ORDER
V.K. Agrawal, Member (T)
1. The issue involved in this appeal filed by M/s. Purvi Fabrics & Texturise (P) Ltd. is whether they are eligible to get the refund of Modvat credit in cash.
2.1 Shri V. Lakshmikumaran, learned Advocate, submitted that the Appellants are an independent textile processors engaged in processing grey fabrics received from their customers which include M/s. Rajasthan Spinning & Weaving Mills Ltd. (in short RSWM); that the Revenue contended that since the Appellants and RSWM are related persons, the price at which RSWM sell the goods should form the basis of assessment of Central Excise duty; that on appeal filed by them the Appellate Tribunal vide Final Order No. 134-143/2001-A dated 4-4-2001 [2001 (131) E.L.T. 594 (T)] set aside the order and held that the Appellants and RSWM were not related persons, and therefore, they are liable to pay excise duty based on principles laid down by the Supreme Court in Ujagar Prints case; that during the interim period in view of insistence and direction given by the department they had started paying duty under protest on the basis of selling price of RSWM; that subsequent to the Final Order passed by the Tribunal the Appellants filed a claim for refund of duty amounting to Rs. 1,47,61,462/- along with evidence that excess duty paid was neither charged nor recovered from RSWM; that the Asstt. Commissioner under Order-in-Original No. 10/2003, dated 13-1-2003 sanctioned the refund of Rs. 81,06,745/- being the excess amount of duty paid by them through their PLA; that the Asst. Commissioner, however, rejected the refund claim for Rs. 66,54,717/- being duty paid by way of debit in Modvat Credit account and Deemed credit; that on appeal the Commissioner (Appeals) under the impugned Order allowed a further refund of Rs. 34,32,609/- in cash; that however, in respect of balance amount of Rs. 32,22,108/- the Commissioner (Appeals) has held that they are entitled for credit in their relevant credit account.
2.2 The learned Counsel further submitted that a manufacturer can discharge his duty liability on finished goods by utilising the Credit as well as by depositing the cash in the Government account; that once the manufacturer utilises the Credit for discharging duty liability on the finished goods, the character of being credit gets lost and for all purposes it will be considered as duty discharged on the final product only; that thus when in future if such duty becomes refundable to the manufacturer in terms of Section 11B of the Central Excise Act entire duty whether deposited in cash or by utilizing Modvat credit has to be refunded without going into how much quantum of duty has been deposited in cash or through utilisation of credit; that Section 11B does not envisage that the refund of duty paid by utilisation of credit has to be granted by allowing the credit in the credit account; that it has been held by the Tribunal in the case of National Organic Chemicals Industries Limited v. CCE, Bombay-III, 1994 (70) E.L.T. 722 (T) that “set off can be claimed by way of cash refund also”; that the appeal filed by the Revenue against the said decision has been dismissed by the Supreme Court as reported in 1996 (84) E.L.T. A106. He also mentioned that the factory of the Appellants is lying closed and at present no manufacturing operations are being carried out in their premises and thus the Appellants are unable to utilise credit given in CENVAT account by the Commissioner (Appeals); that it is well established legal position that where an assessee is unable to utilise credit he should be allowed refund in cash even though duty was earlier paid from Modvat credit account. Reliance has been placed on the decision in the case of Sandoz India Ltd, v. CCE, 1990 (50) E.L.T. 403 (T) wherein it has been held that prohibition contained in Rule 56A(3)(vi)(b) would not apply to the relief due in terms of Tribunal’s Order and relief due shall be paid to the Appellants by cheque. He also relied upon the following decisions :-
(i) CCE, Rajkot v. Deepak Vegetable Oil Industries - 2001 (127) E.L.T. 817 (T), (ii) CCE, Ahmedabad v. Omkar Textiles - 2002 (148) E.L.T. 461 (T), (iii) Ashok Arc v. CCE, Jamshedpur - 2002 (145) E.L.T. 591 (Tribunal) = 2000 (105) ECR 170 (T)
2.3 He finally submitted that the Commissioner (Appeals) has relied upon the decision in the case of CCE, Chennai v. Rajashree Cements – 2001 (132) E.L.T. 724 (T); that the said decision is not applicable as their factory is lying closed since 1999 and they cannot utilise the Credit in their Modvat credit account. The learned Advocate also claimed interest under Section 11BB of the Central Excise Act as they had filed the refund claim on 1-6-2001 and whereas the same has been sanctioned to them in January, 2003 and January, 2004; that the interest was not considered by the lower authorities which is availably to them under the Act.
3. Countering the arguments Mrs. Charul Baranwal, learned SDR, submitted that there are no provisions in Modvat Rules for the refund of Modvat Credit in cash; that the Modvat Credit under the Rules is to be utilised only for payment of any duty of excise on any final product manufactured by the manufacturer or for payment of duty on inputs or capital goods themselves, if such inputs are removed as such or after being partially processed or such capital goods are removed as such; that the refund of Modvat credit in cash is only permissible when the inputs are used in the final product which are exported and it is not possible for the manufacturer to utilise the said credit towards payment of duty on the final product cleared for home consumption; that Section 11B of the Central Excise Act also provides for the refund of Credit of duty only in accordance with the Rules made or any notification; that only in respect of inputs used in the manufacture of export goods the refund of credit is eligible and in no other circumstances. The learned SDR submitted that the decision in the case of National Organic Chemicals Industries Ltd. is not applicable as peculiar circumstances existed in the said matter inasmuch as the Notification No. 178/7/- C.E., dated 18-6-77 under which set off was available had been rescinded by the time the matter was decided in their favour; that in the present matter Modvat credit scheme is still in operation and no peculiar circumstance as it existed in NOCIL case exists in the present matter; that similarly in the case of Deepak Vegetable Oil Industries the refund in cash was granted as by the time the dispute was resolved the final product manufactured by them namely vegetable product was no more dutiable. She finally submitted that the Tribunal in the case of Rajashree Cements has specifically held that the duty having been paid through Modvat Credit account refund is to be given in RG 23, Part II account and not to be paid in cash; that the said decision is squarely applicable to the facts of the present matter. She also relied upon the decision in the case of T.I. Cycles of India v. CCE, Madras, 1997 (93) E.L.T. 126 (Tribunal) wherein the Tribunal has held that refund of duty amount paid by debit to RG 23 account is to be credited to RG account only and is not to be paid in cash or by cheque.
4. We have considered the submissions of both the sides. Central Excise Rules, 1944 earlier and now CENVAT Credit Rules provided for the credit of the duty paid on the inputs used in or in relation to the manufacture of the final product and duty paid on the capital goods. These rules provide that the Modvat Credit of the duty so availed is to be used towards payment of duty on any of the finished goods manufactured by the manufacturer or on the inputs/capital goods, if removed as such. The learned SDR is justified in making the submissions that Modvat Credit Rules do not contain any provision for the refund of the Modvat Credit in cash or by cheque except in cases where the inputs are used in the manufacture of goods which are exported out of India and manufacturer is not in a position to utilise the credit. The refund in cash is granted as an incentive measure to the exporter. We also find force in the submissions of the learned SDR that Section 11B of the Central Excise Act provides for payment of amount of refund to the Applicants only in situations specified in proviso to Sub-section (2) of Section 11B of the Central Excise Act. Clause (c) of the said proviso refers to refund of credit of duty paid on excisable goods used as inputs in accordance with the Rules made, or any notification issued, under the Central Excise Act. The provisions of Central Excise Rules in this regard has already been discussed by us wherein except in the case of export of goods, in no other case refund of credit is permissible under the rules in cash or by cheque. The learned SDR has also distinguished the decisions relied upon by the learned Advocate. This Tribunal has considered the issue regarding refund of Modvat Credit in cash in the case of Rajashree Cements where the Tribunal has held as under :-
“………..this is a Credit Account in which duty paid by the supplier of goods is credited so that the cascading effect of duty is wiped out. The Central Excise Rules permit the refund in cash of such duty only when the final goods are exported out of the country and the manufacturer is not in a position to utilise the credit towards payment of duty ………………… the refund amount is to be given in RG23A, Part II account, if the same is in operation.”
Accordingly we do not find any reason to interfere with the impugned Order. The appeal is thus rejected.