cause notice and as such are required to be set aside on this ground alone. Nevertheless, we proceed to decide the disputed issue, as we find that even the basis adopted by the authorities below for denying the Cenvat credit to the appellant are not sustainable. 10. Undisputedly, 14 value based advance licences stand converted into quantity....
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....ased upon the value of the goods to be imported whereas QABALs are quantity based advance licences. For better appreciation, we may detail here some of the salient features of the VABAL and as also QABAL : * The ceiling for import of inputs is fixed only in terms of value and not in terms of quantity. * The name and description of the inputs to be imported with the CIF value up to which the inputs can be imported. * If there are number of inputs with individual CIF limit, the importer/licencee has the flexibility to import any one or more of the inputs specified in the licence up to the overall value of the licences. * There are restrictions with regard to import of sensitive list items. * The export obligation on the importer is specified in terms of quantity and value of the export product is specified in the licence. * The value addition will be in terms of Input-Output norms specified in Handbook of Procedures, Vol. 2. * &....
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....he total quantity required to be imported, based upon the input output norm and is not the quantity relatable to remaining portion of value based licences. This fact also indicates that the amendment of the licences was not mid-way but VABAL itself was converted/substituted by QABAL. 14. We also note that subsequently these licences were redeemed for the entire quantity without making any distinction between import made already on the basis of VABAL and no objection was ever raised by any authority. 15. In fact, the appellants have submitted that by converting licences from VABAL to QABAL, they are at disadvantageous position as they have been allowed to import less quantity which they would have imported under VABAL. In any case, it is their contention that if they would have applied for QABAL at the first instance itself, there could not have been any objection by D.G.F.T. authorities for issuance of said licences. It is on record that they were issued QABAL as well as VABAL licences. 16. We further note that the appellant vide their letter dated 27-11-1997 addressed to D.G.F.T., has made a request for clubbing of various licences issued to them, which req....
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....from the date of issue of the licence itself." The above clarification issued also supports the view that conversion of value based advance licences into quantity based advance licences would relate back to the original date of issuance of licences and not from the date of conversion. 19. At this stage, we may deal with the objection raised by learned SDR that credit reversal was made by the appellant in terms of Amnesty scheme announced by Govt. on 3-1-1997 vide which the assessee who have availed the Modvat credit as also the benefit of the notification, were given an opportunity to reverse the credit so as to avail the benefit of the Notification No. 203/82. Apart from the fact that we have already hold that VABAL was converted into QABAL ab initio, in which case the appellant was entitled to avail the benefit of credit, it is to be seen that the debit was made by the appellant much before announcement of the said scheme i.e. in the year 1995 itself. As such, it cannot be said that the debit was made in terms of Amnesty scheme and the Revenue's stand that appellant cannot now take a stand different from the above, cannot be upheld. 20. Having held that dispute....
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.... myself unable to agree with the same and hence record a separate order. 23. Even though the facts have been briefly stated by my learned sister, at the cost of repetition of some portions, facts are re-stated in more detail. 24. Instead of narrating the facts myself, I have chosen to reproduce the extracts of relevant facts as mentioned by the appellant in their reply to show cause notice issued to them by Revenue on 19-4-1996. "3. .....We are engaged in the manufacture of cold rolled coils of steel coils classified under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. We export 70% of the quantity produced in the factory. 4. We were holding both Quantity Based as well as Value Based Advance Licences. As per Import-Export Policy in vogue during 1993-94 and 1994-95 we were permitted to import only raw material Hot Rolled (Steel) Coils. 5. We made export against both the quantity based as well as the value based licences. Part of our export has taken place under the Drawback Scheme. 6. All the imports of HRC (Hot Rolled Coils) made under the Advance Licences were utilized for export products. We have not sold or transferr....
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.... based licences. We specifically pointed out that the Hon'ble Member has particularly clarified that we were entitled to re-credit that amount of input stage Modvat credit which was reversed earlier at the direction of the Dept. without any further formalities and approval from any authorities." 25. From the facts reproduced above, what comes out clearly is that the appellants were advised to reverse the Modvat credit availed by them on inputs and the facts reproduced also give an impression that only reason for advice to reverse the Modvat credit was "pending consideration of interpretation of the conversion of valued based licences (VABAL) to Quantity based licences (QABAL)". Therefore, it is necessary to discuss the circumstances which prevailed at that point of time. During the hearing, I had asked the learned advocate appearing on behalf of the appellant specifically as to whether the reversal of credit made by them in 1995 was in connection with the Amnesty scheme. Learned advocate replied in the negative and submitted a copy of the Circular No. 285/1/97-CX, dated 10-1-1997. The conference of Principal Collectors of Central Excise (presently designated as Chief Commis....
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....xpress dated 5-7-2008, the Revenue Secretary had required all the exporters who had availed the Modvat credit in respect of the goods exported under VABAL scheme to reverse the same before 15-7-2008. The relevant portion is extracted below : "All exporters will have to reverse Modvat credit which has been availed by them for goods that have been exported prior to March, 31. Union Revenue Secretary Mr. M.R. Sivaraman told exporters here on Wednesday that if the goods held up in the customs warehouses have to be cleared, the exporters will have to reverse the Modvat credit. He was speaking at a seminar organized by the Federation of Indian Export Organisations (FIEO) to discuss problems of exporters relating to customs, central excise and income-tax. The exporters have been asked to reverse Modvat credit before July 15, failing which the revenue department would pursue legal action. The Government would consider the problems of exporters relating to the import of consignments stuck with customs only after they reverse the credit, said Sivaraman. The problems relating to Modvat after the present Exim policy, do not arise since the policy has outlined that the exporters who....
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....y detailed and from this letter, the following facts emerge : (a) They had reversed Rs. 1 crore on 18-3-1995 on the basis of an assurance that they will be allowed to credit this amount immediately on getting their VABAL converted to QABAL.                          (emphasis added) (b) They had already submitted copies of endorsement by D.G.F.T. converting VABAL to QABAL. (c) A meeting of representatives of various companies was convened by Principal Collector, Vadodara on 15-7-1995 and they were specifically instructed to reverse the Modvat credit taken to avoid any action in that meeting. In the meeting, it was decided that the figure of Modvat credit availed on the input will be worked out by the respective unit and submitted for verification to the officers. (d) Since D.G.F.T. had converted all their VABAL to QABAL (except two licences which had also been approved for conversion), they may be allowed to avail input stage credit under Modvat scheme. The....
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....epartment, was unauthorized. He also cited the decision of the Tribunal in M/s. Shakti Chemical Industries v. Collector Baroda - 1995 (76) E.L.T. 410 (Tri.-Bom.), wherein it was held that re-credit of duty debited suo motu without department's permission is not permissible. Since the appellants did not reverse amount after this letter, the show cause notice was issued. 35. The show cause notice was issued on the ground that credit taken on 11-10-1995 is unauthorised and irregular and not supported by documents. After considering reply submitted by the appellant, the Assistant Commissioner and Commissioner (Appeals) held that in view of the clarification issued by D.G.F.T. stating that the conversion of VABAL into QABAL will have only prospective effect for all purposes, credit taken without supporting documents such as invoices as prescribed in the rules is irregular. 36. The OIA was passed by Commissioner (Appeals) on 14-3-2000 and the appeal filed by the appellant before Tribunal was decided on 19-9-2000 which has been remanded back to this Tribunal for a deeper consideration and fresh decision by the Hon'ble Supreme Court. 37. The appeal came up for heari....
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....ice of the Assistant Commissioner that pending study of the interpretation of the conversion of VABAL into QABAL, they were to reverse the Modvat credit availed on the input used in the goods exported under VABAL. The narration above shows that all through the period, from Jan., 1995 till the date of issue of show cause notice, no one had given assurance to the appellant that they can take suo motu credit and conversion of licences would be sufficient for this purpose. The correspondence also clearly shows that department had obtained clarification from D.G.F.T. in view of the circumstances in this case and the same clarification could have been obtained by the appellant also since they were already in touch with the D.G.F.T. for conversion of their licences and all they had to do was to get a letter from D.G.F.T. and produce to the department that the conversion would have retrospective effect. Further, the original adjudicating authority and Commissioner (Appeals) did not travel beyond show cause notice since they were only countering the defence put up by the appellant that in view of the conversion of licences, by D.G.F.T. from VABAL into QABAL, the credit taken by them cannot ....
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....ndment carried out by D.G.F.T. is right or wrong can be the subject matter of the scrutiny and challenged by the customs authority? 42. After considering several decisions and the submissions, the Tribunal came to the conclusion that D.G.F.T. has no power to modify the licences retrospectively. The Larger Bench had also considered Para 25 of Customs Appraising Manual, which has been cited before us by the learned counsel. In view of the Larger Bench decision holding that amendment cannot be retrospective, the contention of the learned advocate that it is only Court who have to arrive at correct position of law, has also been fulfilled. Further the argument of the learned advocate that the credit taken by them on 11-10-1995 was only an accounting entry and therefore did not require any permission from any authority, is also not correct. This issue was again considered by Larger Bench of the Tribunal in the case of M/s. BDH Industries Ltd. v. CCE reported in 2008 (229) E.L.T. 364 (Tri.-LB), wherein it was held "in view of the above, we answer the reference made to us by holding that all types of refunds have to be filed under Central Excise Act and Rules made thereunder and n....
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....f the departmental representative that this point was not taken up by the assessee before the Commissioner is no answer. It is true that the assessee seems to have missed this point and its defence that the import was made not in terms of Notification 203/92 but of Notification 203/93 to which no such condition is attached; the point however is a basic and fundamental one. It should have occurred without it being pointed out to both the Assistant Commissioner, who adjudicated on the notice or Commissioner (Appeals) who confirmed this order. Whether it did or not the position as we have explained above. We therefore, answer this question in favour of the appellant. 45. From the background as discussed by me above, it may be seen that the issue of wrong availment of benefit of Notification No. 203/92 had attained a status of all India problem. From the Principal Collectors' Conference in January, 1995 to January, 1997, when the Government came out with Amnesty scheme, the department was persuading the exporters and to reverse the credit since the Govt. did not want to harm the exporters. The statement of Revenue Secretary in July and the then Commerce Minister's observations ....
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....lant to go scot free with their irregular re-credit of Modvat credit. The answer according to me is an uniequivocal : "No". Another reason that can be considered for not allowing a new ground is that appellant cannot raise a new ground that respondent had another course of action which they did not choose. A new ground can be an alternative defence, but cannot be the one like this. 47. There are some more reasons as to why the appellant should not be allowed to raise new ground at this late stage. (i) Appellants have made a claim that they actually suffered a loss because of conversion of VABAL into QABAL. A statement submitted by the appellants in their memorandum of appeal at page 324 is reproduced below : Analysis of above statement shows that the appellants had imported 13487.787 tons of HR Coils and were required to export 12431.14 tons of CR Steel Coils, valued at 7048330 US $ whereas the actual value of the equivalent quantity was only US $ 6847463. "The actual value addition on this basis is only 21% as against the requirement of 25% value addition required under VABAL scheme. This would mean that appellants have failed to fulfil ....
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.... Therefore, it is quite clear that their claim that all their licences had been converted into QABAL and therefore they could take the credit, is also incorrect and fortunately for the appellants, no one examined the claim made by them with records. (iii) Except for two licences in all other cases, the last import took place after the last export had taken place and most of the exports were done in advance. This shows that Modvat credit had already been taken in respect of inputs used in the manufacture of exported goods before imports were made. Further, appellant also cannot say that this happened because of ignorance since admittedly they were availing VABAL, QABAL & Drawback schemes and were familiar with all the schemes. The claim of the appellant that they had suffered a loss because of conversion is also not correct and this new ground was raised only because department could not have taken action under Notification No. 203/92, comes out clearly when it is seen that total Customs duty liability that would have arisen in case action under Notification No. 203/92 was to be initiated comes to Rs. 8.3 crores (approx.), whe....
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....sp; Whether the contention that reversal of debit entry was only an accounting entry which would not require duty paying document has to be upheld in the facts and circumstances of the case as held by ld. Member (Judicial) or cannot be accepted in view of the decision of the Larger Bench of the Tribunal in the case of M/s. BDH Industries Ltd. v. CCE reported in 2008 (229) E.L.T. 364 (Tri.-LB), as held by Member (Technical)? (iii) Whether the amendment of licences from VABAL to QABAL licences by the Joint Director of D.G.F.T. has to be given retrospective effect on the ground that the opinion given by JD.G.F.T. is neither proper nor in accordance with law as held by ld. Member (Judicial) or whether the amendment of licence has to be held with prospective effect only in view of the decision of the Larger Bench of the Tribunal in the case of M/s. Bhilwara Spinners v. CCE, Mumbai reported in 2008 (223) E.L.T. 172 (Tri.-LB) as held by Member (Technical)? (iv) Whether the reversal of credit by the appellant can be said to be in terms of amnesty scheme even though the payment was made earlier as held by Member (Technical) or in view of the debits made b....
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.... relied upon in the show cause notice also. This is fatal and the orders have to be set aside on this ground alone. In this regard, the judgment of the Supreme Court in the following cases are referred to : (a) CC, Mumbai v. Toyo Engineering India Ltd. - 2006 (201) E.L.T. 513 (S.C.) (b) Saci Allied Products Ltd. v. CCE, Meerut - 2005 (183) E.L.T. 225 (S.C.) (c) Gujarat State Fertilizers Co. v. CCE - 1997 (91) E.L.T. 3 (S.C.). Difference of Opinion Point No. (iii) : Whether the amendment made to the value based advance licences and converting them to quantity based advance licence is effective from the date of issuance of the licences or it will be from the date of amendment, is decided in favour of the appellants by Bombay High Court in Bhilwara Spinners Ltd. v. Union of India - 2011 (267) E.L.T. 49 (Bom.) which was overruled by the Larger Bench of the Tribunal reported at 2008 (223) E.L.T. 172 and held that the amendment of the licence will date back to the date of issuance of the licence. While holding so, the Bombay High Court took into account the counter-affidavit of the Joint D.G.F.T., w....
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....d be considered as import under 10% EPCG Scheme, pursuant to the amendment made after the imports. In the present case also, while the exports were made prior to amendment/conversion of the licences, the imports, in most of the cases, were effected, after the amendment. Further, the licences were treated as quantity based advance licences by the ALC and also by the D.G.F.T. on 13-2-1998, when it allowed clubbing of as much as 60 QABALS (including the 14 QABALS in question). This was, after the so-called clarification dated 23-4-1996 issued by the Foreign Trade Development Officer. Difference of Opinion Point No. (ii) : The decisions of the Larger Bench in the case of BDH Industries Ltd. - 2008 (229) E.L.T. 364 (Tri.-LB) is with reference to taking of suo motu credit in PLA of the excise duty paid second time on the final product cleared by the assessee. Hence, the said judgment will not apply to credit of duty paid on inputs. Following judgments distinguish BDH Industries on this ground : (a) Ultratech Cement Ltd. v. CCE, Tirupati - 2010 (261) E.L.T. 696 (Tri.-Bang.) (b) Flex Art Foil Pvt. Ltd. v. CCE, Daman - 201....
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....r is not an issue. As regards unjust enrichment, it is submitted that bar of unjust enrichment is not applicable in the present case. Firstly, the inputs on which credit has been taken, have been used in the manufacture of resultant product exported out of India. Secondly, even as per Section 118, such refund of duty paid on the inputs is not hit by unjust enrichment. Thirdly, credit on inputs taken as credit never forms part of cost of the final products, as held by the Supreme Court in Collector v. Dai Ichi Karkaria Ltd. - 1999 (112) E.L.T. 353 (S.C.). The letters dated 11-10-1995 and 23-12-1995 can be taken as refund claims in the matter and the Tribunal may be pleased to hold that the appellants are entitled for refund in view of the above submissions. In the alternative, the taking of credit in the RG-23A should be ratified in view of the above submissions, since the appellants are otherwise eligible for refund otherwise. This will avoid the unnecessary remand of the matter. In fact, the Tribunal in the case of Gopal Zarda v. Commissioner - 2001 (128) E.L.T. 409 (Tri.-Del.), after noting that the duty if paid by the assessee is available as credit, has allowed the app....
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....n the following decisions : (a) Dome Bell Investment (P) Ltd. v. CCE, Meerut - 1994 (34) RLT 194 (CESTAT) (b) Mardia Chemicals Ltd. v. CCE - 2006 (199) E.L.T. 110 (T) (c) Libra Polymers Pvt. Ltd. v. CCE - 2000 (126) E.L.T. 735 (T). Difference of Opinion Point No. (vi) : The Department never made any disputes regarding conversion of licences. Hence, the suggestion that the appellants made false claim is not correct. In fact, many of the observations and finding of the Hon'ble Member (T) were never part of the records. In respect of one licence only (namely licence No. 3499627), the licence was converted/amended in 1997. The rest of the licences were converted in 1995 itself. Further the amendment made to the said licence is not available on record. However, in the letter dated 12-11-1997 made to the Additional D.G.F.T. (Page 325) and the communication of the D.G.F.T. vide letter dated 13-2-1998 (Page 327), this very licence has been treated as quantity based licence. In other words, there is no dispute between the parties that all the 14 licences in question has been converted into quantity bas....
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....pex Court had remanded the matter back to the Tribunal to re-hear the matter in deeper consideration. Hence, the appellant cannot be permitted to raise this new ground at this stage of hearing before Tribunal. 54. I have considered the submissions made at length by both sides and perused the records. 55. Since the facts of the case are already reproduced by the differing Bench, I am not reproducing the same in my order as these are not being disputed. 56. The entire issue in this case is regarding availment of Cenvat credit by the assessee-appellant herein of the amount which was debited by him on his own during the period from March and July, 1995. It is undisputed that during the period March and July, 1995, the appellant had reversed the amount availed as Cenvat credit by them on the inputs received which were utilised for manufacturing of final product which were exported under VABAL scheme. The appellants had subsequently or during the interim period had sought to change the licences from VABAL to QABAL to the D.G.F.T. authorities and the D.G.F.T. authorities allowed and endorsed the said change in terms of their Circular dated 18-10-2004 and they were ....
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....refunds have to pass through doctrine of unjust enrichment, even if it is not so expressly provided for in the statute. From these decisions it clearly emerges that all types of refund have to be filed under Section 11B of the Central Excise Act and no suo motu refund can be taken unless and until the department is satisfied that the incidence of duty has not been passed on. 13. In view of above, we answer the reference made to us by holding that all types of refund have to be filed under Central Excise Act and Rules made thereunder and no suo motu credit of the duty paid in excess may be taken by the assessee. The matter is now sent back to the referral bench for passing appropriate orders on the appeal before it." 58. Since the credit availed by the appellant suo motu is now considered as incorrect availment of Cenvat credit as held by the Larger Bench of the Tribunal, I find that the entire issue now stand resolved through a reference made to a 3rd Member. 59. Ld. Counsel appearing on behalf of the assessee, tries to distinguish the judgment in the case of BDH Industries Limited on the ground that the said decision had been given when there was double pay....