M/S CONTINENTAL AUTOMOTIVE COMPONENTS (INDIA) PVT. LTD vs. C.C.C.E & S.T. BANGALORE

M/s.SURETEX PROPHYLACTICS INDIA PRIVATE LIMITED PLOT NO.74 TO 91 KIADB INDL.ESTATE

3 JIGANI II PHASE, ANEKAL TALUK BANGALORE 560 105 (REP. BY AKHILESH JHANWAR

FINANCIAL CONTROLLER)

… APPELLANT

(BY SRI DAKSHINA MURTHY R., ADV A/W SRI.K.S.NAVEEN KUMAR, ADV)

AND:

THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS & SERVICE TAX BANGALORE I COMMISSIONERATE C.R.BUILDING, QUEENS ROAD BANGALORE 560 001

…RESPONDENT

(BY SRI JEEVAN J. NEERALGI, ADVOCATE)

THIS APPEAL IS FILED UNDER SECTION 35G OF THE CENTRAL EXCISE ACT, ARISING OUT OF ORDER DATED 02.12.2016 PASSED IN FINAL ORDER NO.21358/2016 IN APPEAL NO.E/20799/2014-SM.

C.E.A.No.25/2018

BETWEEN:

M/s.MACH AERO COMPONENTS PVT.LTD PLOT NO.27-B, SY NOS 98-99 DODDABALLAPURA INDUSTRIAL AREA VEERAPURA VILLAGE, KASABA HOBLI DODDABALLAPURA TALUK BANGALORE 561 203

… APPELLANT

(BY SRI M.S.NAGARAJA, ADV A/W SMT. SHRUTI MATHEW, ADV)

AND:

THE COMMISSIONER OF SERVICE TAX

4 BANGALORE SERVICE TAX-I 1ST TO 5TH FLOOR, TTMC BUILDING ABOVE BMTC BUS STAND DOMLUR BANGALORE 560 071

…RESPONDENT

(BY SRI JEEVAN J. NEERALGI, ADVOCATE)

THIS APPEAL IS FILED UNDER SECTION 35G OF THE CENTRAL EXCISE ACT, ARISING OUT OF ORDER DATED 31.07.2017 PASSED IN FINAL ORDER NO.22460/2017.

C.E.A.No.35/2018

BETWEEN:

M/s.CONTINENTAL AUTOMOTIVE COMPONENTS (INDIA) PVT.LTD 8TH & 9TH FLOOR GOLD HILL SUPREME SOFTWARE TECH PARK PLOT NO.21, 22, 27 & 28, PHASE II ELECTRONIC CITY INDUSTRIAL AREA HOSUR ROAD BANGALORE 560 100

… APPELLANT

(BY SRI M.S.NAGARAJA, ADV A/W SMT.SHRUTI MATHEW, ADV)

AND:

C.C.,C.E.&S.T. BANGALORE SERVICE TAX II TTMC BUILDING, OLD AIRPORT ROAD ABOVE BMTC BUS STAND DOMLUR BANGALORE - 560 071

…RESPONDENT

(BY SRI JEEVAN J NEERALGI, ADVOCATE)

THIS APPEAL IS FILED UNDER SECTION 35G OF THE CENTRAL EXCISE ACT, ARISING OUT OF ORDER DATED 08.03.2018 PASSED IN FINAL ORDER NO.20374-385/2018.

THESE APPEALS BEING HEARD AND RESERVED, COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, ARAVIND KUMAR J, DELIVERED THE FOLLOWING:

JUDGMENT

CEA No.31/2017 came to be admitted on 08.08.2018. However, CEA Nos.32/2017 and 33/2017 were ordered to be posted along with CEA No.31/2017 since substantial questions of law had not been formulated.

(ii) Whether the time prescribed under Section 11B of the Central Excise Act, 1944 would be applicable for claiming refund of CENVAT Credit?”

6 CEA No.35/2018 came to be admitted on 23.07.2019 to consider the substantial questions of law indicated thereunder. (i) Whether, the Tribunal is justified and correct in upholding rejection of the claims for refund of untilized Cenvat credit filed quarterly by the Appellant on 1.10.2013 for the period from July 2012 to September 2012 and on 3.1.2014 for the period from October 2009 – December 2009 to April 2012 – June 2012 on the ground that the Applications were filed beyond one year despite there is no definition of “relevant date” for computation of the period of one year for claiming refund of untilized CENVAT credit in Section 11B of the CEA, 1944, Rule 5 of the CCR, 2004 and Notification No.5/2006 CE (NT) dated 14.03.2006 and 27/2012 CE (NT) dated 18.6.2012?

(ii) Whether the Tribunal is justified and right in holding that the “relevant date” for computation of the time limit for submission of claim for refund of unutilized CENVAT credit under Rule 5 of the Cenvat credit Rules, 2004 will be the end of the quarter in which the FIRCs are received, when theer is no such specification either under rule 5 of Cenvat Credit Rules, 2004 or Notifications issued thereunder or Section 11B of the Central Excise Act, 1944 during the relevant period?

(iii) Whether the Tribunal is right in holding that the limitation of one year under Section 11B of the CEA, 1944 is applicable for refund of untilized

7 CENVAT credit when the CENVAT credit Rules, 2004 has not prescribed any time limit either for taking credit or its utilization and has also not prescribed the “relevant date”?

(iv) Whether the Tribunal is justified and correct in upholding rejection of the refund claims contrary to law declared by the jurisdictional Hon’ble High Court in the case relied on by the Appellant?

(v) Whether the Tribunal is justified in denying substantive right of claim for refund of unutilized Cenvat credit merely on procedural grounds, if any?”

CEA No.25/2018 has been admitted on 30.05.2019. Since following substantial question of law had not been formulated, we frame the following substantial question of law after hearing learned Advocates appearing for parties.

(i) Whether the time limit of one (1) year as prescribed under Section 11- B of the Central Excise Act, 1944, would be applicable for claiming refund being the accumulated CENVAT credit?

The facts in these appeals being slightly different, they are enumerated herein below for the purposes of convenience.

8 RE: CEA NOS.31/2017, 32/2017 AND 33/2017:

9 restored the order of the original authority by opining that refund claim has to undergo the scrutiny of limitation provided under the Act and as such accepted the plea of the revenue.

RE: CEA NO.35/2018:

10 of applications for refund having been filed beyond the period of one year namely, after the date of expiry of period prescribed under terms of Section 11B of the Act. The further appeal filed before the CESTAT by the assessee was not accepted and while dismissing the appeals it came to be observed by the tribunal that ‘relevant date’ which is to be construed would be the date as indicated in Section 11B of the Central Excise Act, which would be applicable to the provisions of Finance Act, 1994.

RE: CEA NO.25/2018:

11 from which the appellant exported their final products i.e., bearing equipment and mechanical parts to be fitted into aerojets engines to their clients abroad and on the ground that refund claim under Rule 5 of CENVAT Rules read with notification 5/2006 is to be filed before expiry of one year and also on the ground that appellant had failed to submit the statutory documents to substantiate the claim for export. Being aggrieved by the same, an appeal was filed, which also came to be rejected by arriving at a conclusion that relevant date should be the date on which the export of goods was made. Further appeal to the CESTAT was also rejected on the ground that time limit of one year from the date of export is applicable and the refund application filed was time barred namely, filed after one year. Hence, these appeals have been filed by the respective appellants.

12 Sri.Jeevan J Neeralgi, learned counsel appearing for the revenue.

13 accepting the contention of the revenue that limitation of one year would be applicable, then also such limitation would be applicable only from 01.03.2016 i.e., from the date of issuance of notification No.14/2016 and not earlier to it. In support of his submissions he has relied upon the following judgments: 1. 2012 (28) S.T.R. 426 (Mad.): COMMISSIONER OF C. EX., COIMBATORE Vs. GTN ENGINEERING (I) LTD.

14 8. 2015 (39) S.T.R. 230 (Tri. – Ahmd.) : QUALITY BPO SERVICE PVT. LTD. Vs. COMMISSIONER OF S.T. AHMEDABAD

15 applicable mutatis mutandis insofar as refund claims are concerned and as such, it cannot be gainsaid by the appellants that refund claims filed beyond the period of limitation would be entitled for refund.

RE: SUBSTANTIAL QUESTIONS OF LAW (i) Nos.(1) & (2) in CEA Nos.31/2017, 32/2017 & 33/2017; (ii) Nos.(1), (3) & (4) in CEA No.35/2018 (iii) No.(1) in CEA 25/2018

Rule 5 of the Cenvat Credit rules, 2004 from 1.4.2012

“RULE 5. Refund of CENVAT credit. - Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as

16 the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,

(i) duty of excise on any final product cleared for home consumption or for export on payment of duty; or

(ii) service tax on output service, and where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification:

Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Export of Service Rules, 2005 in respect of such tax.

Provided further that no credit of the additional duty leviable under sub- section (5) of section 3 of the Customs

17 Tariff Act shall be utilised for payment of service tax on any output service.

Explanation: For the purposes of this rule, the words ‘output service which is exported’ means the output service exported in accordance with the Export of Services Rules, 2005.]

Explanation: For the purposes of this rule, "duty" means the duties (1) of rule 3 of these rules.

Rule 5 of the Cenvat Credit rules, 2004 from 1.4.2012

Refund of CENVAT Credit.

(1) A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: specified in sub-rule.

(Export turnover of good + Export turnover of services) Refund amount = * Net CENVAT credit Total turnover

Where,-

(A) “Refund amount” means the maximum refund that is admissible;

(B) “Net CENVAT credit” means total CENVAT credit availed on inputs and input services by the manufacturer or the output service provider reduced by the amount reversed in terms of sub- rule (5C) of rule 3, during the relevant period;

(C) “Export turnover of goods” means the value of final products and intermediate products cleared during the relevant period and exported without payment of Central Excise duty under bond or letter of undertaking;

(D) “Export turnover of services” means the value of the export service calculated in the following manner, namely:-

Export turnover of services = payments received during the relevant period for export services + export services whose provision has been completed for which payment had been received in advance in any period prior to the relevant period – advances received for export services for which the provision of service has not been completed during the relevant period;

(E) “Total turnover” means sum total of the value of –

(a) all excisable goods cleared during the relevant period including exempted goods, dutiable goods and excisable goods exported;

(b) export turnover of services determined in terms of clause (D) of sub-rule (1) above and the value of all other services, during the relevant period; and

(c) all inputs removed as such under sub-rule (5) of rule 3 against an invoice, during the period for which the claim is filed.

(2) This rule shall apply to exports made on or after the 1st April, 2012:

Provided that the refund may be claimed under this rule, as existing, prior to the commencement of the CENVAT Credit (Third Amendment) Rules, 2012, within a period of one year from such commencement:

Provided further that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the [Service Tax Rules, 1994] in respect of such tax.

Explanation 1- For the purposes of this rule,-

(1) “export service” means a service which is provided as per rule 6A of the Service Tax Rules, 1994;

(2) “relevant period” means the period for which the claim is filed.

Explanation 2 – For the purposes of this rule, the value of services, shall be determined in the same manner as the value for the purposes of sub-rule (3) and (3A) of rule 6 is determined.”

21 of duty, the CENVAT Credit on inputs-input services would be accumulating to his CENVAT Credit records. Such manufacturer would be entitled to utilize the CENVAT Credit either for payment of excise duty on final products cleared for home consumption or for export on payment of duty or for payment of service tax on output service. If these contingencies are not forthcoming for any reason, then manufacturer/output service provider can seek refund as provided under Rule 5 read with relevant or extant notifications so issued.

(ii) Notification No. 27/2012 – CE (NT) dated 18.06.2012; and

22 (iii) Notification No.14/2016 – CE (NT) dated 1.3.2016.

The above referred three notifications would clearly indicate that same has been issued by the Central Government in exercise of the powers conferred under Rule 5 of CENVAT Credit Rules, 2004. Refund of unutilized cenvat credit under Rule 5 is subject to the above notification and clause (6) of the notification dated 14.03.2006 which has bearing is extracted herein below: “The application in Form A, along with the prescribed enclosures and the relevant extracts of the records maintained under the Central Excise Rules, 2002, CENVAT Credit Rules, 2004, or the Service Tax Rules, 1994 in original, are filed with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944).”

The above referred clause (6) also finds a place in the subsequent notification dated 18.06.2012 which would clearly indicate that the period specified in Section 11B of the Central Excise Act, 1944 would squarely be attracted in respect of the claims made for refund of Cenvat credit.

Notification dated 01.03.2016 is a notification issued amending the notification No.27/2012 dated 18.06.2012 whereunder paragraph 3 of clause (b) of notification dated 18.06.2012 came to be substituted as indicated herein below: “(b) The application in the Form A along with the documents specified therein and enclosures relating to the quarter for which refund is being claimed shall be filed as under:

(i) in case of manufacturer, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944);

(ii) in case of service provider, before the expiry of one year from the date of –

(a) receipt of payment in convertible foreign exchange, where provision of service had been completed prior to receipt of such payment; or

(b) issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice.”

10.1. Thus, in S.S. Gadgil v. Lal and Co. [AIR 1965 SC 171] , this Court stated: (AIR p. 177, para 13)

“13. As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an agent of a non-resident party under the Income Tax Act before it was amended, ended on 31-3-1956. It is true that under the amending Act by Section 18 of the Finance Act, 1956, authority was conferred upon the Income Tax Officer to assess a person as an agent of a foreign

25 party under Section 43 within two years from the end of the year of assessment. But authority of the Income Tax Officer under the Act before it was amended by the Finance Act of 1956 having already come to an end, the amending provision will not assist him to commence a proceeding even though at the date when he issued the notice it is within the period provided by that amending Act. This will be so, notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the commencement of the amending Act. The legislature has given to Section 18 of the Finance Act, 1956, only a limited retrospective operation i.e. up to 1-4-1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income Tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided, become barred.”

10.2. To similar effect is the judgment in ITO v. Induprasad Devshanker Bhatt [AIR 1969 SC 778] . The Court held: (AIR p. 783, para 6) “6. In our opinion, the principle of this decision applies in the present case and it must be held that on a proper construction of Section 297(2)(d)(ii) of the new Act, the Income Tax Officer cannot issue a notice under Section 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the old Act at the date when the

26 new Act came into force. It follows therefore that the notices dated 13-11- 1963 and 9-1-1964 issued by the Income Tax Officer, Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court [Induprasad Devshanker Bhatt v. J.P. Jani, 1964 SCC OnLine Guj 18 : (1965) 58 ITR 559] by the grant of a writ.”

10.3. In New India Insurance Co. Ltd. v. Shanti Misra [(1975) 2 SCC 840] , this Court said: (SCC p. 846, para 7) “7. … ‘(2) … The new law of limitation providing a longer period cannot revive a dead remedy. Nor can it suddenly extinguish vested right of action by providing for a shorter period of limitation.’”

10.4. Similarly in T. Kaliamurthi v. Five Gori Thaikkal Wakf [(2008) 9 SCC 306] , this Court said: (SCC p. 322, para 40) “40. In this background, let us now see whether this section has any retrospective effect. It is well settled that no statute shall be construed to have a retrospective operation until its language is such that would require such conclusion. The exception to this rule is enactments dealing with procedure. This would mean that the law of limitation, being a procedural law, is retrospective in operation in the sense that it will also apply to proceedings pending at the time of the enactment as also to proceedings commenced thereafter, notwithstanding that the cause of action may have arisen before the new provisions came into force. However, it must be noted that there is an important exception to this rule also. Where the right of suit is

27 barred under the law of limitation in force before the new provision came into operation and a vested right has accrued to another, the new provision cannot revive the barred right or take away the accrued vested right.”

10.5. For the latest exposition of the same rule see Thirumalai Chemicals Ltd. v. Union of India [(2011) 6 SCC 739 : (2011) 3 SCC (Civ) 458] , SCC at para 29.

“108. The discussion in the judgment yields the following propositions. We may forewarn that these propositions are set out merely for the sake of convenient reference and are not supposed to be exhaustive. In case of any doubt or

28 ambiguity in these propositions, reference must be had to the discussion and propositions in the body of the judgment.

(i) Where a refund of tax/duty is claimed on the ground that it has been collected from the petitioner/plaintiff—whether before the commencement of the Central Excise and Customs Laws (Amendment) Act, 1991 or thereafter—by misinterpreting or misapplying the provisions of the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tariff Act or by misinterpreting or misapplying any of the rules, regulations or notifications issued under the said enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactments before the authorities specified thereunder and within the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226—and of this Court under Article 32—cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the

29 light of and in accordance with the provisions of Section 11-B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it.

The said enactments including Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act do constitute ‘law’ within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11- B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal—which is not a

30 departmental organ—but to this Court, which is a civil court.” (emphasis in original)

From the law laid down by this decision it is clear that all claims for rebate/refund have to be made only under Section 11-B with one exception—where a statute is struck down as unconstitutional. Further, the limitation period of six months has to be strictly applied.”

Thus, the irresistible conclusion which has to be necessarily drawn is to the effect that in respect of refund of claims made under Rule 5 of CENVAT Credit Rules, 2004 the provisions of Section 11-B of the Central Excise Act would be squarely applicable. Even in respect of the refund claims made under the CENVAT Credit Rules, 2004 insofar as it relates to “service providers” under the Finance Act, 1994, the provisions of Central Excise Act, 1944 as specified in Section 83 of the Finance Act, 1994 would cover the same inasmuch as, Section 11-B also finds a place in Section 83 of the Finance Act, 1994.

31 inclined to accept the same, inasmuch as, Rule 5 of CENVAT Credit Rules itself clearly specifying that such refund claims would be subject to “such safeguards, conditions and limitations as may be specified, by the Central Government, by notification” and the above referred notification No.5/2006 and 27/2012 clearly specifying in clause (6) and clause 3.0(b) respectively that “before the expiry of the period specified in Section 11-B of the Central Excise Act, 1944” it cannot be gainsaid by the appellants that provisions of Section 11-B of the Central Excise Act is not attracted to the refund claims made under CENVAT Credit Rules, 2004. Hence, we answer the substantial questions of law formulated in appeals 31/2017, 32/2017, 33/2017 & 25/2018 by holding that refund applications filed under the CENVAT Credit Rules, 2004 cannot be without reference to limitation or time prescribed under Section 11-B of the Central Excise Act, 1944. We also answer the substantial question of law formulated in Appeal No.35/2018 at question Nos.1, 3 & 4 to the effect that limitation for claiming refund of unutilized

32 Cenvat credit should be within the period prescribed under Section 11-B of Central Excise Act.

RE: SUBSTANTIAL QUESTION OF LAW NO.2 IN CEA NO.35/2018

33 though Section 11-B of the Act does not cover refund of Cenvat credit, notification No.5/2006 makes it explicitly clear that for the purpose of relevant date for computing one year prescribed under Section 11-B, it has to be determined by applying Rule 5 of Cenvat Credit Rules, 2004, necessarily the refund claims ought to have been filed within one year from the relevant date as specified in Section 11-B. In other words, time limit has to be computed from the last date of the last month of the quarter which would be the relevant date for the purposes of examining if the claim is filed within the limitation prescribed under Section 11-B or otherwise. The details of the refund claims insofar as it relates to 12 claims was on 03.01.2014 had been filed beyond one year from the last date of the last month of the quarters and as such, they were clearly time barred. Insofar as remaining 4 claims, matter has been remanded to the original authority, against which there is no appeal by the revenue. Hence, we answer the substantial question of law No.2 that tribunal was right in holding that the “relevant date for computation of time limit will be the end of the quarter” in

34 which FIRC’s are received as per the extant notification No.27/2012 – CE (NT) dated 18.06.2012.

SD/- JUDGE SD/- JUDGE

Bkp/sp