IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 98 of 2012 With SPECIAL CIVIL APPLICATION No. 101 of 2012 For Approval and Signature:
HONOURABLE THE CHIEF JUSTICE MR.BHASKAR BHATTACHARYA AND HONOURABLE MR.JUSTICE J.B.PARDIWALA ========================================= ================
========================================= =============== MULTIPLE EXPORTS PRIVATE LIMITED & ORS.
Versus UNION OF INDIA - THROUGH JOINT SECRETARY & ANR ========================================= ================ Appearance :
MR PARESH M DAVE for Petitioners.
MR PS CHAMPANERI with MR RJ OZA for Respondents.
========================================= ================ CORAM : HONOURABLE THE CHIEF JUSTICE MR.BHASKAR BHATTACHARYA Date : 11/10/2012
CAV JUDGMENT
(Per : HONOURABLE THE CHIEF JUSTICE MR.BHASKAR BHATTACHARYA) These two Special Civil Applications were heard along with a batch of Tax Appeals [being Tax Appeal No. 1153 of 2011 and analogous matters] involving selfsame question that has arisen herein. Those Tax Appeals have, however, been disposed of by CAV judgment dated September 28, 2012.
2. We propose to dispose of these two Special Civil Applications by this separate judgment.
3. The facts giving rise to filing of these applications may be summed up thus:-
3.1 The petitioners are merchant-exporters who have been purchasing unprocessed fabrics from the open market which are processed through independent textile processing units for exports, and rebate of the duties paid on the goods so exported is also claimed by the petitioners. During the period of June, 2004 to April, 2005, the petitioners purchased unprocessed fabrics from various weavers who were registered as weavers/manufacturers with the Central Excise Department, and the credit of the excise duties paid by such weavers as shown on their Central Excise invoices were passed on by the petitioners to the independent textile processors like M/s. Maruti Textiles Pvt. Ltd. because such independent processors were to undertake dutiable processes on such unprocessed fabrics and they were also obliged to pay excise duties on the processed and finished fabrics.
3.2 The independent processors processed such fabrics, paid excise duties on the processed fabrics by utilizing CENVAT credit of duties on the basis of the invoices of weavers, and returned the processed fabrics to the petitioners under their Central Excise invoices.
3.3 The petitioners exported all such processed fabrics to the foreign countries under claim of rebate of duties paid thereon.
3.4 Separate adjudication orders were passed by the Assistant Commissioner of Central Excise rejecting all the rebate claims on the ground that the weavers from whom unprocessed fabrics were procured were fake and non-existent as declared by Alert Circulars issued by the Surat Central Excise Commissioner and therefore, the credit of excise duties shown to have been paid on invoices of such weavers were not admissible and accordingly, the payment of excise duties on the processed and finished goods out of such CENVAT credit was not actual payment of duties for allowing rebate thereof.
4. Being dissatisfied, the petitioners preferred an appeal before the Commissioner (Appeals), Surat, but the same was rejected on the ground that rebate was not admissible to the petitioners when the weavers from whom unprocessed fabrics were procured had actually not paid and credited any amount as excise duty to the credit of the Central Government.
5. Being dissatisfied, the petitioners preferred a Revision before the Joint Secretary, Government of India who has affirmed the order of the Appellate Authority with slight modification as regards penalty.
6. Being dissatisfied, the petitioners have come up with these Special Civil Applications.
7. The main contention of the petitioners in these Special Civil Applications is that the transaction of the weavers being genuine and fully commercial, because the payment of such weavers was made through account payee cheques and the Central Excise invoices were also received by the petitioners from such weavers who were holding Central Excise registration certificate, there was no justification of refusing rebate as the Department has not established that the weavers concerned were fake and fictitious and in arriving at such conclusion, the respondents have relied on the Alert Circulars issued by the Surat Central Excise Commissionerate.
8. We have already pointed out in a batch of Tax Appeals which were heard along with these matters, where the question arose inter alia as to whether reasonable steps as enumerated under Rule 7(2) of the Cenvat Credit Rules, 2002 can be said to have been complied with simply because the original manufacturers of fabrics were found to be non-existent. Further question that arose for determination in those appeals was, whether the appellants had taken “reasonable steps” within the meaning of the Explanation to Rule 7(2) of the Cenvat Credit Rules, 2002.
9. By CAV judgment dated September 28, 2012 in Tax Appeals No. 1153 of 2011 and analogous matters, this Court, on consideration of the entire materials on record, came to the conclusion that simply because the original manufacturer is now not traceable, is not sufficient for reversal of CENVAT credit already taken by the appellants therein by virtue of original invoices. However, at the same time, this Bench accepted the contention of the Revenue that in order to get the credit of CENVAT, Rule 7(2) cast a further duty upon the appellants to take all reasonable steps to ensure that the inputs or the capital goods in respect of which the appellants had taken credit of CENVAT are the goods on which appropriate duty of excise as indicated in the documents accompanying the goods, has been paid. We further pointed out that the Explanation added to Rule 7(2) even describes the instances which are the reasonable steps. In those cases, the appellants not having taken those steps, we held that the benefit of credit even though he is not party to the fraud, is not available. We also relied upon the case of Sheela Dyeing & Printing Mills P. Ltd. vs.
C.C.E. & E, Surat-1 reported in 2008 (232) ELT 408.
10. In the cases before us, the petitioners have admittedly not taken the steps enumerated in the Explanation to Rule 7(2) of the Cenvat Credit Rules and, thus, in view of our above decision dated September 28, 2012 in Tax Appeal Nos.1153 of 2011 with other allied matters, we hold that the Revenue Authority rightly denied rebate of duty.
11. These Special Civil Applications are, thus, dismissed in view of our above finding. As we have specifically held here that the Explanation to Rule 7(2) of the Cenvat Credit Rules has not been complied with, we have not gone into other question regarding validity of Alert Circulars when it is not the case of the petitioners that they took “reasonable steps” within the meaning of Rule 7(2) of the Cenvat Credit Rules, 2002.
12. The Special Civil Applications are, thus, dismissed. Notice is discharged. In the facts and circumstances, there will be no order as to costs.
[BHASKAR BHATTACHARYA, C.J.] mathew [J.B.PARDIWALA. J.]