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TMI Blog2024 (12) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... emchand Ltd., the respondent in this case has obtained central excise registration No. AACD1952BXM004 for manufacture of flavoured chewing tobacco. On the basis of an intelligence to the effect that the respondent has suppressed the fact of manufacture of an excisable commodity described by them as 'compound'. They cleared the said compound for captive consumption without payment of the duties of excise, additional duties of excise leviable under the said Central Excise Tariff Act, the additional duties of excise (Goods of Special Importance) Act and National Calamity Contingent Duty leviable thereon under sub-section (1) of Section 136 of the said Finance Act with the intent to evade duty leviable thereon, as they had full knowledge that they were availing benefit of exemption from the payment of whole of the duties as mentioned above under notification No. 8/2004-CE, dated 21.01.2004 as amended, in respect of final product namely branded flavored chewing tobacco/jarda scented tobacco wherein the said compound has been used as an input and they were not eligible for exemption from excise duty under notification No. 52/2002-CE, dated 17.10.2002 in respect of compound manufactured b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the appellants also filed one written argument and in the written arguments, the following assertions were made : "1. The intelligence was collected by the Officers of Central Excise, Shillong to the effect that the said respondents had suppressed the fact of manufacture of an accessible commodity, described by them as "compound". They cleared the said "compound" for captive consumption without payment of the duties of excise, additional duties of excise liable under the Central Excise Tariff Act, the Additional Duties of Excise (Goods of special importance) Act and National Calamity Contingent duty leviable there on under sub-section (1) of Section 136 of the Finance Act with the intent to evade duty leviable there on, as they had full knowledge that they were availing benefit of exemption from the payment of whole of the duties of excise, additional duties of excise liable under the Central Excise Tariff Act, the Additional Duties of Excise (Goods of special importance) Act and National Calamity Contingent duty leviable there on under sub-section (1) of Section 136 of the Finance Act under Notification No. 8/2004-CE dated 21.01.2004, as amended, in respect of final prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng their final product. Hence, notification no. 52/2002-CE is not available for the same. The relevant portion of the notification is reproduced below: Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products (other than those cleared either to a unit in a Free Trade Zone or to a 100% Export Oriented Undertaking or to a unit in an Electronic Hardware technology Park or Software Technology Parks), which are exempt from the whole of the duty of excise leviable thereon or are chargeable to "Nil" rate of duty. 9. The benefits of Notification No. 52/2002-CE dated 17.10.2002 cannot be denied on the Compound manufactured and captively consumed in manufacture of Chewing Tobacco which would have satisfied the conditions laid down in the notification no. 52/2002-CE but it failed to satisfy the conditions because they have not manufactured it in their factory and, as per available records, they have not manufactured "Raw Kimam" but they have purchased it as their purchase registers prove the same. If they had manufactured it in their factory, they would have intimated to the department as per the provisions pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as intermediate product as their mere intention is to avail the benefits of Notification No. 52/2002-CE and thus can evade the tax. If they have not mentioned it as intermediate product then they have to clear it as finished/final product where the duty is leviable which indeed is exempted under notification no. 8/2004-CE. The main mala fide intention of the respondents arises here, when the goods that are to be cleared as finished/final product, the event of levy of duty starts. For the payment of this duty, the respondents should have to utilize the Modvat/Cenvat they have got on their inputs used for manufacturing the finished/final product first and the rest of the duty is to be paid, but here it is exempted through notification No. 8/2004-CE subjected to certain conditions. 15. If they have cleared the said compound as final product, then they should have utilized the Modvat/Cenvat Credit got from their inputs and the rest of the duty should be paid. Here in the present cases if it is done so then the respondents have to invest very less amount in plant and machinery in a manufacturing unit which is located in the States of North East or can be invested in infrastructure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of the present appellants and as such, the appellants are not entitled to any relief in this appeal and as such, these appeals are liable to be dismissed with costs. He also referred different provisions of law and also few citations of the Hon'ble Apex Court and referred the written argument submitted on behalf of the respondent. The Hon'ble Court vide order dated 03.04.2024 admitted the appeals and framed the following substantial questions of law which provides as under: "(i) Whether CESTAT has misinterpreted the Notification No. 52/2002-CE dated 17.10.2002 under which the respondent claimed exemption for the intermediate product as the respondent has also again claimed exemption under Notification No.08/2004 dated 21.01.2004 and whether such exemption are permissible as per said two notifications ? (ii) Whether the respondent can avail exemption benefit under Notification No. 8/2004-CE, dated 21.01.2004 and also simultaneously avail exemption benefit under Notification No. 52/2002-CE dated 17.10.2002 i.e. 'double benefit' for the same product in question ? (iii) Whether the Hon'ble CESTAT committed gross error and illegality that the compound which was manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance (Department of Revenue) No. 32/99-Central Excise dated 8th July, 1997 and had continued its manufacturing activities after the 28th day of February, 2001 were granted the exemption from payment of the excise duty equal to the difference between the sum of basic excise duty, special excise duty and additional excise duty, payable, but for the exemption in the said Notification and the sum of basic excise duty, special excise duty and additional excise duty, paid, was to be utilized by the manufacturer only for investment in plant and machinery in a manufacturing unit which is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura a investment in infrastructure or civil works or social projects in the aforesaid states. The Notification clearly provided that the investment made in the said Notification shall not be allowed to be withdrawn before the expiry of ten years from the date on which the investment is made except in a case where the investment withdrawn is reinvested in the same manner as specified in the said notification, in any one of the States mentioned in the said Notification. [10] The Notification No. 8/2004-CE dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured namely 'chewing tobacco' manufactured by the Respondent was exempt from whole of the duty leviable thereon or were chargeable to "Nil" rate of duty. In fact, the similar product if manufactured by other manufacturers, who were not eligible to avail the benefit of Notification No. 8/2004-CE dated 21.01.2004 and the amended Notification No. 28/2004-CE dated 09.07.2004 would have been liable to pay the duty on the same product and thereby it cannot be said by any stretch of imagination that the product chewing tobacco manufactured by the Respondent was exempted from the whole of the duty of excise leviable thereon or are chargeable to "Nil" rate of duty. Rather, can be said that certain eligible manufacturing units are exempted from excise duty. [12] The Notification No. 52/2002-CE dated 17.10.2002 issued in exercise of the powers conferred under sub-Section (1) of Section 5A of the Act of 1944 read with sub-Section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and sub-Section (3) of Section 136 of the Finance Act, 2001. However, the proviso to the said Notification provided that the exemption was in respect of all goods falling und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f excise leviable thereon or are chargeable to "Nil" rate of duty" would man that a manufacture is not liable to duty at all and in such case, no duty can be levied or imposed and the manufacturer does not come within the purview at all. [15] The Respondent further submits that the liability to pay duty and actual payment of duty are conceptually different inasmuch as for the exemption an assessee would be required to pay duty in terms of the provision of the Act of 1944. Exemption presupposes a liability and unless there is liability, the question of exemption does not arise. Only when there is a levy, the question of payment of any duty would arise. [16] In course of his submission, Learned senior counsel for the respondent referred few citations. The Apex Court in the case of CCE Vs. National Tobacco Co. of India Ltd. reported in (1972)2 SCC 560 in paragraph 19 held as under: "19. The term 'levy' appears to us to be wider in its import than the term 'assessment. It may include both 'imposition' of a tax as well as 'assessment'. The term 'imposition' is gene rally used for the, levy of a tax or duty by legislative provision indicating the subject matter of the tax and the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the same was exempted, which meant that there was no liability to tax. The Apex Court rejected the argument of Respondent by holding in para 17. "17. Crucial question, therefore, is whether the appellant had any 'liability' under the Act.... The question of exemption arises only when there is a liability. Exigibility to tax is not the same as liability to pay tax. The former depends on charge created by the statute and the latter on computation in accordance with the provisions of the statute and rules framed thereunder, if any. It is to be noted that liability to pay tax chargeable under Section 3 of the Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. But for the exemption the dealer would be required to pay tax in terms of Section 3. In other words, exemption presupposes a liability. Unless there is liability, question of exemption does not arise. Liability arises in terms of Section 3 and tax becomes payable at the rate as provided in Section 12. Section 11 deals with the point of levy and rate and concessional rate." In CCE v. National Tobacco case reported in (1972) 2 SCC 56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder heading 24039990 with effect from 28.02.2005, it is eligible for the benefit of exemption Notification 8/2004-CE. The Respondent submits that the exemption under 8/2004-CE is applicable to compound as well. However, compound is not removed or cleared as such its identity gets merged in chewing tobacco. Thus, the compound gets cleared along with chewing tobacco. In fact Compound is classifiable as chewing tobacco and falls in the category of products specified under notification No. 8/2004-CE. The Respondent further submit that the exemption of the intermediatory product has been provided in Notification No. 52/2002-CE subject to the condition that the finished product is not exempted from whole of the duty of excise leviable thereon or are chargeable to "Nil" rate of duty. Since the finished products manufactured by the Respondent Company was not exempted from whole of the duty of excise leviable thereon or are chargeable to "Nil" rate of duty, the Respondent Company is entitled the benefit of Section 52 of the Act of 1944. The exemption in any case was a conditional exemption and thereby finished product namely chewing tobacco cannot be said to be by any stretch of imaginatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2004 as amended cannot be said to be by any stretch of imagination to have exempted the finished product manufactured by the Respondent Companies from whole of the duty of excise leviable thereon nor the finished product was chargeable to Nil rate of duty and thereby the Notification No. 52/2002-CE dated 17.10.2002 is not applicable in the present case. [22] The Respondent submit that the issues involved in the present case are squarely covered by the decision of the Division Bench of this Hon'ble Court in Union of India Vs. M/s Dharampal Satyapal Ltd. (Central Excise Appeal No. 1/2019), decided on 22.03.2021 wherein this Hon'ble Court after examining the Notification No. 8/2004-CE dated 21.01.2004 clearly held that the said exemption was a conditional exemption and that the Notification No. 8/2004-CE dated 21.01.2004 as amended cannot be seen as the Notification granting full exemption for payment of duty. This Hon'ble Court held that the said exemption was conditional on various requirements which limited the scope of the assessee to utilize the duty element so exempted, for any purpose at all and such exemption did not directly increase the profitability of the product sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "duty of excise" were used originally in the Act inter-changeably, namely, sometimes in plural and sometimes in singular. When the new term "CENVAT" came to substitute these terms as on 12 May 2000, in order to overcome the difficulty of replacing these words in the entire Act, Section 2A was introduced in the Act with effect from 12 May 2000 by Finance Act 10/2000, whereunder he expressions "duty", "duties", "duty of excise" and "duties of excise" were to be construed to include a reference to "Central Value Added Tax (CENVAT)" and as such the same clearly indicated that there could be no distinction between the phrases "duty", "duties", "duty of excise" and "duties of excise". Section 2A of the Central Excise Act, 1944 that was inserted by Finance Act 10/2000 w.e.f. 12th May 2000 is reproduced below: "24. Reference of certain expressions. In this Act, save as otherwise expressly provided and unless the context otherwise requires, references to the expressions "duty", "duties", "duty of excise" and "duties of excise" shall be construed to include a reference to "Central Value Added Tax (CENVAT)". [25] It was respectfully submitted that the singular use of the word "duty" cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the Tribunal was justified in holding that though auto cess and education cess were duties of excise, yet the goods on which they were paid, continued to be exempted goods as basic excise duty was not payable thereon held that the expression "duty of excise" as used in CENVAT Credit Rules itself includes the various duties and cesses including the education cess and auto cess, etc. as part of "Cenvat", which is an equivalent expression to "duty of excise" after the Central Excise Act was amended by introducing Section 2A therein. The Bombay High Court held that the expression "duty of excise" used in CENVAT Credit Rules does not, by its own force or on its own logic, lend to a distinction between basic duty of excise under the Act and special excise duties or cesses or other duties leviable under other enactments. IMPUGNED SHOW CAUSE NOTICE AND THE ORDER IN ORIGINAL ARE BARRED BY LIMITATION: The Respondents submit that the impugned show cause notice and the order in original are barred by limitation. The extension of period of limitation cannot be invoked in the present case as there was no suppression of facts with an intention to evade duty. The Respondent states that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he factory as such, once the condition of deposit of an amount equal to the duty payable, but for exemption under Notification No. 8/2004-CE stands satisfied for chewing tobacco, the same condition gets automatically satisfied for compound captively consumed as well. This is for the reason that the amount of duty payable on compound, but for the exemption contained in Notification No. 8/2004-CE, is nothing but ZERO, When the amount to be invested for availing of exemption under Notification No. 8/2004-CE, is calculated the amount is to be calculated as if compound and chewing tobacco are both taxable in a regime where Notification No. 8/2004-CE is not in existence. This follows quite clearly from the use of the words, "but for the exemption in this notification" used in Notification No. 8/2004-CE. Thus, the amount to be deposited/invested for compound keeping this in mind, comes to be ZERO because in a tax regime in which 8/2004-CE is non-existent, the intermediate compound having been used captively in dutiable chewing tobacco gets he benefit of duty exemption under Notification No. 52/2002-CE and thus no amount of duty is payable on compound. Thus, the exemption to chewing tobacc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framed on the issue of exemption of excise duty or suppression of material facts before the assessing authorities looking the matter from the question of limitation or of any other technicalities, this Court feels that for whatever the reasons the inspecting or audit authorities who are supposed to conduct periodical/regular audits and inspections could have raised the demand and also issued show cause notice on yearly basis but not acting upon for years together and to the surprise of the respondent, notices are issued and demand is raised before a concern to this Court and a huge amount of excise duty is important. This Court on the ground of technicalities and for certain laches committed by the department officials as pointed out by the respondent counsel is not inclined to decide the case in favour of the respondent. But keeping in mind, the quantum of excise duty and its ancillary duties which are in total of Rs. 98,03,22,312/- approx., this Court feels that the matter needs consideration as to where the things are properly attended or not. [27] Considering the argument of the respondent Learned senior counsel that 'compound' i.e. kimam is purchased from the suppliers and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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