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2013 DIGILAW 1330 (RAJ)

Hindustan Zinc Ltd. v. U. O. I.

2013-07-22

ARUN BHANSALI, NARENDRA KUMAR JAIN

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Hon'ble JAIN, J.—This appeal under Section 35G of the Central Excise Act, 1944 (`the Act') has been filed against final order dated 21.3.2005 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (`CESTAT'), whereby, the appeal filed by the appellant against order in appeal dated 9.12.2003 passed by the Commissioner, Central Excise (Appeals-II), Jaipur [`Commissioner (Appeals-II)'] was dismissed. 2. The appeal was admitted by this Court on 10.4.2007 on the following substantial questions of law:- "(i) Whether in view of the undisputed facts that concentrates were initially cleared on payment of duty and the fact that said concentrates were received back in the factory premises and thereafter reprocessed with the existing in-process quantity of concentrates and declared on payment of duty again, the requirement of Rule 173L were fully satisfied and consequently rejection of refund claim was absolutely arbitrary, void and unjustified? (ii) Whether the conditions prescribed under Rule 173L(2) and 173L(3) are mandatory?" 3. The facts in brief may be noticed that the appellant cleared concentrates for its Visakapatnam Smelter Plant, however, the dispatched goods did not meet the technical requirement and the material was, therefore, recalled; since the same were rejected goods, the appellant took modvat credit treating it as inputs, however, the said modvat credit was reversed amounting to Rs. 10,87,587/- upon being asked to do so; the appellant then filed claim for refund under Rule 173L of the Central Excise Rules, 1944 (`the Rules'); the refund claim was rejected by order dated 24.1.2001 by the Assistant Commissioner. The Commissioner (Appeals-II) rejected the appeal by its order in appeal dated 9.12.2003 filed by the appellant. The CESTAT also rejected the appeal preferred by the appellant vide its order dated 21.3.2005. 4. The Commissioner (Appeals-II) rejected the appeal by its order in appeal dated 9.12.2003 filed by the appellant. The CESTAT also rejected the appeal preferred by the appellant vide its order dated 21.3.2005. 4. It was submitted by learned counsel for the appellant that all the three authorities below have committed grave error of law and fact in dismissing the appellant's claim for refund, inasmuch as, it is not in dispute that the concentrate was originally cleared on payment of duty; the same was received back in the factory premises; the Department was duly apprised of the receipt of concentrate; in view of the nature of goods involved, which were mixed with the existing in process quantity, it was impossible either to process the said quantity of concentrate separately or to keep an account of the said quantity separately; and that while making clearance of concentrate again the duty payable thereon, was deposited and, therefore, it would be a case of double payment of duty and, consequently, the appellant was entitled to refund. 5. It was further submitted that in view of the fact that it was technically not possible to follow Rule 173L(2) and 173L(3) of the Rules, it was incumbent on the Commissioner to relax the compliance of procedural requirement, which power is specifically conferred on the Commissioner under Rule 173L(4) of the Rules and failure to exercise such power is absolutely illegal. 6. Reliance was placed on judgment of Hon'ble Supreme Court in Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner: 1991 (55) E.L.T. 437 (SC). 7. The learned counsel for the Department supported the orders impugned and submitted that in view of the concurrent decisions of three authorities below, the same do not call for any interference. It was submitted that the appellant has failed to comply with the statutory provisions of Rule 173L of the Rules and has further even failed to seek relaxation under Rule 173L (4) and, therefore, there was no occasion for the Commissioner to exercise power, which were never invoked. The compliance of provisions of the Rules are mandatory and, till such time, the provisions are complied with, the appellant is not entitled to claim refund. 8. We have considered the rival submissions made at the Bar. 9. The compliance of provisions of the Rules are mandatory and, till such time, the provisions are complied with, the appellant is not entitled to claim refund. 8. We have considered the rival submissions made at the Bar. 9. The Commissioner (Appeals-II) while deciding the appeal filed by the appellant held by his order in appeal as under:- "I have carefully gone through the case records and submissions made by the appellants. I find, as far as D-3 declaration is concerned, substantive requirement of law can be said to have been met as the appellants gave advance intimation to the Department, filed modvat declaration prior to the receipt of the goods and took modvat on the goods so returned. I further notice, in the above connection that even though modvat credit was ultimately disallowed to them, it was never the case to the department that the impugned goods were not received in the factory of the appellants. However, I observe that there were other mandatory conditions which the appellants were required to follow before refund could be paid, which admittedly were not fulfilled by them. Their contention that rule 173-L(4) give authority to the Commissioner, to relax any of the provisions of this Rule, does not help them, especially in the context of their plea that the nature of goods in their case was such that it was not possible for them to comply with the statutory requirement. Since they knew it ab intio, they should have sought relaxation at the time of receipt of the duty paid goods in their factory itself. Supposing that they could not do so, as they had staked claim for modvat credit, they should have made such a request when they filed refund claim under Rule 173-L to enable learned Commissioner, to have caused necessary verifications or to have prescribed a practical procedure, if considered necessary. Looking to the facts and circumstances of the case, I find no such request was made to the competent authority at any of the two occasions and situation has been presented as fait accompli. From the above, it is obvious that the appellants did not maintain detailed accounts of goods and processes to which those were subjected, nor did they complete the processes for which goods were brought back within six months. From the above, it is obvious that the appellants did not maintain detailed accounts of goods and processes to which those were subjected, nor did they complete the processes for which goods were brought back within six months. They also did not submit any account to the satisfaction of the Commissioner and there is no evidence to support their claim that the goods have been cleared subsequently." 10. The CESTAT by its order dated 21.3.2005 while upholding the order passed by the Commissioner (Appeals-II) held thus:- "3. It is quire evident from the record that the appellants did not follow the procedure laid down in Rule 173L for claiming refund of the duty paid on the material which was received back by them being defective. The contention of the counsel is that the said procedure could not be followed as the material was concentrate, cannot be accepted as they even did not apply to the Commissioner for the relaxation of the provisions of Rule 173L at any stage. They were required to maintain detailed account of the goods and the processes to which those were subjected. There is also no evidence to show that they completed the process for which the goods were brought back. 4. For having failed to satisfy the conditions of Rule 173L, the appellant's refund claim has been rightly rejected. We do not find any illegality in the impugned order and the same is upheld. The appeal of the appellants is dismissed. 11. The provisions of Rule 173L of the Rules read thus: 173L. Refund of duty on goods returned to factory. For having failed to satisfy the conditions of Rule 173L, the appellant's refund claim has been rightly rejected. We do not find any illegality in the impugned order and the same is upheld. The appeal of the appellants is dismissed. 11. The provisions of Rule 173L of the Rules read thus: 173L. Refund of duty on goods returned to factory. (1) The Commissioner may grant refund of the duty paid on manufactured excisable goods issued for home consumption from a factory, which are returned to the same or any other factory for being re-made, refined, reconditioned or subjected to any other similar process in the factory: Provided that (i) such goods are returned to the factory within one year of the date of payment of duty or within such further period or periods not exceeding one year, in the aggregate, as the Commissioner may, on sufficient cause being shown, permit in any particular case; (ii) the assessee gives information of the re-entry of each consignment of such excisable goods into the factory to the proper officer in writing in the proper form within twenty-four hours of such re-entry or within such further period not exceeding ten days, as the Commissioner may, on sufficient cause being shown, permit in any particular case,] to enable the proper officer to verify the particulars of such goods within forty-eight hours of receipt of the information; (iii) the assessee stores the said goods separately pending their being remade, refined, reconditioned or subjected to any other similar process in the factory unless otherwise permitted by the Commissioner by an order in writing and makes such goods available for inspection by the proper officer when so required; (iv) the amount of refund payable shall in no case be in excess of the duty payable on such goods after being re-made, refined re-conditioned or subjected to any other similar process in the factory: Provided further that in relation to the declared excisable goods, for clause (ii) of the first proviso, the following clause shall be substituted, namely: (ii) the assessee gives information of the re-entry of each consignment of such excisable goods into the factory to the proper officer in writing in the proper form within twenty-four hours of such re-entry or within such further period not exceeding ten days, as the Commissioner may, on sufficient cause being shown, permit in any particular case. (2) The assessee shall maintain a detailed account of the returned goods and the processes to which they are subjected, after their return to the factory in the proper form. (3) No refund under sub-rule (1) shall be paid until the processes mentioned therein have been completed and an account under sub-rule (2) having been rendered to the satisfaction of the Commissioner within six months of the return of the goods to the factory. No refund shall be admissible in respect of the duty paid, (i) in respect of opened packages containing goods with concessional rates of duty or partial exemption for the small or cottage sector, as set forth in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), or by a notification issued under rule 8 or section 5A of the Act; (ii) if the amount of refund payable on the goods is less than rupees fifty; (iii) on goods which are disposed of in any manner other than for production of goods of the same class; (iv) on the unmanufactured tobacco from which cigars, cheroots and cigarettes so returned to the factory have been produced; (v) if the value of the goods at the time of their return to the factory is, in the opinion of the Commissioner, less than the amount of duty originally paid upon them at the time of their clearance from the factory. Explanation. In this Clause, "value" means the market value of the excisable goods and not the ex-duty value thereof. (4) The Commissioner may, for reasons to be recorded in writing, relax the provisions of this rule for the purpose of admitting a claim for refund. (5) The provisions of this rule shall not apply to excisable goods manufactured, (i) in a free trade zone and returned to a factory in any other place in India; or (ii) by a hundred per cent export-oriented undertaking and returned to another factory in any place in India." 12. From the orders passed by the Commissioner (Appeals-II) and CESTAT, it is abundantly clear that despite being aware of the requirements of Rule 173L of the Rules for the purpose of claiming refund, first the appellant claimed modvat credit, then reversed the same and is claiming the declaration submitted for claiming modvat credit to be sufficient compliance of provisions of Rule 173L. Further, the basic requirement of submitting Form D-3 was never complied with by the appellant and, as such, in fact the process of seeking of refund under Rule 173L was not even properly initiated by the appellant, as such, having failed to satisfy the conditions of Rule 173L, the appellant's refund claim was rightly rejected. 13. Coming to the exercise of power of relaxation under Rule 173L (4) of the Rules, we are of the considered opinion that for invoking power of relaxation under thee said Sub-rule, the appellant was required to comply with the requirements of the Rules and satisfy the Commissioner in this regard, which relaxation was in fact never applied by the appellant and, on the other hand, it was contended that once it was found by the respondent that the requirements of Rule 173L(2) and 173L(3) of the Rules have not been fulfilled by the appellant, it was incumbent on the Commissioner to invoke power under Rule 173L(4) of the Rules. We are afraid that putting such an interpretation to the requirements of Rule 173L of the Rules is not envisaged on a plain reading of the said Rule. 14. So far as the judgment in the case of Mangalore Chemicals and Fertilizers (supra) relied on by learned counsel for the appellant is concerned, which deals with distinction between a procedural condition of technical nature and substantive condition for grant of exemption, has no application to the facts of the present case. 15. On the other hand, the decision of Hon'ble Supreme Court in the case of India Aluminium Co. Ltd. vs. Thane Municipal Corporation: 1991 (55) ELT 454 (SC) would be more appropriate; in that case to avail of the concessional rate of octroi, importers were required to make declaration in prescribed form to the effect that the goods imported shall not be used for any other purpose for sale or otherwise etc. Thus an incentive was sought to be given to such entrepreneurs by such concession if the raw material which is imported is also utilised in the industrial undertaking without selling or disposing of otherwise. This being the object, a verification at the relevant time by the octroi authorities becomes very much necessary before a concession could be given. Thus an incentive was sought to be given to such entrepreneurs by such concession if the raw material which is imported is also utilised in the industrial undertaking without selling or disposing of otherwise. This being the object, a verification at the relevant time by the octroi authorities becomes very much necessary before a concession could be given. Since the company in that case which had imported the goods within the Municipal Limit had failed to fulfill the obligation of filing the requisite declaration, the Supreme Court held that if cannot turn-around and ask the authorities to make verification of record. The Supreme Court further observed that the verification at the time when the raw material was there is entirely different from a verification at a belated stage after it has ceased to be there. The Supreme Court further observed that the failure to file the necessary declaration would disentitle the company from claiming any such concession. 16. In view of the above discussion, we see no reason to interfere with the concurrent orders passed by three authorities below and, in the facts and circumstances of the case, answer both the questions against the appellant and in favour of the Revenue. 17. Consequently, the appeal has no substance and is, therefore, dismissed.