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2015 (8) TMI 404 - SUPREME COURT

2015 (8) TMI 404 - SUPREME COURT - 2015 (322) E.L.T. 587 (SC), 2015 (9) SCR 360, 2015 (10) SCC 651, 2015 (7) JT 156, 2015 (8 SCALE 550 - Demand of interest - whether the excise duty was in fact deposited late and therefore interest would be charged - Held that:- Section 11A of the Act permits the Central Excise Officer to recover duty not levied or not paid or short levied or short paid or erroneously refunded. It can be done within one year from the relevant date by serving show cause notice on .....

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Government by Notification in the Official Gazette. - Utilization of Cenvat Credit for delayed payment of duty - Held that:- Appellant paid the duty on clearing each consignment. Substantial portion of the duty, i.e., to the tune of ₹ 7 crores was paid in account current through PLA. However, for payment of small portion of a duty which was in the neighbourhood of ₹ 31 lakhs, the appellant utilised Cenvat Credit Account. It is this payment from Cenvat Credit which has become the .....

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, appellant was liable to pay interest @ 24% p.a. from the period from 19.12.2000 to 20.05.2002. Order-in-Original dated 13.06.2002 passed by the Commissioner affirming the demand in show cause notice has been confirmed by the Tribunal. - It is imperative to point out that even the Department accepted the opinion of the High Courts. For this reason, judgments rendered by the High Courts were not challenged and instead to remedy the situation, Rule 8 of the Central Excise Rules, 2002 itself .....

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- Decided in favour of assessee. - Civil Appeal No. 1468 of 2004, Civil Appeal No. 7386 of 2005 - Dated:- 6-8-2015 - A. K. Sikri And N. V. Ramana,JJ. For the Appellant : Mr. V.Lakshmikumaran,Adv. Mr. M. P. Devanath,Adv. For the Respondent : Mr. Ashok Kumar Panda, Sr.Adv. Mr. Arijit Prasad,Adv. Mr. B. Krishna Prasad,Adv. JUDGMENT A. K. Sikri, J. The issue involved in these appeals lies in a narrow compass which pertains to the demand of interest calculated on the dues of excise duty which were al .....

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tead of consignment basis. In this manner on the goods cleared in the first fortnight the duty was payable by 20th of the said month and for the goods cleared during the second fortnight the duty was payable by 5th May of the next month. The Revenue Authorities found that in the months of August, October and November 2000, the appellants had not paid the central excise duty on time. This led to the passing of an order by the Revenue suspending the facility of clearing goods of paying the duty ev .....

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om the Cenvat Account for payment of excise duty in the aforesaid period. The authorities took the view that the appellant could not have utilized the credit from the account. The appellant was asked to pay the said sum in cash and the appellant obliged. Since this payment was made later/belatedly, the Commissioner (Excise) issued the show cause notice as to why the interest at the rate of 24% per annum should not be charged for the belated period, i.e., from 19.12.2000 to 20.05.2002. The appell .....

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ule (e) of Rule 173G of the Central Excise Rules, 1944 for a period of two months, it was not open to the appellant to make use of Cenvat account during this period. As per the Commissioner, the implication of the aforesaid withdrawal of facility was to pay the excise duty for each consignment by debit to the account current, i.e., by cash only. 4. The appellant assailed the aforesaid order by filing appeal before the Customs Excise and Service Tax Appellate Tribunal (CESTAT). CESTAT has affirme .....

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nder Rule 173G was suspended. To put it otherwise, when the duty during this period was to be paid on consignment basis, it was also incumbent to pay the same in cash only and utilisation of Cenvat Credit was also forfeited during this period. 6. We have heard the learned counsel for the parties on the aforesaid issues who have taken us through the relevant provisions contained in Central Excise Act as well as Rules. Section 11A of the Act permits the Central Excise Officer to recover duty not l .....

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, he is liable to pay interest on the delayed period which is at the rate not below 18% and not exceeding 36% p.a. as for the time being fixed by the Central Government by Notification in the Official Gazette. 7. Chapter III of the Rules deals with 'Levy and Refund of, and Exemption from Duty'. Rule 9 thereof stipulates time and manner of payment of duty and sub-rule 1 thereof reads as under: Rule 9: Time and manner of payment of Duty:-(1) No excisable goods shall be removed from any pla .....

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may require. 8. The next Rule relevant for our purpose is Rule 173G which is textually very long dealing with various aspects. It prescribes the procedure that has to be followed by the assessee for the purpose of discharging his duty/liability in respect of clearances of excisable goods from the place of permission specified under Rule 9 or from a store room or other place, storage approved by the Commissioner under Rule 47. 9. Eschewing the portion which is not relevant for us, we reproduce th .....

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made: (i) during the first fortnight of the month, by the twentieth day of that month; (ii) during the second fortnight of the month, other than the month of March, by the fifth day of the succeeding month; and xx xx xx (b) The manufacturer shall maintain an account current with the Commissioner and shall discharge his duty liability by debiting such account current or by utilising CENVAT credit, in the following manner: (I) the manufacturer shall assess the duty due on the excisable goods inte .....

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e the total duty liability so payable by making debit entry in the account current or by utilising CENVAT credit, as the case may be. (c) the duty of excise shall be deemed to have been paid for the purpose of these rules, on excisable goods removed in the manner prescribed in this sub-rule, and the credit of such duty, as may be prescribed, under any rule, will be permissible. (d) If the manufacturer fails to pay the amount of duty payable by the due date, he shall be liable to pay the outstand .....

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of instalments are to be made is violated for the third time in a financial year, whether in succession or otherwise, then the manufacturer shall forfeit the facility to pay the dues in instalments under this sub-rule for a period of two months, starting from the date of communication of an order passed by the proper officer in this regard and during this period the manufacturer shall be required to pay excise duty for each consignment by debit to the account current referred to in clause (b) a .....

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the prescribed manner i.e. as per sub-rule (b) it would amount to discharging the liability of payment of excise duty. On failure to pay the duty by the due date interest at the rate of 24% p.a. can be charged on the delayed payment. Sub-rule (e) deals with the situation where the manufacturer commits default on account of payment of duty for the reasons mentioned therein and in such a case the authorities can forfeit the facility to pay the dues in installments under these sub-rule for a perio .....

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n account current through PLA. However, for payment of small portion of a duty which was in the neighbourhood of ₹ 31 lakhs, the appellant utilised Cenvat Credit Account. It is this payment from Cenvat Credit which has become the bone of contention. The respondent communicated to the appellant that duty through Cenvat during this period, when facility under Rule 173G was withdrawn, is not permissible. Without demur, the appellant complied with the demand of the respondent by paying this po .....

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bunal is that it was admitted by the appellant that facility of payment of duty by installments had been withdrawn for two months. It was also admitted by the appellant that during this period, the appellant discharged a portion of duty through Cenvat Credit Account but afterwards paid this amount of duty in cash and, therefore, admitted that payment of duty through Cenvat Credit Account was not permissible under the provisions of sub-rule (e) of Rule 173G(1) of the Rules. According to the Tribu .....

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course of action was permissible or not had to be examined in the light of the legal provisions. There is no estoppel against law. Merely because the appellant had yielded to the demand of the Revenue to pay that portion of duty also in cash, would not mean that the appellant was precluded from taking a stand that such mode of payment through Cenvat Credit Account even during the period when facility of payment of duty by instalments had been withdrawn for two months, was permissible. It had ta .....

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scharged beyond a period of thirty days from the date on which the instalment was due in a financial year, or (ii) the due date on which full payment of instalments are to be made is violated for the third time in a financial year, whether in succession or otherwise, then the manufacturer shall forfeit the facility to pay the dues in instalments under this sub-rule for a period of two months, starting from the date of communication of an order passed by the proper officer in this regard and duri .....

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period of two months in case the assessee commits default of the nature specified therein. Thus, the main purport of this Rule is to withdraw the facility of payment of dues in instalments and calling upon the assessee to pay the duty during the aforesaid period on clearing each consignment, i.e., on everyday basis. In this context, the question that arises is as to whether such a duty has to be necessarily paid only by debit to the account current or it can be paid through Cenvat Credit as well .....

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able goods shall be removed from the place where they are produced, cured or manufactured or any premises pertained thereto, which may be specified by the Commissioner in this behalf, whether for consumption, export or manufacture of any other commodity in or outside such place, until excise duty leviable thereon is determined and indicated on each application in the proper form or each gate pass, as the case may be, presented to the proper officer at such place and in such manner, as may be pre .....

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ded in the said Rule. For certain specified nature of defaults mentioned in Clause (e) of Rule 173G(1), this facility to pay the dues in instalments on fortnightly basis is to be forfeited for a period of two months. 16. What follows from the aforesaid scheme discernible from the combined reading of Rules 9, 49 and 173G(1) is that focus of these Rules is on the manner in which duty is to be paid, namely, on daily basis or on fortnightly basis. The mode of payment of duty is altogether different .....

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ode of payment of duty through Cenvat Credit is as good as making payment through account current. This Court in Commissioner of Central Excise, Pune v. Dai Ichi Karkaria Limited 1999 (112) ELT 353 (SC) described credit under the Modvat scheme to be as good as tax paid . The reasons for the aforesaid view taken by the Court are contained in paras 17 and 18 of the judgment which may be recapitulated as under: 17. It is clear from these Rules, as we read them, that a manufacturer obtains credit fo .....

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r, 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 prod .....

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posed easily becomes available, namely, even during the period when the facility of payment of excise duty in instalments on fortnightly basis is not available and remains suspended for a period of two years, the only obligation for the assessee is to pay the duty on each clearance and not on deferred basis. At the same time, insofar as manner of duty is concerned, it can be either through account current or Cenvat Credit. 19. We are conscious of the words during this period the manufacturer sh .....

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sub-rule (e) in this behalf coupled with the fact that the payment of excise duty through Cenvat Credit is recognised as a valid mode of payment. In fact, as would be noticed below, the Department itself understood the scope and purport of the aforesaid provision in this very manner, as it existed at that time. 20. In this behalf, it also required to emphasize that the Central Government introduced a scheme namely MODVAT Scheme in the Central Excise Law as introduced by a separate Chapter contai .....

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er Act as the case may be by the notification issued and subject to such conditions as may be specified. As per Rule 57F, the inputs on which credits have been taken may be used in or in relation to the manufacture of final products and the inputs may be removed for home consumption or for export under bond. As per this rule, all the removals of inputs for home consumption shall be made on payment of duty equal to the amount of credit availed in respect of such inputs and under the cover of invo .....

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ay be used for the manufacture of final products or can be removed after payment of duty for home consumption. Rule 57-I provides for recovery of credit wrongly availed of or utilised in an irregular manner. It provides for recovery of the duty credit of which was wrongly availed and if the manufacturer has taken the credit by reason of fraud or willful misrepresentation, suppression of facts etc. with the intention to evade payment of duty then he shall, apart from his liability to pay the amou .....

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overy of credits wrongly availed and a provision for imposing penalty for violation of the provisions and availing wrong credit. With the introduction of this new scheme, the assessee had the option to pay excise duty by availing credit of the duty paid on inputs provided he is a manufacturer of the finished products making use of such inputs. 22. This provision came up for interpretation before at least four High Courts and all these Courts took the view that even when the facility is withdrawn .....

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. It is true that as per rule 173G(1)(b) also the payment utilising Cenvat credit is an approved manner of payment of duty by these rules. It is equally true that even in the absence of such a provision contained in Rule 173G(1)(b) accepting the mode of payment utilising Cenvat credit, an assessee, even by virtue of the provisions contained under Rule 49 read with Rule 57A, will be entitled to utilise such input credit. In other words, there is force in the contention of the assessee that Rule 1 .....

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making an assessee a defaulter and to deny him the benefit of utilising the input credit will become unworkable and ineffective. It has to be noticed as rightly pointed by the counsel appearing for the petitioner that the rule making authority took notice of this lacuna and by the Central Excise Rules, 2002 - second amendment 2005, which came into force from 1st April, 2005, the Central Excise Rules 2002 was amended and Rule 3A was inserted which reads as follows: If the assessee defaults in pa .....

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erest thereof are paid, whichever is later, and during this period notwithstanding anything contained in sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall be required to pay excise duty for each consignment by debit to the account current and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow. 24. It is for the first time that a non obstantive cl .....

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