ORDER
K.S. Venkataramani, Member (T)
1. The appellants, M/s. Rashtriya Chemicals and Fertilizers Ltd., Mumbai are a public sector undertaking and engaged in the manufacture of fertilizers and chemicals falling under old Tariff Item No. 14HH of the First Schedule of the Central Excise and Salts Act, 1944. The Central Government, as per the budget proposals for the year 1979-80, reduced the rate of Excise duty on fertilizers with effect from 1-3-1979. The appellants, however, not being aware of the reduction of duty continued to pay duty on the finished product at a higher rate which was prevailant prior to 1-3-1979. Thereafter, realising that they had paid excess excise duty, filed a refund claim for the period 1-3-1979 to 15-3-1979 for Rs. 22,55,162.66. The Asstt. Commissioner, however, allowed a refund of Rs. 3,63,438.67, which was paid through P.L.A. Regarding the refund of Rs. 18,91,723.99 he held that this was paid through proforma account in Form RG. 23 Part II and as such under Rule 56A(3)(vi) of the Central Excise Rules, 1944, refund was not admissible in cash but can only be allowed to be taken as credit under RG. 23 Account. Being aggrieved by the order of the Asstt. Commissioner, the appellant filed an appeal to the Commissioner (Appeals). The Commissioner (Appeals) rejected the appeal leading to the present appeal. The appellants have furnished the clearance obtained from the Government of India Committee on Disputes to pursue the appeal before the Tribunal.
2. Shri Percy Gandhy, the ld. Counsel for the appellants contended that the lower authorities erred in invoking Rule 56A(3)(vi)(b) to deny refund in cash and in this context the ld. Counsel urged that their case is covered by the Bombay High Court decision in the case of Deccan Sales Corporation and Anr. v. R. Parthasarthy and Ors. – 1982 (10) E.L.T. 885 (Bom.) wherein the High Court has held that what is prohibited under the above Rule is only that the assessee should not get a surplus benefit of an amount more than the duty payable on the finished product by way of cash refund. The ld. Counsel submitted that the judgment of the Bombay High Court has been quoted with approval by the Andhra Pradesh High Court in a case similar to that of the appellants in Coromandel Fertilisers v. UOI – 1990 (48) E.L.T. 333. It was also urged that the Tribunal has followed the Bombay High Court decision in the case of Hindustan Lever v. Commissioner -1990 (15) ETR 673 and in National Organica Chemical Industries v. Commissioner -1990 (15) ETR at page 657 ibid.
3. The ld. D.R. Shri Gurdeep Singh contended that the question ultimately is whether the refund of the duty paid on the final product can be granted in cash. The amended provisions of Section 11B of Central Excise Act, 1944 would be attracted and the appellants have to show that they have not passed on the burden of duty to the buyers of their product. The ld. DR relied upon the judgment of the Larger Bench of the Supreme Court in Mafatalal Industries v. UOI – 1997 (89) E.L.T. 247 (S.C.). Ld. DR. also urged that the Deccan Sales Corpn. case supra is distinguishable. The High Court had found that the petitioners sought indirectly relief in respect of deposits which they were compelled to make in P.L. Account since proforma credit was not given to them in time by the Department and were not seeking refund of any part of proforma credit simpliciter.
4. Submissions made have been carefully considered. The claim for refund arose for the reason that appellants have paid higher duty during 1-3-1979 to 15-3-1979 on fertilizers manufactured by them being unaware that the duty thereon had been reduced from 1-3-1979. Thus it is to be noted that what they claimed as refund was the excess duty paid on their final product and not of the credit of duty. Rule 56A(3)(vi)(b) only says that no part of proforma credit allowed shall be refunded in cash or by cheque. It is in this context that the Bombay High Court judgment in the case of Deccan Sales Corpn. (supra) relied upon by the appellants has to be seen where the High Court dealing with the provisions of Sub-rule (vi) as it was in 1970, had held, ” … although ordinarily Rule 56A would entitle the parties manufacturing a notified product to avail of the benefits by adjustments, 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 – 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 … exceeds the quantum of excise duty payable by that manufacturer on the goods produced.” The High Court further observed
“cash refund is not to be equated with cash payment.”
The Andhra Pradesh High Court in the case of Coromandal Fertilizers v. UOI 1990 (48) E.L.T. 333 referred to the above observation of the Bombay High Court in upholding an order of the Tribunal following the same judgment. That was also a case where the Assistant Commissioner had found that the petitioner therein was eligible for refund but held that their claim for refund in cash or cheque was barred by provisions of Rule 56A(3)(vi)(b) that no credit shall be refunded in cash or cheque. The Andhra Pradesh High Court also did not accept the plea by the Department in that case that the amount could still be adjusted in RG. 23 Part II after noting the petitioner’s submission that since 1980 no duty is leviable either on raw material or on the finished product.
5. In this connection, it is also relevant to note that the appellants have relied upon a Trade Notice of the Bangalore Central Excise Collectorate No. 96/70(37) Gen., dated 8-6-1970 in which it has been stated that paying duty on finished products in Form RG 23 by way of debit entry in the proforma credit account is to be treated as payment of duty in cash for purposes of rebate of duty paid on exported excisable goods. This shows the department’s understanding that payment of duty by debit in proforma credit account RG. 23 Part II amounts to payment of duty in cash.
6. In the present case, the appellants have utilised the proforma credit allowed on raw material components towards payment of duty on the finished product as stipulated in Rule 56A(3)(vi)(a). What they are claiming is the refund of the excess duty paid on the finished product, and, granting of such refund in cash or cheque will not, in the light of the judgments of the High Courts cited supra, and of the department’s understanding of the effect of payment of duty by debiting proforma credit account as in the Trade Notice referred to above, amount to refunding a part of proforma credit in cash. It is only refund of part of proforma credit in cash or cheque that is barred under -Rule 56A(3)(vi)(b) of Central Excise Rules. In the result, it is held that the order of the lower authority denying refund in cash invoking provisions of the above Rule is not sustainable. The appellants will be entitled to refund as per law under Section 11B of Central Excise Act, 1944 as amended.
7. A contention has been made by the ld. Counsel that the amended provisions will not be attracted as this is a case of refund of amount of duty relatable to refund of credit of duty paid on excisable goods used as inputs covered by provisions of Clause (c) of first proviso to Section 11B(2). However, this argument ignores the fact that their claim is for refund of excess duty paid on their final product which squarely falls under Section 11B of the Act. It is not a claim for restoration of credit in their proforma credit account. Moreover, the matter has also to be in consonance with the law since laid down by a 5 Judges1 Bench of the Supreme Court in the case of Mafatlal Industries v. UOI -1997 (89) E.L.T. 247 (S.C.). The Larger Bench of the Supreme Court has reiterated that the amended provisions will apply to all pending claims including the presumption under Section 12B of the Act that every person who has paid excise duty on any goods under the Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods. Therefore, this contention of the appellants is unacceptable.
8. The appeal is disposed of accordingly.
