Commissioner of Central Excise vs Bharat Chemicals

This Appeal has been admitted on the following substantial question of law:

"Where the assessee has cleared the manufactured goods for export on payment of excise duty at 20% by debiting the Modvat Credit Account and subsequently obtained rebate of the said duty paid under Rule 12 of the Central Excise Rules, 1944 and later on if it is found that the correct duty payable was 10%, whether the excise authorities can claim cash payment of the excess duty debited to the Cenvat Credit Account?" 2. Mr.A.S. Rao, appearing in support of the Appeal would submit that very few facts are required to be referred by this Court for determining this question of law. The respondent Assessee is engaged in manufacturing of Paracetamol (bulk drug) falling under Chapter sub heading No. 2907.90 of Central Excise Tariff Act, 1985. It is chargeable to duty @ 10% Adv. in terms of Notification No. 6 of 1994 dated 1st March, 1994. Thus, for purpose of both home consumption and export, the Assessee can clear the goods and at the stage of removal thereof, he is required to pay Adv. Duty @ 10% in terms of this notification, which benefit has been availed of by the Assessee in both situations, namely of export and home consumption. However, in one particular clearance and for export, the Assessee paid duty at 20% and utilised excess Modvat credit on the goods cleared for export. Therefore, the Range Superintendent issued a show cause cum demand notice dated 3rd October, 1994, requiring it to show cause why the sum of Rs.5,54,600/-should not be recovered from the Assessee under Rule 57 I of the Central Excise Rules, 1944.

Mr. Rao submits that the Assistant Commissioner, Central Excise passed an order of adjudication on 28th March, 1996, and he confirmed the demand. This order was upheld partially by the Commissioner (Appeals), by his order dated 26th July, 1998.

Mr. Rao would submit that in the clearance of the same product for export and against the tariff rate, the claim of rebate of duty could have been made in terms of Rule 18 of the Central Excise Rules, 2002. However, since the amount of 20% of the duty at tariff rate was paid from the accumulated credit in the Modvat account namely RG 23 Part II, then, this rebate or refund was not admissible. Mr. Rao would submit that this is a clear case of an erroneous refund within the meaning of Rule 57 I of the Central Excise Rules, 2002. The confirmation of show-cause notice and the demand partially by the Commissioner should have been upheld by the Tribunal.

Mr. Rao has criticized the reasoning of the Tribunal and particularly in paragraph 4 of the impugned order. Mr. Rao would submit that this is a improper reading of Rule 12 of the Central Excise Rules. The Tribunal should have appreciated the fact that the amount having been paid from the Modvat and the accumulated credit available therein, refund or rebate was inadmissible. The Assessee should have as in earlier cases availed of the benefit of the partial exemption from payment of central excise duty, or it should have given up the entire benefit under the notification and paid duty at tariff rate and sought refund in terms of the then Rule 12 or Rule 18 of the Central Excise Rule, 2002. For these reasons Mr. Rao would submit that the substantial question of law should be answered in favour of the Revenue.

Mr. Nadkarni counsel for the Assessee on the other hand supports the impugned order of the Tribunal. He submits that there is no prohibition in law for the course adopted and so long as the refund was admissible, the same could not have been denied merely because payment of duty was made from Modvat account. This is not a wrongful availment of Modvat credit, but a clear case of refund of duty in terms of applicable rules. In the circumstances, he says that the Appeal raises no substantial question of law.

We have perused the Appeal paper book and the annexures including the impugned order with the assistance of the counsel appearing for the parties. There is no dispute about the factual position. The notification dated 1st March, 1994, itself clarifies that there is a partial exemption to specified goods falling under Chapters 28, 29 and 30 of the Central Excise Tariff Act, 1985. A copy of this Notification dated 1st March, 1994 (Notification No. 6/94-C.E.) denotes that serial no.6 are bulk drugs on which 10% Adv. duty can be paid. There are no conditions attached and appearing in the table. In the present case, the exemption as partially granted by this notification was available in both the cases namely clearance for home consumption and for export. If the Assessee in this case has paid duty at the tariff rate namely 20% and not availed of the exemption under the subject notification, and subsequently sought refund of the duty paid over and above 10%, or has made payment from the accumulated amount or the credit accumulated in his Modvat account, the Tribunal found that he could not have been denied the relief. In the present case, Mr. Rao would invoke Rule 57 I, but we do not think that this was a case where any credit on the raw materials or inputs has been claimed, or availed of. This was a situation where the benefit of the partial exemption was not availed of by the Assessee. In case of export, though partial payment of duty is enough, the Assessee paid 20% duty namely at tariff rate and sought refund of the sum over and above that covered by the exemption notification. That he sought refund of the 10% differential amount of duty and obtained it. Merely because he made payment of duty at tariff rate, namely at 20% from Modvat account, does not mean that this was a case covered by Rule 57 I or is a case of wrongful availment of Modvat credit. We do no see how Rule 57 I had any applicability to the present case. Rule 57 I itself in its title clarifies that it is recovery of credit availed of or utilized in an irregular manner, but where duty is paid on inputs that this situation or the applicability of Rule 57 I may occur. It may not be the situation and governing the present case. It may not apply to the facts and circumstances of the present case or govern the situation which was noted by the Revenue. In the circumstances, the show cause cum demand notice itself was without any authority and jurisdiction. No demand could have been raised in the present circumstances and such a finding is essentially emanating from the purported factual position. The finding of fact, therefore, really raises no substantial question of law. We find that the Tribunal''s reasoning and particularly in paragraph no.4, does not warrant our interference because, the Tribunal''s view is a possible and plausible one. It is consistent with the factual materials on record. Hence, it is neither perverse nor vitiated by any error of law apparent on the face of record. There is no prohibition in law for the course adopted by the Assessee that we must sustain the impugned order. As a result of the above discussion, this Appeal fails. It is accordingly dismissed. No costs.