ORDER
Jeet Ram Kait, Member (T)
1. By this appeal, the appellants challenge the order in appeal No. 127/94(M) dated 29.4.1994 passed by the Commissioner (Appeals) by which the Commissioner (Appeals) has rejected the refund claim of the appellants and upheld the order in original passed by the original authority.
2. The brief facts of the case are that the appellants manufacture Carbon dioxide (Co2) from impure carbon-dioxide gas received from M/s. Madras Fertilizers Ltd. They preferred refund claim for Rs. 4,56,141.47 on the ground that duty was paid on Co2 when was available on the same in terms of Notification No. 40/85-CE dated 17.3.1985 (sic) as amended. They had been receiving impure C02 without payment of duty under Chapter X procedure under Notification No. 235/85 dated 15.11.1985. This Notification was superseded on 15.11.1985 by Notification No. 417/86 and as a result. The facility of getting Co2 gas without payment of duty under Chapter X procedure was restricted to SSI unit only. Accordingly the appellants who are not a SSI Unit were not eligible to receive impure Co2 without payment of duty and had to procure the same from M/s. Madras Fertilizers Ltd. on payment of duty and the appellants at the time of clearing the purified Co2 started availing modvat benefit by making necessary debit entry in the RG 23A. However, they claimed exemption under Notification No. 40/85 dated 17.3.1985 as amended in respect of the duty paid on the purified Co2, and preferred a refund claim for Rs. 4,56,141.47 being the duty paid by them on Co2. Inasmuch as the appellants did not follow the Chapter X procedure, in terms of Notification No. 40/85, in order to avail “NIL” rate of duty during the material period, the department took the view that they were not eligible for any exemption under the said Notification. In the circumstances show cause notice was issued which resulted in the order passed by the original authority whereby he has rejected the claim of the appellants. Their appeal against the order in original was rejected by the Collector (Appeals). Hence this appeal.
3. Heard Shri M. Venkataraman, learned Counsel for the appellants who submitted that the refund claim has been rejected by the authorities below on the ground that the assessee-appellants have not followed the procedure set out in Chapter X in terms of Notification 40/85. He submitted that with the issue of Notification No. 235/85 they had to get impure Co2 on payment of duty availing the Modvat benefit for impure Co2 and cleared the purified Co2 on payment of duty by way of adjustment in RG 23A Part II. He submitted that at the relevant time, they were not permitted to obtain impure Co2 under the provisions of Rule 56A and they were compelled to get the Co2 on payment of duty to avoid shutting down their plant. The learned Counsel in short submitted that procedural lapses in not following the Chapter X procedure cannot be a bar for claiming the exemption and eligibility to refund as they have substantially fulfilled the conditions prescribed by Notification No. 40/85. In the circumstances he prayed for allowing the appeal.
4. Shri C. Mani, learned JDR appearing for the Revenue on the other hand invited our attention to para 4 of the impugned order wherein the lower appellate authority has dilated issue and has recorded a reasoned finding that the appellants are not entitled to the refund as the conditions set out in the notification has not been followed by the appellants. He, therefore, prayed for rejection of the appeal as being devoid of merits.
5. We have considered the rival submissions and gone through the case records including the case law cited by the appellants. We find that the lower appellate authority has very thoroughly discussed the whole issue before coming to a conclusion that the appellants are not entitled to any refund. The finding portion of the order in appeal is reproduced below:
4. I have carefully considered the case records, grounds urged by the appellants and the arguments advanced by the consultant for the appellants during the course of Personal Hearing. The issue before me for my consideration and decision would be as to whether the payment of duty of Rs. 4,56,141,47 paid by the appellants on the impugned clearances of C02 is in order, and whether the appellants are eligible for any refund of duty as claimed by them. To avail exemption from payment of duty under Notification No. 40/86 dated 17.3.1985, procedure set out in Chapter X of the Central Excise Rules, 1944, should be followed, if the use of Co2 is elsewhere than in the factory of production. In this case, admittedly, the procedure set out was not followed. In lieu of payment of duty, they can avail exemption provided they follow they can avail exemption provided they follow the procedure of Chapter X, which admittedly, was not done by the appellants. Besides, while paying duty on the purified Co2, they availed the faceliting of Modvat Credit, and accordingly they are not eligible for any exempties from payment of duty. Moreover the appellants voluntarily chose to pay duty on the purified Co2, by availing Modvat credit on the input viz., impure Co2, and having done so, they cannot claim any refund of duty at this juncture, which would result in the (i) contravention of Rule 57C of the Central Excise Rules, 1944 on the part of the appellants and (ii) in the irregular availment of modvat credit on the part of the Industrial consumers who received the impugned Co2 from the appellants. Therefore, I am of the considered view that the duty of excise paid by the appellants on the impugned clearances is very much in order, in the facts of the case in accordance with law, and accordingly they are not entitled to any refund. The interesting feature of the issue of the present appeal would be that the appellants had been clearing their product viz., Co2 by availing the benefit of Notification No. 40/85- dated 17.3.1985 as long as they could receive impure Co2 from M/s. Madras Fertilizers Ltd., Manali, under the provisions of Notification No. 235/85 CE dated 15.11.1985, and when this facility of getting the inpure Co2 in terms of Notification No. 235/85-CE dated 15.11.1985 was closed to them in the wake of the introduction of notification No. 417/86-CE dated 15.9.1986, they had to switch over to clear their product Co2 only on payment of duty, which is correct as per law, and I am really afraid as to how the appellate could think and contend now, that duty was paid erroneously and they are eligible for a refund. The appellates vide para (2) of the grounds of appeal have stated as follows:
As stated earlier in the statement of facts in the present appeal, the appellants the appellants have been receiving impure Co2 from M/s. Madras Fertilisers Ltd. Manali without payment of duty under Chapter X procedure in terms of the Government of India Notification No. 235/85 Central Excise dated 15.11.1985 and clearing the same after prfification under Government of India Notification No. 40/85-CE dated 17.3.1985 under the same procedure to industrial users for special industrial purpose. But consequent on issue of the Notification No. 417/86-CE dated 15.9.1986 a restriction was imposed for clearances of the impure Co2 from the distillery/factory only to “bottling plants” which are registered as SSI units. In view of the fact that the provisions of the erstwhile notification No. 235/85-CE dated 15.11.1985 was completely shut out to them, after it was rescinded, in view of the fact that the said superceding Notification No. 417/86-CE dated 15.9.1986 was inapplicable to the appellants as their industry is not an SSI unit, and in view of the fact that their industry will get completely paralised if they do not secure impure Co2, they had perforce resorted to obtaining impure Co2 from their suppliers M/s. Madras Fertilisers Ltd., Manali on payment of duty and ineviably too they had no other go except to clear the purified Co2 to industrial users on payment of duty by way of adjustment in RG 23A part II.
Therefore, from their from their own narration of facts and submissions themselves 1 is very clear that the duty of excise paid by them on the impugned clearances is correct in law. From the facts of the case it is very clear that when they had received the input under Chapter X procedure, they cleared Co2 under Chapter X procedure, and when they had to receive the input on payment of duty, they to cleared their product Co2 on payment of duty, which is correct in law. As stated earlier, any refund of duty at this juncture would result in the contravention of Rule 57-C by the appellants and wrong availment of Modvat credit by the Industrial consumer’ who had received Co2 from the appellants. The appellants cannot have the cake and sat it too.
5. Another ground taken and urged by the appellants is that noncompliance with the following of Chapter X procedure in the facts of the case does not vitiate the claim for refund. In support of this, they would rely on the decisions rendered by the Tribunals in the cases reported in
(i) 1987 (29) ELT (Tri)
(ii) 1989 (39) ELT (Tri)
The decisions rendered by the Honourable Tribunal in the cases cited above, in no way, are in support of the contention of the appellants that “non-compliances with the Chapter X procedure does not vitiate the claim of refund”, inasmuch as the Honourable Tribunal have categorically hold that, “Exemption Notification Benefit there from available even in case of unauthorised removals provided conditions of Notification fulfilled”. From the above, it is very clear that in order to derive the benefit of a notification the conditions stipulated thereon should be fulfilled. In the present case, admittedly, the appellants have not fulfilled the condition stipulated under Notification No. 40/85-CE dated 17.3.1985 i.e. they did not follow the Chapter X procedure in respect of the impugned clearances. Instead of following the prescribed procedure, for which alone the benefit of Notification No. 40/85-CE dated 17.3.1985 is available in respect of Co2, they chose to pay the duty which was in lieu of following Chapter X procedure, vis-a-vis availing the exemption. Having chosen to pay the duty at the time of clearance of Co2, the submissions made by the appellants now, in order to contend that, non-following of Chapter X procedure is only a procedural lapse, which does not vitiate the claim for refund are not only sophistries, but also an after thought, and the same are not acceptable both on facts and in law. Therefore, I have no hesitation to hold that the duty of excise paid by the appellants on the impugned clearances of Co2 is correct in law, and accordingly, they are not eligible for any refund of duty. Therefore the rejection of the refund claim for Rs. 4,56,141,41 of the appellants, by the lower authority is in order.
6. Now, coming to the aspect of unjust enrichment, the appellants would state that, if refund is decided to be paid, the provisions of unjust enrichment will not be applicable, as the refund claim was decided against the appellants one year prior to the issue of the amended section. It may be mentioned that, as I have held that the appellants are not eligible for any refund of duty on merits, in view of my findings recorded in the preceeding paras, examining the same on the aspect of unjust enrichment does not arise.
As noted by the authorities below, when the appellants themselves chose to pay duty at the time of clearance of the goods viz. purified Co2, in lieu of following chapter X procedure, and availed Modvat Credit, they cannot at a later date turn around and say that non-satisfaction of the conditions under Notification 40/85 is procedural lapse and that they are therefore, entitled to refund. We are not able to accept this plea of the appellants for the reason that the said Notification is a conditional notification and satisfying the condition set out therein is sine-qua-non for the purpose of availing the benefit thereof.
6. We are of the considered opinion that the order passed by the lower appellate authority reflects applications authority. Accordingly the impugned order is upheld and the appeal is rejected.
(Pronounced in open Court on 17.6.2003)