AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1376
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in certain conditions. Inability to utilise the credit due to export of finished goods is only reason on which the credit can be allowed. He pointed out that the conditions necessary for allowing refund of the credit on material used in the export of goods and which cannot be utilised by the appellant are specified in the notification issued under the said rule. He pointed out that in the case of Steel Strips Vs. CCE, Ludhiana - 2011 (269) ELT 257 (Tri-LB), the larger bench of the Tribunal has examined the admissibility of credit allowing unutilized as refund. After examining the decision of the Hon'ble High Court of Karnataka in the case of Slovak India Trading Co. Pvt. Ltd. (supra), the larger bench has held that there is no provision for refund of unutilized/accumulated Cenvat credit on closure of unit. It can be seen that the fact that the Cenvat credit claimed as refund does not pertain to the export goods and no evidence to counter. This has been produced by the respondent. He further argued that the refund of the Cenvat Credit allowing in their accounts as on 16/03/2005 has been claimed on 12/03/2007 and the claim is clearly barred by limitation. He further relied on the de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny is engaged in manufacture of shoes for M/s. Bata India Ltd. They are registered under the Central Excise Registration. The respondent surrendered their registration. A refund application was made on 14-5-2003 claiming a refund of Rs. 4,15,057/- During the Internal Audit, it was noticed that the assessee has availed Cenvat Credit of the materials received by them during the past on the strength of the photocopies of the duplicate copy of invoices and the original copies of the invoices were never produced. The assessee had availed the credit to the tune of Rs. 3,09,390/-. On scrutiny, it was noticed that there was neither production nor clearance of finished goods. Cenvat Credit availed by the respondent is irregular. A show cause notice was issued in the matter with regard to irregular availment and also with regard to rejection of refund claim. Reply was submitted. Thereafter, an order was passed ordering allowance of Cenvat Credit of Rs. 3,72,405/- availed on the invoices mentioned in the show cause notice except invoice No. 62 dated 19-2-2002. Refund claim was also rejected in terms of Sec. 11B of the Act. It was stated that there is no provision in Rule 5 of Cenvat Credit Ru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ps (supra). After examining the decision of Hon'ble High Court of Karnataka in the case of Steel Strips (supra) has observed as under: 5.1 Scheme of Modvat dealing with input credit was subject matter of analysis in Ichalkaranji Machine Centre Pvt. Ltd. v. Collector of Central Excise, Pune 2004 (174) E.L.T. 417 (S.C.). It has been held that Modvat is basically a duty-collecting procedure, which aims at allowing relief to a manufacturer on the duty element borne by him in respect of the inputs used by him. It was introduced w.e.f. 1-3-1986. The said scheme was regulated under Rules 57A to 57J of Central Excise Rules, 1944. Rule 57A entitled a manufacturer to take instant credit of the central excise duty paid on the inputs used by him in the manufacture of the finished product, provided that the input and the finished product were excisable commodities and fell under any of the specified chapters in the tariff schedule. Under Rule 57G, every manufacturer was required to file a declaration before the jurisdictional Assistant Collector, declaring his intention to take Modvat credit after paying duty on the inputs. The object behind Rule 57A read with Rule 57G and Rule 57-I was utiliz....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Legislature - Ref : C.A. Abraham v. ITO, Kottayam, AIR 1961 SC 609, p. 612. The principle behind this rule is that an enactment designed to prevent fraud upon the revenue "is more properly a statute against fraud rather than a taxing statute, and for this reason properly subject to liberal construction in the Government favour" - Ref : CRAWFORD, Statutory Construction, p. 508. So in interpreting a provision to plug leakage and prevent tax evasion a construction which would defeat its purpose should be eschewed and a construction which preserves its workability and efficacy should be preferred - Ref : Commissioner of Sales Tax, Delhi v. Sri Krushna Engg. Co., (2005) 2 SCC 695, p. 703. Non-Filing of Appeal by Revenue is not a Bar for Scrutiny in another case 5.5 Doctrine of merger was pressed into service by the ld. Sr. Counsel Sri Anand appearing on behalf of the Assessee submitting that due to dismissal of Revenue's Civil Appeals, present reference was unwarranted. For appreciation of Doctrine of merger, it would be beneficial to reproduce Paras 40 - 44 of the judgment of the Hon'ble Supreme Court laying down the law in the case of Kunhayammed v. State of Kerala - 2001 (12....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion are shown to exist. Where the order rejecting an SLP is a speaking order, that is, where reasons have been assigned by this Court for rejecting the petition for special leave and are stated in the order still the order remains the one rejecting prayer for the grant of leave to appeal. The petitioner has been turned away at the threshold without having been allowed to enter in the appellate Jurisdiction of this Court. Here also the doctrine of merger would not apply. But the law stated or declared by this Court in its order shall attract applicability of Article 141 of the constitution. The reasons assigned by this Court in its order expressing its adjudication (expressly or by necessary implication) on point of fact or law shall take away the jurisdiction of any other court, tribunal or authority to express any opinion in conflict with or in departure from the view taken by this Court because permitting to do so would be subversive of judicial discipline and an affront to the order of this Court. However this would be so not by reference to the doctrine of merger. 41. Once a special leave petition has been granted, the doors for the exercise of appellate Jurisdiction of this C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. First stage Is up to the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and special leave petition is converted into an appeal. (iii) Doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter. (iv) An order refusing special leave to appeal may be a non....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts as has been held in the case of C.K. Gangadharan v. CIT, Cochin, reported in 2008 (228) E.L.T. 497 (S.C.) = 2009 (16) S.T.R. 659 (S.C.) = 2009 (16) S.T.R. 659 (S.C.). In Gauri Piasticulture (P) Ltd. (supra) except the claim being permitted under equitable considerations the controversy remained unanswered on the point of law while grant of refund of the nature claimed was not mandate of the Act or the 1994 Rules. The issue, therefore is rightly called for consideration in the present reference on the point of law. Policy of Refund of Input Credit is Regulated by Statutory Provisions 5.7 A distinction between provisions of statute which are of substantive character and are built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in their nature, on the other, must be kept clearly distinguished. An eligibility criteria to get refund....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. Substance and Essence of Statute are Paramount Considerations 5.9 The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential. In the cases of refund substantial compliance to the law granting refund is sine qua non. Courts have to decide what the law is but not what it should be 5.10 In a plethora of cases, it h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n in Para 10 of the reported order that if denial of credit has compelled an assessee to pay duty out of PLA, the refund of the same would be in cash to the extent of payment of duty in cash during that period. It was further held that if no cash payment towards duty were made through PLA and credit would have remained unutilized in the account books, such credit cannot be allowed by way of cash. 5.13 While arriving at the aforesaid conclusion, the Larger Bench in Para 11 of the order recorded the fact that in the case before them debit entry in credit account was made by the Appellants on 23-11-2000 while central excise registration was surrendered by the assessee in September 2000 i.e., before making the debit entry in RG-23 account. Further observation of the Bench was even if the amounts towards duty would not have been debited by them in the said account, the same would have been remained unutilized. As such, on the success of their appeal before the Commissioner (Appeals), they cannot claim the refund of the same in cash, inasmuch as on account of such debit entry, they have not discharged any duty out of PLA. If the said refund is granted to the appellants by way of cash, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me account from where it was debited i.e. RG-23A Part II account However, if an assessee is not able to use the credit on account of any reasons, whatsoever (which may be closure of his factory or final products being exempted, etc.) the refund becomes admissible in cash or by way of credit entry in PLA to the extent duty paid in cash or out of PLA during the relevant period." 5.15 The decision made in Gauri Plasticulture (P) Ltd. was called for on the question before the Larger Bench as framed in Para 1 thereof. At the cost of repetition it may be stated that the question before Larger Bench in that case was "whether duty debited in RG-23 A Part II can be refunded in cash, when the refund becomes otherwise due" [Emphasis supplied]. But the conclusion in that case as per Para 10 was that if denial of credit has compelled an assessee to pay duty out of PLA, the refund of the same would be admissible in cash to the extent of payment of duty in cash during that period. However, if no cash payments towards duty were made through PLA and the credit would have remained unutilized in the account books, such credit cannot be allowed by way of cash. Such decision does not appear to have fl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the conditions prescribed under Rule 5 of the Cenvat Credit Rules and the notification issued there under. The respondents have not done so. 6. The respondents have claimed that refund has been sanctioned to them in the year 2009 and the same cannot be recovered as the said order has not been challenged by the Revenue. The Hon'ble Supreme Court in the case of Woodcraft Products Ltd. - 2002 (143) ELT 247 has observed as under: 2. The assessee manufactures block board. It submitted a classification list classifying block board under Tariff Entry 4410.90 attracting 'nil' rate of duty. The Assistant Commissioner did not accept that classification; he classified it under Tariff Entry 4408.90 attracting excise duty, which the assessee paid. The respondent's appeal against such classification was dismissed. The assessee then filed an appeal before the Tribunal. The Tribunal upheld the respondent's contention and allowed the appeal. The Revenue preferred an appeal to this Court. Stay having been refused in that appeal, the Revenue refunded to the assessee the duty that it had paid. In respect thereof, the respondent gave an undertaking that the amounts refunded would be repaid within ....