JUDGMENT
Jeet Ram Kait, Member (T)
1. This appeal is directed against the Order-in-Appeal No. 65/2003-CE dated 27.3.2003 passed by the Commissioner (Appeals), Coimbatore by which the Commissioner has rejected the refund claim of the appellants.
2. The brief facts of the case are that the appellants are engaged in the manufacture of Electric Horn Assembly falling under sub-heading 8512.00 of the Schedule to the CETA, 1985. They have supplied the goods to Maruti Udyog Limited (MUL). MUL rejected 11,000 horns and returned to the appellants for repair and on receipt of the rejected goods at the factory of the appellants, Appellants filed D-3 Declarations on two occasions viz. 22.2.1997 and 19.5.1997 alongwith copies of duty paid documents and the declarations were verified by the proper officer and the quantity particulars were found correct. Appellants cleared 3,300 horns out of the returned 11,000 horns duly repaired and necessary entries were made in the statutory registers and the repaired goods were kept ready for despatch on receipt of orders. They have filed two refund claims for Rs. 77,480 and another claim for a sum of Rs. 53,640 on 18.11.97 under Rule 173L of the erstwhile CE Rules, 1944 within six months from the date of re-entry of the goods into their factory, as required under the rules. Show cause notices were however, issued to the appellants proposing to reject the claims on the ground that the repaired goods were still lying with the appellants and at that stage the question of allowing the refund does not arise. Though at the time of filing the reply, the repaired goods were not cleared on payment of duty, the same were later on cleared on payment of duty and the appellants submitted documentary evidence for having cleared 3300 numbers of repaired horns again on payment of duty and this fact was also brought to the notice of the original authority at the time of personal hearing. However, the refund claims were rejected by the Assistant Commissioner vide Order-in-Original No. 24/98 dated 22.7.98 on the ground that appellants have not specified the amount of refund payable as per proviso (iv) to Rule 173L(1) of the CE Rules, 1944. Aggrieved by the said order of the original authority, the appellants preferred appeal before the lower appellate authority who by the impugned order has rejected the claim holding as under:
“As per Sub-Rule (1) of Rule 173L, refund granted is the duty paid on excisable goods issued for home consumption which are returned for being re-made, refined etc. As such, in the case of a person claiming refund under Rule 173L, only after payment of duty on reprocessed goods, a person becomes eligible to claim refund on goods originally cleared on payment of duty. This is more so because under Rule 173L, the processes of remaking should amount to manufacture as clarified by the Board vide Circular No. 2/878 dated 7.1.87…..Unless duty is paid on reprocessed goods, duty paid on goods originally cleared does not become duty not payable. As such I do not find any merit in the appellants contention that the finding of the lower authority that duty should be paid before filing the refund claim was not in accordance with the provisions of Section 11B. A harmonious reading of the Rule 173L and Section 11B would indicate that the appellants are legally bound to complete the remaking processes, clear the remade goods on payment of duty and yet make a refund claim all within the statutory time limit of six months.
2.1 The lower appellate authority has also held that by not paying duty on the reprocessed goods within the statutory time limit at the time of claiming refund, the appellants cannot be said to have become eligible to refund. He has also held that although the term ‘payable’ was used in the proviso (iv) to Sub-rule (1) of Rule 173L, unless the duty is paid on reprocessed goods, the refund sanctioning authority would not know whether the claim is covered under the aforesaid provision or not. He has also relied upon the judgment of the Hon’ble Apex Court in the case of New Delhi Municipal Committee v. Kalu Ram, AIR 1976 SC 1637 wherein it was held that payable generally means that which should be paid.
3. Aggrieved by Order-in-Appeal, the appellants have come in appeal. In the grounds of appeal, it is inter alia stated as under:
(a) The lower appellate authority has stated totally different reason for rejection of refund claims by the original authority, inasmuch as the original authority had rejected the refund claim on the ground that the appellants have claimed the refund claim without specifying the amount of refund payable as per proviso (iv) of Rule 173L (1) of the rules ibid, while the lower appellate authority has rejected the claim on the ground that the appellants become eligible for refund only on payment of duty on the repaired /reconditioned goods. Therefore, the rejection of the refund claim by the lower appellate authority is on an improper understanding of the order passed by the adjudicating authority.
(b) The lower appellate authority has not disputed the fact of payment of duty twice by the appellants and so also by the original authority.
(c) The lower appellate authority himself has quoted the ruling of the Tribunal in the case of Harawala Engineering Works Pvt. Ltd. v. CCE, 1985 (22) ELT 903 (T) wherein it was held that the very concept of refund implies that it is available to the party who had paid a given amount and which amount was not payable for whatsoever reason.
Therefore, even after relying on the above decision, the lower appellate authority has taken a contrary view.
(d) The fact of clearance of the repaired horns numbering 3300, on payment of duty for the second time is proved by the evidence on record. Merely because the repaired goods were returned after filing the refund claim, that cannot be a ground for rejection of the claims.
4. Shri Subash Chandiran, learned Counsel appeared for the appellants while reiterating the grounds of appeal submitted that all the requirements under Rule 173L have been complied with by the appellants and the term “payable” appearing under proviso (iv) of Rule 173L refers to a future contingency, and it is not necessary that the payment of duty for the second time should have been made before filing the refund claim. He submitted that what is mentioned under Rule 173L is “duty payable” and not duty “paid”. Further Rule 173L did not stipulate that the reprocessed goods should be cleared before filing the refund claim. He has also dilated at length as to the definition of the term “payable” by referring to various Dictionaries to bring home his point that the term “payable” refers to a future contingency. He has also cited the judgment of the Hon’ble High Court of Judicature at Madras in the case of. Selvambal Animal v. Venkataram, AIR 1966 Mad. 460, wherein the Court has defined that the term “payable” means the money payable in future. He further submitted that the original authority had rejected the refund claims on the ground that the amount has not been specified as per proviso (iv) to Rule 173L while the lower appellate authority had rejected the claims on the ground that a person becomes eligible to claim refund on the goods originally cleared on payment of duty only after payment of duty on the reprocessed goods. He submitted that in the present case all the formalities enumerated under Rule 173L have been complied with and the appellants have submitted evidence of duty having been paid for the second time, and hence the rejection of their claims was against the provisions of the Rule. He has also cited the decision of the Tribunal in the case of MV Enterprises v. CCE, Bangalore, 1996 (83) ELT 529, wherein in similar circumstances refund of claim of the party therein was allowed. Further, in the case of CCE, Pune v. Tektronix Automation Electronics P Ltd., 2001 (127) ELT 164, it was held that in respect of repaired/reconditioned goods, refund claim can be made as soon as the reconditioning is made and payment of refund claim may be delayed up to the actual clearance of the goods for the second time. Similar view was taken by the Tribunal in the case of HD Alloys (P) Ltd. v. CCE, Meerut, 2001 (130) ELT 385. The learned Counsel in the circumstances, prayed for allowing the appeal.
5. Shri A. Jayachandran, learned JDR appeared for the department and defended the impugned order. He has also referred to the para-wise comments received from the Commissionerate, a copy of which has been filed in the Court on the date of hearing. In the comments it is inter alia stated as under:
(a) The party’s statement that the lower appellate authority and the original authority have not disputed the fact of duty twice paid by the appellant is contrary to facts. It is the non-payment of duty on the goods remade that forms the crux of the issue.
(b) It has been specifically stated in Rule 173L(3) that the process should be completed within 6 months. Hence, the party’s statement that no where under Rule 173L the statutory time limit of six months is prescribed only reflects the poor reading of statutes.
(c) The lower appellate authority has given his finding that since duty has not been paid on the goods at the time of filing the refund claim. Hence, it cannot be said that he has not given any finding on this aspect.
(d) The lower appellate authority has clearly stated in para 6.2 that the payment of duty on processed goods has to be within the statutory time limit and that too at the time of filing refund claim. But the petitioners have made payment only subsequently, after filing the refund claim.
5.1 In view of the above, the learned JDR prayed for rejection of the appeal.
6. We have carefully considered the submissions made by both the sides, the written submissions made by the Department and have perused the case laws cited by the party. The question that arises for determination in the present case, is whether the assessee-appellants are entitled to refund of duty in respect of the duty payable on the reprocessed goods that were returned to the buyer, when the assessee has admittedly complied with all the formalities envisaged under Rule 173L. Before we answer this question, we have to bring out certain facts of the case which remain undisputed and which are set out hereunder:
(1) The Goods were originally cleared to the buyer M/s MUL on payment of duty.
(2) The defective goods returned by the buyer i.e. M/s MUL have come back to the factory of the appellants within one year from the date of original clearance, as required under Rule 173L.
(3) D-3 intimation have been filed by the party within 24 hours from the date and time of receipt of the returned goods.
(4) The goods have been stored separately before being repaired.
(5) Details of the repair carried out on the goods have been submitted within the stipulated time.
(6) The reprocessed/repaired goods (3300 horns) have been cleared to the buyer on payment of duty though after filing the refund claim and documentary evidence to this effect has been submitted to the Department.
(7) The re-processed goods have been duly accounted for and photo copy of the V form in support of this has been furnished to the Department.
(8) The original authority has categorically stated in his order that formalities which are required to be observed under Rule 173-L for grant of refund have been satisfactorily followed by the appellants except payment of duty again on the re-processed goods.
6.1 In the backdrop of the above undisputed factual position, the plea of the department that the party has not made payment twice, is contrary to facts. As regards the language used in Rule 173L(3) that the process should be completed within six months, the Revenue contended that the process in respect of the returned goods also implies payment of duty for the second time before claiming refund. For better appreciation of the said rule, we reproduce Rule 173L(3) for convenience of reference:
“No refund under Sub-rule (1) shall be paid until the process mentioned therein have been completed and an account under Sub-rule (2) having been rendered to the satisfaction of the Collector within six months of the return of the goods to the factory”.
7. From the above, it is clear that the term “process” relates to the process which are required to be carried out on the returned goods and not payment of duty on the returned goods for the second time. We are of the considered opinion that no other meaning can be read into the above provisions of law. Therefore, the contention of the Department that the party has not understood the rule is not acceptable.
8. Now coming to the next question whether the term “payable” as envisaged under proviso (iv) of Rule 173L(1), refers to a future action or it refers to past and that payment of duty for the second time on the re-processed goods is essential before claiming refund of the duty, it is necessary to appreciate the relevant rule viz. proviso (iv) to Rule 173L (1), which is reproduced herein below for convenience of reference:
“the amount of refund in no case be in excess of the duty payable on the goods after being remade, refined, reconditioned or subjected to any other similar process in the factory”
9. We are of the considered opinion that the term “payable” refers to a future action and not past. In fact what the rule stresses is that refund should not be in excess of the duty payable on the reprocessed goods when cleared, more so at times, the quantum of reprocessed goods being cleared may not be matching with the quantum of returned goods and in such situation, the quantum of duty payable would be less. The rule nowhere prescribes that the refund can be claimed only on payment of duty for the second time. Further, similar view has been taken in the various case laws cited by the party and noted above. We further note the Tribunal in the case of Rajasthan Spg. & Wvg. Mills Ltd. v. CCE, Jaipur-II, 2001 (45) RLT 411 (CEGAT-Del) in an identical situation while allowing an appeal of the appellant therein has held as under:
“One of the conditions prescribed in the proviso to Rule 173L(1) is that the amount of refund payable shall in no case be in excess of the duty payable on such goods after being re-made, refined etc, the Appellate Tribunal in the case of Metazine (India) Ltd. supra held that restrictions placed under proviso (iv) is only in respect of duty payable on such goods after being re-processed and not to duty paid. It does not contemplate a situation that the re-processed goods should actually be cleared on payment of duty. So long as it is not disputed that the goods initially removed were cleared on payment of duty and refund amount claimed under Rule 173L does not exceed the duty payable on re-processed goods, refund is admissible.”
10. We note that in terms of the Explanation (B) (b) to Section 11B, in respect of returned goods the refund claim is required to be made within six months from the date of re-entry of the goods for repair. Therefore, as rightly contended by the learned Counsel for the appellants, they have filed the refund claims before removal of the goods on payment of duty for the second time, to remain within the time limit, prescribed under Explanation ibid and hence they cannot be found fault with for filing the refund claim before clearance of the goods for the second time. Appellants have also made a prayer before the adjudicating authority for keeping the refund claims pending till the clearance of the repaired goods on re-payment of excise duty, as could be seen from the grounds of appeal. In such circumstances, the adjudicating authority could have kept the claims pending till such time payment of duty is made for the second time to know the exact amount of duty paid for the second time, rather than rejecting the claims, on the ground that amount of refund has not been specified in the claims, more particularly when the adjudicating authority itself has admitted that the appellants have complied with all the formalities required under Rule 173L except payment of duty. In view of our discussion and finding above, we have no hesitation to come to conclusion that it is not essential that the reprocessed goods should actually be cleared on payment of duty for the second time, before filing the refund claim. We, therefore, hold that the appellants are entitled to refund. However, the refund could be sanctioned only after payment of duty for the second time and till such time the duty is paid for the second time, the refund claim has to be and can be kept pending, as held by the Tribunal in the case of CCE, Pune v. Tektronix Automation Electronics P. Ltd. (supra). Since they have admittedly filed the refund claims within six months from the date of re-entry of the defective goods for repair/reconditioning etc, in terms of Explanation B(b) to Section 11B, and duty on the repaired /reconditioned goods have admittedly been paid by them for the second time, we direct that their claims should be settled within a period of three months from the date of receipt of this order. The impugned order and the attendant Order-in-Original are therefore set aside and the appeal is allowed, with consequential relief.