TMI Blog2012 (12) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... as a matter of right. Secondly, utilization of Cenvat credit for the purpose of payment of unauthorizedly collected so called excise duty was not permissible under the Rules. The contention of the Department that by doing so, the respondent passed on Cenvat credit to the purchaser to be availed by them ultimately which credit such purchasers were not entitled to, cannot be brushed aside. Regarding period of limitation - held that:- 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. Demand u/s 11D confirmed - Order of Tribunal reversed - Decided in favor of revenue and against the assessee. - 1744 of 2007 - - - Dated:- 28-6-2012 - Akil Kureshi and Harsha Devani, JJ. REPRESENTED BY : Shri Y.N. Ravani, for the Appellant. Shri Paresh M. Dave, for the Respondent. [Judgment per : Akil Kureshi, J. (Oral)]. This appeal is filed by the Revenue calling in question legality and validity of the judgment and order dated 14-5-2007 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Act, therefore, the respondent was liable to refund such amount. 3. A show cause notice came to be issued by the Commissioner of Central Excise, Ahmedabad. In such notice, it was alleged that the respondent was clearing certain parts of Induction Furnace on as such basis at a higher value and passing on unutilized Cenvat credit by raising the value of inputs and collecting the same from the buyer of such goods. It was alleged that for the period between 1-3-2003 and 31-12-2005, the respondent assessee had collected total amount of Rs. 3,28,37,692/- towards such duty from the purchasers of the goods as such. The respondent had against such clearance of goods taken Cenvat credit to the tune of Rs. 1,59,33,421/-. It was, therefore, alleged that the differential amount between the duty collected and the Cenvat credit taken on such goods of Rs. 1,69,04,271/- was not allowable for inputs cleared as such. In the show cause, it was further stated that statement of Shri Hardik H. Medh, Financial Controller and Company Secretary of the respondent was recorded on 8-2-2006 in which he had stated that the respondent was availing Cenvat credit from the beginning and was paying duty on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to contend that such proceedings for recovery of duties should not be raised after a reasonable period of time. 6. The Commissioner, however, was not convinced. He, by his order dated 27-2-2007, confirmed the duty demand raised in both the notices. With respect to penalty, he found that the goods were removed in contravention of the rules with ulterior motive. Maximum penalty that could be imposed was Rs. 10,000/- per transaction. Since there were large number of transactions, he imposed consolidated penalty of Rs. 5 lacs covering both the show cause notices. He also ordered recovery of total sum of Rs. 2,05,33,931/- covering both the show cause notices with interest at appropriate rate under Section 11DD of the Central Excise Act, 1944. 7. The respondent assessee challenged the order of the Commissioner before the Tribunal. The Tribunal by the impugned order dated 14-5-2007 allowed the assessee s appeal. Before the Tribunal, counsel for the assessee urged that the assessee was supplying spare parts to the purchasers on higher price and also paying duty on higher price and hence Section 11D of the Central Excise Act did not apply. 8. The Tribunal in its brief order accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying unutilized in its account. 9.1 Counsel submitted that such modality was noticed upon investigation, initially finding that though the respondent was engaged in exporting goods, very little credits in the Cenvat account were lying. It was found that such excess Cenvat credit was being utilized for payment of duty collected from the purchasers of goods on as such basis on inflated price. Counsel submitted that such modality would permit the purchasers of such goods to claim higher Cenvat credit which was not available and on the other hand, permit the respondent to encash its unutilized Cenvat credit in the account. 10. On the other hand, learned counsel Shri Paresh Dave for the respondent assessee strongly opposed the appeal contending that the Tribunal has come to the correct conclusion. The respondent may have charged higher price for the goods sold and may have charged duty though it did not apply, but the duty collected was immediately deposited with the Central Government. Section 11D of the Central Excise Act therefore would not apply. He further submitted that in the show cause notice, the Department did not put up the case that no Cenvat credit was available in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 (for short Rules 2004 ). Barring some minor changes here and there, in all material aspects, these rules were similar. Therefore, except for changes which are material, we may examine the rule position emerging in the Rules, 2004. 12. In the Rules, 2002, sub-rule (4) of Rule 3 provided as under : (4) When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under section 4 or section 4A of the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in rule 7. This rule was amended with effect from 1-3-2003. In the amended form, Rule 3(4) of 2002 reads as under : (4) When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, the manufacturer of final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 2004 which is similar to the amended Rule 3(4) of Rules, 2002 reads as under : (5) When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 9. .. Sub-rule (6) of Rule 3 provides that the amount paid under sub-rule (5) and sub-rule (5A) shall be eligible as Cenvat credit as if it was a duty paid by the person who removed such goods under such sub-rules. 13.1 Rule 4 of the Rules, 2004 pertains to conditions for allowing Cenvat credit. Rule 5 pertains to refund of Cenvat credit and provides, inter alia, that where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the Cenvat credit in respect of the input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person on whom the notice is served under sub-section (2), determine the amount due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. (4) The amount paid to the credit of the Central Government under sub-section (1) or sub-section (1A) or sub-section (3), as the case may be, shall be adjusted against the duty of excise payable by the person on finalization of assessment or any other proceeding for determination of duty of excise relating to the excisable goods referred to in sub-section (1) and sub-section (1A). (5) Where any surplus is left after the adjustment under sub-section (4), the amount of such surplus shall either be credited to the Fund or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B and such person may make an application under that section in such cases within six months from the date of the public notice to be issued by the Assistant Commissioner of Central Excise for the refund of such surplus amount. These in nutshell are the statutory provisions coming into play in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t credit for depositing such amount so collected did not arise. 17. We may recall that Rule 3(4) of the Rules, 2004 provides for cases where Cenvat Credit can be utilized for payment of duties. None of the clauses (a) to (e) thereof would cover a situation where the amount has been collected from the purchaser under the title of excise duty which can never be categorized as such since no manufacturing activity was carried out by the respondent. Utilization of Cenvat credit for such purpose, therefore, was wholly impermissible. The decisions of the Apex Court cited before us and that of the Rajasthan High Court, at best may suggest that the payment made through Cenvat credit is as good as actual payment, however, such payment should be for the purpose for which it is authorized under the Rules. In the case of Dai Ichi Karkaria Ltd. (supra) relied on by the respondent, the Apex Court observed as under : 17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government in terms of Section 11D of the Act. The same not having been done, the Department was within its right to seek recovery thereof. 20. The view of the Tribunal that in any case the respondent could have encashed the unutilized credit in the Cenvat account and that therefore the same did not make any difference to the Department, in our view, suffers from fallacy. Firstly, as noted, Rule 5 of the Rules, 2004 permitted refund of Cenvat credit under certain circumstances which provides that such refund shall be allowed subject to such safeguards, conditions and limitations as may be specified by the Central Government by notification. It can, thus, be seen that grant of refund is neither automatic nor a matter of course. Nothing has been brought on record to suggest that the respondent was entitled to such refund as a matter of right. Secondly, utilization of Cenvat credit for the purpose of payment of unauthorizedly collected so called excise duty was not permissible under the Rules. The contention of the Department that by doing so, the respondent passed on Cenvat credit to the purchaser to be availed by them ultimately which credit such purchasers were not entitled to, c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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