CX - Refund - Duty paid twice on Ethanol - If appellants were told that their activity amounts to manufacture, dispute could not have arisen - Appeal allowed: CESTAT
By TIOL News Service
MUMBAI, AUGUST 18, 2014: THE appellant is engaged in manufacture and distribution of petroleum products. Prior to 31.12.2002, the appellant was procuring duty paid Ethanol and they had not taken credit thereon and the same is mixed with motor sprit. After mixing, the said product is called Ethanol Blended Motor Spirit (EBMS). The contention of the appellant is that as they have not availed CENVAT credit on Ethanol at the time of procurement and cleared EBMs on payment of duty, therefore, they paid duty twice on Ethanol and hence they are entitled for a refund for the duty paid during the period 01.02.2002 to 31.12.2002.
The lower authorities were of the view that the activity of blending of Ethanol with Motor Sprit amounts to manufacture and it was only notification No. 62/2002-CX dated 31.12.2002 that exempted the EBMS duty-free and, therefore, the refund is not admissible. It was further observed by the lower authorities that the appellants had failed to pass the test of unjust enrichment.
The appellant is before the CESTAT.
It is submitted that before commencing the activity of blending, the appellants have sought permission from the department for blending of Ethanol with motor sprit and vide their letter dated 21.11.2002, they were informed that the activity does not amount to manufacture and, therefore, the appellants are not entitled to take CENVAT credit of duty paid Ethanol. In this set of facts, they did not take CENVAT credit on duty paid Ethanol and started their activity of blending Ethanol with motor sprit. As the price was fixed by the Govt. Of Indiathey paid Central Excise duty on the clearance of EBMS. As they paid duty twice on Ethanol contents in EBMS, therefore, they are entitled for refund of duty content on Ethanol in EBMS or they are entitled for CENVAT credit on Ethanol at the time of procurement.
The Revenue representative submitted that the letter issued by the Range Superintendent had not been challenged by the appellant and, therefore, they are not entitled for refund claim in the light of the judgment in the case of Priya Blue 2004-TIOL-78-SC-CUS. It is further submitted that in the light of Notification 62/2002-CX dated 31.12.2002 their activity amounts to manufacture and their product has become exempt from duty from the said date, therefore, if they had paid duty on the inputs they are not entitled for credit of the same.
The Bench inter alia observed -
+ If, the appellants were told that their activity amounts to manufacture, the dispute could not have arisen as on today. In this context of that it cannot be said that the appellants are required to pay duty twice. As the appellants have claimed refund of excess duty paid on Ethanol portion at the time of clearance of EBMS or they are entitled for CENVAT credit at the time of procurement of Ethanol, the consequences will be the same as they are entitled to get the refund of excess duty borne by them. As the facts of double payment of duty on Ethanol is not in dispute at any stage and the dispute has been arisen on the wrong understanding of the Revenue while granting them permission for blending the Ethanol with MS. Therefore, following the principles of natural justice we hold that the appellants are entitled for refund claim for duty paid on Ethanol.
+ The appellants have challenged the findings of the adjudicating authority before the Commissioner (Appeals) but the same has not been appreciated in his order.
+ Where the sale price of end product is controlled by the Government, assumption that assessee would have passed on the incidence of duty to the customer is neither reasonable nor logical.
Holding that the appellants are entitled for refund claim, the appeals were allowed with consequential relief.
(See 2014-TIOL-1521-CESTAT-MUM)
