By TIOL News Service

MUMBAI, JAN 08, 2019: THE appellant had filed a refund claim in respect of the MODVAT credit balance lying in their account on the date of surrender of registration. A similar claim was also filed in respect of the balance in PLA.

The lower authorities rejected the claims on merits as well as on the ground of time bar.

The appellant is before the CESTAT.

The Member (Technical) concluded that in view of the Larger Bench decision in Gauri Plasticulture (P) Ltd. - 2006-TIOL-1121-CESTAT-MUM-LB, the order of the lower authority is upheld except for the refund of PLA amount.

The Member (J) while agreeing with the refund of PLA amount had a different opinion in respect of the refund of unutilized credit.

After considering the facts, the Member (J) observed -

"13. It is seen that against the said refund application filed by the appellant no show-cause notice was issued to the appellants proposing to deny the same specifying the grounds on which Revenue intends to deny the refund. The refund application was taken up directly by the Assistant Commissioner for adjudication. No doubt a personal hearing was granted to the appellant before rejection, during which the appellant relied upon the Hon'ble High Court decision in the case of UOI Vs. Slovak India Trading Co. Pvt. Ltd., - 2006-TIOL-409-HC-KAR-CX…"

Reproducing the order of the Assistant Commissioner, the Member (J) pointed out that the refund claim was rejected by him only on the point of limitation without giving any findings on the merits of the case.

Nonetheless, the appellate authority had gone into the merits of the case and had rejected the appeal on merits as also on limitation.

The Member (J), therefore, observed –

"17. …Obviously, when there is no rejection on merits, it is neither possible nor practicable for the assessee to challenge the order on merits. In such a scenario, it was not open for the Commissioner (Appeals) to go to the merits of the case and to reject the refund claim on merits…In fact the Assistant Commissioner also seeks a clarification as to whether the Karnataka High Court decision have been accepted by the Revenue or not, it was found that the Hon'ble Supreme Court has dismissed the petition filed by the department for Special Leave Petition moved before the Hon'ble Supreme Court. The original adjudicating authority stops there and does not go ahead on the merits of the case, thus, leaving a vacuum for the higher authorities to find out as to whether the merits have been accepted by him or not. In the absence of such a vacuum left by the original adjudicating authority, I really fail to understand as to how the Commissioner (Appeals) would presume that refund claim has been rejected on merits also and thus would proceed ahead with the same. With due respect to my learned Brother, I do not agree with the findings arrived at by him that rejection of refund claim on limitation would be deemed to have been a rejection on all counts including the merits and unjust enrichment angle. There is no deeming clause/provisions in adjudication."

Citing the apex court decision in Smithkline Beecham Co. - 2003-TIOL-58-SC-CX, the Member (J) concluded that it was not open to the Commissioner (Appeals) (or the Bench) to go ahead to discuss the merits.

As regards limitation, the Member (J) observed –

"…In the absence of acceptance of their registration certificate surrendered, the assessee unit continued to remain an excisable unit and it is beyond imagination that an excisable unit would file a refund claim relatable to unutilised Cenvat Credit. According to me, the refund of unutilised excess credit would arise only when the appellant's registration certificate gets surrendered with due acceptance of the same by the Central Excise authorities inasmuch as the refund is of unutilized accumulated Cenvat Credit at the time of surrender of licence and stopping of their manufacturing activity. As such, I am of the view that the limitation aspect is not to be considered by treating the date of filing of application for surrender of the licence as the relevant date. In my view it needs to be reconsidered as to when the appellant's registration surrender application was accepted by the Revenue either directly or by referring to the completion of the adjudication proceedings against them…"

It was, therefore, opined that the matter needed to be remanded to the original adjudicating authority for consideration of the limitation aspect.

The following difference of opinion was, therefore, referred to the President for decision by the third Member -

" Whether the appeal has to be rejected in toto as held by the learned Member (Technical) or the matter has to be remanded to the original adjudicating authority for fresh decision as observed by the learned Member (Judicial)."

(See 2019-TIOL-80-CESTAT-MUM)