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The Commissioner of Central Excise Customs And Service Tax Versus M/s Apollo Tyres Ltd.

2015 (9) TMI 1267 - KERALA HIGH COURT

Utilization of CENVAT credit of the Additional Excise Duty - Assessee used accumulated credit of AED for payment of Basic Excise Duty (BED) and Special Excise Duty (SED) on their final product - Held that:- Reading of the Tribunal's order in CEAT Tyres' case [2010 (3) TMI 621 - CESTAT, MUMBAI] shows that the issues raised in these appeals, were exactly similar and therefore the Tribunal justified in proceeding on the basis that the controversy raised before it was covered by the Tribunal's order .....

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rds payment of duty of excise leviable under the first schedule or the second schedule to the Excise Tariff Act. In other words, the restriction introduced by the explanation was only in the utilization of the accumulated credit of AED towards payment of duty under the schedules of Excise Tariff Act. This means that this restriction applied only in the payment of BED and SED, which alone is payable under the Excise Tariff Act and not to AED payable under Section 3 of Act 58 of 1957 - Decided aga .....

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by the orders passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore in Appeal Nos.E/298/2010 & E/1080/2010. 2. We heard the Standing Counsel for the appellants and the learned Senior Counsel appearing for the respondents. 3. Before we deal with the respective contentions of the parties, it is necessary to take note of the relevant facts. The respondents are engaged in manufacture of automotive tyres. One of the raw materials used by them is Nylon Tyre .....

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could be used only for payment of AED on any final product manufactured and cleared from their factories. Since AED was not payable on their final product, viz., tyres, the respondents were having accumulated credit of AED. In so far as the respondent in C.E.Appeal No.2/13 is concerned, they had accumulated credit of ₹ 9,39,19,737/- and in so far as the respondent in C.E. Appeal No.3/13 is concerned, they had accumulated credit of ₹ 5,41,28,449/-. 5. While so, as a result of an amend .....

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the respondents for utilization in the payment of BED and SED on the final product. 6. As a result of this retrospective amendment, department issued show cause notices to the respondents alleging that the credit of AED accrued prior to 01.04.2000 was not available for utilization for payment of BED and SED on tyres and that therefore, ₹ 9,97,11,819/- and ₹ 5,41,28,449/- were liable to be recovered. In terms of the procedure for recovery introduced by the Finance Act 2005, the respon .....

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, out of the accumulated credit of AED, an amount of ₹ 16,76,148/- was utilized by them. Further as DNTCF was used captively in the manufacture of tyres, the credit of AED paid on DNTCF was also taken by them and utlised for payment of BED and SED on tyres. 8. In this factual back ground, show cause notices were issued to the respondents alleging wrong restoration of AED credit in the CENVAT Credit Account and also its wrong utilization for payment of AED on DNTCF. Replies were filed by th .....

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ved is fully covered in favour of the respondents by the Tribunal's order in the Good Year case and allowed the appeals. These appeals are filed by the department which is aggrieved by the orders passed by the Tribunal. 10. A reading of the order passed by the Tribunal shows that it has placed total reliance on the order of the Tribunal, Mumbai in the case of CCE Mumbai v. CEAT Ltd. [(2010) 254 ELT 349]. The impugned order also shows that the department's representative before the Tribun .....

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tract AED (GSI) and since the relevant modvat/cenvat provisions prohibited utilization of AED (GSI) for discharge of BED payable on tyres and flaps, credit of such AED paid on inputs could not be utilized and accumulated in its account. As per Rule 3(6)(b) of CCR, Cenvat credit in respect of, inter alia, Additional Duty of Excise leviable under Sec. 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, shall be utilized only towards payment of duty of excise leviable unde .....

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nt issued detailed directions for payment of BED discharged by the assessee along with interest @13% in 36 equal instalments. The assessee accordingly paid an amount of ₹ 65,54,373/- every month from July, 2005 to June, 2006. On payment of BED from PLA the appellant took suo motu credit of equal amount in the AED (GSI) account. Through the impugned proceedings, the department sought to disallow credit taken by the assessee under AED (GSI) account on the ground that the same was taken again .....

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f the Finance Act, 2004, the following Explanation was introduced in Rule 3(6) (b) of Cenvat Credit Rules, 2004 effective from 1-3-03 : "Explanation - For the removal of doubts, it is hereby declared that the credit of the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and paid on or after the 1st day of April, 2000, may be utilized towards payment of duty of excise leviable under the First Schedule .....

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ve continued to have a balance of ₹ 32,78,21,329/- including ₹ 20,49,01,087/- earned prior to 1-4-2000. Since the Finance Act, 2004 prohibited use of AED (GSI) for payment of BED, the credit balance of AED (GSI) would remain undisturbed in its account. During July, 2005 to June, 2006, the assessee had paid an amount of ₹ 65,54,373/- every month from AED (GSI) and later discharged the same liability by payment of duty from PLA. We find that credit is intended to be spent only to .....

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efore, there was no question of the assessee claiming refund of the same. The transaction utilizing AED (GSI) should be held to have been cancelled. We find that that the Commissioner properly allowed the appellant to retain the AED (GSI) credit and maintain status-quo ante once the debits made towards BED during July, 2005 to June, 2006 was held to be not payment of duty. 7. We have considered the case laws cited by the ld. counsel for the respondents. We discuss them below seriatim. (i) In the .....

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ected to. (ii) In the Mahindra & Mahindra Ltd. case, dealing with a similar case of utilization of Modvat credit towards payment of duty on I.C. engines and M.V. parts, which had not been declared as final product by the assessee, the Tribunal held that while duty involved on I.C. engines and M.V. parts could be ordered to be paid through PLA that had to be simultaneous with restoration of an equivalent amount in RG-23A Part II for utilization towards the duty on the declared final product v .....

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of duty from PLA. (iv) In Kumar Auto Cast Limited case supra, the Tribunal found that the respondents had wrongly availed Modvat credit for payment of duty on MCI inserts by debiting their RG 23A Part II account. The Tribunal ordered that once they had regularized such wrong utilization of Modvat credit by payment of duty from their PLA, the RG. 23A account had to be credited with the amount debited earlier. 8. We find that the judicial authorities cited by the appellants are to the effect that .....

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td. [2006 (193) E.L.T. 468 (T) = 2007 (7) S.T.R. 613 (T) = 2005 (71) RLT 334] In this case the appellant had paid excess duty by mistake and thereafter sought permission to take credit of the amount paid by mistake. The Tribunal held that the amount involved was not duty and limitation did not apply for its refund. (b) Comfit Sanitary Napkins (I) Pvt. Ltd. - 2004 (174) E.L.T. 220. In this case it was held that the assessee cannot suo motu take credit without applying for refund, when excess duty .....

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nal answered the reference holding that all types of refund have to be filed under the Central Excise Act and Rules made thereunder and no suo motu credit of the duty paid in excess may be taken by the assessee. We find that the ratio of the BDH Industries Ltd. case relates to excess duty paid and the procedure to be followed for getting back such excess duty paid. Ratio of that case does not apply to the subject case. 9. The impugned credit had been legitimately earned by the assessee on procur .....

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nt from PLA. In the instant case, the debits were held to be of no consequence when the assessee was required to pay duty initially discharged using AED (GSI) credit. Therefore, the credit needed to be restored and was correctly ordered so by the Commissioner. We find considerable merit in the finding of the Commissioner that but for the statutory changes introduced with effect from 1-3-03 following which the assessee had discharged the duty liability on tyres using AED (GSI), it would have cont .....

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ibunal justified in proceeding on the basis that the controversy raised before it was covered by the Tribunal's order in CEAT Tyres case. It is also seen that the order of the Delhi Tribunal in Good Year India's case was confirmed by the High Court of Punjab and Haryana in C.E.A.No.140 of 2006, by its judgment dated 25.01.2007. Though, SLP was filed by the department against this judgment of the High Court that was rejected by the Apex Court on the ground of delay and keeping the questio .....

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le under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1956 (58 of 1957) paid on or after 1st day of April, 2000, may be utilized towards payment of duty of excise leviable under the first schedule or the second schedule to the Excise Tariff Act". 14. Reading of the above explanation shows that credit of AED paid on or after 01.04.2000, is permitted to be utilized towards payment of duty of excise leviable under the first schedule or the second schedule to .....

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