Commissioner of Central Excise vs Cipla Ltd.

This Writ Petition under Article 226 of the Constitution of India is by the Commissioner of Central Excise, Mumbai-III. He is aggrieved and dissatisfied with the Revisional order. The Revisional order has been passed by the Respondent No. 2 to this Writ Petition, namely, The Joint Secretary, Government of India. The 1st Respondent, M/s. Cipla Limited, claims to be a merchant exporter who procures Central Excise Duty paid goods for export from various local manufacturers.

The Commissioner has challenged the order passed by the 2nd Respondent on a very limited issue inasmuch as the claim for refund has been allowed by reversing the order of the Commissioner of Central Excise (Appeals). However, while passing that order, the Revisional Authority in para 10 has directed that the Government cannot retain the amount paid without any authority of law. Therefore, the Government allows the amount to be re-credited in the Cenvat credit account of the concerned manufacturer. The Commissioner''s order was modified to this extent.

Mr. Jetly submits that para 10 of the order, if read in its entirety, is a reconsideration of the earlier view and contains a contrary direction. In that regard, he relied upon another order which is passed in identical circumstances by the Revisional authority whereunder it does not give any clarification. Rather it referred to Section 12B of the Central Excise Act, 1944. That enabled the Government or the Commissioner of Excise to take a stand that in the event, the re-credit in this Cenvat Credit account of the concerned manufacturer is provided, he will be obliged to satisfy the authority from whom any relief or benefit or refund is sought that he has not passed on the burden to the buyer in terms of Section 12B. Lest, in the submission of Mr. Jetly Section 12B would apply straightway and the presumption would enable the Government to deny the benefit or the relief. Our attention has been drawn to orders passed by the Central Government, namely, the Respondent No. 2, in the case of a revision application. That was filed by the very Assessee before us and in that regard, orders have been passed on 15th October, 2013 and 22nd October, 2013 in which above mentioned clarification has been given.

We have heard Mr. Jetly and Mr. Sridharan and perused the impugned order and relevant to the above extent. It is a common ground that the first respondent applied for rebate by invoking Rule 18 of the Central Excise Rules, 2002 read with a Notification. An Order-in-Original on 27th June, 2012 dealt with these rebate claims and the adjudicating authority in its detailed analysis and reasoning sanctioned the rebate claims restricting the amount to 5% ad valorem and rejected the balance or the remaining amount. This direction is to be found at page 28 of the paper book.

Aggrieved by these Orders-in-Original, Appeals were preferred by M/s. Cipla Limited, 1st Respondent before us and the Appellate Authority disposed of the Appeals by concluding that duty was paid at a higher rate only to encash the Cenvat credit which is in balance because of the rate of duty on the exported goods is much lesser than the rate of duty on the inputs. Hence, the question of refund of such unutilized credit does not arise. It was found that the unutilized Cenvat is on account of duty paid by the input manufacturers and not by the manufacturer of finished goods. Therefore, Cipla Limited cannot claim refund of duty. If it desires that it was entitled to such rebate, the Commissioner clarified that there was another option available. By such reasoning, the Appeal came to be disposed of. Meaning thereby, the Orders-in-Original were upheld.

The Revision Application was filed against these orders and in the said Revision Application, the ultimate direction has been given but prior thereto the finding in para 9 is that there is no merit in the contentions of the applicant Cipla Limited that they are eligible to claim rebate of duty at 10%. That is a General Tariff Rate of duty ignoring the effective rate of duty at 4 or 5% and in terms of the exemption Notification dated 1st March, 2006. Therefore, the rate of duty was taken as 4 or 5% and rebate was admissible only to that extent of duty paid in terms of this notification. Thereafter in para 10 following direction is given:--

"10. In view of above discussion, Government observes that in the instant cases, rebate claims are admissible of the duty paid at effective rate of duty at the rate of 4% or 5% in terms of Notification No. 4/06-C.E. , dated 1-3-2006 as amended as applicable on the relevant date on the transaction value of exported goods determined under Section 4 of Central Excise Act, 1944. The amount of duty paid in excess of duty payable at effective rate of 4% or 5% as per Notification No. 4/06-C.E. is to be treated as voluntary deposit with the Government. In such cases where duty is paid in excess of duty actually payable as held by Hon''ble Apex in the case discussed in para 8.8.2 and also held by Hon''ble High Court of Punjab and Haryana as discussed in para 8.8.3 above, the excess paid amount is to be returned/adjusted in Cenvat Credit account of Assessee. Moreover, Government cannot retain the said amount to be re-credited in the Cenvat Credit account of the concerned manufacturer. The impugned orders stand modified to this extent."

The question was of the amount paid in excess of duty at the above effective rate and in terms of the Notification. The Revisional Authority referred to such sum being lying with the Government as a deposit. The judgments of Punjab & Haryana High Court were referred and the opinion was that the Government cannot retain the amount paid without any authority of law. The direction to allow the amount to be re-credited in the Cenvat credit account of the concerned manufacturer does not require any interference by us because even if the impugned order of the Appellate Authority and the Order-in-Original was modified by the Joint Secretary (Revisional Authority), what is the material to note is that relief has not been granted in its entirety to the first respondent. The first respondent may have come in the form of an applicant who has exported goods, either procured from other manufacturer or manufactured by it. Looked at from any angle, we do not find that any observation at all has made which can be construed as a positive direction or as a command as is now being understood. It was an observation made in the context of the amounts lying in excess. How they are to be dealt with and in what terms and under what provisions of law is a matter which can be looked into by the Government or even by the Commissioner who is before us. That on some apprehension and which does not have any basis in the present case, we cannot reverse the order or clarify anything in relation thereto particularly when that it is in favour of the authority. For all these reasons, the Writ Petition is misconceived and disposed of.