TMI Blog2009 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... him in the above rules is justified in passing an order on 6-1-2009 by directing the petitioner to avail credit of duty paid on the inputs but restraining them from utilising the said credit in paying duty on final products manufactured out of the duty paid inputs during the period from 16-1-2009 to 15-7-2009, is the question raised in this petition. 2. The petitioner manufactures aluminium products falling under Chapter Heading 76 of the Central Excise Tariff Act, 1985. 3. On 17/18 th July, 2008 the factory premises of the petitioner was visited by the Officers of the Central Excise department wherein various records were withdrawn under a panchanama and statements of several employees of the petitioner were recorded. 4. On the basis of the said documents and the statements recorded, the excise officers were of the prima facie opinion that the petitioner had grossly undervalued the assessable value of the aluminium conductors manufactured and sold by them by showing lesser sale price and highly inflated freight charges. It was noticed that the declared sale price of the final product was less than the cost of production and the freight charges recovered by the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid order, the present petition is filed. 9. Mr. Shreedharan, learned counsel appearing on behalf of the petitioner has restricted his argument to challenge the validity of the impugned rules and the order dated 6-1-2009 to the extent it relates to restraining the petitioner from utilising the Cenvat credit during the period from 16-1-2009 to 15-7-2009. 10. Mr. Shreedharan firstly submitted that the impugned Rules are ultra vires the Central Excise Act, 1944 because the said Rules are framed far in excess of the power conferred upon the Central Government under the Central Excise Act, 1944. He submitted that in the guise of regulating the provisions relating to the Cenvat credit, the Central Government cannot deny utilisation of the credit that too before completion of the investigation. In this connection, he relied upon the Judgment of the Apex Court in the case of Kunj Beharilal v. State of Himachal Pradesh reported in 2000 (3) S.C.C. 40. 11. As regards the allegation of undervaluation, Mr. Shreedharan submitted that the sale price received as well as the freight charges recovered have been properly recorded in the books of accounts maintained by the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restriction regarding utilisation of Cenvat credit for 6 months can be enforced from the date of Judgment and in that case no prejudice would be caused to the respondents. Accordingly, Mr. Shreedharan submitted that it is a fit case for admission and grant of interim relief. 14. Mr. M.I. Sethna, learned senior Advocate appearing on behalf of the respondents, on the other hand vehemently argued that the Writ Petition filed by the petitioner even before completion of investigation and the issuance of the show cause notice is totally premature and ought not to be entertained. He submitted that there is enough evidence on record to form a prima facie opinion that the petitioner had attempted to evade duty to the tune of Rs.2 crores and had wrongfully availed Cenvat credit of Rs.1.59 crores on inputs without actually receiving the inputs. In these circumstances pending investigation the member, CBEC is justified in passing the impugned order in exercise of the powers conferred under the impugned rules. After six months period is over the petitioner is entitled to utilise the accumulated credit and, therefore, no fault can be found with the impugned order. 15. Mr.Sethna submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty paid on inputs while paying the excise duty on the final products. Section 37 of the Central Excise Act empowers the Central Government to frame rules to implement the provisions of the Act. The question therefore to be considered is, whether the rule framed by the Central Government to restrain a manufacturer from utilising the Cenvat credit on a prima facie opinion formed by the Member, CBEC regarding evasion of duty or wrongful availment of the Cenvat credit, even before completion of investigation and even before issuance of a show cause notice can be said to be a rule framed for implementing the provisions of the Central Excise Act? Whether denying the right of a manufacturer to utilise the credit of duty paid on inputs under the impugned rules amounts to imposing penalty even before adjudication? Can penalty be imposed on a manufacturer even before he is found to be guilty in the adjudication proceedings? Can it be said that the manufacturers who are prima facie found to have attempted to evade duty form a separate class so that they can be penalised even before adjudication? 20. Restraining a manufacturer from utilising the Cenvat credit has serious civil consequenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the petitioner to JSK Industries Ltd. and back, the undisputed fact is that the final product namely, aluminium conductors manufactured by the petitioner has been cleared on payment of excise duty. Thus, prima facie, it appears that in the present case, the duty has been paid on the inputs as well as the final product. 23. According to the revenue JSK Industries could not manufacture aluminium stranding wires during March-April, 2008 because there was no electric connection. According to the petitioner, the manufacture was carried out with the help of D.G. sets. Assuming that the JSK Industries could not have manufactured the intermediate product during the period from March - April, 2008, it may still be a case of the revenue neutral because admittedly JSK Industries has paid duty of Rs.1.59 crores on the inputs allegedly sold by them to the petitioner. As noted earlier, it is not in dispute that duty paid aluminium ingots were purchased by the petitioner-JSK Industries. Thus, excise duty actually paid on aluminium ingots is Rs.1.40 crores. Excise duty actually paid on aluminium stranding wires is Rs.1.59 crores and admittedly aluminium conductors manufactured by the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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