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TMI Blog2012 (11) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... vailed by IPCL. The department issued five show-cause/demand notices to ONGC alleging short-payment of duty on the said goods and demanding total differential duty of Rs. 16,98,52,336/-. (One of these notices was issued by the jurisdictional Commissioner and the rest by the Range Superintendent). ONGC paid up this amount in two instalments during November-December 1999 before adjudication of the said show-cause notices. Subsequently, on their request, the Central Excise Range Superintendent on 23-12-1999 issued two certificates - one covering payment of differential duty of Rs. 12,95,45,749/- paid in November 1999 and the other covering payment of differential duty of Rs. 4,03,06,587/- paid in December 1999 - under Rule 57E of the Central Excise Rules, 1944. 3. IPCL took MODVAT credit of the above differential amounts of duty on the strength of the above certificates under Rule 57E on 30-12-1999. 4. On 14-1-2000, the Central Excise Range Superintendent at ONGC's end issued them a letter saying that, as the Commissioner of Central Excise, Mumbai-III, had already issued them show-cause notice for recovery of differential duty for extended period, issuance of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal preferred to the Commissioner (Appeals) on the ground that, in view of the Tribunal's Order (No. A/336/WZB/2004, dated 28-5-2004) holding ONGC liable to pay interest under Section 11AB of the Act on the differential duty, sub-rule (3) of Rule 57E was applicable and hence no certificate could have been issued under sub-rule (2) of the Rule. The departmental appeal did not succeed vide Order-in-Appeal No. 324/2005, dated 22-6-2005 whereby the Assistant Commissioner's decision was upheld. The present Appeal No. E/3286/2005 of the department is directed against the order of the Commissioner (Appeals). 10. In the wake of revalidation of Rule 57E certificates, ordered by the Assistant Commissioner (Panvel Division) vide Order-in-Original No. 109 dated 13-9-2004, IPCL suo motu restored MODVAT credit of Rs. 16,98,52,336/- (which they had reversed under protest earlier) in their RG 23A Part II on 29-9-2004 and intimated this fact to the Assistant Commissioner (Alibag Division) by letter dated 30-9-2004. Later, the department issued show-cause notice dated 1-9-2005 to IPCL for (i) recovery of the above amount under Section 11A of the Act read with Rule 14 of the CENVAT Credit Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a manufacturer of the final products has not taken any credit or has taken credit on any inputs and subsequently it so happens that any additional amount of duty is recovered by the manufacturer of such inputs or importer of such inputs in respect of such inputs, then the manufacture of the final products shall be allowed an additional credit equal to the amount of duty so recovered, if the manufacturer or importer of such inputs has passed on the incidence of the additional amount of duty to the manufacturer of final products. (3) The provision of sub-rule (2) shall not apply in cases where the additional amount of duty became recoverable from the manufacturer or importer of inputs on account of any short levy or non-levy by reason of fraud, collusion or any willful misstatement or suppression of facts or [contravention of any provisions of the Act or of the Customs Act, 1962 (52 of 1962)] or rules made thereunder with intent to evade payment of duty. (4) No additional credit under sub-rule (2) shall be allowed to a manufacturer of the final products unless he produces a certificate issued by the Superintendent of Central Excise having jurisdiction over the factory of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise Rules, 1944 read with sub-section 1 of Section 11A of the Central Excise Act, 1944, including proviso thereto. Assessee have neither discharged duty correctly nor resorted to provisional assessment as required under Rule 9B of the Central Excise, therefore they are also liable to penalty under Rule 9(2), 52A, 173Q and 226 of the Central Excise Rules, 1944 and the provision of Section 11AC of the Central Excise Act, 1944. Assessee is also liable to pay interest under 11AB. The assessee argument regarding the penalty under Section 11AC only after enactment is acceptable. Since the notices has already paid duty amount voluntarily, I take a lenient view while imposing penalty under Rule 173Q." 3. The following show cause notices were issued denying duties Date of Notice Period Amounts in Rs. (i) 5-4-1999 4/94 to 12/98 88,11,86,469/- (ii) 9-6-1998 1/99 to 5/99 8,24,82,373/- (iii) 15-10-1999 6/99 to 9/99 5,73,67,945/- (iv) 22-3-2000 10/99 to 1/2000 1,73,13,241/- (v) 16-11-1998 5/98 to 10/98 1,33,76,269/- The Commissioner has adjudicated all the notices by the order now impugned. Confirmed the demand of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as arrived by Commissioner cannot be a cause for penalty. There was no requirement of disclosure or an effort to conceal this attempt of seeking revision since the documents were shown to officers when they visited. The failure to comply with provisional assessment procedure as found by the adjudicator does not materially effect the position, since there is no duty found to be barred by limitation or/and loss to revenue on that account. Penalty under Section 11AC is not called for in facts of this case. The same is set aside. As regard penalty under Rule 173Q, since the ONGC declared whatever was the approved price as per the Ministry of Petroleum and cleared goods at these rates, there is no contravention of any rule. Penalty under Rule 173Q is therefore to be set aside. 6. As regards interest, Section 11AB as arrived at, the liability to pay interest will start for the first day of the month, immediately after the month in which the duty ought to have been paid by the manufacturer & sub-section (2) declares the same not to be retrospective. Interest therefore has to be computed as per laws. 7. Appeal as regards penalty under Section 11AC & Rule 173Q allowed. Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Reliance') has reversed the credit so availed being inadmissible. (On 31-1-2000 and 3-2-2000). Thus, at the material time there was no pending issue pertaining to application of provisions of erstwhile Rule 57E. New Rules do not permit the same. Section 38A, applies only in case where any right/liability accrued/incurred in pending. Further, it is provided that it shall not revive anything not in existing at the time at which new rules came in being. In this case, action under erstwhile Rule 57E was already completed. 4. Without prejudice to the above, demand in the instant case was confirmed for extended period invoking proviso to Section 11A, the Hon'ble Tribunal vide order dated 28-5-2004, did not interfere with the demand and upheld the interest liability under Section 11AB. This clearly shows that the duty demand as admitted by M/s. ONGC, who paid on detection, was borne out of reasons of fraud, suppression of facts etc. 5. In view of para (4) above, the impugned certificates would not have been issued. Therefore, the Assistant Commissioner's order and Commissioner (Appeals) order for revalidating the certificate u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also upheld by the Tribunal on the same ground and that the assessee accepted the Tribunal's verdict by voluntarily paying interest under Section 11AB ibid. On these facts, according to the learned JCDR, the assessee's claim for certificates under Rule 57E was barred by sub-rule (3) of the Rule. Relying on the Tribunal's decision in the case of TELCO Ltd. (supra), he argued that the Revenue's plea was not in any way affected by the fact that the dropping of Section 11AC penalty was not challenged. He added that this legal position was overlooked by the original and first appellate authorities. Learned JCDR also claimed support from Commissioner v. Sunita Pipes Pvt. Ltd. [2010 (262) E.L.T. 1031 (Tri.-Mum.)] to his argument that the Tribunal's order No. A/336/2004 in respect of ONGC's duty liability should be considered to have amounted to upholding the finding of suppression of facts etc. 17. (a) The learned counsel representing ONGC heavily relied on the Tribunal's findings contained in para (5) of Order No. A/336/2004 dated 28-5-2004 and submitted that, in view of those findings, sub-rule (3) of Rule 57E was not applicable and hence the cancellation of certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate's claim that the interest on duty was calculated and paid under Section 11AA of the Central Excise Act. He submitted that the interest was paid in terms of Section 11AB only. In this connection, the JCDR filed copies of (i) TR-6 challan No. 3/2004-05 dated 30-6-2004 covering payment of interest of Rs. 17,98,318/- by ONGC, (ii) ONGC's letter dated 27-7-2004 to the Central Excise Range Superintendent showing that the payment was made as per CESTAT's Order No. A/336/2004 dated 28-5-2004, (iii) the Superintendent's letter dated 15-7-2011 to the Divisional Deputy Commissioner stating that ONGC had paid the above amount of interest under Section 11AB as per Order-in-Original No. 7/2000 dated 29-9-2000 and (iv) calculation sheet (pertaining to the amount of interest) as enclosure to the Superintendent's letter dated 15-7-2011. Relying on these documents, the learned JCDR submitted that the interest was calculated from the first day of the month subsequent to the month in which the duty became payable, clearly indicating that the calculation and payment of interest were made under Section 11AB only. Having so paid the interest on duty, ONGC was precluded from contending that sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Case Law cited : (i) Guj-Chem Distilleries India Ltd. v. State of Gujarat & Others - [1995] 96 STC 37 (Guj.). (ii) Woodcraft Products (supra) (d) Where no reason was found by this Tribunal to invoke Section 11AC of the Central Excise Act against ONGC vide Order No. A/336/2004, Rule 57E(3) was not to be pressed into service for denying MODVAT credit to IPCL. Case law cited : * Century Rayon v. Commissioner - 2005 (191) E.L.T. 216 (Tri.-Mum) 20. Learned JCDR representing the respondent in RIL's case argued as follows :- (a) Rules 57A to 57E constituted an integrated scheme and therefore Rule 57E was to be viewed as mandatory rather than procedural. In the case of Home Ashok Leyland Ltd., the Supreme Court did not have occasion to consider sub-rule (3) of Rule 57E and hence the decision was not applicable to the present case. Case law cited on certain mandatory rules : (i) Amrit Paper v. Commissioner - 2006 (200) E.L.T. 365 (S.C.) = 2008 (12) S.T.R. 536 (S.C.) (ii) Commissioner v. Spectra Electronics Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 2011 (269) E.L.T. 298 (S.C.) (ii) Commissioner v. Hari Chand Shri Gopal - 2010 (260) E.L.T. 3 (S.C.) 21. In his rejoinder, the learned Counsel for RIL made the following submissions :- (a) The right to take credit accrued to IPCL when ONGC paid differential duty on the inputs supplied to them. As the proceedings against ONGC continued even after the change of law (supersession of the MODVAT provisions of the Central Excise Rules, 1944), IPCL's right to MODVAT credit stood protected by Section 38A(e) of the Central Excise Act. (b) Rule 57E was procedural in so far as the manufacturer of final product (IPCL in this case) was concerned. Both ONGC and IPCL made earnest efforts to comply with the provisions at every stage. (c) In the case of Home Ashok Leyland Ltd., the High Court and the Supreme Court considered the provisions to be procedural upto 15-4-2000. (d) Cancellation of the Rule 57E certificates was not quasi-judicial and hence not appealable. 22. We have mindfully considered the submissions. The following issues have to be resolved in this case : (a) Whether sub-rule (3) of Rule 57E of the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be so construed as to rule out the applicability of sub-rule (3) of Rule 57E. Therefore, a closer look at the Tribunal's order has become necessary in this case. 25. From para (4) of the Tribunal's order (which reads: "Since the issue of liability of duty on merits was not pressed, no findings are arrived as regards the liability to pay the duty"), it appears that the question whether the assessee (ONGC) was liable to pay the differential amount of duty, whether or not on account of any short-levy or non-levy by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any provision of law, was not addressed at all. Therefore it will not be correct to say that the Tribunal's order settled the said issue in favour of the Revenue. Moreover, in para (5) thereof, the Tribunal's order clearly held that there was no element of fraud, collusion or any willful misstatement or suppression of fact on the part of the assessee and hence the penalty under Section 11AC of the Central Excise Act could not be upheld. Considering the fact that the assessee had originally paid duty on the goods on the basis of the price fixed by the Ministry of Petro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamination of the question whether any of the ingredients of Section 11AB was present in the case, the order just required the amount of interest to be computed "as per laws". Even if it be presumed that the Tribunal's order required the assessee to calculate and pay the amount of interest on the differential duty in terms of Section 11AB, in our view, it will not per se entitle the Revenue to take the stand that the Tribunal's order was a pronouncement on the said question, nor can it be said that the assessee, by calculating interest in terms of Section 11AB and paying it, admitted short-levy or non-levy of differential duty "by reason of fraud, collusion or wilful misstatement or suppression of facts or contravention of any provision of law with intent to evade payment of duty". It is pertinent to note that it was after holding (in the context of dealing with Section 11AC penalty) that there was no element of fraud, collusion or any willful misstatement or suppression of facts on the part of ONGC that this Tribunal in its Order dated 28-5-2004 directed that the interest on differential duty be computed "as per laws". One cannot lose sight of the fact that the legal requirement f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT credit of the differential duty paid by ONGC. The learned counsel for ONGC and RIL have argued to the effect that the certificates issued under Rule 57E were saved by Section 38A of the Central Excise Act and hence could be used by RIL for availment of the said credit. The counsel for ONGC in this context has relied on the Tribunal's order in Bell Ceramics case and Shriram Foundry case. According to the learned JCDR, Rule 57E was repealed without any saving clause and therefore the certificates issued thereunder did not survive the repeal of the Rule. This argument is based on the premise that there was no dispute between the department and ONGC with regard to Rule 57E certificates at the time of repeal of this Rule. In this connection, the learned JCDR has claimed support from the Tribunal's decision in Chennai Petroleum Corporation case (supra). 31. The old MODVAT provisions (Rules 57A to 57U) were replaced by new provisions (Rules 57AA to 57AK) through amendment of the Central Excise Rules, 1944 w.e.f. 1-4-2000. The Central Excise Rules, 1944 were superseded by the Central Excise Rules, 2001 and the latter came to be rescinded by the Central Excise No. (2) Rules, 2001, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, notification or order, as the case may be, had not been amended, repealed, superseded or rescinded. The case of ONGC and RIL is apparently covered by clause (c) of Section 38A which provides that, where any rule issued under the Central Excise Act is repealed, superseded or rescinded, then, unless a different intention appears, such repeal/supersession/rescission shall not affect any right which accrued under the rule so repealed/superseded/rescinded. We find that, when the Superintendent of Central Excise issued the certificates to ONGC under Rule 57E after the latter paid the differential duty on the goods already cleared to IPCL, a right accrued to the buyer of the goods viz. IPCL (RIL) for taking MODVAT credit of such duty under Rule 57A on the strength of such certificates which were documents prescribed under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be settled against the input-manufacturer who, thereupon, paid the duty sometime in 1996 and requested for a certificate from the Superintendent under Rule 57E. There was considerable delay in the issuance of this certificate, which was issued in the year 2000, by which time Rule 57E had disappeared as a result of amendment of the MODVAT Rules. The new rules did not prescribe the certificate as a document on the basis of which MODVAT credit could be taken. The question considered by this Tribunal was whether the party could take MODVAT credit on the inputs on the basis of Rule 57E certificate which was issued to the input-manufacturer after the rule was repealed. The Tribunal held that Section 38A of the Central Excise Act protected the action taken under the erstwhile rule and therefore the certificate issued to the input manufacturer under Rule 57E would be a valid document for the manufacturer of final product to take MODVAT credit even after the change of law. 33. Before 1-4-2000, a certificate issued under Rule 57E by the Superintendent of Central Excise having jurisdiction over the manufacturer of inputs/capital goods, was one of the documents prescribed under Rule 57G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57A and the object of the MODVAT scheme and that the right of a manufacturer to take credit of the duty paid on his inputs could not be cut down by reason of procedure. By holding Rule 57E to be procedural and clarificatory, the Hon'ble High Court upheld the Tribunal's view on the point and allowed MODVAT credit to the assessee. The High Court's decision was upheld by the Hon'ble Supreme Court after holding that Rule 57E was procedural and clarificatory and therefore would not affect the substantive right of the manufacturer of final product to claim MODVAT credit of the additional amount of duty paid on his inputs subsequent to the date of receipt of such inputs. This ruling was applied by this Tribunal in the case of EBG India Pvt. Ltd. (supra) for a period subsequent to the repeal of Rule 57E. Nobody has claimed before us that the Tribunal's decision in the said case was not accepted by the department. It is equally noteworthy that the Tribunal's decision in the case of Bell Ceramics case was not challenged by the department. In the result, we hold that RIL is entitled to MODVAT/CENVAT credit of the differential duty paid by ONGC. 35. We have also noted that principles of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of MODVAT credit of the differential duty paid on the inputs stood satisfied. When the Superintendent issued the certificates evidencing payment of differential duty by ONGC, these documents were valid under Rule 57G(3) for taking MODVAT credit of the duty. It is not in dispute that IPCL took the credit in their MODVAT account when these rules were very much in force. When these rules were replaced by a new set of rules (57AA to 57AK), the substantive provision for MODVAT/CENVAT credit did not change and only the procedural provisions came to be amended with the result that a supplementary invoice issued by the manufacturer of input/capital goods was substituted for a certificate of the Superintendent. The limited case of the department for denying MODVAT credit to IPCL (RIL) is based on this procedural change. Such a case cannot succeed in view of judicial pronouncements to the effect that a substantive right cannot be defeated on the plank of strict construction of procedural provisions. We are of the view that the case law cited by the learned JCDR on mandatory nature of certain rules and on application of principles of equity is not applicable to the above matrix of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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