Central Excise – Exports – Refund of AED ( T&TA ) on inputs – entitled - a beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively : Bombay High Court

By TIOL News Service

MUMBAI, JULY 20, 2009: ALL these Appeals are filed by the Revenue challenging the dismissal of their appeals by the CESTAT against the order passed by the Commissioner of Central Excise, who had allowed the three appeals of the respondents against the order of the Assistant Commissioner of Central Excise refusing refund of additional excise duty. The common question of law in all these appeals is as follows:-

“Whether in the facts and in the circumstances of the case the Tribunal was right in law in holding that “Boards Circular No. 701/17/2003- CX dated 12.03.2003 allows refund of unutilized credit of additional duty of excise (Goods of Special Importance) on export of the finished goods even if such finished goods are not subjected to levy of the said additional duty”, when the said Circular do not have retrospective application to the period before introduction of CENVAT Rules, 2002. The restriction on utilizing credit of duty paid under T&TA Act, was removed vide Notfn.No . 13/2003 dated 01.03.2003”.

The respondent is engaged in manufacture of decotised manmade/ chemile fabrics. The respondent had cleared goods under bond and also submitted final proof of export and also had not made any separate claim for rebate. The respondent was availing credit of the duties paid on inputs under Rule 57A of the Central Excise Rules, 1944. It was also required to pay additional excise duty on textile and textile articles. The respondent applied for refund of the duty, including the basis excise duty and the additional excise duty on textile and textile articles. The Assistant Commissioner of Central Excise held the respondents entitled for refund of basic excise duty, but found that refund could not be allowed in respect of additional excise duty on T&TA and to that extent he refused the claim.

The respondent challenged the order of the Adjudicating Officer before the Commissioner (Appeals), who in turn took a view that the proviso of Rule 57F ( 12) as inserted by corrigendum dated 1.3.1997 and Rule 57F (13) allow utilization of credit on input used in the manufacture of final products exported outside India or credit of specified duty paid (additional duty paid on inputs) may be taken in the normal course for payment of duty on any final product. In view of this, the Commissioner (Appeals) held that the respondent is entitled to credit of additional excise duty and accordingly he allowed the appeals and set aside the order of the Adjudicating Officer. The order passed by the Commissioner (Appeals) was challenged before the Tribunal by the Revenue. The Tribunal dismissed the appeal holding that no ground was made out to interfere.

The Tribunal however, did not accept the contention of the Revenue, particularly in view of the Circular No.701 /17/2003- CX dated 12.3.2003 issued by the Central Board of Excise & Customs in respect of refund of unutilized credit of additional duty of excise (Goods of Special Importance) in terms of Rule 5 of CENVAT Credit Rules, 2002. After considering the relevant provisions, particularly Rule 5 of the CENVAT Credit Rules and the Additional Duties of Excise (Goods of Special Importance) Act, it was clarified by the said circular that refund of AED ( GSI ) shall be allowed under Rule 5 of CENVAT Credit Rules, 2002 regardless of the fact the said duty is not leviable on the final products. Para 3 of the circular reads as follows :

“Accordingly, it is clarified that the refund of AED ( GSI ) shall be allowed under Rule 5 of Cenvat Credit Rules, 2002 regardless of the fact tha the said duty is not leviable on the finished product. Pending cases if any, may be decided accordingly.”

Revenue is in further appeal before the High Court.

It was contended on behalf of the Revenue that the said Circular dated 12.3.2003 was applicable only in respect of additional excise duty on goods of special importance and it could not be applicable to the additional excise duty on inputs used for production of textiles and textile articles which are covered under AED ( T&TA ) Act. However, on 22.3.2007, the Central Board of Excise & Customs, issued a circular, which shows that taking into consideration numerous references received from the field as well as from the trade seeking clarification on whether refund of AED ( T&TA ) is allowed on the similar lines for export of goods. In Para 2 of that circular, after considering the relevant provisions, the circular finally provided as follows : -

“...Accordingly, it is clarified that clarification issued for the refund of AED ( GSI ) under rule 5 of the CENVAT Credit Rules, 2002 vide Board's Circular No.701 /17/2003- CX , dated 12.03.2003, will be applicable to AED ( T&TA ) subject to the conditions and limitations as prescribed under the said rules.”

Thus, it has become clear that the circular dated 12.3.2003, which was originally issued in respect of the additional duty of excise on goods of special importance, has been made applicable to additional excise duty payable on textiles and textile articles also.

The High Court noted that in Arviva Industries (I) Ltd. Versus Union of India - 2004-TIOL-61-HC-MUM- CUS , the Division Bench of this Court observed that the Supreme Court ruled that the circular issued by the Board is binding on the departmental authorities and the department cannot repudiate the circular issued by the Board on the ground that it was inconsistent with certain statutory provisions.

In Suchitra Components Ltd. vs. Commissioner of Central Excise, Guntur - 2007-TIOL-09-SC- CX , the Supreme Court referred to the earlier Judgment in Commissioner of Central Excise, Bangalore v. M/s. Mysore Electricals Industries Ltd ., - 2006-TIOL-153-SC- CX wherein the Supreme Court had held that a beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively.

In the present case, both these circulars of 2003 and 2007 are beneficial circulars as far as the assessees are concerned and the Government intended to give benefit of refund to them in respect of the unutilised credit given for additional excise duty. Both these circulars clearly show that the Board had seriously considered the provisions of the rules, representations and demands of the trade and industry and had come to conclusion that benefit of refund can be given under the rules. Therefore, the Board issued both the circulars which are clarificatory in nature. If the intention would be to make them prospective in application, the Board could have said so. On the contrary, by clearly declaring that all the pending cases shall be disposed of according to that circular, the Board clarified that it was not prospective in nature but would have application to all the pending matters also. The Tribunal considered the circular of 2003 and incidentally that view has been supported by the latter circular of 2007 issued by the Board.

All the three Appeals stand dismissed.

(See 2009-TIOL-355-HC-MUM-CX in 'Excise')