Aroma Chemicals vs Union of India

By means of the present writ petition, the petitioner has prayed for a writ, order or direction in the nature of mandamus directing respondent No. 3, the Assistant Commissioner, Central Excise Division, Moradabad to refund the amount of rebate claimed in pursuance of the order dated 30-10-2007 and to pay interest @ 12% on amount of Rs. 1,37,833/- from three months from the date of filing of rebate claim till date of payment along with other reliefs. The fact of the case is that the petitioner is a partnership firm and is engaged in the manufacturing of various excisable items such as product of Mentha, Menthol, Menthol Crystal and essential oils falling under Chapter Nos. 29, 30 and 33 of Central Excise Tariff Act, 1985. It is duly registered with the Central Excise Department.

The petitioner claims that it is engaged in export of menthol and is entitled to rebate of duty paid on the exported goods as per the Rules. The claim of the petitioner for rebate of duty was denied by the Department and the matter was carried in revision before the Central Government. The Central Government by its order dated 14-6-2006 allowed the revision filed by the petitioner and held that the petitioner/applicants are eligible for rebate of Central Excise duty paid on the clearance of the impugned goods. The matter was remanded back to the original authority for sanctioning rebate of Central Excise duty to the applicants/petitioner as discussed in the order. After remand, the department again rejected the claim of the petitioner by its order dated 31-3-2007. The petitioner carried the matter in appeal before the Commissioner (Appeals), Customs and Central Excise Division, Moradabad. The said appeal has been allowed by the order dated 30-10-2007 and the order-in-appeal has been set aside. Thereafter, the petitioner filed an application for refund of amount on 13-12-2007. A copy of which is Annexure-7 to the writ petition. The petitioner had sent several reminder for refunding the said amount but in vain. Feeling aggrieved that no action is being taken by the Department, the present writ petition has been filed. In the counter affidavit, the material averments made in the writ petition have not been denied. However, the respondent has come with the case that the order dated 30-10-2007 passed by the Commissioner (Appeals) is sub judice before the Central Government by way of revision. Since the revision is pending, according to the respondent, no case of grant of any refund has been made.

Heard Sri Bharatji Agarwal, learned senior counsel along with Sri Subham Agarwal for the petitioner and Sri BKS Raghuvansi, learned counsel for the respondent.

Sri Bharatji Agarwal, counsel for the petitioner submits that Respondent No. 3 is bound to comply with the order dated 30-10-2007 passed by the Commissioner (Appeals) as there is no order of the Central Government staying the effect and operation of the order of the Commissioner (Appeals). He submits that mere pendency of revision before the Central Government is of little consequence so far as refund is concerned.

In contra, Sri Raghuvansi, counsel for the respondents submits that the revision is pending before the Central Government as petitioner has failed to file reply of the revision.

Considered the respective submissions of the learned counsel for the parties. It is not in dispute that in the first round of litigation, the petitioners were successful up to the stage of Central Government. The revision filed by the petitioner was allowed by the order dated 14-6-2006. The relevant paragraph of the said order, for the sake of convenience, is reproduced below.

From the facts mentioned above, it is clear that export of Central Excise duty paid goods is not in dispute. The procedure and condition of the Rule 18 of the Central Excise Rules, 2002 is also complied with by the applicants. Hence the applicants are eligible for rebate of Central Excise duty paid on clearance of the impugned goods. However, the rebate of Education Cess paid on the impugned goods is not admissible to the applicants as Education Cess was not specified duty under relevant Notification No. 40/2001-C.E. (N.T.), dated 26-6-2001, issued u/r 18 of the Central Excise Rules, 2001.

In view of above facts and circumstances Govt. remanded the case back to the original authority for sanctioning rebate of Central Government duty to the applicants as discussed above, if otherwise is in order.

The Revision Application is disposed of in above terms.

So ordered.

In spite of the above order passed by the Central Government, Respondent No. 3, denied refund and rejected the claim of the petitioner by the order dated 31-3-2007. The operative portion of the said order is reproduced below.

I reject the rebate claim amounting to Rs. 1,37,833/- (Rs. One lac Thirty Seven Thousand Eight Hundred Thirty Three only) in respect of goods exported by M/s. Aroma Chemicals, Siddhi Sadan, Moradabad vide ARE-1 No. 8, dated 30-9-2004.

The matter was carried in appeal before the Commissioner (Appeals), who vide his order dated 30-10-2007 has allowed the appeal. The operative portion of the order is reproduced below.

I have carefully gone through the facts of the case and records of personal hearings. I find that the case was already decided in favour of the appellants on merits by the Govt. of India in their revision application. However, the adjudicating authority has not found the same otherwise in order, and has rejected the rebate on the sole ground that the rebate of duty paid out of credit taken on inputs received from units located in the area availing area based exemption under notfn. 32/99 cannot be allowed as the supplier already gets refund of the said duty. In this regard I find that the C.B.E. & C. vide Circular No. 209/11/2005-CX-6, dated 8-12-2006 has clearly specified that such rebate is not deniable. I also see that the same adjudicating authority has himself allowed another rebate claim of the appellant vide order dated 12-4-2007 under the same circumstances by following the guidelines given in the said circular. Therefore, I do not find any reason for disallowing the present claim. In this regard I agree with the appellant that this is utter disregard to the orders given by the Govt. of India in their revision application. I also find that the C.B.E. & C. has further clarified the matter vide their instruction F. No. 209/11/2005-CX-6, dated 3-4-2007 wherein it has clearly said that the rebate claim of duty paid from the cenvat credit availed on inputs received from units located in J & K, North East, Sikkim and Kutch is allowable. I, therefore, find that in the light of C.B.E. & C. circulars cited supra, there is no ground to disallow the claim on the ground taken by the adjudicating authority and the order of the adjudicating authority merits to be set aside.

ORDER

Based on discussion and findings as above the impugned Order-in-Original is set aside and the appeal is allowed with consequential relief.

The above facts are no longer in dispute. The only defense set up by the respondent is that the order of the Commissioner (Appeals) is sub judice in revision before the Central Government. Be that as it may. It could not be said by the respondent that there is any interim order in their favour of the Central Government, staying the order of the appellate authority.

We find that the Apex Court in Union of India and others Vs. Kamlakshi Finance Corporation Ltd., had occasioned to consider the similar controversy. The Supreme Court has held that the principle of judicial discipline requires that the order of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department, in itself an objectionable phrase and is the subject matter of an appeal, can furnish no ground for not following it unless its operation is suspended by the competent court. For the sake of convenience, para 6 of the judgment is reproduced below.

Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers in reaching their conclusion by passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasised that it is of utmost importance that in disposing of the quasi judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the Department -in itself an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only undue harassment to assessee and chaos in administration of the tax laws.

Sri Bharatji Agarwal, counsel for the petitioner submits that the petitioner could not obtain any instructions and proceeded to the hearing of the writ petition as if the revision is pending consideration before the Central Government. Sri BKS Raghuvansi, counsel for the respondent also submits that he has received no instructions from the department informing him that revision has been decided by the Central Government. We proceeded to hear the matter as if revision is still pending before the Central Government.

There is no dispute that there is no interim or stay order in the revision which is said to be pending before the Central Government.

Section 11B of the Act provides for refund of duty. Its sub-section (5)(ec) contemplates where the duty became refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any Court, the date of such judgment, decree, order or direction.

It means that the refund shall be due from the date of the judgment, decree, order or direction of the appellate court or by Tribunal or any Court. Here the facts of the present case are not disputed that in pursuance of the order dated 30-10-2007, the amount is refundable and due to the petitioner.

The petitioner has also filed an application for refund on 13-12-2007. The order of the appellate authority was final in Section 11BB of the Act which deals with interest on delayed refunds. It provides that the Central Government shall be liable to pay interest not below 5% and not exceeding 30% per annum as is, for the time being, fixed by the Central Government. In the year 2007, the Central Government had issued a Notification dated 12-9-2007 whereby the rate of interest or refund has been fixed at the rate of 6% per annum.

Having regard to the facts of the case, we are of the opinion that a case for refund amounting to Rs. 1,37,833/- along with interest has been made out. Mere pendency of revision before the Central Government, at the instance of the Department, is of no consequence as held by the Apex Court in the case of Union of India v. Kamlakshi (supra).

The petitioner shall be entitled to get interest after expiry of period of three months from the date of application for refund at the rate of 6% per annum i.e. from 13-3-2008 till the date of actual payment of amount.

We, therefore, direct Respondent No. 3 to issue refund voucher of the aforesaid amount along with interest @ 6% as directed herein above till the date the actual payment within a period of one month from today. The respondents are also liable to pay the cost of the present writ petition which we assess at Rs. 25000/-. The said amount shall also be paid within a period of one month. With the aforesaid directions, the writ petition is disposed of.