M/s. J.U. Pesticides And Chemicals Private Limited vs Commissioner Of Central Excise

The only issue to be decided is whether the appellant is entitled to the refund claim made under Section 11B of the Central Excise Act, 1944.

Heard Ms. K. Nancy, Learned Advocate appearing for the appellant and Ms. Sridevi Taritla, Learned Additional Commissioner (Authorized Representative) appearing for the Revenue.

The undisputed facts inter alia are that the appellant was engaged in the manufacture of insecticides and MS Ingots; that they filed a refund claim for Rs.24,59,328/- on 04.06.2012 relating to the accumulated CENVAT Credit lying unutilized in their CENVAT account, on account of closing down of their manufacturing operations; that a Show Cause Notice dated 22.08.2012 was issued proposing the deny the refund inter alia on the ground that the reasons for claiming the refund of accumulated credit was not covered under any category falling under the provisions of Section 11B ibid. read with Rule 5 of the CENVAT Credit Rules, 2004 ('CCR' for short); that vide Order-in-Original No. 213/2012 (R) dated 13.12.2012, the above refund claim of the appellant was rejected; that thereafter, vide impugned Order-in-Appeal No. 52/2014 (M-II) dated 02.07.2014, the First Appellate Authority also rejected the appeal and that the same is arraigned in the present appeal. The eligibility of the appellant for refund is apparently not at all questioned by the Revenue.

Section 11B ibid. deals with a situation where an application for refund of duty and interest paid is filed and the treatment thereof. In a nutshell, the said Section prescribes guidelines as to what an Officer has to do upon receiving such application for refund. Sub-section (3) to Section 11B inter alia mandates that no refund shall be made except as provided in sub-section (2), which means the Officer has to strictly adhere to sub-section (2) while processing the application for refund. Accordingly, if the Officer is satisfied, then he may refund the whole or any part of the claim instead of being credited to the Fund, subject to the conditions prescribed under the first proviso to sub-section (2) at (a) to (f). This means the Revenue has to credit to the Fund, if not refund to the claimant, but here, neither of the two is done apparently; no whisper about crediting to the Fund and certainly no refund.

Be that as it may, there is no dispute that nothing has to be read into the provisions which the legislature in its wisdom has consciously drafted. No disputes also that Rule 5 of the CCR does not speak of refund in a situation where the manufacturing unit is closed down. There is also no doubt that Rule 5 does not specifically prohibit refund when a unit closes down; so, what is not there can never be read into a provision while strictly adhering to the legislative intention as to not read something into a provision. Rule 5, admittedly, does not specifically prohibit refund in a situation where a manufacturing unit closes down and the credit available could not get utilized. Hence, the legislative intention cannot be applied to the advantage of the Revenue especially when the tax suffered amount in the form of CENVAT Credit is lying with the Revenue. The authority to collect tax has to be applied in entirety, keeping in mind also the proviso to sub-section (2) to Section 11B ibid. When the Constitution mandates that there shall not be any collection of tax without the authority of law, there cannot also be the retention of tax by the Revenue without the authority of law, which means that having rejected the refund claim, there should be a mention about the credit of the same to the Fund subject to satisfaction of unjust enrichment, etc., which is apparently lacking, from a perusal of both the Order-in-Original as well as the impugned Order-in-Appeal.

6.1 The Hon'ble High Court of Rajasthan in the case of M/s. Welcure Drugs & Pharmaceuticals Ltd. v. Commr. of C.Ex., Jaipur reported in 2018 (15) G.S.T.L. 257 (Raj.) has analysed the above issue in the light of decisions of other High Courts as well as the Hon'ble Supreme Court and has further observed as under:

"...12. Four different High Courts have also taken the view against which the SLP was preferred and earlier also the Tribunal granted refund against which the SLP was not preferred. In that view of the matter, the principle of estoppel applies as once the department has accepted the view taken by the Tribunal it will not be appropriate to challenge the same by choosing the present assessee.

In our considered opinion, the judicial discipline is required to be maintained. The Tribunal cannot distinguish the High Court judgments. They are bound by the High Court judgments even jurisdictional High Court and at the most they can refer it back prior to distinguish on facts but no authority has been made. Full Bench decision of the Tribunal has to be followed.

Hence, we answer the issue in favour of assessee against the department.

The appeal is allowed. The view of Karnataka High Court which has been confirmed by the Supreme Court is required to be approved and the same is approved."

(Emphasized in bold, for clarity)

6.2 In view of the above, I am of the opinion that the lis in the case on hand has already been settled by the Hon'ble High Courts and hence, the denial of refund being incorrect, cannot be sustained.

The impugned order is therefore set aside, the Adjudicating Authority is directed to work out and refund in accordance with law, with consequential benefits, if any, as per law.

The appeal stands allowed on the above terms.

(Order pronounced in the open court on 03.09.2021)