Custom, Excise & Service Tax Tribunal
Raymond Ltd vs Commissioner Of Central Excise, ... on 2 January, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL Nos. E/1963, 3002, 3003, 3090/04-Mum (Arising out of Orders-in-Original No. 12/CEX/2004 dated 16.4.2004, No.29/CEX/2004 dated 30.7.2004 and No. 06/KKS/2004-2005 passed by Commissioner of Central Excise & Customs, Nashik and Mumbai-III) For approval and signature: Honble Mr. S.S. Kang, Vice President Honble Mr. P.K. Jain, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
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Raymond Ltd. Appellant
Raymond Ltd.
R.K. Shriyan
Raymond Ltd.
Vs.
Commissioner of Central Excise, Mumbai-III/Nashik Respondent
Appearance:
Shri V. Sridharan, Sr. Advocate, for appellant
Shri B.S. Meena, Additional Commissioner (AR), for respondent
CORAM:
Honble Mr. S.S. Kang, Vice President
Honble Mr. P.K. Jain, Member (Technical)
Date of Hearing: 5.12.2013
Date of Decision: 2.1.2014
ORDER NO
Per: P.K. Jain
In this order, we are dealing with four appeals. Three appeals are filed by appellant, M/s. Raymond Ltd. The first appeal (appeal No. E/3090/04) pertains to Raymond Ltd. (Textile Division), Thane. The second appeal (appeal No. E/1963/04) pertains to Raymond Ltd., Nashik. The third appeal (appeal No. E/3002/04) also pertains to Raymond Ltd., Nashik. The fourth appeal is filled by Shri R.K. Shriyan, DGM, Raymond Ltd., Nashik. The first two appeals were decided by this Tribunal wherein part of the appeal was allowed and part was remanded to the Commissioner for re-adjudication. Revenue filed appeal against the said order of the Tribunal before the Honble Bombay High Court. The Honble Bombay High Court, in turn, has remanded the matter to this Tribunal for re-adjudication.
2. Common issue is involved in the first three appeals and fourth appeal is relating to penalty. The issue in brief is that the appellant had accumulated credit of additional duties of excise (textile and textile articles) (hereinafter referred to as AED(T&TA) as on 1.4.2000. In addition, certain credit of the said duty was availed during 1.4.2000 to 30.6.2001. This credit could not be utilized during the period of availment as the goods chargeable to AED(T&TA) was not cleared and hence duty liability was far less than the accumulated credit. The credit was, however, utilized during January 2003 to May 2003 for payment of additional duties of excise (goods of special importance) (hereinafter referred to as AED(GSI) and as also basic excise duty leviable under Central Excise Act, 1944. Thus the basic issue involved in the appeals is whether accumulated credit of AED(T&TA) can be cross utilized for payment of duty relating to AED(GSI) and for payment of basic excise duty during January 2003 to May 2003.
3. In the earlier round of litigation in relation to appeal No. E/1963/04, this Tribunal vide order No. A/459/WZB/2005/C-I/EB dated 10.5.2005, based upon this Tribunals judgment in the case of Reliance Industries Ltd. vs. CCE reported in 2003 (150) ELT 479 and Grasim Industries Ltd. vs. CCE reported in 2003 (54) RLT 288 (T), held that credit of AED(T&TA) can be utilized for payment of AED(GSI). As far as the appellants plea relating to utilization of AED(T&TA) for payment of basic excise duty is concerned, the matter was remanded to the Commissioner with certain directions. Similar order was passed in respect of appeal No. E/3090/04, vide order No. A/13 to 15/2007/C-I (EB) dated 11.12.2006. Revenue took the matter relating to allowing utilization of credit of AED(T&TA) for payment of duty under AED(GSI). The Honble High Court of Bombay vide order dated 29th March 2012 disposed of both the appeals as under:-
1. The above appeals were admitted on 10th July, 2008. After the above matter was argued for some time, counsel for both the parties state that by consent the orders impugned in the appeals be set aside and the appeals be restored to the file of CESTAT for de novo consideration in accordance with law. Accordingly, the orders impugned in both the appeals are quashed and set aside and the matters are restored to the file of CESTAT for de novo consideration.
2. Both the appeals are disposed off accordingly with no order as to costs.
3. All contentions of both the parties are kept open.
4. The learned Advocate for the appellant argued that before 1.3.2000 cross-utilization of AED(T&TA) was not permitted for purpose of payment of AED(GSI). However, new Cenvat Credit Rules were brought into force in 2000 and with effect from 1.4.2000 to 30.6.2001, due to transitional provisions contained in the new Rules, the appellant acquired right to use the said credit for purpose of payment of AED(GSI). During the period 1.4.2000 to 30.6.2001, cross-utilization was allowed as held by this Tribunal in the case of Reliance Industries (supra). The said decision has been further followed by the Tribunal in the case of Grasim Industries Ltd. vs. CCE, Indore (supra). In view of this legal position, the appellant acquired a vested right to use the accumulated credit as on 30.6.2001 for payment of AED(GSI). With effect from 1.7.2001, new Cenvat Credit Rules were introduced and in the new Cenvat Credit Rules, again the cross-utilization was not permitted. However, since they had already acquired the vested right to use the accumulated cenvat credit relating to AED(T&TA) for payment of AED(GSI), this right cannot be taken away by the amended Rule and the amended Rule did not have any retrospective effect and, therefore, they have correctly utilized the said accumulated credit of AED (T&TA) for payment of AED(GSI) and as also BED during the period January 2003 to May 2003. The learned Advocate also contended that the said amended provision cannot be given retrospective effect as the Government has no such power under Section 38A of the Central Excise Act. In support of his contention, he quoted the Honble Supreme Courts judgment in the case of Eicher Motors Ltd. vs. UOI reported in 1999 (106) ELT 3 (SC). This also follows from the decision of the Honble Supreme Court in the case of Govind Das reported in 1976 (1) SCC 906 and CIT vs. Shah Sadiq & Sons reported in 1987 (3) SCC 516.
5. The learned AR, on the other hand, opposed the contentions of the appellant. He argued that the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 and the Additional Duties of Excise (Goods of Special Importance) Act, 1957 operate in different fields and have different purposes. It would be seen from Section 3(2) of AED (T&TA) Act, 1978 that the proceeds of AED(T&TA) shall not be distributed among the States and the proceeds go to the Union of India. In the case of AED(GSI), Section 4 of AED(GSI) Act, 1957 very specifically provides that part of the net proceeds of additional duty collected during a financial year is required to be distributed among the States. The learned AR further argued that in view of this position, cross-utilization of cenvat credit of AED(T&TA) is not allowed since the inception of Cenvat Credit Rules. He further argued that till 1.4.2000, this was specifically disallowed vide para 2 of Notification No.21/1999-CE(NT) dated 28.2.1999. The learned AR further argued that in 2000, Rules relating to cenvat credit on inputs and capital goods were redrafted and the redrafted Rules were brought into the Central Excise Rules vide Notification No.11/2000-CE(NT) dated 1.3.2000 as amended. He further argued that sub-rule (2) of Rule 57AB specifically stated that credit in respect of AED(T&TA), AED (GSI) and additional duty under Section 3 of the Customs Tariff Act shall be utilized only towards payment of duty of excise leviable under the said AED(T&TA), Act or under the said AED(GSI) Act. In view of this position, even during this period, cross-utilization of AED(T&TA) was not permitted. Rule 57AG provided for the transitional provision which saved the accumulated credit and provided that the said credit can be utilized in accordance with these Rules (new Rules). The learned AR further argued that in 2001 separate Cenvat Credit Rules were notified by the Government (which were hitherto part of Central Excise Rules) and Rule 3(6)(b) specifically stated for utilization of AED(T&TA) for purpose of AED(T&TA) and here again, the new transitional provision stated that the accumulated credit shall be allowed and utilized in accordance with these Rules. From the legislative history as also the purpose for which AED(T&TA) is collected, it is abundantly clear that credit of AED(T&TA) can be utilized only for purpose of payment of AED(T&TA). He further argued that under the circumstances, there cannot be any vested right to the appellant. The appellant has utilized the credit in 2003 and as per the Rules existing at that point of time, AED(T&TA) could have not been utilized for payment of any other duty. The learned AR further argued that the decision in Reliance Industries (supra) was challenged by the department. An application was made to the Tribunal to refer the point of law to the Honble Gujarat High Court, which was turned down. However, thereafter the department filed reference application to the Honble High Court of Gujarat and the Honble High Court of Gujarat directed the Tribunal to make a reference to the Honble High Court. The matter is pending thereafter. Similarly, in the case of Grasim Industries Ltd. the department requested the Tribunal to make a reference to the Honble High Court of Madhya Pradesh at Indore. The Tribunal refused to make a reference. Thereafter the department approached the Honble High Court and the Honble High Court, in turn, has directed the Tribunal to frame the question of law and refer to it. The matter is pending there. He further stated that these facts were brought to the notice of the Honble Bombay High Court in pursuance of the decision of this Tribunal relating to the first two appeals and after hearing the argument for some time, the matter has been remanded to this Tribunal. In view of this position, this Tribunal should decide the matter without getting influenced by the decision of the Tribunal in the case of Reliance Industries (supra) and Grasim Industries (supra) and do not represent the law correctly. Both the decisions are under cloud. The learned AR further argued that keeping in view the legislative intent and purpose of collecting AED(T&TA), it was an established practice of the whole of the industry not to utilize AED(T&TA) for any other purpose. Even during the amended Rule, i.e. from 1.4.2000 to 30.6.2001, AED(T&TA) was not being used for any other purpose, even by the present appellant. It was only consequent to the Tribunals decision in the case of Reliance Industries (supra) that the appellant decided to use the accumulated credit for purpose other than payment of AED(T&TA). The learned AR further quoted this Tribunals judgment in the case of K.G. Denim Ltd. vs. CCE, Salem reported in 2008 (222) ELT 464, wherein the Tribunal has correctly interpreted the Rule and had held that AED(T&TA) cannot be used for any other purpose. Similar view has been taken by this Tribunal in the case of Laxmi Suitings vs. CCE, Jaipur-II reported in 2008 (232) ELT 864. Similar view has been taken, though at the stay stage, by this Tribunal in the case of Arviva Industries (India) Ltd. vs. CCE, Belapur reported in 2013-TIOL-225-CESTAT-MUM. As far as the appellants contention that they have acquired a vested right and they can utilize the accumulated credit as per the law prevalent in 2000 to 2001, even in year 2003, the learned AR quoted the Honble Supreme Courts judgment in the case of National Engineering Industries vs. CCE, Jaipur reported in 2005 (188) ELT 471 (SC). In the said case, the Honble Supreme Court has very categorically held that the law prevalent at the time has to be applied. In this case, refund was pertaining to the period when the doctrine of unjust enrichment was not brought into the statute book. However, when the refund was being granted, the principles of unjust enrichment was brought into the law and the Honble Supreme Court has categorically held that the refund claim has to be examined with reference to the new law. The learned AR further stated that a review petition against the said judgment was also dismissed by the Honble Supreme Court. He stated that in view of this decision, even if it is presumed that during the period 2000 to 2001, the appellant was entitled to use (which itself is incorrect) the said credit for payment of AED(GSI), the same cannot be made applicable in January to May 2003 when the law specifically prohibited the same. In case of the appellant, majority of the accumulated credit was pertaining to the period before March 2000 wherein the law specifically prohibited. Thus, both at the time of taking the credit as also at the time of utilization, the prohibition existed. In view of the above position, the learned AR stated that the appellant has no case and all the appeals should be dismissed. Ld. AR also submitted that in case of Reliance Industries Ltd. (supra), credit was availed and utilized during April 2000-May 2001, unlike the present case and is therefore distinguishable on this count.
6.1 We have considered the rival submissions very carefully. In order to properly appreciate the issue in hand, it will be appropriate to see the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, the Additional Duties of Excise (Goods of Special Importance) Act, 1957 as also the legislative history relating to modvat/cenvat credit. Additional Duties of Excise (Textiles and Textile Articles) Act was introduced by an ordinance by the Government with effect from 4.10.1978. Later on, the said ordinance was replaced by the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. Statement of Objects and Reasons while introducing the Additional Duties of Excise (Textiles and Textile Articles) Bill, 1978, read as under:-
STATEMENT OF OBJECTS AND REASONS In pursuance of the textile policy statement announced in Lok Sabha on the 7th August, 1978, the obligation on cotton textile mills to produce controlled cloth has been removed from 1st of October, 1978. According to the said policy announcement, the financial burden resulting therefrom was to be borne by the entire textile industry in such a manner that there would not be any burden on the public exchequer. The manner of sharing of the burden by the textile industry was considered by the Government and it was decided that a levy in the nature of an additional excise duty at the rate of 10 per cent of the effective excise duty on specified products of textile industry could bring in the required amount of funds to subsidise production of controlled cloth for the weaker sections of the society. With the removal of the obligation of production of controlled cloth by cotton textile mills from 1st October, 1978, it became necessary to impose the levy immediately so as to minimize the loss to the exchequer consequent on the outgo as subsidy.
2. Accordingly, the President promulgated the Additional Duties of Excise (Textiles and Textile Articles) Ordinance, 1978 (4 of 1978), which came into force on 4th October, 1978. The Ordinance imposed an additional duty of excise at 10 per cent of the amount of excise duty chargeable under the Central Excises and Salt Act, 1944, read with any notification issued by the Central Government in relation to the said excise duty, in respect of the goods specified in the Schedule to the said Ordinance.
3. The Bill seeks to replace the provisions of the Ordinance.
NEW DELHI; H.M. PATEL The 14th November, 1978 As the Act is very brief, the same is reproduced as under:-
ADDITIONAL DUTIES OF EXCISE (TEXTILES AND TEXTILE ARTICLES) ACT, 1978 (40 OF 1978) [6th December, 1978] An Act to provide for the levy and collection of additional duties of excise on certain textiles and textile articles.
Be it enacted by Parliament in the Twenty-ninth Year of the Republic of India as follows: Short title and commencement.
1. (1) This Act may be called the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978.
(2) It shall be deemed to have come into force on the 4th day of October, 1978.
Definition.
2. In this Act, cotton fabrics silk fabrics woollen fabrics man-made fabrics and wool tops shall have the meanings respectively assigned to them in Item Nos. 19, 20, 21, 22 and 43 of the First Schedule to the Central Excises and Salt 1 of 1944 Act, 1944.
Levy and collection of additional duties of excise on certain textiles and textile articles.
3. (1) When goods of the description mentioned in the Schedule chargeable with a duty of excise under the Central Excise Act, 1944 (1 of 1944), read with any notification for the time being in force issued by the Central Government in relation to the duty so chargeable (not being a notification providing for any exemption for giving credit with respect to, or reduction of duty of excise under the said Act on such goods equal to, any duty of excise under the said Act, or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), already paid on the raw material used in the production or manufacture of such goods), are assessed to duty, there shall be levied and collected a duty of excise equal to fifteen per cent of the total amount so chargeable on such goods.
(2) The duties of excise referred to in sub-section (1) in respect of the goods specified in the Schedule shall be in addition to the duties of excise chargeable on such goods under the Central Excise Act, 1944 (1 of 1944), or any other law for the time being in force and shall be levied for the purpose of Union and the proceeds thereof shall not be distributed among the States.
(3) The provisions of the Central Excise Act, 1944 (1 of 1944), and the rules made thereunder, including those relating to refunds and exemptions from duties, shall, so far as may be, apply in relation to the levy and collection of the duties of excise leviable under this section in respect of any goods as they apply in relation to the levy and collection of the duties of excise on such goods under that Act or those rules.
Repeal and saving.
4. (1) The Additional Duties of Excise (Textiles and Textile Articles) Ordinance, 1978 (4 of 1978), is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken under the Ordinance so repealed shall be deemed to have been done or taken under the corresponding provisions of this Act.
THE SCHEDULE (See Section 3)
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S.No. Description of goods
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(1) (2)
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1. Man-made fibres, other than mineral fibres man-made filament yarns, cellulosic spun yarn and non-cellulosic wastes, all sorts as described in Item No.18 I, 18 II, 18 III and 18 IV respectively of the First Schedule to the Central Excises and Salt Act, 1944.
2. Cotton yarn, all sorts described in Item No.18A of the First Schedule to the Central Excises and Salt Act, 1944.
3. Woollen and acrylic spun yarn as described in Item No.18B of the First Schedule to the Central Excises and Salt Act, 1944.
4. Non-cellulosic spun yarn as described in Item No.18 E of the First Schedule to the Central Excises and Salt Act, 1944.
5. Cotton fabrics.
6. Silk fabrics.
7. Woollen fabrics.
8. Man-made fabrics.
9. Wool tops. Section 3(2) very specifically provides that the said levy is being levied for purposes of the Union and the proceeds thereof shall not be distributed among the States. Further, if we see the schedule, the said Act mainly covers fibre, yarn and specified type of fabrics. These items are even otherwise chargeable to basic excise duty. In addition, AED(GSI) is also chargeable.
6.2 The Additional Duties of Excise (Goods of Special Importance) Act, 1957 was introduced in 1957 with a view to collect duties of excise on certain commodities in lieu of sales tax. It is because of this reason that AED(GSI) collected is required to be distributed among various States. Section 4 of the ADE (GSI), 1957 Act is as under:-
4. Distribution of additional duties among States. During each financial year, there shall be paid out of the Consolidated Fund of India to the States in accordance with the provisions of the Second Schedule such sums representing a part of the net proceeds additional duties levied and collected during that financial year, as are specified in that Schedule. Keeping in view the fact that AED(T&TA) is levied exclusively for purposes of the Union while AED(GSI) is mainly for purposes of distribution to the States, the cross-utilization of credit of AED(T&TA) for payment of any other duties of excise was not allowed from the time textile industry has been brought under the Modvat/Cenvat Scheme.
6.3 Till March 2000, Central Excise Rules 57A 57G governed the Modvat Credit Rules. Notification No.21/1999-CE(NT) dated 28.2.1999 was issued in exercise of the powers conferred under Rule 57A of the Central Excise Rules, 1944. Clause 2 of the said Notification reads as under:-
2. Credit of specified duty paid on the inputs may be utilized for payment of duty of excise for any of the purposes mentioned in sub-rule (12) or rule 57F of the said rules subject to the restrictions mentioned below, namely:-
(a) credit of specified duty, in so far as it relates to duty paid under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978) or the equivalent additional duty paid under section 3 of the Customs Tariff Act, 1975 (51 of 1975), shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act;
(b) credit of specified duty, in so far as it relates to duty paid under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) or the equivalent additional duty paid under section 3 of the Customs Tariff Act, 1975 (51 of 1975), shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Goods of Special Importance) Act; and .. ..
From the reading of Rule 57F(12) and the above mentioned clause, it is very clear that there was a specific restriction to utilize the credit of AED(T&TA) for payment of AED(T&TA) alone. Similarly, credit of AED(GSI) was to be utilized only for payment of AED(GSI). The legislative intent was clear. This was also the understanding of the textile industry and the Revenue. With effect from 1.4.2000, the Central Excise Rules relating to credit of duty were redrafted/re-casted and the new Rules included were self-contained inasmuch as various Notifications governing the subjects were also merged in the new Rules. Rule 57AA defined various terms. Rule 57AB specified that a manufacturer of final product shall be allowed to take credit of various types of specified duties. Clause (iii) of Rule 57AB(1) specifically listed additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. Similarly, clause (iv) specifically listed additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Thus, the credit of both AED(T&TA) as also AED(GSI) were allowed. Further, Rule 57AB(1)(b) provided as under:-
(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. Rule 57AB(2) further read as under:-
(2) Notwithstanding anything contained in sub-rule (1) - (a) credit of duty in respect of inputs or capital goods produced or manufactured-
(i) in a free trade zone and used in the manufacture of the final products in any other place in India; or
(ii) by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or Software Technology Parks and used in the manufacture of the final products in any place in India, shall be restricted to the extent which is equal to the additional duty leviable on like goods under section 3 of the Customs Tariff Act, 1975 paid on such inputs;
(b) credit in respect of-
(i) the additional duty of excise under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);
(ii) the additional duty of excise under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957); and
(iii) the additional duty under section 3 of the Customs Tariff Act, 1975, equivalent to the duty of excise specified under clauses (i) and (ii) above shall be utilised only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or under the said Additional Duties of Excise (Goods of Special Importance) Act, on any final products manufactured by the manufacturer or for payment of such duty on inputs them-selves if such inputs are removed as such or after being partially processed. (Emphasis supplied) Thus, the above mentioned Rule provided various restrictions on utilization of cenvat credit on various types of duties. While re-issuing the said Rules, there did not appear to be any intention to permit cross-utilization of AED(T&TA) for payment of AED(GSI) or vice versa. The words under the said Act have been used twice and separately for AED(T&TA) and AED(GSI). Even the circulars issued at the time of introduction of new Rules did not indicate any intention to permit cross-utilization of AED(T&TA). Rule 57AG governs the transitional provision. Sub-rule (1) of the said Rule reads as under:-
(1) Any amount of credit earned by a manufacturer under rules 57A, 57B or 57Q, as they existed prior to 1st day of April, 2000 and remaining unutilised on that day shall be allowable as CENV AT credit to such manufacturer under these rules, and be allowed to be utilised in accordance with these rules. In 2001, the Government decided to frame separate Cenvat Credit Rules (which were hitherto part of Central Excise Rules) i.e. the Cenvat Credit Rules, 2001. Rule 3 listed various commodities in respect of which cenvat credit would be allowed. Sub-rule (3) of Rule 3 again provides that cenvat credit may be utilized for payment of any duty of excise on any final product. However, sub-rule (6) of Rule 3 puts restriction on the utilization/cross-utilization of different types of duties. Sub-rule (6) reads as under:-
(6) Notwithstanding anything contained in sub-rule (I),-
(a) CENVAT credit in respect of inputs or capital goods produced or manufactured, -
(i) in a free trade zone or a special economic zone and used in the manufacture of the final products in any other place in India; or
(ii) by a hundred per cent. export-oriented undertaking or in Electronic Hardware Technology Park or Software Technology Park and used in the manufacture of the final products in any place in India, shall be restricted to the extent which is equal to the additional leviable on like goods under section 3 of the Customs Tariff Act, 1975 (51 of 1975) paid on such inputs or capital goods;
(b) CENVAT credit in respect of -
(i) the additional, duty of excise under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978 (40 of 1978);
(ii) the additional duty of excise under section 3 of the Additional Duties of Excise (Goods of Special importance) Act, 1957 (58 of 1957);
(iii) the National Calamity Contingent duty under section 136 of the Finance Act, 2001 (14 of 2001); and
(iv) the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), equivalent to the duty of excise specified under clauses {i), (ii) and (iii) above, shall be utilized only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or under the said Additional Duties of Excise (Goods of Special Importance) Act, or the National Calamity Contingent duty under the said section 136 of the Finance Act. 2001(14 of 2001) respectively, on any final products manufactured by the manufacturer or for payment of such duty on inputs themselves if such inputs are removed as such or after being partially processed. It will be seen from the said restriction that additional duties of excise (textiles and textile articles) can be used only for payment of additional duties of excise (textiles and textile articles). Similarly, credit of AED(GSI) can be used only for payment of AED(GSI). Similar is the position in respect of National Calamity Contingent duty. Even the credit of NCC duty can be utilized only for payment of NCC duty. To our mind, the said provisions have specific purpose. These duties are being collected with certain objectives and are required to be accounted for under that head and also used for that purpose. In case credit of such duty is allowed to be used for duty liability of other type, the quantum and purpose of collecting the said duties will get defeated/distorted. For example, if credit of AED(T&TA) is allowed to be used for payment of AED(GSI), the collection of AED(GSI) will come down by an amount equivalent to the cross-utilization of AED(T&TA). Obviously, this will distort the whole collection system. Similar will be the position if credit of NCC duty is allowed to be used for payment of duty liability under AED(T&TA) or AED(GSI). Further, it is also important that there should not be any cascading effect in respect of even individual duties. For example, if AED(T&TA) collected at the fibre stage and again at the yarn or fabric stage, then there would be cascading effect of this levy. In order to balance out the two objectives, the law provided for taking the credit and also has put restriction on utilization of such credit to the respective field. Rule 9 of the Cenvat Credit Rules, 2001 deals with the transitional provisions and reads as under:-
9. Transitional provision. - (1) Any amount of credit earned by a manufacturer under the Central Excise Rules, 1944 as they existed prior to the 1st day of July, 2001 and remaining unutilised on that day shall be allowable as CENVAT credit to such manufacturer under these rules, and be allowed to be utilised in accordance with these rules. Thus w.e.f. 1.7.2001, that rules very clearly stated that accumulated credit has to be used as per new Rules. Thus there is no question of utilizing the accumulated credit of AED(T&TA) for purpose of payment of duty other than AED(T&TA).
6.4 In our view if at any point of time Central Excise Rules/Cenvat Credit Rules permit cross-utilization of AED(T&TA) to AED(GSI), the same will be in conflict with Section 3(2) of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 and Section 4 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and would therefore require to be struck down as Rules cannot be in conflict with purposes of the Acts.
7. In view of the above analysis, we have no hesitation in our mind that credit of AED(T&TA) was all along allowed to be utilized only for payment of AED(T&TA) and for no other purpose. We also note that even during the period 2000 to 2001, Rule 57AB(2)(b) used the word said Additional Duties of Excise (Textiles and Textile Articles) Act, or under the said Additional Duties of Excise (Goods of Special Importance) Act. Thus, the word said was used twice and separately for two types of additional excise duty and, therefore, in our view, AED(T&TA), even during this period, could have been used only for payment of AED(T&TA) and not for cross purpose. We also note that in the case of Reliance Industries (supra), the credit availment as well as utilization happened during the period October 2000 to June 2001. These availment and utilization both have taken place during the life of Rule 57AB(2)(b). In the present case, admittedly, a major portion of the credit was accumulated before the said Rules came into force and all the credit accumulated before April 2000 as also accumulated during April 2000 June 2001 was utilized only during January to May 2003. In May 2003, the Cenvat Credit Rules, 2002 were applicable and Rule 3(6)(b) very specifically prohibited cross-utilization of the credit. We are in agreement with the learned ARs contention that utilization of the credit will be governed by the law as it stood at the time of utilization. Similarly, availment of credit will be governed by the law on the date of availment. We have gone through the Honble Supreme Courts judgment in the case of National Engineering Industries (supra). The facts of this case are similar to the present case though relating to refund. The Honble Supreme Court in the said case has observed as under:-
3.?The period for which refund is claimed is from 1976-1977, 1977-1978 and 1978-1979. However, it appears that there was a dispute between the Appellants and the Respondent as to how the benefit under Notification No. 198/76-C.E., dated 16th June, 1976 was to be calculated. This dispute was ultimately decided by CEGAT in favour of the Appellants. The claim for refund had then to be worked out. Pursuant to the decision of CEGAT, the Appellants claims for refund were taken up for consideration in 1993. By that time Section 11-B had been amended and the doctrine of unjust enrichment had been incorporated in Section 11-B. Thus even though the Appellants refund claims were allowed, refund was not granted to them on the ground that they had recovered amounts from their purchasers. The amounts were directed to be credited to the Fund instituted for that purpose.
4.?It is submitted that the claim for refund is based upon Notification No. 198/76-C.E., dated 16th June, 1976. It is submitted that under this Notification the benefit could only become available at the end of the year as it had to be worked out as to what was the base clearances and the excess clearances. It was also submitted that during that period Rule 173(I) did not contemplate any refund but an automatic adjustment between the Department and the Assessee, in the account of the Assessee. It was submitted that under these circumstances the doctrine of unjust enrichment should not be applied. It was submitted that the law prevalent at that time should be applied. In support of this submission reliance was placed upon the decision of this Court in the case of M.R.F. Ltd. v. Collector of Central Excise, Madras reported in 2004 (164) E.L.T. 383 (S.C.).
5.?There can be no dispute with the proposition that the law prevalent at the relevant time has to be applied. It is on this very principle that the refund has not been granted and question of grant of refund arose actually only after the decisions of the CEGAT. Till then there was a dispute as to the manner in which the benefit was to be worked out. By the time the claim for refund were taken up for consideration, Section 11-B had already been amended. It now provided that where the amounts had already been recovered from customers, no refund could be made. The review petition against the said judgment of the Honble Supreme Court was also dismissed. We are of the view that the ratio of the said judgment is equally applicable in the facts and circumstances of the present case. The learned Advocate for the appellant has quoted the Honble Supreme Courts judgment in the case of Eicher Motors (supra). We have gone through the said judgment. The facts of that case are entirely different. There, the petitioner has certain credit which, by an amending rule, was ordered to be lapsed and it is in this context that the Honble Supreme Court has held the said rule as null and void. Here, there is no such thing. The learned Advocate for the appellant has quoted the judgment of the Honble Supreme Court in the case of Govind Das (supra). We have gone through the said judgment. In the said case, a HUF was partner in two firms and assessments for the years 1950-51, 1954-55 and 1956-57 were completed under the old Income Tax Act, 1922, but the same were reopened after the Income Tax Act, 1961 came into force and the Income Tax department determined several liabilities on the members of the HUF. It is in this context that the Honble Supreme Court held that if the liability is so fastened, it would amount to retrospective operation of sub-section (6) of Section 171. Similarly, in the case of Shah Sadiq & Sons (supra), the Honble Supreme Court was dealing about the change in liability with reference to the old Income Tax Act of 1922 and the new Income Tax Act of 1961 and it is in that context that the Honble Supreme Court has held the right to carry forward loss is a vested right and remains unaffected by subsequent amendment. In the present case there was no such right undisputedly till March 2000. Even during the period April 2000 to June 2001 there was no such right and from July 2001, again the law specifically prohibited cross-utilization of the credit. It is only during April 2000 to 2001, the drafting of the law was interpreted in a particular way by this Tribunal, which is being claimed as a vested right. We have already noted such an interpretation is in conflict with the main Acts. In fact, even the appellant has this very understanding and was, therefore, not cross-utilizing the cenvat credit relating to AED(T&TA). When this Tribunals judgment in the case of Reliance Industries was published in 2002 the appellant decided to utilize the accumulated credit during January to May 2003. Under the circumstances, we are of the view that the theory of vested rights cannot be made applicable in the circumstances of the case and the circumstances would be appropriately covered by the Honble Supreme Courts judgment in the case of National Engineering Ind. (supra). We also note that this Tribunal has been taking a consistent view that cross-utilization of credit of AED(T&TA) is not permitted as is evident from this Tribunals judgment in the case of K.G. Denim Ltd. (supra). In the said judgment, the Tribunal has held as under:-
3. Having considered the cited provisions of law, we are in full agreement with the contention of learned SDR that the respondents right to utilise the credit of AED (T & TA) paid on inputs, for payment of duty of excise on their final products is governed by the provisions of sub-rule (6) of Rule 3 of the Cenvat Credit Rules, 2001. Sub-rule (1) of Rule 3 provides that a manufacturer of final products shall be allowed to take Cenvat credit of certain specified duties of excise/customs paid on any inputs or capital goods received in his factory on or after the first day of July, 2001. These duties are: (i) BED leviable under the Central Excise Act; (ii) Special Excise Duty leviable under the said Act; (iii) AED leviable under the Additional Duties of Excise (T &TA) Act; (iv) AED leviable under the Additional Duties of Excise (GSI) Act; (v) National Calamity Contingent Duty (NCCD) leviable under Section 136 of the Finance Act, 2001; and (vi) Additional Duty of Customs (CVD) leviable under Section 3 of the Customs Tariff Act. Sub-rule (3) reads as follows :-
The Cenvat credit may be utilised for payment of any duty of excise on any final products 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. Learned counsel has laid stress on the word any preceding duty of excise in the above sub-rule and has argued that credit of AED (T & TA) could be utilised for payment of any other kind of duty of excise. Learned SDR has contested this argument by referring to sub-rule (6).
Sub-rule (6), shorn of irrelevant clauses, reads as under :
Notwithstanding anything contained in sub-rule (1),
(a) .........
(b) Cenvat credit in respect of
(i) the additional duty of excise under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978;
(ii) the additional duty of excise under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;
(iii) the National Calamity Contingent duty under Section 136 of the Finance Act, 2001; and
(iv) the additional duty under Section 3 of the Customs Tariff Act, 1975, equivalent to the duty of excise specified under clauses (i), (ii) and (iii) above, shall be utilised only towards payment of duty of excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or under the said Additional Duties of Excise (Goods of Special Importance) Act, or the National Calamity Contingent duty under the said Section 136 of the Finance Act, 2001 respectively, on any final products manufactured by the manufacturer or for payment of such duty on inputs themselves if such inputs are removed as such or after being partially processed;
(c) .........
(d) ......... (emphasis added) It has been argued by learned Counsel to the effect that the non obstante clause in sub-rule (6) had nothing to do with sub-rule (3) and, therefore, the right of a manufacturer of final products to utilise Cenvat credit of any of the specified duties of excise paid on inputs, for payment of any duty of excise on any final products was not affected by anything contained in sub-rule (6). He has also referred to the corresponding provisions of the Cenvat Credit Rules, 2004. Sub-rule (4) of Rule 3 of the Cenvat Credit Rules, 2004 corresponds to sub-rule (3) of Rule 3 of the Cenvat Credit Rules, 2001. Sub-rule (7)(b) of the Cenvat Credit Rules, 2004 corresponds to sub-rule (6)(b) of the Cenvat Credit Rules, 2001. A conspicuous difference between Rule 3(6)(b) of the 2001 Rules and Rule 3(7)(b) of the 2004 Rules, pointed out by learned counsel, is that the non obstante clause of the latter reads: Notwithstanding anything contained in sub-rule (1) and sub-rule (4), whereas the non obstante clause of the former reads: Notwithstanding anything contained in sub-rule (1). The case of learned Counsel is that, had there been mention of sub-rule (3) [equivalent to sub-rule (4) of the 2004 Rules] in the non obstante clause of sub-rule (6) of Rule 3 of the 2001 Rules, it could have been reasonably contended by the Revenue that sub-rule (6)(b) of the 2001 Rules had overriding effect vis-a-vis sub-rule (3) of Rule 3 of the said Rules. According to learned Counsel, such overriding effect cannot be claimed by the Revenue under the 2001 Rules. Learned Counsel means to say that, while under the 2004 Rules a manufacturer of final products could utilise Cenvat credit of AED (T & TA) paid on inputs, only for the payment of the same kind of duty on his final products by virtue of the non obstante clause [containing mention of sub-rule (4)] of sub-rule (7) of Rule 3 of the said Rules, he could utilise similar credit for payment of any duty of excise on final products under sub-rule (3) of Rule 3 of the 2001 Rules, unaffected by anything contained in sub-rule (6) of the said Rule, there being no mention of sub-rule (3) in the non obstante clause of sub-rule (6). Though this argument might seem to be impressive superficially, it is found, on deeper analysis, to be inconsistent with the legislative purpose which is writ large on the scheme of the law embodied in the Cenvat Credit Rules.
4. It is settled law that a provision of law incorporating a non obstante clause containing mention of another provision has overriding effect. It was held to this effect, in the case of Jindal Poly Films Ltd. v. Commissioner of Central Excise, Meerut-II [2006 (198) E.L.T. 3 (S.C.)], by the Honble Supreme Court referring to Rule 57B(1) which read: Notwithstanding anything contained in Rule 57A, a manufacturer of final products shall be allowed to take credit of the specified duty on the following goods. It was held that the goods which had been specified under Rule 57B(1) had been given a special treatment different from the treatment given to the goods specified under Rule 57A as sub-rule (1) of Rule 57B opened with a non obstante clause. In the case of Indica Laboratories Pvt. Ltd. v. Commissioner of Central Excise, Ahmedabad [2007 (213) E.L.T. 20 (Tri.-LB)], a Larger Bench of this Tribunal took note of the non obstante clause in sub-section (2) of Section 4A reading Notwithstanding anything contained in Section 4 and held that the provisions of Section 4A were overriding in nature vis-a-vis those of Section 4.
The dispute in the present case revolves round the non obstante clause occurring in sub-rule (6) of Rule 3 of the Cenvat Credit Rules, 2001, which reads: Notwithstanding anything contained in sub-rule (1). The enacting part of sub-rule (6), relevant to the present case, is clause (b), which says that Cenvat credit in respect of (i) AED (T &TA); (ii) AED (GSI); (iii) NCCD and (iv) CVD shall be utilised only towards payment of AED (T &TA), AED (GSI) and NCCD respectively. Thus sub-rule (6)(b) provides for manner of utilisation of CENVAT credit of various duties of excise. On the other hand, sub-rule (1) is the main provision which confers the right to take Cenvat credit of specified duties paid on inputs and capital goods, on the manufacturer of final products. A sub-rule which provides for the manner of utilisation of Cenvat credit cannot override one which has created the very right to take such credit. This is because, unless credit is taken, it cannot be utilised. In other words, the non obstante clause occurring in sub-rule (6) cannot be construed as having given overriding effect to the provisions of the said sub-rule vis-a-vis sub-rule (1). [Had sub-rule (3) been mentioned instead of sub-rule (1) in the non obstante clause of sub-rule (6), it would have made sense]. It can only be ignored as superfluous. Therefore, we are of the view that clause (b) of sub-rule (6) of Rule 3 of the Cenvat Credit Rules, 2001 should be construed without reference to the non obstante clause occurring in the sub-rule.
Sub-rule (3) says that the Cenvat credit [allowed under sub-rule (1)] may be utilised for payment of any duty of excise on any final products 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. Sub-rule (6)(b), shorn of the non obstante clause, says that Cenvat credit in respect of (i) AED (T &TA); (ii) AED (GSI) and (iii) NCCD shall be utilised only towards payment of AED (T & TA), AED (GSI) and NCCD respectively. We find that, both the sub-rules deal with utilisation of Cenvat credit and that, while sub-rule (3) is in the nature of a general provision providing for utilisation of Cenvat credit for payment of any duty of excise, sub-rule (6) restricts utilisation of credit to payment of the same kind of duty of excise, that is, credit of AED (T &TA) to be utilised only towards payment of AED (T & TA) on final product. The legislative scheme is that the benefit provided under sub-rule (3) can be availed only to the extent permitted under the restrictive provision viz. sub-rule (6). SDR was right when he argued that the two sub-rules should be read together.
5. In the result, the appellants could have utilised Cenvat credit of AED (T &TA) only towards payment of the same kind of duty of excise i.e., AED (T &TA) in terms of Rule 3(6)(b) of the Cenvat Credit Rules, 2001. In fact, they utilised Cenvat credit of AED (T &TA) paid on their inputs, for payment of BED and AED (GSI) on their final products. This was not permissible in law. The appellants, therefore, do not have a case on merits.
8. In view of the above, appellants appeal (No. E/1963/04 and E/3090/04) in respect of cross-utilization of credit of AED(T&TA) for payment of AED(GSI) is rejected. The appellant is directed to pay the said amount in cash to Revenue. The appellant can take credit of the said amount of AED(T&TA) and can use it, if possible, for purpose allowed under the law. For the utilization of credit of AED(T&TA) for payment of BED, matter was remanded by the Tribunal to the Commissioner. Liability of interest and penalty (on proportionate basis) will also follow.
9. In appeal No. E/3002/04, we find that the appellant has utilized credit of AED(T&TA) for payment of AED(GSI). For the reasons stated for other two appeals, this is not permitted. Hence the appellants contention/appeal in this count is dismissed.
10. We note that BED has not even been grouped with AED(T&TA), AED(GSI) in para 2 of Notification No.21/1999-CE(NT) dated 28.1.1999 or Rule 57AB(2)(b) of the Central Excise Rules, 1944 (during 1.4.2000 to 30.6.2000) to Rule 3(6)(b) of the Cenvat Credit Rules, 2001 (or corresponding provision in the Cenvat Credit Rules, 2002). The case of BED is not even on as much footing as in case of AED(GSI).
11. In appeal No. E/3002/04, the appellant has cross-utilized AED(T&TA) for payment of BED also. We find that similar issue in respect of the other two appeals was remanded by the Tribunal for re-adjudication by the Commissioner. Normally, we would have remanded for this appeal also. We find that the matter is pending in the Tribunal for almost 10 years and keeping in view the subsequent judgments like that of K.G. Denim, Laxmi Suitings, Arviva Industries etc. as also our own analysis in this order, we do not find any meaningful purpose would be served by remanding this matter.
12. In view of the above analysis as also the view taken by this Tribunal in the above mentioned decisions, we do not find any case whatsoever, even during the period April 2000 to 2001 for utilization of AED(T&TA) for payment of basic excise duty. The appellants contention of recasting the payment details is rejected for the simple reason that on merits we have not even upheld the utilization of AED(T&TA) for purpose of AED(GSI) or BED. Moreover, even in 2002, this Tribunal in the case of Reliance Industries (supra) has held utilization of AED(T&TA) for purpose of AED(GSI) and not for payment of basic excise duty. In fact BED is not at all listed in Rule 57AG(2) and, therefore, there can be no doubt that such a cross-utilization was not permitted even at that time. Accordingly, we totally dismiss the appeal filed by the appellant vide appeal No. E/3002/04.
13. The appellant will pay the total amount including payment in cash along with interest and penalty. The appellant will be free to take credit and utilize, if possible, and in accordance with law.
14. As far as the penalty imposed on Shri R.K. Shriyan vide appeal No. E/3003/04 is concerned, the same is set aside in view of the fact that in earlier two appeals, the same has been set aside.
15. All the appeals are disposed of in above terms.
(Pronounced in Court on 2.1.2014) (S.S. Kang) Vice President (P.K. Jain) Member (Technical) tvu 1 29