1. The instant appeal has been preferred by the Revenue/Appellant under section 35G of the Central Excise Act against the judgment and order dated 18th December, 2019 passed by the Customs, Excise and Service Tax Appellate Tribunal, Kolkata (CESTAT) in Appeal No. E/76154/2014, whereby the appeal filed by the respondent against the common adjudication order dated 31st March, 2014 and corrigendum dated 5th May, 2014 of the Commissioner of Central Excise, Shillong, was allowed.
2. The necessary facts, in brief, are that a certain notification, being notification No. 32/99-CE, dated 8th July, 1999, had been issued by the Government of India, Ministry of Finance, wherein it was proposed to exempt goods specified in the First and Second Schedule of the Central Excise Tariff Act, 1985, from payment of Excise duty from units located in North East India, as specified in the annexure to the said notification. This scheme provided for refund of the duty of excise or additional duty of excise leviable thereon as equivalent to the amount of duty paid by the manufacturer, other than the amount of duty paid by Cenvat credit under the Cenvat Credit Rules. The respondent, which reportedly manufactured excisable goods at its factory situated at Byrnihat, Meghalaya, during the period March, 2002 to November, 2004, was, therefore, found to be eligible for benefits under the said notification.
3. It appears that thereafter, pursuant to a search and seizure operation and subsequent investigation conducted by the Directorate General of Central Excise Intelligence (DGCEI), it was alleged that the respondent had misused the exemption notification No. 32/99-CE, dated 8th July, 1999 and wrongly availed refunds amounting to Rs. 9,45,67,825/- during the period from October, 2002 to December, 2004, for the clearances of finished goods, claimed to have been manufactured by the respondent Unit during the period March 2002 to November 2004. It was further alleged that the respondent had also availed of irregular Cenvat credit amounting to Rs. 53,05,582/-. A show cause notice dated 28th February, 2006, was then issued by the Additional DG, DGCEI, Kolkata, to the respondent and the charges levelled were, inter alia, as follows:
i) That the respondent, M/s. Ishaan Technologies Pvt. Ltd., Amjok, Byrnihat, Meghalaya bearing Central Excise Registration No. AAACI8965RXM001 engaged in manufacture of excisable goods falling under Chapter 73 and 84 of the First Schedule to the Central Excise Act, 1944 was availing benefit of exemption had misused exemption Notification No. 32/99-CE dated 08.07.1999 as amended. It was alleged that the respondent misused the said exemption Notification by availing wrong refund to the tune of Rs.9,98,73,407/- by fraudulent claim of manufacture and clearance of goods under the aforesaid Notification and thus availed refund under Area based exemption notification on goods shown to have manufactured and cleared without manufacturing any excisable goods and thereby availing double benefit of passing Cenvat Credit to their buyers.
ii) That M/s. Manaksia Limited (formerly known as M/s. Hindustan Seals Ltd.) having seventeen numbers of units spreading across India engaged in the manufacture of aluminium products, galvanized steel, packing materials such as crown, caps and closures, metal containers, and mosquito coil, purchased more than 91% of the products of M/s. Ishaan Technologies Pvt. Ltd., Byrnihat.
iii) That in the contrary it appears from the purchase accounts of M/s. Ishaan Technologies that they have/had regularly purchased raw material, components from the M/s. Manaksia Ltd.
iv) That investigation revealed that both M/s. Manaksia Ltd. and M/s. Ishaan Technologies Pvt. Ltd. were managed and controlled by the same group of people.
v) That it was alleged that M/s. Manaksia Ltd. in its own business/financial interest, set up a company called M/s. Ishaan Technologies Pvt. Ltd. to promote its own financial/business interest and to avail not only Central Excise refund, Income Tax and Sales Tax exemptions in the N.E. Region and Kutch region but also manipulated the Accounts in such a manner to help M/s. Manaksia Ltd. to inflate its Balance Sheet and avail excess Cenvat Credit and exemption. There was mutuality of financial/business interest of both the companies. Both the Companies were controlled by one family. M/s. Ishaan Technologies Pvt. Ltd. was not a separate entity but a dummy unit of M/s. Manaksia Ltd. All its operation from purchase of raw materials to receipts of finished products on papers were organized by the employees at the direction of management of M/s. Manaksia Ltd. and were controlled by the Agarwal family.
4. That the respondent was also called upon to show cause as to why: -
(a) The amount of Rs.9,45,67,825.70/- shall not be demanded from and paid by the respondent in terms of proviso to Section 11A (1) of Central Excise Act, 1944.
(b) The amount of Rs.53,05,582/- being the amount of wrong Cenvat Credit availed be not demanded and paid by the respondents in terms of Rule 12 of Cenvat Credit Rules, 2002 and/or Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944.
(c) Penalties be not imposed in terms of Section 11AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002.
(d) Penalties be not imposed in terms of Rule 13 of Cenvat Credit Rule, 2002 and/or Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
(e) Interest at appropriate rates under Section 11AB on duty demanded and interest at appropriate rate under Rule 12 of Cenvat Credit Rules, 2002 and/or Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 on the duty demanded shall not be paid by the respondents.
(f) The amount of Rs.1,70,00,000/- already paid by the respondent voluntarily in admission of the contravention of the Central Excise Rules notifications, etc. vide TR-6 Challan No. 02/05-06 dated 19.05.2005 and 04/05-06 dated 31.08.2005, should not be appropriated against the confirmed demand of duties, penalties, interest, etc.
5. The show cause notices were then adjudicated upon and the Commissioner, who was appointed as Common Adjudicator, by an order dated 31st March, 2014, confirmed the duty demand of Rs.9,45,67,825.70p. against the respondent under section 11A (2) of the Central Excise Act, 1944 and Rules 12 and 14 of the Cenvat Credit Rules, 2002 and 2004, read with section 11A of the Act, respectively, along with interest under section 11AB of the Act and Rules 12 and 14 of the Cenvat Credit Rules, 2002 and 2004 and imposed penalties upon the respondent and other co-noticees named in the show cause dated 28th February, 2006.
6. The respondent and other co-noticees, being aggrieved by the adjudication order, thereafter preferred appeals before the Tribunal [Appeal Nos. E/76154/2014 (Ishaan Technologies Pvt. Ltd. Vs. CCE&ST), E/76156-76160/2014 & E/76174-76175/2014 (appeals by co-noticees), E/76094/2014 to E/76099/2014 (CCE&ST, Shillong Vs. Manaksia Ltd.) and Appeal No. E/76155/2014 (Manaksia Ltd. Vs. CCE&ST, Shillong)]. The said appeals were disposed of by the Tribunal by the common impugned judgment and order dated 18th December, 2019 and the appeals of Ishaan (respondent), the co-noticees and Manaksia Ltd., Kutch were allowed, whereas the appeals filed by the Revenue were rejected.
7. This judgment and order of the Tribunal dated 18th December, 2019, is now under consideration in the instant appeal.
8. Dr. N. Mozika, learned senior counsel assisted by Ms. L. Jana, learned counsel for the appellant, submits that the learned Tribunal (CESTAT) had ignored material and relevant facts and had not applied the legal principles in appreciating the matter and instead had dwelt on inconsequential facts, which has given rise to various substantial questions of law, that are to be adjudicated and examined by this Court. Learned senior counsel contends that the CESTAT erred in law in holding that, – since according to the show cause notice, and impugned order itself, there was no manufacture of goods, therefore, there can be no levy and hence no requirement to make payment of any duty of Central Excise payable under the Act and resultantly, the question of any recovery of duties not levied or not paid or erroneously refunded in terms of section 11A(1) of the Act does not arise (emphasis supplied). This observation, he submits, is patently incorrect, inasmuch as, the exemption notification provided for refund of duty of excise in respect of goods manufactured in a specific area of the region and as such, in respect of goods that are not manufactured in a specific area, there will be no question of any refund under the said notification. The other points raised by the learned counsel, in brief, are; the CESTAT had ignored vital materials such as the fact that the respondent did not have requisite plant and machinery to manufacture the subject goods and also the fact that the respondent had resorted to conscious and deliberate mis-declaration and mis-representation by misusing the notification of exemption with the mala fide intention of passing irregular Cenvat Credit to various customers. As such, he prays that appeal be allowed and the impugned order be set aside and quashed.
9. Mr. D. Sahu, learned counsel for the respondents, while rebutting the submissions of the appellant submits that the records and documents produced before the Tribunal (CESTAT) were examined and verified which showed the respondent as eligible for exemption under the said notification and that the refund of duty paid was based on the exemption notification. That apart, he submits, the Tribunal also observed that during the period of refund, the department never challenged the said refund orders and as such, the proceedings under section 11A are unsustainable. Learned counsel through his written submission has also put forward the point that in a similar case, that is the case of Commissioner of Central Excise, Shillong Vs. Jellalpore Tea Estate reported in 2011 (268) E.L.T. 14 (Gau.), it has been held that, the order granting refund could have been challenged only by resorting to section 35E of the Act and that, Revenue could not take recourse to section 11A of the Act and that this judgment being passed by the then jurisdictional High Court is binding. It is finally submitted that there is no substantial question of law that has arisen in the instant case.
10. Having heard the learned counsel and having examined the materials on record, especially the impugned judgment and order, it is palpably evident, on the face of the record itself, that there is no substantial question of law involved in this appeal. A bare reading of section 11A of the Act (as amended), clearly shows that the stipulation under this provision, can be exercised only if certain conditions precedent are present, as spelt out in section 11A, itself. For the sake of convenience relevant portion is reproduced hereinbelow to illustrate this fact:-
“11A. Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded.- (1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,-
(a) the Central Excise Officer shall, within two years from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short- levied or short- paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;
(b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of-
(i) his own ascertainment of such duty; or
(ii) duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA.”
On examination of the above quoted provision of law, it clearly shows that the case at hand, is not one concerning conditions as given in section11A, but the issue concerns refunds made purportedly under the entitlements claimed by the respondent under the exemption notification, which, the Appellant/Revenue seeks to recover by taking recourse to section 11A which in our view, is not admissible. The cited case of Commissioner of Central Excise, Shillong Vs. Jellalpore Tea Estate (supra) also appears to squarely cover the instant case.
11. The learned Tribunal (CESTAT) in its order has also clearly come to a finding that the respondents had cleared the goods during the relevant period, that is October, 2002 to December, 2004, and had claimed the refund of the duty paid under the said exemption notification dated 08th July, 1999. It was also found by the learned Tribunal that during the period of refund, the department never challenged the refund orders passed by the Revenue. Extract of the impugned judgment and order wherein the conclusive findings of the Tribunal are recorded, are reproduced hereinbelow:
“10. As per the impugned order Ishaan, by a letter dated 04.07.2002 informed the jurisdictional Assistant Commissioner, the prescribed authority under Notification No. 32/99-CE, that their factory located in the specified area and had started commercial production with effect from 22.03.2002 and requested sanction of eligibility certificate and that the Assistant Commissioner by an order dated 27.09.2002 held that Ishaan is eligible for exemption under the said notification by way of refund of duty paid from account current on the products allowed to be manufactured and cleared; accordingly an amount of Rs.10,21,26,696/- was refunded to Ishaan during the period from October 2002 to December 2004 for clearances claimed to have been during March 2002 to November 2004. The said order of refund was not challenged by the Revenue. By the impugned order the Revenue has sought to recover an amount of Rs.8,92,62,243/- out of the said refunded amount in terms of Section 11A(2) of the Act, pursuant to a show cause notice issued under the Proviso to Section11A of the Act, as amount wrongly refunded under the said Notification No. 32/99-CE. A further sum of Rs. 53,05,582/- has also been confirmed against Ishaan as wrong cenvat credit availed and utilized in terms of Rule 12/14 of the Cenvat Credit Rules 2002/2004 read with Section 11A of the Act. 11.1 Herein also the jurisdictional Assistant Commissioner of Central Excise, Shillong Division, vide his order dated September 27, 2002, had held that Ishaan was eligible for exemption under the said notification “by way of refund of duty paid from account current on the product allowed to be manufactured and cleared” and accordingly, an amount of Rs.10,21,61,696/- (of which the sum of Rs. 9,45,66,825.70 is a part) was refunded to Ishaan during the period October 2002 to December 2004. The order of the Assistant Commissioner granting refund could have been challenged by the Department only by resorting to Section 35E of the Act, which has not been done in the instant case, and therefore, as held by the Hon’ble Gauhati High Court, the Revenue cannot initiate collateral proceedings to set aside the said order by resorting to Section 11A of the Act.
11.5 In the present case, since according to the show cause notice and the impugned order themselves there was no manufacture of the subject goods, there can be no levy and hence no requirement to make payment of any duty of central excise payable in respect of subject machineries
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under the Act. Consequently, the question of any recovery of “duties of excise” not levied or not paid or short levied or short paid or erroneously refunded in terms of Section 11A(1) of the Act also does not arise. 11.6 …………………… 11.7 …………………….. 11.8 …………………….. 11.9 In so far as the demand of Rs. 53,05,582/- against Ishaan as wrongly availed and utilised cenvat credit, the said notification does not allow refund of the cenvat credit utilised. Therefore, the act of utilization of the subject cenvat credit by Ishaan for payment of part of the total excise duty paid on the subject goods effectively reversed the cenvat credit of Rs. 53,05,582/- and hence there is no wrongful or irregular cenvat credit being availed by Ishaan, as held by this Bench itself in the case of Manaksia Ltd. & Spark Exports Ltd. Vs. CCE, Bolpur, Order No. FO/A/75027-75028/2019 dated 07.01.2019 passed in Appeal Nos. E/278/2009 & E/412/2006. As such, this demand is also unsustainable. 11.10 ………………………….. 11.11 In the premises the demands of duty, interest and penalties against Ishaan and the other appellants in Appeal Nos. E/76156-76160/2014 imposed by the impugned order are unsustainable.” 12. In such circumstances and especially in view of the stated position of law and facts, we find no infirmity in the impugned judgment and order and no substantial question of law is involved. The appeal accordingly stands dismissed along with MC (Central Excise Ap.) No.4 of 2020. 13. However, before parting with the records, we hasten to add that this judgment and order shall not preclude the appellant from taking any other action, provided of course, it is entitled to do so, in accordance with law. 14. No order as to costs.