T.i. Cycles of India Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. appellant is absent, but has sent a request for disposal of the appeal on merits. we have heard shri m. ali, jdr and perused the papers.2. appellant, engaged in the manufacture of cycle and cycle parts covered by erstwhile t.i. 68, was availing benefit of notification no.201/79 dated 4-6-1979. subsequently, appellant filed refund claim for rs. 3,14,314.96, being the excess duty paid by the appellant on the finished product. the assistant collector sanctioned the refund claim partly allowing cash refund only to the extent actual of rs. 1,23,734.22, but made actual cash refund in cash only of rs. 89,89,366.87 and withheld cash repayment of the balance amount of rs. 34,367.35 in view of the bar in the notification. collector (appeals) having dismissed the assessee's appeal, the present appeal has been filed.3. the heading of notification no. 201/79 as amended from time to time purports to be as follows :- "set-off of duty of excisable goods used in the manufacture of other excisable goods falling under t.i. 68." the body of the notification states that government exempted all exisable goods on which duty of excise is leviable and in the manufacture of which any goods falling under tariff item no. 68 have been used as raw materials or component parts (inputs) from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs. this is subject to the procedure set out in the appendix to the notification. the second proviso to the notification characterises the benefit of the notification as "credit of duty allowed in respect of the inputs." the fifth proviso refers to the subject as "exemption under this notification." clause 2 of the appendix to the notification states that a manufacturer may take credit of the duty already paid on the inputs received after submitting the declaration and utilise such credit for payment of duty of excise on the said goods. clauses 2a to 4 also speak of taking "credit of the duty paid on the inputs." clause 5(d), of the appendix requires the manufacturer to maintain an account in parts i and ii of form rg 23 in appendix i to the rules. clause 9(a) of the appendix states that credit of the duty taken in respect of any inputs may be utilised towards payment of duty on any goods for the manufacture of which such inputs were declared by the manufacture to be brought into the factory or where such inputs were cleared from the factory as such, on such inputs. clause 9(b) states that no part of such credit shall be utilised save as provided in clause (a) or shall be refunded in cash or by cheque.4. the lower authorities have relied on clause 9(b) of the appendix to the notification to deny cash refund of rs. 34,6366.35 on the ground that payment of duty on the finished product to that extent had been not by cash or by debiting in the pl account but by debit in the rrg 23 part ii register. on the same reasoning, the assistant collector allowed cash refund of rs. 89,366.87 because that part of the duty on the finished product had been paid in cash or by debiting in pl account.5. the terminonolgy used in the notification is somewhat confusing.there is an apparent contradiction between the three sets of expressions used in the notification, namely, "set off", "exemption from so much of the duty as is equivalent to the duty paid on the inputs and "credit of the duty paid on inputs." but looking at the entire scheme of the notification and in particular some of the proviso thereof and a large number of clauses in the appendix to the notification, coupled with the insistence on maintaining an account in parts i and ii of rg 23 and the provisions in clause 9, the notification has to be regarded as one extending the benefit of taking credit of the duty paid on inputs falling under t.i. 68 used in the manufacture of finished products and utilisation of credit to pay duty on the finished products. if this be the real purport of the notification, the bar under rule 9(b) of the rules, that is bar against refunding any part of the credit in cash or by cheque would apply in the instant case, as rightly held by the lower authorities.6. to avoid the above view being taken, appellant has placed reliance on two decisions, deccan sales corporation and anr. v. r. parthasarthy and ors., 1982 (10) e.l.t. 885 (bom.) and the decision of the high court of andhra pradesh in coromandal fertilisers ltd. v. union of india - 1990 (48) e.l.t. 333 (a.p.). the deccan sales corporation case was a case under rule 56a of the rules. the manufacturer was entitled to the benefit of rule 56a for the period from 1-3-1969 to 28-2-1980, but benefit was not allowed immediately for various reasons and benefit was sanctioned only towards the end of october, 1969. meanwhile, the manufacturer cleared finished goods and paid duty thereon in cash and subsequently applied for refund of the duty paid in cash on the finished product. rule 56a contained a bar similar to the one contained in notification no. 201/79. this is seen in clause (vi) of rule 56a. it was argued on behalf of the manufacturer that what is barred is not cash payment but cash payment in excess of the quantum of excise duty leviable or in other words, what is barred is excess net claim by way of cash refund. the high court accepted this contention and observed as follows : "all that is sought is reduction of liability to pay excise duty on the final manufactured product. ordinarily, such reduction of liability would be available through adjustment. in the instant case such adjustment could not take place and credit was delayed because the necessary documents (in the opinion of the bombay office) were not immediately made available. as and when the documents were made available, the petitioners became entitled to receive the credit. it may be that ordinarily the petitioners or parties similarly situate may not require cash payment and would be content with adjustment against future liability to pay excise duty. in other words, cash refund is not to be equated with cash payment. to put it in another way, although ordinarily rule 56a would entitle the parties manufacturing a notified product to avail the benefit by adjustment, there is nothing in clause (vi) to warrant the conclusion that this is the only manner in which the benefit could be given. if in the meantime the party has paid the full quantum of excise duty, a part of that quantum could be returned to it. what clause (vi) prescribes, in other words, is giving to the manufacturer a net surplus or advantage in cash on the footing that the quantum of excise duty collected on the raw materials component parts exceeds the quantum of excise duty payable by that manufacturer on the goods produced." the same view was taken by the high court of andhra pradesh in corontandal fertilisers ltd. case also.7. the present case is distinguishable from the above mentioned two cases on which the appellants have placed reliance. in the said cases, the assessee-appellants were not permitted initially to utilise proforma credit admissible under rule 56a with the result that they had to pay duty on their exciseable product by cash/cheque. subsequently they sought refund of the duty so paid by them by cash/cheque. the courts held that the refund amounts were payable to them by cheque. the bar on payment of refund in terms of rule 56a(3)(vi)(b) was held to be not applicable for such refunds. in the present case, on the contrary, there was no restraint or refusal for the availment of the credit in question and the appellants had, in fact, used the credit for payment of duty on their final product. refund was claimed by them not on the ground of refusal of permission to use the credit leading to additional utilisation of their personal ledger account (pla) to that extent.refund was claimed on the ground that duty was required to be paid initially on a higher value of the product namely the selling price of their distributors. the claim was held to be admissible and refund was sanctioned. as duty had been paid by them partly through their personal ledger account and the balance through debit in their rg 23 account, refund was made to them through cheque of an amount equal to the portion paid through pla. refund of the duty amount paid by debit to their rg 23 account was not, however, made by cheque. amount of refund was ordered to be credited to their rg 23 account. this was consistent with the provision contained in paragraph 9(b) of the appendix to the subject notification laying down that no part of credit shall be refunded in cash or by cheque. the fact that the appellants had utilised the credit for payment of duty does not entitle them to get such amount in cash or cheque. their eligibility to refund can only have the result of restoring them to the status quo ante as far as the subject credit is concerned. in other words they can only have the credit restored to their rg 23 account. allowing their refund claim in full by cash or cheque would render paragraph 9(b) of the appendix mentioned above nugatory.8. for the reasons indicated above, we find no ground to interfere and accordingly dismiss the appeal.

Judgment:
1. Appellant is absent, but has sent a request for disposal of the appeal on merits. We have heard Shri M. Ali, JDR and perused the papers.

2. Appellant, engaged in the manufacture of cycle and cycle parts covered by erstwhile T.I. 68, was availing benefit of Notification No.201/79 dated 4-6-1979. Subsequently, appellant filed refund claim for Rs. 3,14,314.96, being the excess duty paid by the appellant on the finished product. The Assistant Collector sanctioned the refund claim partly allowing Cash refund only to the extent actual of Rs. 1,23,734.22, but made actual Cash refund in cash only of Rs. 89,89,366.87 and withheld cash repayment of the balance amount of Rs. 34,367.35 in view of the bar in the notification. Collector (Appeals) having dismissed the assessee's appeal, the present appeal has been filed.

3. The heading of Notification No. 201/79 as amended from time to time purports to be as follows :- "Set-off of duty of excisable goods used in the manufacture of other excisable goods falling under T.I. 68." The body of the notification states that Government exempted all exisable goods on which duty of excise is leviable and in the manufacture of which any goods falling under Tariff Item No. 68 have been used as raw materials or component parts (inputs) from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs. This is subject to the procedure set out in the Appendix to the notification. The second proviso to the notification characterises the benefit of the notification as "credit of duty allowed in respect of the inputs." The fifth proviso refers to the subject as "exemption under this notification." Clause 2 of the Appendix to the notification states that a manufacturer may take credit of the duty already paid on the inputs received after submitting the declaration and utilise such credit for payment of duty of excise on the said goods. Clauses 2A to 4 also speak of taking "credit of the duty paid on the inputs." Clause 5(d), of the Appendix requires the manufacturer to maintain an account in Parts I and II of Form RG 23 in Appendix I to the Rules. Clause 9(a) of the Appendix states that credit of the duty taken in respect of any inputs may be utilised towards payment of duty on any goods for the manufacture of which such inputs were declared by the manufacture to be brought into the factory or where such inputs were cleared from the factory as such, on such inputs. Clause 9(b) states that no part of such credit shall be utilised save as provided in Clause (a) or shall be refunded in cash or by cheque.

4. The lower authorities have relied on Clause 9(b) of the appendix to the notification to deny cash refund of Rs. 34,6366.35 on the ground that payment of duty on the finished product to that extent had been not by cash or by debiting in the PL account but by debit in the RRG 23 Part II register. On the same reasoning, the Assistant Collector allowed cash refund of Rs. 89,366.87 because that part of the duty on the finished product had been paid in cash or by debiting in PL account.

5. The terminonolgy used in the notification is somewhat confusing.

There is an apparent contradiction between the three sets of expressions used in the notification, namely, "set off", "exemption from so much of the duty as is equivalent to the duty paid on the inputs and "credit of the duty paid on inputs." But looking at the entire scheme of the notification and in particular some of the proviso thereof and a large number of clauses in the Appendix to the notification, coupled with the insistence on maintaining an account in parts I and II of RG 23 and the provisions in Clause 9, the notification has to be regarded as one extending the benefit of taking credit of the duty paid on inputs falling under T.I. 68 used in the manufacture of finished products and utilisation of credit to pay duty on the finished products. If this be the real purport of the notification, the bar under Rule 9(b) of the Rules, that is bar against refunding any part of the credit in cash or by cheque would apply in the instant case, as rightly held by the lower authorities.

6. To avoid the above view being taken, appellant has placed reliance on two decisions, Deccan Sales Corporation and Anr. v. R. Parthasarthy and Ors., 1982 (10) E.L.T. 885 (Bom.) and the decision of the High Court of Andhra Pradesh in Coromandal Fertilisers Ltd. v. Union of India - 1990 (48) E.L.T. 333 (A.P.). The Deccan Sales Corporation case was a case under Rule 56A of the Rules. The manufacturer was entitled to the benefit of Rule 56A for the period from 1-3-1969 to 28-2-1980, but benefit was not allowed immediately for various reasons and benefit was sanctioned only towards the end of October, 1969. Meanwhile, the manufacturer cleared finished goods and paid duty thereon in cash and subsequently applied for refund of the duty paid in cash on the finished product. Rule 56A contained a bar similar to the one contained in Notification No. 201/79. This is seen in Clause (vi) of Rule 56A. It was argued on behalf of the manufacturer that what is barred is not cash payment but cash payment in excess of the quantum of excise duty leviable or in other words, what is barred is excess net claim by way of cash refund. The High Court accepted this contention and observed as follows : "all that is sought is reduction of liability to pay excise duty on the final manufactured product. Ordinarily, such reduction of liability would be available through adjustment. In the instant case such adjustment could not take place and credit was delayed because the necessary documents (in the opinion of the Bombay Office) were not immediately made available. As and when the documents were made available, the petitioners became entitled to receive the credit. It may be that ordinarily the petitioners or parties similarly situate may not require cash payment and would be content with adjustment against future liability to pay excise duty. In other words, cash refund is not to be equated with cash payment. To put it in another way, although ordinarily Rule 56A would entitle the parties manufacturing a notified product to avail the benefit by adjustment, there is nothing in Clause (vi) to warrant the conclusion that this is the only manner in which the benefit could be given. If in the meantime the party has paid the full quantum of excise duty, a part of that quantum could be returned to it. What Clause (vi) prescribes, in other words, is giving to the manufacturer a net surplus or advantage in cash on the footing that the quantum of excise duty collected on the raw materials component parts exceeds the quantum of excise duty payable by that manufacturer on the goods produced." The same view was taken by the High Court of Andhra Pradesh in Corontandal Fertilisers Ltd. case also.

7. The present case is distinguishable from the above mentioned two cases on which the appellants have placed reliance. In the said cases, the assessee-appellants were not permitted initially to utilise proforma credit admissible under Rule 56A with the result that they had to pay duty on their exciseable product by cash/cheque. Subsequently they sought refund of the duty so paid by them by cash/cheque. The Courts held that the refund amounts were payable to them by cheque. The bar on payment of refund in terms of Rule 56A(3)(vi)(b) was held to be not applicable for such refunds. In the present case, on the contrary, there was no restraint or refusal for the availment of the credit in question and the appellants had, in fact, used the credit for payment of duty on their final product. Refund was claimed by them not on the ground of refusal of permission to use the credit leading to additional utilisation of their Personal Ledger Account (PLA) to that extent.

Refund was claimed on the ground that duty was required to be paid initially on a higher value of the product namely the selling price of their distributors. The claim was held to be admissible and refund was sanctioned. As duty had been paid by them partly through their Personal Ledger Account and the balance through debit in their RG 23 account, refund was made to them through cheque of an amount equal to the portion paid through PLA. Refund of the duty amount paid by debit to their RG 23 account was not, however, made by cheque. Amount of refund was ordered to be credited to their RG 23 account. This was consistent with the provision contained in paragraph 9(b) of the Appendix to the subject Notification laying down that no part of credit shall be refunded in cash or by cheque. The fact that the appellants had utilised the credit for payment of duty does not entitle them to get such amount in cash or cheque. Their eligibility to refund can only have the result of restoring them to the status quo ante as far as the subject credit is concerned. In other words they can only have the credit restored to their RG 23 account. Allowing their refund claim in full by cash or cheque would render paragraph 9(b) of the Appendix mentioned above nugatory.

8. For the reasons indicated above, we find no ground to interfere and accordingly dismiss the appeal.