FLOW TECH POWER Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) M /s Flow Tech Power (Assessee or FTP for short) manufactured and cleared plastic articles necessary for Drip/Sprinkler Irrigation System (SIS) during 1992 to 2000. They claimed exemption for these clearances under Notification No. 46/94 -CE dated 01.03.94 (later Notification No. 56/95 dated 16.03.95) as parts of SIS falling under CSH 84.24. As the department was of the view that the goods involved were plastic pipes/tubes, the exemption claimed was not allowed. During the material period the assessee paid duty applicable to plastic parts under protest. Assessee had availed input credit all through under the Modvat scheme. The dispute was finally resolved vide Final Order No. 1262/2000 dated 05.09.2000 of the Chennai Bench of the Tribunal. The Tribunal decided that the impugned goods were covered by Notification No. 46/94 -CE dated 01.03.94 and Notification No. 56/95 dated 16.03.95. Assessee claimed refund of the duty paid pursuant to the final order. Claim was for an amount of Rs. 64,72,809/ - paid in RG23A and Rs. 25,58,995/ - paid from PLA. The claim was rejected as being barred by unjust enrichment and limitation vide Assistant Commissioner's order No. 207/2003 dated 21.08.03. The Commissioner (Appeals) allowed FTP's appeal and decided that the refund claim was not barred by limitation nor would involve unjust enrichment vide his order No. 88/2004(SCN) -Try -II dated 31.03.04. The Cestat vide Final Order No. 302/05 dated 3.03.05 decided that the refund claim was not barred by limitation or attracted unjust enrichment. As the order dated 21.08.03 of the original authority rejecting the refund claim had not considered captive consumption of inputs and unjust enrichment, department filed appeal against that order on those grounds. Disposing the appeal, Commissioner (Appeals) concurred with the order No. 88/2004(SCN) -Try -II dated 31.03.04 and decided that refund would not entail unjust enrichment. Department's petition against the final order No. 302/05 dated 3.3.05 of Cestat (supra) was rejected by the Madras High Court. The Hon'ble High Court observed that no question of law arose from the final order.

(2.) THE assessee sought consequential relief. The assessee was then issued a SCN proposing to reject the refund claim to the extent the same represented payment from Modvat credit on the ground that the assessee was not eligible for the credit taken as the final products were exempt. Refund claim was disposed off sanctioning the amount paid from PLA i.e. Rs. 25,58,995/ - and the interest for the delay of more than three months from the date of order of the High Court. Commissioner (Appeals) upheld the order of the original authority on the basis that credit used to pay the amount claimed had not been admissible in the first place in terms of Rule 57C. The assessee was not eligible for the credit. FTP filed the subject appeal against the said order seeking refund of Rs. 64,72,809/ - and interest for the entire amount for the period of delay with reference to the date of initial claim.

(3.) DISPOSING the appeal the Commissioner (Appeals) held in the impugned order that as per Rule 57C current during the material period, if a product became exempted, credit of duty paid on inputs had to be reversed. This was a basic requirement under Modvat scheme. In his view the eligibility of Modvat credit could be taken up only while sanctioning the refund and the same had not merged with earlier orders as contended. He relied on the decision of the Tribunal in CCE, Pune III v. Solar Busiforms Ltd. (2007 -TIOL -298 -CESTAT MUMBAI). The Tribunal had decided in that case that when the final product was found to be not liable to duty after clearance on payment of duty, refund was admissible only to the extent the duty was paid from PLA as the input credit taken was not admissible. As regards the interest due, the Commissioner (Appeals) decided that the same was admissible only with reference to the date of order of the Hon'ble High Court in terms of Section 11BB of the Central Excise Act '44.