TMI Blog2016 (9) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... cash - demand of duty justified. Imposition of penalty - Rule 96ZO(3) of the Central Excise Rules, 1944 - Held that: - imposition of penalty set aside. appeal disposed off - decided partly in favor of appellant. - C.M.A.Nos.1449 and 1450 of 2000, M.P.Nos.1 of 2009 - - - Dated:- 19-7-2016 - MR.JUSTICE S.MANIKUMAR AND MR.JUSTICE D.KRISHNA KUMAR For the Appellant : Mr.K.Jayachandran For the Respondent : Mr. A.P. Srinivas, Senior Standing Counsel for Central Excise JUDGMENT (Judgement of this Court was made by S.MANIKUMAR, J.) Civil Miscellaneous Appeal is directed against the Final Order Nos.614 and 615 of 2008, dated 24.06.2008, passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Regional Bench, Chennai, 1st respondent herein. 2. Facts leading to the appeals are that the appellant is engaged in the manufacture of non-alloy steel ingots and billets, falling under Chapter Sub-Heading No.7206.90 of the Schedule to the Central Excise Tariff Act, 1985, covered under Section 3A of the Central Excise Act, 1944, during compounding levy scheme. Two show cause notices were issued to the appellant on 24.03.1999, one for recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition that in terms of Rule 2(7) of Central Excise Rules, duty means duty payable under Sections 3 and 3A of the Act and in Rule 57AB(1B) of the Central Excise Rules, there is no prohibition to utilise the available CENVAT credit amount? (iii) Whether the order of the Tribunal is right in holding that penalty is leviable in the facts and circumstances of the case and the quantum alone reduced? 7. By inviting the attention of this Court to a decision of the Supreme Court in Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise reported in 2015 (326) ELT 209 (SC), Mr.K.Jayachandran, learned counsel for the appellants submitted that insofar as penalty is concerned, the Hon'ble Supreme Court has struck down the same. His submission is placed on record. 8. On the substantial questions of law 1 and 2, extracted supra, learned counsel for the appellants submitted that the Central Excise Act, 1944, provides for levy of duty of excise on the activity, amounting to manufacture, as defined in Section 2(f) of the Act. He further submitted that the Central Excise Tariff Act, 1985, prescribes rates of duty for various goods chargeable to duty of excise. Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 3 or as per the Finance Act, Section 3A of the Central Excise Act, 1944. According to him during the period upto 15.07.2000, Rule 57AB(1b) of Cenvat Credit Rules, was in force. He further added that there was no prohibition in payment of duty, through CENVAT account. 13. He further submitted that as per Section 3A of the Act, 1944, assessees were only prohibited from taking or availing cenvat credit, during the period from 01.09.1997 to 31.03.2000 and that there was no bar for utilizing the credit earned after the lapse of the scheme, for discharging the arrears of duty during the period, covered under the Scheme. According to him, both the Commissioner of Central Excise, Chennai and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Regional Bench, Chennai, have erred in holding that the appellant should pay duty through PLA (Personal Ledger Account) and thereafter, can utilize the same amount as Cenvat credit. According to him, the duty demanded under the compounded levy scheme, can be paid through cenvat credit account on 15.07.2000, as there was no prohibition, under the Central Excise Rules, for such mode of payment. 14. He also submitted that on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit account earned, after the period, under the scheme. 17. It is the submission of the learned counsel for the appellant that unlike in Rule 97ZO(1) of the Central Excise Rules, 1944, debiting the amount in the Personal Ledger Account, maintained by the manufacturer, there is no such stipulation in Sub-Rule (3) of Rule 96ZO of the Central Excise Rules, 1944. It is also the submission that Sub-Rule (3) of Rule 96ZO of the said Rules, is a code by itself, which provides for payment of duty of ₹ 5,00,000/- per month, in two equal instalments, the first instalment latest by the 15th day of each month and the second instalment latest by the last day of each month. According to him, Sub-Rule 3 of Rule 96ZO does not impose any condition of debiting the amount, in the current account and therefore, arrears of duty, if any, during the period of compounded levy scheme, can always be paid through cenvat credit account, after the period of scheme. Thus, on the above submissions, learned counsel for the appellant seeks for an answer, on the substantial questions of law, in favour of the assessee. 18. Per contra, placing reliance on a decision of this Court in Kalaimagal alloys Stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Apex Court, has to be rejected. 22. With reference to the above said submissions, learned counsel for the revenue also invited the attention of this Court to the relevant provisions. He further submitted that between the period, from October, 1998 to February, 1999, credit earned by the assessee would lapse and therefore, payment of excise duty on the production capacity, should be made only through PLA. 23. Distinguishing the judgment of the Punjab and Haryana High Court in Commissioner of Central Excise, Ludhiana v. Punjab Casting Pvt. Ltd., reported in 2014 (306) ELT 612 (P H), it is the submission of the learned counsel for the revenue that the said judgment cannot be made applicable to the case on hand, as there was no reference to the judgment of the Hon'ble Apex Court in Hans Steel Rolling Mill's case (cited supra). For the reasons, stated supra, he prayed for dismissal of the Civil Miscellaneous Appeals. Heard the learned counsel appearing for the parties and perused the materials available on record. 24. Before adverting to rival contentions, let us have a cursory look at the relevant rules and the Compounded Levey scheme, operational from 01.09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act.; (iii) Special Economic Zone has the meaning assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005). (1A) The provisions of sub-section (1) shall apply in respect of all excisable goods other than salt which are produced or manufactured in India by, or on behalf of, Government, as they apply in respect of goods which are not produced or manufactured by Government. (2) The Central Government may, by notification in the Official Gazette, fix, for the purpose of levying the said duties, tariff values of any articles enumerated, either specifically or under general headings, in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as chargeable with duty ad valorem and may alter any tariff values for the time being in force. (3) Different tariff values may be fixed - (a) for different classes or descriptions of the same excisable goods; or (b) for excisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual capacity of production: Provided further that in a case where the factor relevant to the production is altered or modified at any time during the year, the annual production shall be redetermined on a proportionate basis having regard to such alteration or modification. (3) The duty of excise on notified goods shall be levied, at such rate, on the unit of production or, as the case may be, on such factor relevant to the production, as the Central Government may, by notification in the Official Gazette, specify, and collected in such manner as may be prescribed: Provided that, where a factory producing notified goods did not produce the notified goods during any continuous period of fifteen days or more, duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfils such conditions as may be prescribed. (4) The provision of this section shall not apply to goods produced or manufactured, by a hundred per cent export - oriented undertaking and brought to any other place in India. Explanation 1: For the removal of doubts, it is hereby clarified that for the purposes of section 3 of the Customs Tari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Tariff Act, 1975, equivalent to the duty of excise specified under clauses (i), (ii), (iii) and (iv) above, paid on any inputs or capital goods received in the factory on or after the first day of April, 2000. Explanation. -For removal of doubts it is clarified that the manufacturer of the final products shall be allowed CENV AT credit of additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) on goods falling under Chapter heading No. 98.01 of the First Schedule to the said Customs Tariff Act. (b) The CENV AT credit may be utilised for payment of any duty of excise on any final products manufactured by the manufacturer or for payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed, or such capital goods are removed as such. Explanation. -When inputs or capital goods are removed from the factory, the manufacturer of the final products shall pay the appropriate duty of excise leviable thereon as if such inputs or capital goods have been manufactured in the said factory, and such removal shall be made under the cover of an invoice prescribed under rule 52A. (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff Act, 1985 (5 of 1986) shall be allowed to the extent of thirty rupees per square meter. Explanation. -Where the provisions of any other rule or notification provide for grant of partial or full exemption on condition of non-availability of credit of duty paid on any input or capital goods, the provisions of such other rule or notification shall prevail over the provisions of the rules made under this section. 27. The issue involved in the instant appeals, is whether, the Commissioner of Central Excise, was right in demanding a sum of ₹ 16,06,507/-, as duty, for the period from October, 1998 to February, 1999 and imposing penalty. Compounded levy scheme, under Section 3-A was in force, during the period from 01.09.1997 to 31.03.2000 and it was revoked from 01.04.2000. As per the submission of the learned counsel for the appellant, the total amount of duty payable for the period between October' 1998 and February' 1999, under the 2nd show cause notice, dated 24.03.1999, was ₹ 43,12,500/-. Out of this, a sum of ₹ 27,25,000/- was paid through Personal Ledger Account and the balance amount of ₹ 16,06,507/- can be through CENVAT account. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise submitted that the law laid down by the Hon'ble Supreme Court in Shree Bhagwati Steel Rolling Mills's case (cited supra), is binding. Recording the said submission, the appellant stand to succeed in C.M.A.No.1450 of 2009, on the substantial question of law, extracted supra, as regards penalty. Respectfully following the above decision, the third substantial question of law, viz., Whether the order of the Tribunal is right in holding that penalty is leviable in the facts and circumstances of the case and the quantum alone reduced? framed by this Court, on 24.06.2009, is answered in favour of the appellant. Consequently, C.M.A.No.1450 of 2009 is allowed. 32. The other two substantial questions of law, framed by this Court, on 24.06.2009, are as follows: (i) Whether on the facts and circumstances of the case, the Tribunal is right in holding that the appellant is not entitled to utilize the CENVAT Credit available for payment of duty on the products cleared under the compounding levy scheme? (ii) Whether the Tribunal is right in not appreciating the legal position that in terms of Rule 2(7) of Central Excise Rules, duty means duty payable under Sections 3 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod from 1st day of September,1997 to the 31st day of March, 1998, shall be adjusted towards the total amount of duty liability payable under clause (a); (c) if a manufacturer fails to pay the total amount of duty payable under clause (a) by the 31st day of March, 1998, he shall be liable to pay the outstanding amount (that is the amount of duty which has not been (paid by the 31st day of March, 1998) along with interest at the rate of eighteen percent per annum on such outstanding amount calculated for the period from the 1st day of April, 1998 till the date of actual payment of the outstanding amount : Provided that if the manufacturer fails to pay the total amount of duty payable under clause (a) by the 30th day of April, 1998, he shall also be liable to pay a penalty equal to the outstanding amount of duty as on 30th day of April, 1998 or five thousand rupees, whichever is greater. II. Total amount of duty liability for a financial year subsequent to 1997-98 (a) a manufacturer shall pay a total amount calculated at the rate of ₹ 750/- per metric tonne on the annual capacity of production of his factory as determined under the Induction Furnace Annual Capac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance of stock of the ingots and billets of non-alloy steel; (c) the manufacturer, when he starts production again, shall inform in writing about the starting of production to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise1, with a copy to the Superintendent of Central Excise, either prior to the date of starting production or on the date of starting production; (d) the manufacturer shall on start of production again along with the closing balance of stock on restarting the factory, intimate the reading of the electricity meter to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise1, with a copy to the Superintendent of Central Excise; (e) the manufacturer shall while sending intimation under clause (c), declare that his factory remained closed for a continuous period starting from --hours on -(date) to --hours on -(date). (3) Notwithstanding anything contained elsewhere in these rules, if a manufacturer having a total furnace capacity of 3 metric tonnes installed in his factory so desires, he may, from the first day of September, 1997 to the 31st day of March, 1998 or any other financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise or Deputy Commissioner of Central Excise, in the following proforma: We ............(name of the factory), located at ..........(address) hereby wish to avail of the scheme described in sub-rule (3) of rule 9620, for full and final discharge of our duty liability for the manufacture of ingots and billets of non-alloy steel undersection3A of the Central Excise Act, 1944 (l of 1944). Dated......... Sd............. Name and Designation (With Stamp) 35. Reading of the rules, extracted supra, makes it clear that a manufacturer of non-alloy steel ingots and billets, falling under sub-heading Nos. 7206.90 and 7207.90 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), shall debit an amount calculated at the rate of ₹ 750 per metric ton, at the time of clearance of ingots and billets of non-alloy steel from his factory in the account-current maintained by him under sub-rule (1) of rule 173G of the Central Excise Rules, 1944, subject to the condition that the total amount of duty liability shall be calculated and paid in the manner, stated above. At this juncture, we have taken note of the indisputed fact, as to the method of calculat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturer of non-alloy steel ingots, during the scheme, manner of payment, ie., in the account maintained by the manufactuer, under sub-rule (1) of rule 173G of the Central Excise Rules, 1944, time for such payment and the consequences thereof, resulting in penalty for failure to pay duty, within the prescribed period, are morefully detailed in the scheme. Therefore, the compunded levy scheme in force between 01.09.1997 to 31.03.2000, has to be held as a comprehensive scheme, which has carved provisions for payment of excise duty, on the products, (i) ingots and billets of non-alloy steel manufactured in an Induction Furnace and (ii) hot rolled products of non-alloy steel manufactured or produced in a hot re-rolling steel mill and accordingly, held by the Apex Court. 39. Though Mr.K.Jayachandran, learned counsel for the appellant submitted that sub-Rule (3) of Rule 96ZO(II) of the Central Excise Rules, 1944, opens with a notwithstanding clause and therefore, arrears of duty, payable between 01.09.1997 to 31.03.2000, can be paid through cenvat credit, earned after 31.03.2000 and that payment through personal ledger account, is not specifically provided for, in sub-rule (3) of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, after recording a categorical finding that the appellant has not paid the entire duty amount of ₹ 43,12,500/-, through personal ledger account and taking note of the payment of ₹ 27,25,000/- through Personal Ledger Account, the Commissioner of Central Excise, has demanded a sum of ₹ 16,06,507/-, to be paid through the personal ledger account. 42. Now let us consider the decisions relied on by the learned counsel appearing for both the parties. The main thrust of the appellant is on the decision of the Punjab and Haryana High Court in Commissioner of Central Excise, Ludhiana v. Punjab Casting Pvt. Ltd., reported in 2014 (306) ELT 612 (P H), wherein, the respondent therein was engaged in the manufacture of non-alloy steel ingots. The assessee debited the Cenvat Credit Account of inputs for discharging their liability of payment of excise duty for the period under the Compounded Levy Scheme. The appellant therein contended that the respondent therein could not have made use of Cenvat Credit Account and the duty had to be paid only through Personal Ledger Account and finding fault with the procedure in payment of duty, the Adjudicating Authority i.e., the Jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on such capacity of production. It has to be taken into consideration that the compounded levy scheme for collection of duty based on annual capacity of production under Section 3 of the Act and Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 is a separate scheme from the normal scheme for collection of central excise duty on goods manufactured in the country. Under the same, Rule 96P of the Rules stipulate the method of payment and Rule 96P contains detailed provision regarding time and manner of payment and it also contains provisions relating to payment of interest and penalty in event of delay in payment or non-payment of dues. Thus, this is a comprehensive scheme in itself and general provisions in the Act and Rules are excluded. 13. The judgments of this court in the cases of Commissioner of C.Ex Customs v. Venus Castings (P) Ltd., reported in 2000 (117) ELT 273 (SC) and Union of India v. Supreme Steels and General Mills reported in 2001 (133) ELT 513 (SC), has clearly laid down the principle that the, compound levy scheme is a separate scheme altogether and an assessee opting for the scheme is bound by the terms of that particular scheme. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in Hans Steel Rolling Mill's case (cited supra). Submissions have been advanced that compounded levy scheme is a separate scheme, by which, a procedure for determining the payment, has been made and the question of applying Section 11A to such scheme, does not arise. 47. Reading of Kalai Magal Alloys Steel Pvt. Ltd.,'s case (cited supra) shows that contentions have been made that the Hon'ble Supreme Court has held that the time limit prescribed under one scheme, could be unwarranted for another scheme and the time limit under Section 11A is not an exception and hence, the substantial questions of law, whether the Tribunal was justified in upholding the demand contrary to Section 11A of the Central Excise Act, 1994 on the ground that Rule 96ZP of the Central Excise Rule, 1944 contained where no period of limitation is prescribed? Should be answered as against the assessee. Yet another substantial question of law, raised therein was, whether Rule 96ZP of Central Excise Rule, 1944 and Section 3A of the Central Excise Act, 1944 are the charging provisions and also provide for machinery for recovery of due? Dealing the above substantial q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the appellant made an attempt to distinguish the judgment in Kalai Magal Alloys Steel Pvt. Ltd.,'s case (cited supra) and contended that in the abovesaid judgment, this Court only held that unutilized cenvat/modvat credit, cannot be adjusted against the liability under Rule 96ZO of the erstwhile Central Excise Rules, 1944 and no where, in the judgment, it is stated that the duty accrued, during the period under the compounded levy scheme, should be paid by cash through PLA, this Court is not inclined to accept the said contention, for the reason that Kalai Magal Alloys Steel Pvt. Ltd.,'s case (cited supra), is certainly a decision applicable to the case on hand, on the dictum that the scheme is comprehensive, as regards payment of duty, time and manner of payment. The said judgment is also applicable, on the grounds of exclusion of the general provisions of the Act and the Rules, during the period of the compounded levy scheme. When the general provisions of availing cenvat credit are excluded, consequences thereof, is to make payment through PLA, which means remittance in cash. 49. In the light of the discussion and decisions considered, this Court is not inclined ..... X X X X Extracts X X X X X X X X Extracts X X X X
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