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TMI Blog2012 (12) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... ount amounts to payment of duty as required under Section 11D of the Central Excise Act, 1944?" 2. Facts in brief may be noted. Respondent is a manufacturer of induction furnace and other engineering goods. They export such products and also sell them in domestic market. The respondent-manufacturer regularly pays excise duties and other duties under the Central Excise Act, 1944 and the Rules made thereunder. Against the export of goods, the respondent is entitled to certain duty waivers. The Central Excise Authorities noticed that for a period of about two and a half years between March 2003 and December 2005, the respondent had made substantial exports. It should therefore have excess Cenvat credit lying unutilized in Cenvat account. Closer scrutiny, however, revealed that such credits were not available. Further investigation was carried out and it was found that the respondent was clearing certain parts of induction furnaces without any manufacturing activity referred to in the technical term 'as such' basis at a higher value. The Department noticed that the respondent was encashing unutilized Cenvat credit lying in RG 23A Pt. II by raising value of the goods to be cleared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount representing as Central Excise duty from the buyers of the goods. In terms of Section 11D(1) of the Act, the respondent has to forthwith pay such amount to the Central Government. Notice, therefore, called upon the respondent why : (i) The amounting to Rs. 1,69,04,271/- (Rupees One crore sixty nine lakhs four thousand two hundred seventy one only) should not be recovered under Section 11D(2) of the Central Excise Act, 1944 as discussed above; (ii) Why interest should not be recovered from them under Section 11DD of Central Excise Act, 1944 in respect of excess amount recovered as shown para 1 above; and (iii) Why the penalty should not be imposed upon them under Rule 13 of Cenvat Credit Rules, 2002/Rule 15 of the Cenvat Credit Rules, 2004." 4. A similar notice for a different period for alleged infraction between 1-1-2006 and 30th June 2006 also came to be issued on 23-11-2006. In such notice also, the respondent was called upon to show cause why an amount of Rs. 36,29,660/- should not be recovered under Section 11D(2) of the Central Excise Act with interest and penalty. Since in all material aspects, the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee supplied spare parts on higher value to the purchasers and collected excise duty payable and debited the same from Cenvat credit account, the Revenue cannot have any quarrel against the same. The Tribunal was of the opinion that Section 11D of the Central Excise Act did not apply. The Tribunal concluded as under : "On the plain reading of the above reproduced section, it can be seen that this section can be brought into play to demand the duty only when the assessee has collected excess amount in the guise of excise duty from his purchasers and has not deposited the same with the Government of India. In the present case the issue is' not so. It is on record and undisputed that the amount of the duty as indicated on the invoices, during the relevant period, has been deposited by the appellant by making a debit made in Cenvat credit account. It is a settled law that debits made in Cenvat credit accounts is discharge of the duty liability by the assessee. Since the provisions of Section 11D are not at all applicable in the present case, we find that the impugned order is liable to be set aside and we do so." It is this decision of the Tribunal which the Revenue has challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;Counsel relied on following decisions in support of his contentions : (i) In the cae of Eicher Motors Ltd. v. Union of India - 1999 (106) E.L.T. 3 (S.C.) wherein the Apex Court held that the provision for facility of credit in the Modvat scheme is as good as tax paid. (ii) In the case of Collector of Central Excise, Pune v. Dai Ichi Karkaria Ltd. - 1999 (112) E.L.T. 353 (S.C.), the Apex Court observed that in terms of the Rules, when a manufacturer obtains credit for the excise duty paid on raw material to be used by him in production of excisable product, making a declaration and obtaining acknowledgment thereof, such manufacturer is entitled to use the credit at any time thereafter when making payment of excise duty on excisable product. It was observed that there is no provision in the Rules which provides for reversal of the credit by the excise authorities except where it has been illegally or irregularly taken. (iii) In the case of Shankeshwar Fabrics Private Ltd. v. Union of India - 2002 (142) E.L.T. 42 (Raj.), a Division Bench of the Rajasthan High Court held that once the capital goods which have been already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame on the date of removal and on the value determined for such goods under Section 4 or 4A of the Central Excise Act. In short, prior to 1-3-2003, the computation of central excise on the goods removed on as such basis was on transaction value. On 1-3-2003, significant change was made inasmuch as on removal of goods as such from the factory, the manufacturer of final product had to pay amount equal to the credit availed in respect of such inputs or capital goods and such removal had to be made under the cover of an invoice referred to in Rule 7. We may at this stage record that such provision is found in later Rule 2004 in Rule 3(5) thereof. 13. With this brief recording of Legislative change, we advert to the Rules, 2004 applicable to the present case. Rule 3 of Rules, 2004 pertains to Cenvat credit. Sub-rule (2) thereof provides that a manufacturer or producer of final products or a provider of a taxable service shall be allowed to take credit to be referred as Cenvat credit of several duties mentioned in clauses (i) to (xi) of sub-rule (1) paid on any input or capital goods received in the factory of manufacture of final product or premises of the provider of output servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here 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. 13.2 Rule 15 of the Rules, 2004 provides for confiscation of penalty and prescribes different penalties for different breach of the Rules. 13.3 Section 11D of the Central Excise Act pertains to duties of excise collected from the buyer to be deposited with the Central Government and reads as under : "11D. Duties of excise collected from the buyer to be deposited with the Central Government. - (1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, every person who is liable to pay duty under this Act or the rules thereunder, and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods in any manner as representing duty of excise, shall forthwith pay the amount s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such clearance was made at an inflated price. Certain charge was collected from the purchaser on the basic price in the guise of excise duty. The respondent though surrendered the entire amount so collected to the Department in the form of debiting the credit in the Cenvat account, according to the Department, this was in breach of Rule 3(4) of the Rules, 2002 and thereafter Rule 3(5) of the Rules, 2004. Since there was no manufacturing activity, no question of collection of excise duty would arise and therefore, the entire amount so collected had to be deposited in terms of Section 11D of the Act. 15. To our mind, there is considerable force in such contention. It is not in dispute that the respondent cleared the goods as such. Since no manufacturing activity was undertaken, question of collection of excise did not arise. While clearing the goods after 1-3-2003, the respondent had to follow the procedure laid down in the amended Rule 3(4) of Rules, 2002 and thereafter Rule 3(5) of the Rules of 2004. Such rules required that on clearance of goods on as such basis, the assessee should have paid an amount equal to the credit availed in respect of such inputs and that such remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available." 18. With this background, we if peruse Section 11D of the Central Excise Act, 1944, it emerges that under sub-section (1) thereof, every person who is liable to pay duty under the Act or the Rules made thereunder and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods from the buyer of such goods, in any manner as representing dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any case, admittedly Section 11D of the Central Excise Act does not provide any rigid time limit. In such cases, as so long as the recovery proceedings are initiated within reasonable time, the same cannot be struck down only as time-barred. What would be the reasonable period of time is essentially a question of fact to be judged on the basis of each individual case. In the present case, nothing has been pointed out to suggest that despite full knowledge of the modus employed by the respondent, the Department for a long period of time raised no demand. 22. With respect to penalty also, we are of the opinion that the Commissioner noted that there were large number of transactions during the period in question. We also notice that for breach of the rules in question, maximum penalty of Rs. 10,000/- per transaction was imposable. Considering the large number transactions, the Commissioner imposed consolidated penalty of Rs. 5 lacs which also is not required to be touched. 23. Counsel for the respondent did make a faint attempt to suggest that breach of the procedure laid down in the amended Rule 3(4) of the Rules, 2002 and of Rule 3(5) of Rules, 2004 was on account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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