Madras High Court
Unirols Airtex vs The Assistant Commissioner Of Central ... on 13 August, 2013
Author: T.S.Sivagnanam
Bench: R.Banumathi, T.S. Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 13..08..2013
C O R A M
The Honourable Mrs. Justice R.BANUMATHI
and
The Honourable Mr. Justice T.S. SIVAGNANAM
Writ Appeal No.1607 of 2013 &
M.P.No.1 of 2013
Unirols Airtex
rep. by its Propx:Meena Boopalan .. Appellant
versus
1.The Assistant Commissioner of Central Excise
Coimbatore Division IV
1237, ELGI Building
Trichy Road, Coimbatore 641 018.
2.The Superintendent of Central Excise
Coimbatore IV-C-Range
Singapore Plaza, No.333, Cross Cut Road
Coimbatore 641 012.
3.The Inspector of Central Excise
Coimbatore Division IV
1237, ELGI Building
Trichy Road, Coimbatore 641 018. .. Respondents
Prayer : Memoranda of Grounds of Appeals filed under Clause 15 of the Letters Patent against the order of a learned single Judge of this Court dated 26.6.2013 passed in Writ Petition No.29623 of 2012.
For Appellants : Mr.K.Jayachandran
For Respondents : Mr.S.Thirumavalavan,
- - - - -
J U D G M E N T
R.BANUMATHI, J & T.S.SIVAGNANAM, J This Appeal is directed against the order dated 26.6.2013, in W.P.No.29623 of 2012.
2.The writ petitioner is the appellant herein. The Writ Petition was filed for issuance of a writ of certiorarified mandamus to quash the proceedings of the second respondent dated 2.8.2012 and detention mahazar drawn by the second and third respondents dated 26.10.2012 and for a direction to permit the appellant to avail the Cenvat credit facility for future clearances after providing reasonable opportunity to the petitioner, by issuing show cause notice for violation of Rule 8 (3-A) of the Central Excise Rules.
3.The learned single Judge dismissed the Writ Petition, holding that the second respondent was justified in directing the appellant to pay the entire duty amount with interest without utilising the Cenvat credit. Aggrieved by the said order, the present appeal has been preferred.
4.Before we proceed to consider the contentions raised by the learned counsel appearing for the appellant and the submissions of the learned counsel appearing for the Department, a brief factual background is necessary to see the circumstances which led to the filing of the Writ Petition.
5.The appellant is a manufacturer of overhead travelling cleaners and accessories suitable for ring frames used in the textile industry. In terms of Rule 8 of the Central Excise Rules, 2002 (herein after referred to as 'the Rules'), the duty on the goods removed from the factory during a month shall be paid by the 6th day of the following month, if the duty is paid electronically through internet banking, by 5th day of the following month, in any other case. The appellant citing financial crises, did not remit the Central Excise Duty, within the time prescribed under Rule 8 of the Rules for different spells from September 2011 to June 2012. While making the payment belatedly with interest, the appellant utilised the Cenvat credit of duty paid on the inputs and other eligible credits used in the manufacture of final products The respondents did not give credit to the duty paid by using the Cenvat credit and consequently, it reflected in the accounts as non-payment. Thereafter, the respondents by proceedings dated 02.08.2012, directed the appellant to pay the sum of Rs.53,62,822/- along with appropriate interest, within a period of ten days, failing which stated that action for recovery will be initiated under the provisions of section 11 of the Central Excise Act, 1944 read with section 142 of the Customs Act, 1962. The appellant having not complied with the said demand was issued with a detention mahazar dated 26.10.2012. Aggrieved by the action taken by the Department, the appellant filed the Writ Petition, challenging the demand dated 2.8.2012 and the consequential detention mahazar dated 26.10.2012. The learned single Judge, after analysing the statutory provisions, more particularly Rule 8(3-A), held that the said Rule does not permit the assessee to pay the excise duty by using the Cenvat credit as it restrain the assessee from using the Cenvat credit till the entire outstanding amount including the interest is paid.
6.Mr.K.Jayachandran, learned counsel appearing for the appellant submitted that the Department directed the appellant to pay the sum of Rs.53,62,822/-, without affording any opportunity to the appellant as no show cause notice was issued and straight away a demand was served on the appellant. Further, the learned counsel submitted that on a similar issue in W.P.No.19909 of 2011, dated 29.10.2011, the learned single Judge of this Court, allowed the Writ Petition and directed the authorities to issue show cause notice and consider the case of the petitioner therein afresh and pass orders in terms of Rule 8 (3-A) of the Rules with its explanation appended thereto. The learned counsel further submitted that the entire duty together with interest has been paid utilising the Cenvat credit, which is permissible and the appellant should be afforded an opportunity to submit his objections and this Court should interfere with the action initiated by the Department and direct the Department to issue show cause notice to the appellant to hear the appellant and thereafter pass orders on merits and in accordance with law.
7.Mr.S.Thirumavalavan, learned counsel appearing for the respondents submitted that there is no violation of principles of natural justice as the assessee/appellant has been instructed several times through communications dated 08.03.2012 and 21.6.2012 and inspite of the same, the Central Excise Duty was not remitted and therefore, the Department was justified in issuing the Demand dated 2.8.2012. It is therefore submitted that the Writ Court rightly refused to interfere with the action taken by the Department and dismissed the Writ Petition.
8.We have heard the learned counsel appearing on either side and perused the materials placed on records.
9.In the Writ Petition filed by the appellant, they have not challenged the validity of Rule 8 (3A) of the Rules, but, they have filed a separate Writ Petition in W.P.No.20421 of 2013, which is pending before this Court. Therefore, we are not called upon to decide the validity of Rule 8(3A) of the Rules in this Appeal. The appellant's primary ground of challenge is that the demand dated 2.8.2012 was raised without affording an opportunity and an opportunity may be granted to the appellant to submit their explanation.
10. The default in payment of central excise duty for the clearances effected by the appellant is said to have commenced from July 2011. Admittedly, the duty for such clearances was paid belatedly much after the extended period of thirty days. From the counter affidavit filed in the Writ Petition, we find that there has been belated payment of duty payable for clearances from July 2011. Therefore, in terms of Rule 8 (3-A), if the assessee defaults in payment of duty beyond thirty days from the due date as prescribed in Sub Rule 1 of Rule 8, then notwithstanding anything contained in Sub Rule (1) and Sub Rule (4) of Rule 3, the assessee is required to pay the excise duty for each consignment at the time of removal, without utilising the Cenvat credit till the date the assessee pays the outstanding amount including interest thereon and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequence of penalties as provided in the Rules shall follow .
11. The Department by their communications dated 8.3.2012 and 21.6.2012, called upon the appellant to regulrise their accounts and report about the compliance in the matter of payment of duties on consignment basis. The appellant by their letter dated 13.7.2012, is said to have assured the Range Officer that they would not utilise the Cenvat credit till the liquidation of defaulted dues with interest. In such circumstances, it primafacie appears that there is no justification for the appellant to now state that despite their letter dated 13.7.2012, they are entitled to pay the defaulted amount utilising the Cenvat credit .
12. After the demand dated 2.8.2012 was raised on the appellant, the appellant has paid Rs.5,00,000/- and has not made any further payment. It is seen that prior to issuing the demand dated 2.8.2012, the respondents have not issued any show cause notice. It is the contention of the respondents that the default committed by the appellant is deliberate and they are aware about the amount defaulted and they are also aware of the fact that they cannot utilise the Cenvat credit to liquidate these dues, therefore, there is no violation of principles of natural justice.
13. It may be true that the assessee is aware about the amount of Central Excise Duty payable on the clearances effected by them. Yet, before the quantifying the total amount, which according to the Department is a default commencing from July 2011, the respondents ought to have issued a show notice to the appellant clearly setting out the period of default, the amount payable, the interest payable on the said amount and afford an opportunity to the appellant. However, considering the above facts and also taking note of the appellant's communication dated 13.7.2012, in which the appellant appears to have stated that they will not utilise the Cenvat credit till the liquidation of the default dues, we are of the view that the appellant should be put on some terms before the Department is directed to issue a show cause notice to the appellant.
14. Accordingly, the Writ Appeal is disposed of by directing the appellant to pay a further sum of Rs.5,00,000/-, within a period of eight weeks from the date of receipt of a copy of this order. On receipt of such payment, the respondents shall issue a show cause notice to the appellant clearly indicating the defaulted amount together with interest and the appellant shall be entitled to submit their reply to the show cause notice and thereafter the respondents shall pass orders on merits and in accordance with law. In the event the appellant fails to remit the sum of Rs.5,00,000/- as directed above, the benefit of this order shall not enure to the appellant and the Writ Appeal shall stand dismissed automatically without further reference to this Court and in which event, the respondents would be entitled to proceed against the appellant in accordance with law. No costs. Consequently, connected Miscellaneous Petition is closed.
(R.B.I., J.) (T.S.S., J.) 13th , August , 2013
rpa
Index : Yes
Website : Yes
R.Banumathi, J.
and
T.S. Sivagnanam, J.
rpa
To
1.The Assistant Commissioner of Central Excise
Coimbatore Division IV
1237, ELGI Building
Trichy Road, Coimbatore 641 018.
2.The Superintendent of Central Excise
Coimbatore IV-C-Range
Singapore Plaza, No.333, Cross Cut Road
Coimbatore 641 012.
3.The Inspector of Central Excise
Coimbatore Division IV
1237, ELGI Building
Trichy Road, Coimbatore 641 018.
Pre-Delivery Judgement in
Writ Appeal No. 1607 of 2013
13..08..2013