TMI Blog2017 (12) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified on such capital goods has been paid by the said manufacturer to such financing company prior to payment of first lease rental installment, or first hire purchase installment or first installment of re payment of loan, as the case may be, along with a copy of the agreement entered into with the said financing company - The difference in Sub Rule (3) of erstwhile Rule 57R and Sub Rule (3) of Rule 57AC is crystal clear from the plain reading of both the Sub Rules. The procedure which is provided under Sub Rule (3) of Rule 57R is not provided in the amended provision. From the date of conversion, the procedure which is required to be followed as per sub clause (b) of clause (ii) of Rule 57R(3) will not apply. As far as SBI is concerned, the admitted position which is recorded in paragraph 2.1 of the impugned order is that the excise duty was reimbursed under Rule 57R(3) and in particular Sub Rule (3) thereof. The finding recorded on the basis of admitted position is that there was no contravention. In paragraph 2.1, the Appellate Tribunal, after considering 57R(3) has rightly observed that the said provision does not contain any stipulation to the effect that credit on capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Duty component, or the same can be availed only after reimbursing the leasing company for the excise duty portion? (b) Whether in the facts and circumstances of the case and in law the Hon'ble CESTAT is justified in dismissing the appeal of the Revenue in view of the Respondents not being eligible for credit as claimed? 4. The first substantial question of law in both the Appeals is the same. 5. The proceedings originated on the basis of the show cause notice issued by the Revenue to the respondent assessee on 4th February, 2002. The Order in Original dated 31st January, 2006 was passed by the Commissioner of Central Excise. The Commissioner of Central Excise held that the respondent had availed premature credit of ₹ 3,14,20,082/ and therefore, the respondent is liable to pay back the said amount. He imposed penalty of ₹ 25 Lakhs under Section 11AC of the Central Excise Act, 1944 (for short the said Act ). The respondent was also directed to pay interest in accordance with the provisions of Section 11AA of the said Act. An Appeal was preferred by the Appellant Revenue against the said Order in Original dated 31st January, 2006. The reason fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he equipment. 9. In the show cause notice, reliance was placed on the letters of 30th March, 2000 and 28th March, 2000 issued by IFCI and SBI respectively. As far as IFCI is concerned, it was stated in the said letter that the respondent has not commenced payment lease rentals/or installments. It was stated that only interest is being paid by the respondent. 10. As far as the letter addressed by the SBI is concerned, it was confirmed that the payment of lease rentals had not commenced and assets subject matter of lease are not capitalized in the books of accounts. 11. On 16th July, 2001 IFCI converted the leasing facility granted to the respondent into Non Convertible Debentures. In the letter dated 17th October, 2001 addressed by the IFCI it was informed that in view of conversion into Non Convertible Debentures, lease agreement of 7th August, 1996 stands terminated. 12. Reliance is placed on statements of officers of respondent as well as statement of the officers of IFCI and SBI. Reliance was placed on Unamended Rules. It was alleged that no credit can be given to the assessee as payment of Central Excise Duty to be availed as MODVAT credit by the assessee is a pre c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant is not on record, the precise date on which the said Appeal was filed is not on record. The Appeal was preferred by the appellant Revenue in April, 2006. Nevertheless, the Appeal preferred by the appellant Revenue was decided on 10th September, 2007 by which the order of Commissioner of not confirming the demand to the extent of approximately ₹ 10 Crores was confirmed. As far as the Appeal preferred by the Respondent Revenue is concerned, the Appellate Tribunal held that as far as transaction with SBI is concerned, there is no contravention of Rule 57R(3) of unamended Rules. In paragraph 2.1 of the judgment and order dated 24th July, 2006 it was held that Rule 57R(3)(ii)(b) does not contain any stipulation to the effect that credit of capital goods acquired on the lease can be availed only after reimbursement of the excise duty component to the financing company. The Appellate Tribunal noted that as far as IFCI is concerned, the agreement was converted into NonConvertible Debentures from July, 2001 and that till that date, the Respondent had not paid any lease rental. That is the reason why it was observed that there was no contravention of Rule 57R(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned judgment and order. 16. We have given careful consideration to the submissions. We have perused the show cause notice and other documents on record. The show cause notice proceeds on the footing that the Respondent availed of MODVAT credit in the sum of ₹ 13,69,64,121/ . It appears that the show cause notice is in respect of credit availed during the period from April, 1997 to March, 1998. 17. Firstly, it is necessary to advert to the findings recorded by the Commissioner in the Order in Original. We have carefully perused the Order in Original and in particular the findings recorded from paragraph 15 onwards. After perusing the notice, in paragraph 20, the Commissioner has recorded a finding of fact that though in the notice it is alleged that the credit of ₹ 13,69,64,121/ has been availed, the Annexures 'C' and 'D' quantifies the credit to the tune of ₹ 3,14,20,082/ by giving reference to RG 23C Part II entry numbers as well as the date of availment of such credit. There is a specific finding recorded that in absence of any evidence to the contrary, a finding will have to be recorded that the amount of credit availed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant documents required for the purpose of availing credit of the specified duty paid on such capital goods under rule 57T shall bear the name of the manufacturer along with that of the financing company. Sub Rule (3) basically provides that the credit of the specified duty paid on the capital goods shall be allowed to a manufacturer if the capital goods are acquired by the manufacturer on lease, hire purchase or loan agreement, from a financing company subject to following the procedure provided in clauses (i) to (iv) in SubRule 3. The basic entitlement to avail credit is laid down in Sub Rule 3. Clauses (i) to (iv) lay down the procedure for availing of a credit. Subclause (b) of clause (ii) incorporates a requirement of producing a certificate from the financing company to the effect that the duty specified on such capital goods has been paid by the said manufacturer to such financing company prior to payment of first lease rental installment, or first hire purchase installment or first installment of re payment of loan, as the case may be, along with a copy of the agreement entered into with the said financing company. The allegation in the show cause notice is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee could at best be liable for interest, if any applicable as per law, if the credit was utilized by debit entries before the eligibility de hors the certificate as per Rule 57R (3) (iii). 22. As far as the penalty is concerned, reliance was placed on the decision of Kapadia Enterprise Vs. Union of India 2013 (287) ELT 255 (Guj.) in paragraph 17, the Division Bench of this Court held thus : To our mind, the stand of the Department suffers from legal fallacy. Proviso to Section 11A in clear terms provides that normal period of limitation of one year for initiation of proceedings for recovery of excise duty would be extendable in cases where such duty has not been levied or paid or short levied or short paid or erroneously refunded by reason of fraud, collusion or any wilful mis statement or suppression of facts, or contravention of any of the provisions of the Act or the rules with intent to evade payment of duty by such person or his agent. The words 'such person or his agent' are extremely significant. The recovery is to be made from a person from whom such duty is not levied or has not paid or short levied or short paid or erroneously refunded. Extend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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