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TMI Blog2009 (6) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... s have arisen, has to be made at the very outset for a better appreciation of the issues involved in the present cases. With a view to provide necessary impetus to the development of industries in the north-eastern region a new Industrial Policy Resolution was notified by the Government of India on 24.12.1997. A package of incentives and concessions was announced under the new industrial policy which, inter alia, envisaged exemption from payment of income tax and central excise for a period of ten years as well as for exemption from payment of sales tax, municipal and other local taxes in consultation with the State Government. In the present cases, the Court would be concerned with the exemption from payment of central excise on industrial activities in the north-eastern region under the Industrial Policy Resolution dated 24.12.1997. As exemption from payment of central excise duty can only be granted by exercise of statutory powers under the Central Excise Act, 1944, Notification No. 33/99-CE dated 8.7.99 was issued under Section 5 of the Act exempting goods specified in the schedule to the said Notification cleared from a unit located in the State of Assam, Tripura, Meghalaya, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the inputs used in or in relation to the manufacture of goods cleared under this notification." With effect from the same date i.e. 23.12.2002, a second proviso to Rule 3(3) of the CENVAT Credit Rules, 2002 was added which is to the following effect : "Provided further that the CENVAT credit of the duty paid on the inputs used in the manufacture of final products cleared after availing of the exemption under the notification numbers 32/99-Central Excise, dated the Eighth July 1999[G.S.R. 508(E) dated the EighthJuly1999] and 33/99-Central Excise dated the Eighth July 1999 [G.S.R. 509(E) dated the EighthJuly1999], shall be utilized only for payment of duty on final products cleared after availing of the exemption under the said notification numbers 32/99-Cenral Excise, dated the Eighth July 1999 and 33/99-Central Excise, dated the Eighth July, 1999." 5. By the Finance Act, 2003 (Section 151 read with the Seventh Schedule) a similar proviso was added to Rule 3(3) of the CENVAT Credit Rules, 2001 w.e.f. 1.7.2001, Notification No. 33/99-CE dated 8.7.99 also stood amended by Section 153(1) of the Finance Act, 2003 in the manner specified in the Eighth Schedule on and from Eighth o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellip;…………………………………………….. ………………………………………………………………….. ………………………………………………………………….. Section 153 (4) Notwithstanding the cessation of the amendment under sub-section (1) on the 22nd day of December,2002, recovery shall be made of all amounts of duty or interest or other charges which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, which would not have been refunded if the provisions of this section had been in force at all material times, within a period of thirty days from the day on which the Finance Bill, 2003 receives the assent of the President, and in the event of non-payment of duty or interest or other charges so recoverable, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.99 initially contemplated exemption of goods specified in the schedule appended to the Notification from "so much of the duty of excise leviable thereon …………………………….. as is equivalent to the amount of duty paid by the manufacturer of goods from the account current maintained under rule 9 read with rule 173G of the Central Excise Rules, 1944". By the amendment made with effect from 1.7.2001 by Notification No. 35/2001-CE in paragraph 1, 2(a) and (b) of Notification No.33/99-CE, exemption of excise duty leviable was made equivalent to the amount of duty paid by the manufacturer other than the amount of duty paid by utilizing the CENVAT credit. In other words, the duty paid by utilizing CENVAT credit became dis-entitled for exemption and the consequential refund in accordance with the scheme contained in the Notification No. 33/99-CE dated 8.7.99. By the Notification No. 61/02-CE dated 23.12.2002, a proviso was incorporated in Clause 2(b) of the Notification No. 33/99-CE dated 8.7.99 making it clear that the refund to be granted shall not exceed "the amount of duty paid less the amount of CENVAT credit avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e challenge is somewhat different. In the said two cases, the concerned manufacturers are aggrieved by the orders dated 5.2.2003 and 21.1.2003 passed by the Deputy Commissioner of Central Excise, Guwahati by which CENVAT credit allowed to the manufacturers during the relevant period i.e. 23.12.2002 to 31.12.2002 has been adjusted against the duty payable and the amount of refund sanctioned for the month of December, 2002 has been proportionately reduced. 13. We have heard Sri P.K. Goswami, learned senior counsel for the appellants in W.A. No. 435/06 as well as Dr. A.K. Saraf, learned senior counsel for the appellants in W.A. Nos. 401/06, 402/06, 403/06, 404/06, 405/06, 406/06, 407/06, 408/06, 409/09, 410/06, 411/06, 412/06, 413/06 and 429/06 ; Mr GN Sahewalla, learned senior counsel for the appellant in W.A. No. 38/07; Mrs. M Hazarika, learned senior counsel for the appellant in W.A.No. 7/07 and Mr S Bharali, learned counsel for the appellant in W.A No. 53/07. We have also heard Sri. K.N. Choudhury, learned senior counsel appearing on behalf of the respondents. 14. Sri P.K. Goswami, learned senior counsel for the appellants in W.A. No. 435/06 has submitted that initially the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, would be liable to be levied and realised. Beyond the aforesaid two situations nothing else is contemplated by the Finance Act, 2003. Sri Goswami has also submitted that the overall effect of the amendments to the Notification No. 33/99-CE dated 8.7.99 is that the exemption and the consequential refund would be available only for actual duty paid and not in respect of duty paid by adjustment of CENVAT credit. It is only upon issuance of the Notification No. 65/03-CE dated 6.8.2003 that provisions were made to the effect that a manufacturer, to be entitled to exemption under Notification No. 33/99-CE dated 8.7.99, must first exhaust available CENVAT credit in his account and pay the balance, if any, in cash. The Notification No. 65/03-CE dated 6.8.2003, according to Sri Goswami, is clearly prospective. The learned counsel has, therefore, argued that the above being the purport and effect of the various Notifications issued from time to time amending Notification No. 33/99-CE as also Section 153 of the Finance Act read with the Eighth Schedule thereof, the jurisdictional Deputy/Assistant Commissioners were not at all authorized to issue the impugned order dated 3.6.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand is on account of unutilized CENVAT credit, the same is equally unauthorized as the amount of CENVAT credit granted to the appellant constituted the duty paid on the inputs which is in the custody of the Government. Therefore, according to the learned counsel, the impugned order dated 3.6.2003 virtually represents a second or a repeat demand of central excise duty on inputs already paid by the appellant for which it has been given due credit in its CENVAT account. 16. Lastly, Sri Goswami has argued that in the present case no financial prejudice has been caused to the Revenue so as to enable it to seek return of the part of the refunded amount in question. Sri Goswami has sought to explain the above position by giving illustration of a situation where a manufacturer has a duty liability of ₹ 100/-. Until 6.8.2003, according to Sri Goswami, the manufacturer had the option of clearing the said duty by cash payment of the entire amount of ₹ 100/-, in which case, he was entitled refund of the amount paid i.e. ₹ 100/-. The second option for the manufacturer was to pay a part of the duty liability, say ₹ 50/- in cash and adjust the CENVAT credit for the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailed of', Sri Choudhury has submitted that the said expression means the total CENVAT credit granted to a manufacturer on the basis of the duty paid by him on the inputs regardless of utilization of such credit. This, according to Sri Choudhury is the basis of the demand contained in the impugned orders. Regarding the Notification No. 65/03-CE dated 6.8.2003, it is the contention of Sri Choudhury that the same is a clarificatory Notification expressing in clear and unambiguous terms the purport and effect of Section 153 of the Finance Act, 2003 and the Notification No. 61/02-CE dated 23.12.2002. Reliance has also been placed on a judgment of the Apex Court in the case of Commissioner of Income Tax, Bombay & Ors. -vs- Podar Cement Pvt. Ltd. & Ors., reported in (1997) 5 SCC 482. Sri Choudhury has also submitted that the aforesaid provisions of the Finance Act and the Notification No. 61/02 had cast upon a manufacturer an obligation to use the CENVAT credit for payment of duty. If such obligation had been discharged by the manufacturer, the CENVAT credit account would have stood proportionately reduced which is the real purport of the provisions of Section 153 of the Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the refund that can be granted under the main part. There can be, therefore, no doubt that para-2 of the Notification No.33/99-CE dated 8.7.99 read with the proviso, makes it abundantly clear that the duty that is refundable under the said notification is not to include the CENVAT Credit available in the account of a manufacturer regardless of the fact whether such credit has been utilized by the manufacturer or not. 21. A perusal of the pleadings contained in the writ petitions indicate that in almost all the writ petitions except Writ Appeal No.435 of 2006, there are clear and categorical averments made by the writ petitioners that once the proviso to Clause-(b) of Para-2 of the Notification No.33/99-CE dated 8.7.99 was brought into effect from 23.12.2002 the petitioners had started utilizing the available CENVAT Credit by bringing the account to nil as on 31.3.2003. The above fact also indicates that the understanding of the petitioners with regard to the purport and effect of the proviso had been what has been indicated above. Consequently, on the clear language of the proviso to Clause-(b) of para-2 of the Notification No.33/99-CE dated 8.7.1999 and also on the basis of un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act, 2003, the very same proviso, inserted by the notification No.42/2002-CE(NT) dated 23.12.2002 was inserted in Rule 3(3) of the CENVAT Credit Rules of 2001 with effect from 1.7.2001 (the date of coming into force of the CENVAT Credit Rules, 2001). In the absence of the aforesaid proviso in the CENVAT Credit Rules, 2001, duty may have been paid on non-exempted goods by utilization of the CENVAT credit earned by payment of duty on inputs used in the manufacture of exempted goods. Once the said proviso was brought into force retrospectively by the Finance Act, 2003, payment of such duty became unauthorized and, therefore, open to fresh collection and levy. Such fresh collection and levy has been authorized by the provisions of sub-section (4) of Section 153 of the Finance Act, 2003. 23. The question of recovery of refund granted during the period 8.7.1999 to 22.12.2002, when the proviso to Clause-(b) of para-2 of the Notification No.33/99-CE dated 8.7.1999 was not in force (the same having been brought in retrospectively by the Finance Act, 2003) may now be answered. The argument of the petitioners that such refund can only be in respect of CENVAT credit utilized, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003, by virtue of the proviso to Rule 3(3) of the CENVAT Credit Rules, 2002, inserted by Notification No.13/03-CE(NT) dt.1.3.2003 such debit became legally impermissible. In-fact, same was the position with regard to utilization of CENVAT Credit for payment of duty since the coming into force of the CENVAT Credit Rules, 2001. 27. The aforesaid proviso which came into effect from 1.4.2003 is to the following effect :- "Provided that while paying duty, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month for payment of duty relating to the month.". 28. If by the aforesaid proviso, utilization of CENVAT credit available on the last date of the month is permitted for payment of duty relating to the month, obviously the goods in respect of which duty can be paid by utilization of the CENVAT credit has to be those cleared in the course of the month and not goods cleared in any preceding period. 29. Therefore, debiting of the CENVAT credit account of the manufacturer on the date when the Finance Act of 2003 came into force i.e. 14.5.2003 was factually not possible and legally not permissible. At the same time, retention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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