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2017 (2) TMI 483 - GUJARAT HIGH COURT

2017 (2) TMI 483 - GUJARAT HIGH COURT - TMI - Recovery u/s 11D of amount collected by the assessee in the name of duty of excise - retrospective effect - Cigarettes - Whether Notification No.355/86-CE dated 24/06/1986 is a notification granting Set Off of the duty paid on the input viz., cut tobacco while paying duty on the finished product i.e. Cigarettes or is a notification granting exemption, simplicitor from payment of excise duty to Cigarettes? - Held that: - exemption Notification is requ .....

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n No.355/86-CE is a Notification granting set off of excise on the duty already paid on Cut Tobaco as sought to be contended on behalf of the assessee - decided in favor of Revenue. - Whether the Board Circulars dated 06/07/1990 and 01/04/1981 and the Trade Notice dated 08/08/1986 did not establish that N/N.355/86 in effect conferred benefit on the manufacturer in the nature of Set Off and the same was not in the nature of an exemption notification simplicitor? - Held that: - the said Circul .....

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the input, namely, Cut Tobaco - decided in favor of Revenue. - Whether by virtue of the operation of Notification No.355/86-CE dated 24/06/1986, the appellants had in fact paid the full effective duty on the final products and hence were within their rights to recover the full duty from their customers? - Held that: - As per exemption N/N.355/86-CE excise duty liability would be ₹ 80/- only. In the present case though the assessee paid the excise duty at ₹ 80/- (after debiting & .....

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ent of duty under Notification No.355/86 when the duty collected from the buyer of the finished products was not more than the duty already paid on the input and the duty paid on the finished product at the time of removal cumulatively? - SCN - period of limitation - Held that: - the show cause notice came to be issued in the year 2000 for the alleged transactions for the period between 1993 to 1995, and therefore, the same has been issued after six years i.e. unreasonable period. The aforesaid .....

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show cause notice has been issued in the month of December, 2000, and therefore, it cannot be said that the same can be said to have been issued after unreasonable period. If the submissions on behalf of the assessee is accepted, in that case, the amendment in Section 11D by Finance Act, 2000 making Section 11D applicable retrospectively with effect from 20/09/1991 would become nugatory. If the show cause notice is issued after five or six years or unreasonable period from the amendment of Sect .....

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L NO. 539 of 2004 - Dated:- 20-1-2017 - MR. M.R. SHAH AND MR. B.N. KARIA, JJ. FOR THE APPELLANT : M/S TRIVEDI & GUPTA, ADVOCATE FOR THE OPPONENT : MR SUDHIR M MEHTA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Customs Excise & Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as the learned tribunal ) dated 09/06/2004 by which the learned tribunal has di .....

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i.e. Cigarettes or is a notification granting exemption, simplicitor from payment of excise duty to Cigarettes? (ii) Whether the Board Circulars dated 06/07/1990 and 01/04/1981 and the Trade Notice dated 08/08/1986 did not establish that Notification No.355/86 in effect conferred benefit on the manufacturer in the nature of Set Off and the same was not in the nature of an exemption notification simplicitor? (iii) Whether by virtue of the operation of Notification No.355/86-CE dated 24/06/1986, t .....

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ely? (v) Whether the Tribunal did not err in treating a delay of six years as reasonable on the ground that this is a mere technicality? [2.0] The facts leading to the present Appeal in a nutshell are as under; [2.1] The appellant herein - M/s. GTC Industries Ltd. (hereinafter referred to as the assessee ) was engaged inter alia in the manufacture of machine rolled cigarettes falling under Chapter 24 of the Central Excise Tarrif Act, 1985. The factory premises of the assessee was visited by the .....

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onsignment of machine rolled cigarettes from their factory. Such invoices showed interalia details providing variety, brand of cigarettes under clearance, value amount of duty payable and other charges recoverable from the customer etc. (iv) GTC also maintained PLA register for making entries relating to deposits & debits of Central Excise duty. [2.2] During the course of the checks, Officers noticed that the assessee was availing partial exemption from payment of duty under Notification No. .....

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duty already paid on the Cut Tobaco used in the manufacture of such machine rolled cigarettes. For arriving at consumption of Cut Tobaco in the manufacture of such machine rolled cigarettes, assessee submitted to the Central Excise Department Blend and Brand Information in respect of each brand of cigarettes manufactured by them. On the basis of the formula adopted in such Blend and Brand information , GTC calculated the amount of exemption available to them under Notification No.355/86-CE date .....

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excise duty as per the rates prescribed under Notification No.3/94-CE dated 01/03/1994 and consequently recovered the entire amount of excise duty from the customer, and therefore, it was fond that the said extra amount was charged to their customer representing excise duty and it was equal to the amount of concession availed by them under Notification No.355/86-CE. Therefore, appropriate authority issued notice upon the assessee dated 05/12/2000 in exercise of powers under Section 11D of the A .....

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nd not credited to the Central Government may not be recovered from them under Section 11D of the Act. The assessee was called upon to show cause why penalty should not be imposed upon them under Rule 210 of the Central Excise Rules, 1944 for commencement of the provisions of Section 11D of the Act. The Joint Commissioner of Central Excise held in favour of the assessee. The order passed by the Joint Commissioner of Central Excise was subject matter of Appeal before the first appellate authority .....

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izing credit of duty already paid on Cut Tobaco, which was available as set off and such payment has been accepted by the Department. It was contended that Section 11D shall not be applicable. Before the learned tribunal the assessee heavily relied upon Trade Notice No.153/86 dated 02/07/1996 and Trade Notice No.174/86 dated 08/08/1986 in support of their case that Notification No.355/86-CE was set off Notification and not general exemption Notification. It was also contended on behalf of the as .....

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[3.1] (i) Whether Notification No.355/86-CE dated 24/06/1986 is a notification granting Set Off of the duty paid on the input viz., cut tobacco while paying duty on the finished product i.e. Cigarettes or is a notification granting exemption, simplicitor from payment of excise duty to Cigarettes?:- [3.2] Shri Uday Joshi, learned advocate appearing on behalf of the assessee has vehemently submitted that in the facts of the case the learned tribunal has materially erred in not properly appreciatin .....

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rettes and is unlike majority of notifications, where the extent of exemption granted to the finished product is quantified and indicated as a particular percentage or amount. It is submitted that such amount of set off of duty paid on the input was as such utilized while making payment of excise duty on the finished product. It is submitted that admittedly the assessee was entitled to set off of the duty paid on the input, namely, Cut Tobaco. It is submitted that therefore if the Notification N .....

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led to the set off of the duty while making payment of excise duty on finished product. It is submitted that therefore Department also construed that Notification No.355/86-CE was notification granting set off of duty and not exemption as now sought to be contended by the Department. [3.4] In support of the above submissions, Shri Joshi, learned advocate appearing on behalf of the assessee has relied upon the decision of the Hon ble Supreme Court in the case of J.K. Synthetics Vs. CCE, Jaipur re .....

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) J.K. Synthetics Vs. CCE, Jaipur reported in 1996 (81) ELT 648 dealing with the Notification No.225/86-CE; (ii) CCE Vs. ITC Ltd. reported in 1993 (67) ELT 852; (iii) Andhra Pradesh Paper Mills Ltd. Vs. Collector of Central Excise, Guntur reported in 1987 (27) ELT 692. [3.5] Making the above submissions, it is requested to answer question no.(i) in favour of the assessee and against the revenue. [4.0] (ii) Whether the Board Circulars dated 06/07/1990 and 01/04/1981 and the Trade Notice dated 08/ .....

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ff of duty paid on inputs, namely, Cut Tobaco. It is submitted that the said Trade Notices are binding to the Department. In support of his above submissions, Shri Joshi, learned advocate appearing on behalf of the assessee has relied upon the followed decisions of the Hon ble Supreme Court; (i) Desh Bandhu Gupta and Co. Vs. Delhi Stock Exchange Association Ltd. reported in (1979) 4 SCC 565; (ii) Collector of CE, Guntur Vs. Andhra Sugar Ltd. reported in 1988 (38) ELT 564; (iii) State of Tamilnad .....

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, the appellants had in fact paid the full effective duty on the final products and hence were within their rights to recover the full duty from their customers? [5.1] Now so far as question no.(iii) is concerned, it is vehemently submitted by Shri Joshi, learned advocate appearing on behalf of the assessee that the duty suffered in respect of inputs in the present case (Cut Tobaco) by consequent credit in set off account can very well be used for effective payment of duty on finished goods by d .....

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vision of Section 11D of the Central Excise Act, 1944 could be invoked in respect of payment of duty under Notification No.355/86 when the duty collected from the buyer of the finished products was not more than the duty already paid on the input and the duty paid on the finished product at the time of removal cumulatively?:- [6.1] Now so far as question no.(iv) is concerned, it is vehemently submitted by Shri Joshi, learned advocate appearing on behalf of the assessee that the show cause notice .....

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on the finished goods during the said period by them, the provisions of Section 11D of the Act cannot be invoked by issuing show cause notice dated 05/12/2000. It is submitted that this is because of the fact that the said finalization of the assessment ought to have been challenged by the Department or at the best, a show cause notice ought to have been issued within reasonable time as held by the Hon ble Supreme Court in catena of decisions. It is therefore submitted that as such show cause no .....

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ndia Vs. Citadel Fine Pharmaceuticals reported in (1989) 3 SCC 483; (iv) Ani Elastic Industries Vs. Union of India reported in 2008 (222) ELT 340. [6.2] Making the above submissions, it is requested to allow the present Appeal and answer question no.(iv) in favour of the assessee and against the revenue. [7.0] The present Appeal is opposed by Shri Sudhir Mehta, learned advocate appearing on behalf of the revenue. [7.1] It is vehemently submitted that as such Notification No.355/86-CE is very cle .....

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ncluding the amount of set off of tax paid on input, Cut Tobaco from the consumer). It is submitted that therefore the assessee collected more amount of excise duty then paid and did not recover the excise duty on the final product from the customers, after deducting the excise duty as per Notification No.355/86-CE. It is submitted that therefore the difference of the amount of actual excise duty and the amount of set off of duty paid on input - Cut Tobaco would be enrichment, and therefore, the .....

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e clarificatory in nature with respect to the procedure to be followed while claiming the set off of duty paid on input. It is submitted that therefore there is no question of any conflict between Notification No.355/86-CE and Trade Notice No. 153/86 dated 02/07/1996 and Trade Notice No. 174/86 dated 08/08/1986 as sought to be contended on behalf of the assessee. It is submitted that therefore the decisions, which are relied upon by the learned advocate appearing on behalf of the assessee, shall .....

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ot be applicable to the facts of the case on hand and /or the same shall not be of any assistance to the assessee. It is submitted that similar decisions of the tribunal, which are relied upon also shall not be applicable to the facts of the case on hand. [7.3] Now so far as the contention on behalf of the assessee that the show cause notice was either beyond the period of limitation and /or issued after unreasonable period is concerned, it is submitted that Section 11D of the Act has been amend .....

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to make Section 11D of the Act, as amended by Finance Act, 2000, applicable retrospectively nugatory. It is submitted that therefore in the present case when the show cause notice has been issued on 05/12/2000 the same cannot be said to be either beyond the period of limitation and /or beyond unreasonable period. Making the above submissions, it is requested to dismiss the present Appeal and answer the questions against the assessee and in favour of the revenue. [8.0] Heard the learned advocate .....

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ntral Excise Rules, 1944, the Central Government hereby exempts Cigarettes, falling under sub heading no.2403.11 of the Schedule to the Central Excise Tariff Act,1985 (5 of 1986), from so much of the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944), as is equivalent to the duty of excise leviable under the said Central Excises and Salt Act already paid on Cut Tobaco falling under sub-heading No.2409.90 of the said Schedule and used in the manufacture of su .....

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he Cigarettes falling under sub heading No.2403.11 of the Schedule to the Central Excise Tariff Act, 1985, from so much of the duty of excise leviable thereon under the Central Excises and Salt Act,1944 as is equivalent to the duty of excise leviable under the said Central Excises and Salt Act already paid on Cut Tobaco falling under sub heading No.2404.90 of the said Schedule and used in the manufacture of such Cigarettes. Therefore, on fair reading of the Notification it can be said to be and .....

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tribunal in holding Notification No.355/86-CE dated 24/06/1986 as exemption Notification. It may be a different thing that while making the payment of excise duty on the final product - Cigarettes the assessee might use such credit of the duty of excise already paid on Cut Tobaco. However, by that, it cannot be said that Notification No.355/86-CE is a Notification granting set off of excise on the duty already paid on Cut Tobaco as sought to be contended on behalf of the assessee. [8.2] Now so .....

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Supreme Court the controversy was with respect to the amount of set off and before the Hon ble Supreme Court such controversy was not raised, which is raised in the present case. Under the circumstances, the said decision shall not be applicable to the facts of the case on hand. In view of the above, question no.(i) is answered against the assessee and in favour of the revenue. [9.0] Now so far as reliance placed upon Trade Notice No.153/86 dated 02/07/1996 and Trade Notice No.174/86 dated 08/0 .....

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laiming the set off with respect to the amount of excise duty paid on input - Cut Tobaco. The said Trade Notices, as such, cannot be said to be in conflict with the Notification No.355/86-CE dated 24/06/1986. As observed and held hereinabove, Notification No.355/86-CE dated 24/06/1986 is a Notification granting exemption on excise duty payable on Cigarettes to the extent of duty paid on the input, namely, Cut Tobaco. Under the circumstance, question no.(ii) is answered against the assessee and i .....

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g. the excise duty payable on Cigarette is ₹ 100/- and the assessee paid ₹ 20/- towards excise duty on input, namely, Cut Tobaco. As per exemption Notification No.355/86-CE excise duty liability would be ₹ 80/- only. In the present case though the assessee paid the excise duty at ₹ 80/- (after debiting ₹ 20/- paid on input, namely, Cut Tobaco) they recovered excise duty at ₹ 100/- from the customer. Thus, ₹ 20/- was recovered by the assessee in excess of .....

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ppellate tribunal or any Court or in any other provisions of this Act or the Rules made thereunder, (every person who is liable to pay duty under this Act or Rules made thereunder, and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act or the Rule made thereunder from the buyer of such goods) in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government. (ii) Wher .....

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er Sub Section (2), determine the amount due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. (iv) The amount paid to the credit of the Central Government under Sub Section (1) or Sub Section (3) shall be adjusted against the duty of excise payable by the person on finalisation of assessment or any other proceeding for determination of the duty of excise relating to the excisable goods referred to in Sub Se .....

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rplus amount. Under the circumstances, question no.(iii) is answered against the assessee and in favour of the revenue. [11.0] Now so far as the question whether the show cause notice was beyond the period of limitation and /or after unreasonable period is concerned, it is the case on behalf of the assessee that the show cause notice came to be issued in the year 2000 for the alleged transactions for the period between 1993 to 1995, and therefore, the same has been issued after six years i.e. un .....

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