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M/s. Jayaswal Neco Ltd. Versus Commissioner of Central Excise, Raipur

2015 (8) TMI 404 - SUPREME COURT

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 the person chargeable with the duty. It is not necessary to state in detail the procedure prescribed therein. For our purposes it is suf .....

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t 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 bone of contention. The respondent communicated to the appellant that duty through Cenvat during this period, when facility under Rule 17 .....

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d 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 is amended by inserting sub-rule 3A vide Notification No.17/05-C.E. (N.T.) dated 31.03.2005 w.e.f. 01.04.2005. This Rule now specifically .....

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. 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 allegedly deposited late. The period involved is 19.12.2000 and 18.02.2001, i.e., two months. The only question is as to whether the excise .....

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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 every fortnight and interest. Instead, the appellant was directed to make the payment of duty on consignment basis for a period of two mont .....

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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 appellant refuted the aforesaid averment in the show cause notice with the submission that the payment through Cenvat account was also a valid .....

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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 affirmed the order of the Commissioner holding that payment of duty by debiting the Cenvat Credit was not permissible during the said period of .....

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mbent 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 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 .....

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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 place where they are produced, cured, manufactured or any premises appurtenant thereto, which may be specified by (Commissioner) in this beh .....

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bes 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 that part of the Rule which is concerned with this case, reads as under: Rule 173G. Procedure to be followed by the assessee.-[(1)(a) Every .....

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her 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 intended to be removed, for each consignment and shall enter the particulars of such consignments [amount of duty payable had been substitute .....

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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 outstanding amount along with interest at the rate of twenty four per cent per annum on the outstanding amount, for the period starting with the .....

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rer 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) and in the event of any such failure it will be deemed as if such goods have been cleared without payment of duty and the consequences and .....

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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 period of two months. 11. In the present case, no doubt, this facility was withdrawn under Rule 173G(1)(e). The effect of withdrawal of this f .....

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pellant 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 portion of duty also through account current. However, this happened in May, 2002. The respondent now took the position that the custom dut .....

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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 Tribunal, since these were the admitted facts, the interest @24% p.a. which is prescribed for late payment, was rightly claimed by the Departm .....

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y 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 taken a specific defence in this behalf and, therefore, the Tribunal was required to examine the matter in the light of the aforesaid Rule. .....

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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 during this period the manufacturer shall be required to pay excise duty for each consignment by debit to the account current referred to in .....

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draw 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. 15. For answering this question, first thing that is necessarily to be pointed out is the purport behind Rule 49 and Rule 173G of the R .....

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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 prescribed in these Rules or as the Commissioner may require. However, Rule 49 gives facility to the assessees to remove the goods without p .....

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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 aspect. 17. In sub-para (b) of Rule 173G, a duty has been cast on the manufacturer to maintain an account current with the Commissioner f .....

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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 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 dec .....

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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 du .....

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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 shall be required to pay excise duty for each consignment by debit to the account current referred to in Clause (b) …... occurring i .....

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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 containing Rule 57A to 57(U) from 1986. As per the MODVAT credit scheme introduced by the aforesaid Rules, the manufacture of certain final pro .....

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hich 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 invoice prescribed under Rule 52A. The inputs can also be removed as such or after they have been partially processed by the manufacturer of .....

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overy 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 amount equivalent to the credit, be liable to pay penalty equal to the same amount plus interest under Section 11AA. 21. The Scheme is thus, .....

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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 for making payment in instalments, the excise duty can be paid through Cenvat Credit. It is not necessary to refer to all these judgment .....

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. 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 173G does not give any benefit of any input credit and merely by referring to the entitlement of the assessee to use the Cenvat credit aga .....

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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 payment of duty by the date prescribed in sub-rule (2) and the same is discharged beyond a period of thirty days from the said date, then t .....

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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 clause was added so as to take away the benefit under the Cenvat Credit rules and to utilise the input credit during the operation of the s .....

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