1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CDNTRAL EXCISE APPEAL NO. 49 OF 2004 WITH CENTRAL EXCISE APPEAL NO. 137 OF 2005 WITH CENTRAL EXCISE APPEAL NO. 161 OF 2006 The Commissioner of Central Excise,) Thane II, Navprabhat Chambers ) Ranade Road, Dadar (W), ) Mumbai 400 028. ).. Appellant Vs. M/s. D.C. Polyester Pvt.Ltd., ) E-26/2, MIDC,Tarapur, ) Boisar, Dist.Thane. ).. Respondents. Mr. P.S.Jetly with Mr. A.S.Rao for the appellant (in all matters). Mr. Prakash Shah with Mr. Jitu Motwani & Mr.J.Sanghavi i/b. PDS Legal for respondents (in all matters). 2 CORAM: F.I.REBELLO AND J.H.BHATIA,JJ. DATE: 30th June, 2009. JUDGMENT: (PER J.H.BHATIA,J.) 1. All these Appeals are filed by the Revenue challenging the dismissal of their appeals by the CESTAT against the order passed by the Commissioner of Central Excise, who had allowed the three appeals of the respondents against the order of the Assistant Commissioner of Central Excise refusing refund of additional excise duty. The common question of law in all these appeals is as follows :- “Whether in the facts and in the circumstances of the case the Tribunal was right in law in holding that “Boards Circular No. 701/17/2003-CX dated 12.03.2003 allows refund of unutilized credit of additional duty of excise (Goods of Special Importance) on export of the finished goods even if such finished goods are not subjected to levy of the said additional duty”, when the said Circular do not have 3 retrospective application to the period before introduction of CENVAT Rules,2002. The restriction on utilizing credit of duty paid under T&TA Act, was removed vide Notfn.No.13/2003 dated 01.03.2003”. 2. Facts in all the cases leading to these Appeals are similar. For the purpose of convenience, facts in Appeal no.49 of 2004 may be stated in brief thus: The respondent is engaged in manufacture of decotised man- made/chemile fabrics. The respondent had cleared goods under bond and also submitted final proof of export and also had not made any separate claim for rebate. The respondent was availing credit of the duties paid on inputs under Rule 57A of the Central Excise Rules, 1944. It was also required to pay additional excise duty on textile and textile articles. The respondent applied for refund of the duty, including the basis excise duty and the additional excise duty on textile and textile articles. The Assistant Commissioner of Central Excise held the respondents entitled for refund of basic excise duty, but found that refund could not be allowed in respect of additional excise duty on T&TA and to that extent he refused the claim. The respondent challenged the aforesaid order of the Adjudicating Officer 4 before the Commissioner (Appeals), who in turn took a view that the proviso of Rule 57F(12) as inserted by corrigendum dated 1.3.1997 and Rule 57F (13) allow utilization of credit on input used in he manufacture of final products exported outside India or credit of specified duty paid (additional duty paid on inputs) may be taken in the normal course for payment of duty on any final product. In view of this, the Commissioner (Appeals) held that the respondent is entitled to credit of additional excise duty and accordingly he allowed the appeals and set aside the order of the Adjudicating Officer. The order passed by the Commissioner (Appeals) came to be challenged before the Tribunal by the Revenue. The Tribunal dismissed the appeal holding that no ground was made out to interfere. Therefore, the orders passed by the Commissioner of Appeals and the Tribunal are challenged in the present Appeal by the Revenue. 3. Heard the learned Counsel for the parties. 4. Initially, the MODVAT system was introduced with a view to avoid double payment of duty on certain goods which were used as inputs for manufacture of another final product. For this purpose, the credit was given for the payment of duty on the excisable goods used as inputs and the 5 procedure for utilization of the credit of duty so paid was incorporated in Rule 57A under the Central Excise Rules, 1944. Rule 57A specifically empowers the Central Government to specify by notification finished excisable goods for the purpose of allowing the credit of any duty of excise or the additional duty, as may be specified in the said notification, paid on the goods used in the manufacture of such final products. Thus, the availability of the credit is controlled by notification issued by the Government of India from time to time. Rule 57F deals with the procedure of utilization of credit allowed in respect of the duty paid on the inputs. Sub-rule (12) of Rule 57F specifically provides that the credit of specified duty allowed in respect of any input, may be utilized by the manufacturer of the final product towards payment of duty of excise on any of the final products in the manufacture of which such inputs are intended to be used. Sub-rule (13) of Rule 57F provides that where any inputs are used in the final products which are cleared for export under bond or used in the intermediate products cleared for export, the credit of specified duty in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export on payment of duty. It further provides that where for any reason such adjustment is not possible, the 6 manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitations as may be specified by the Central Government by notification. 5. It is the case of the respondent that almost total final products produced by the respondent were exported on bond or on payment of duty and, therefore, it was not possible to utilise the credit of the duty paid on inputs used for the final products. This contention is not in dispute. According to the respondents, they are entitled to refund of the total credit in respect of the basic duty as well as the additional excise duty paid on the inputs used in production of the final products. On behalf of the Revenue, it is vehemently contended that the respondent would be entitled only to refund of the unutilised credit to the extent of payment of basic duty and not the additional excise duty. The Assistant Commissioner, who was the Adjudicating Officer, allowed refund of the credit to the extent of basic duty, but refused refund to the extent of credit in respect of the additional excise duty. 6. In fact, sub-rule (13) provides for the utilization of “specified duty” and in case that cannot be utilized about refund of the same. The question is whether the words “ specified duty” include 7 the basic excise duty alone or the basic excise duty as well as the additional excise duty. The Notification 24/94-CE(NT) dated 20th May,1994, issued by the Central Government under Rule 57A, specifies the final products in respect of which the credit of duty of excise under the Central Excise and Salt Act, Additional Duties of Excise (Textiles and Textile Articles) Act,1978 and the Additional Duties of Excise (Goods of Special Importance) Act,1957 and additional duty under Section 3 of the Customs Tariff Act already paid on inputs shall be allowed as credit when used in or in relation to manufacture of the final products. The said notification provided that the credit of duty so allowed shall be utilized for payment of duty leviable on the said final products or, as the case may be, on such inputs if such inputs have been permitted to be cleared under Rule 57F of the said Rules. It was subject to certain restrictions. It further provided that credit of specified duty insofar as it related to the additional duty of excise paid under the Additional Duties of Excise (T&TA) Act shall be allowed to be utilized only towards payment of duty of excise payable under the Additional Duties of Excise (T&TA) Act on the final products or as the case may be on the inputs if such inputs have been permitted to be cleared under Rule 57A. On the 8 basis of this proviso in the notification dated 20th May, 1994, it is vehemently argued by the learned counsel for Revenue that the credit allowed to the respondents in respect of the additional duty could be utilized only towards payment of duty of excise leviable under the Additional Duties of Excise (Textiles and Textile Articles) Act on the final products and there is no provision for refund of the same. 7. The Tribunal however, did not accept the contention of the Revenue, particularly in view of the Circular No.701/17/2003-CX dated 12.3.2003 issued by the Central Board of Excise & Customs in respect of refund of unutilized credit of additional duty of excise (Goods of Special Importance) in terms of Rule 5 of CENVAT Credit Rules,2002. After considering the relevant provisions, particularly Rule 5 of the CENVAT Credit Rules and the Additional Duties of Excise (Goods of Special Importance) Act, it was clarified by the said circular that refund of AED (GSI) shall be allowed under Rule 5 of CENVAT Credit Rules, 2002 regardless of the fact the said duty is not leviable on the final products. Para 3 of the circular reads as follows : “Accordingly, it is clarified that the refund of AED (GSI) 9 shall be allowed under Rule 5 of Cenvat Credit Rules, 2002 regardless of the fact tha the said duty is not leviable on the finihed product. Pending cases if any, may be decided accordingly.” Thus, it specifically provided that “pending cases, if any, may be decided accordingly”. It was contended on behalf of the Revenue that the said Circular dated 12.3.2003 was applicable only in respect of additional excise duty on goods of special importance and it could not be applicable to the additional excise duty on inputs used for production of textiles and textile articles which are covered under AED (T&TA) Act. However, it appears that on 22.3.2007, the Central Board of Excise & Customs, issued a circular, which shows that taking into consideration numerous references received from the field as well as from the trade seeking clarification on whether refund of AED (T&TA) is allowed on the similar lines for export of goods. In Para 2 of that circular, after considering the relevant provisions, the circular finally provided as follows :- “...Accordingly, it is clarified that clarification issued for the refund of AED (GSI) under rule 5 of the CENVAT Credit Rules, 2002 vide Board’s Circular No.701/17/2003-CX, dated 10 12.03.2003, will be applicable to AED (T&TA) subject to the conditions and limitations as prescribed under the said rules.” Thus, it has become clear that the circular dated 12.3.2003, which was originally issued in respect of the additional duty of excise on goods of special importance has been made applicable to additional excise duty payable on textiles and textile articles also. 8. The learned Counsel for the Revenue vehemently contended that the circular dated 12.3.2003 and the circular dated 22.3.2007 could not be given retrospctive effect. On the other hand, the learned counsel for the respondent contended that the language of the circular dated 12.3.2003 makes it clear that it was only a clarificatory circular and words “pending cases, if any, may be decided accordingly” clearly indicate that the circular would be applicable to all the pending cases without any exception. It was immaterial before which authority the case is pending. It only indicates that the circular about the refund of AED (GSI) would not be applicable only to those cases which were finally closed by that time. Taking into consideration the language of para 3 of the circular, we find it difficult to accept the contention of the Revenue that it could not be given retrospective 11 effect. As far as the circular dated 22.3.2007 extending the applicability of the earlier circular dated 12.3.2003 to the AED (T & TA) is concerned, it also clearly indicates that the second circular was in nature of clarification and it was clarified that the clarification given by the Central Board by earlier circular dated 12.3.2003 would be applicable to AED (T&TA) also.Thus, it is clear that this circular dated 12.3.2003 would be applicable in respect of the claim for refund of AED (T&TA). It nowhere points out that it would have only prospective effect and not retrospective effect. If, as per this circular, the circular dated 12.3.2003 is applicable, the words “pending cases,if any, may be decided accordingly,” in para 3 of that circular would also be material and it must be held that even though the clarification about refund of additional duty of excise (T&TA) was issued on 22.3.2007, it was to be applicable to all the pending cases and therefore, its application cannot be restricted only to future. 9. In Arviva Industries (I) Ltd. Versus Union of India 2004 (167) E.L.T.135 (Bom.), the Division Bench of this Court observed as follows in para 13: “13. In Paper Products Ltd., the Supreme Court ruled that the 12 circulars issued by the Board were binding on the departmental authorities and the department cannot repudiate the circular issued by the Board on the basis that it was inconsistent with the statutory provision. Same thing is sought to be done by the department by repudiating the Circular N. 39/99 issued by the Board though in the garb that the said circular has been issued clarifying the whole position. But the fact is that the Circular No.39/99 is sought to be repudiated by the department indirectly because it is inconsistent with the EXIM policy.” Thus the Supreme Court ruled that the circular issued by the Board is binding on the departmental authorities and the department cannot repudiate the circular issued by the Board on the ground that it was inconsistent with certain statutory provisions. In fact, the learned counsel for the Revenue could not point out that these two circulars and particularly circular of 2007 is contrary to any statutory provisions. 10. In Suchitra Components Ltd. vs. Commissioner of Central Excise, Guntur 2007 (208 ELT 321 (S.C.), Their Lordships referred to the earlier Judgment in Commissioner of Central Excise, Bangalore v. M/s. 13 Mysore Electricals Industries Ltd., 2006 (204) ELT 517 (S.C.) wherein the Supreme Court had held that a beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively. In the present case, both these circulars of 2003 and 2007 are beneficial circulars as far as the assessees are concerned and the Government intended to give benefit of refund to them in respect of the unutilised credit given for additional excise duty. Both these circulars clearly show that the Board had seriously considered the provisions of the rules, representations and demands of the trade and industry and had come to conclusion that benefit of refund can be given under the rules. Therefore, the Board issued both the circulars which are clarificatory in nature. If the intention would be to make them prospective in application, the Board could have said so. On the contrary, by clearly declaring that all the pending cases shall be disposed of according to that circular, the Board clarified that it was not prospective in nature but would have application to all the pending matters also. The Tribunal considered the circular of 2003 and incidentally that view has been supported by the latter circular of 2007 issued by the Board. 11. Taking into consideration this legal position and the developments, we find that the Board was justified in holding that the 14 respondent was entitled to refund of AED (T&TA) on the basis of the circular dated 12.3.2003. 12. For the aforesaid reasons, all the three Appeals stand dismissed. No order as to costs. (J.H.BHATIA,J.) (F.I.REBELLO,J.)