Custom, Excise & Service Tax Tribunal
Emcure Pharmaceuticals Ltd vs Commissioner Of Central Excise, Pune on 17 January, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. III APPEAL No. E/809/07 (Arising out of Order-in-Appeal No. PI/11/07 dated 25.2.2007 passed by Commissioner of Central Excise & Customs (Appeals), Pune) For approval and signature: Hon'ble Ms. Jyoti Balasundaram (Vice President) ======================================================
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?
====================================================== Emcure Pharmaceuticals Ltd. Appellant Vs. Commissioner of Central Excise, Pune Respondent Appearance: Shri Bharat Raichandani, Advocate, for appellant Shri Ajay Saxena, Authorised Representative (SDR), for respondent CORAM: Hon'ble Ms. Jyoti Balasundaram, Vice President Date of Hearing: 17.1.2008 Date of Decision: 29.1.2008 ORDER NO................................. Per: Ms. Jyoti Balasundaram, Vice President
Credit of education cess of Rs.1,88,367/- availed by the appellants herein who are manufacturers of medicaments, during the period 16.6.2005 to 19.10.2005, has been disallowed by the authorities below on the ground that the goods were supplied to them by 100% EOU, M/s. Jubiliant Organosys Ltd., and as per Rule 3(7)(a) of the Cenvat Credit Rules, 2004, an assessee receiving goods from a 100% EOU can avail credit of BED only as per the formula prescribed thereunder.
2. I have heard both sides.
3. Rule 3(1) of the Cenvat Credit Rules, 2004 provides as under:-
A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the Cenvat Credit) of -
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;
(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978)
(iv) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(v) the National Calamity Contingent duty leviable under Section 136 of the Finance Act, 2001 (14 of 2001)
(vi) The Education Cess on excisable goods leviable under Section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004)
(vii) The additional duty leviable under Section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i) (ii), (iii), (iv), (v) and (vi) (viia) the additional duty leviable under sub section (5) of Section 3 of the Customs Tariff Act, as substituted by clause 72 of the Finance Bill, 2005, the clause which has by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law:
Provided that a provider of taxable service shall not be eligible to take credit of such additional duty)
(viii) the additional duty of excise, leviable under section 157 of the Finance Act, 2003 (32 of 2003);
(ix) the service tax leviable under section 66 of the Finance Act;
(x) the Education Cess on taxable services leviable under Section 91 read with Section 95 of the Finance (No.2) Act, 2004 (23 of 2004); and
(xi) the additional duty of excise leviable under clause 85 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931) the force of law) Paid on -
(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and
(ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September 2004, Including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.214/86-Central Excise, dated the 25th March 1986, published in the Gazette of India vide number G.S.R.547 (E), dated the 25th March 1986, and received by the manufacturer for use in or in relation to the manufacture of final product on or after the 10th day of September, 2004.
Explanation - For the removal of doubts it is clarified that the manufacturer of the final products and the provider of output service shall be allowed Cenvat Credit of additional duty leviable under Section 3 of the Customs Tariff Act on goods falling under heading 9801 of the First Schedule to the Customs Tariff Act."
4. Rule 3(7)(a) and (b) provide as under:-
"Notwithstanding anything contained in sub-rule (1) and sub-rule (4), -
(a) "Cenvat credit in respect of inputs or capital goods produced or manufactured, by a hundred percent export oriented undertaking or by a unit in an Electronic Hardware Technology Park or in a Software Technology Park other than a unit which pays excise duty levied under section 3 of the Excise Act read with serial numbers 3, 5, 6 & 7 of Notification No.23/2003-CE dated the 31st March, 2003, (GSR 266 (E), dated 31/03/2003) and used in the manufacture of the final products or in providing an output service, in any other place in India, in case the unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the notification No.23/2003-CE (GSR 266 (E) dated the 31/03/2003) shall be admissible equivalent to the amount calculated in the following manner namely:-
Fifty percent of (X multiplied by {1+BCD/100) multiplied by (CVD/100)}], where BCD and CVD denote ad valorem rates, in percent, of basic customs duty and additional duty of customs leviable on the inputs or the capital goods respectively and X denotes the assessable value".
(b) Cenvat credit in respect of -
(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);
(ii) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);
(iii) the education cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);
(iv) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under items (I), (ii) and (iii) above;
(v) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);
(vi) the education cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004); and
(vii) the additional duty of excise leviable under clause 85 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, the force of law, shall be utilized only towards payment of duty of excise or as the case may be, of service tax leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), or the education cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004, ......"
5. Rule 3(1) allows a manufacturer to take credit of specified duties paid on inputs or capital goods or input services and Rule 3(4) allows a manufacturer to utilise such credit for payment of excise duty on final product or service tax on output service. However, an exception has been carved out in respect of inputs supplied by an EOU where the availment of credit is restricted to the formula specified under Rule 3(7)(a) only in respect of basic excise duty levied under Section 3 of the Central Excise Act. Rule 3(7)(a) does not cover all duties paid by EOU as it refers only to availment of credit of duty paid by EOU under Section 3 of the Central Excise Act, 1944. The rule refers to Notification 23/2003-CE which exempts duty leviable under Section 3 of the Central Excise Act, 1944 and nowhere refers to the Finance Act under which education cess is levied. From this, it appears that the objective of the legislature was to restrict availment of credit of BED paid by an EOU and not to restrict availment of credit of other duties leviable under the Finance Act, 1944 (Education Cess) and National Calamity Contingent Duty Act and Additional Duties of Excise (Textile and Textiles Articles) Act, etc.
6. According to the Revenue, since Rule 3(7)(a) begins with a non-obstante clause, it overrides the provisions contained in sub-rule (1) and (4) of Rule 3 and, therefore, the only credit available to the appellants in respect of the inputs supplied by EOU will be the amount as specified under the formula given therein. However, this stand is not tenable for the reason that the non-obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found in the same enactment or some other enactment, and not all provisions contained therein. My view is fortified by the apex court's decision in UOI vs. G.M. Kokil (1984) Supp SCC 196, wherein the apex court has held as under:-
"Section 70, so far as is relevant, says "the provisions of the Factories Act shall, notwithstanding anything contained in that Act, apply to all persons employed in and in connection with a factory". It is well-known that a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions. Thus the non obstante clause in Section 70, namely, "notwithstanding anything contained in that Act" must mean notwithstanding anything to the contrary contained in that Act and as such it must refer to the exempting provisions which would be contrary to the general applicability of the Act. In other words, as all the relevant provisions the Act are made applicable to a factory notwithstanding anything to the contrary contained in it, it must have the effect of excluding the operation of the exemption provisions. Just as because of the non obstante clause the Act is applicable even to employees in the factory who might not be 'workers' under Section 2(1), the same non obstante clause will keep away the applicability of exemption provisions qua all those working in the factory. The Labour Court, in our view, was, therefore, right in taking the view that because of the non obstante clause Section 64 read with Rule 100 itself would not apply to the respondents and they would be entitled to claim overtime wages under Section 59 of that Act read with Section 70 of the Bombay Shops and Establishments Act, 1948."
The above decision has been followed by the larger bench of the Tribunal in Das & Co. vs. CCE 2000 (121) ELT 275, holding that a non-obstante clause is used where contrary provisions exist. Similar view has been expressed by the apex court in the case of Jindal Polyfilms Ltd. vs. CCE 2006 (198) ELT 3 (SC) in the context of the Modvat Rules. Rule 3(1) is applicable to all manufacturers or producers of final products or providers of taxable services including 100% EOU. Rule 3(7)(b) allows utilisation of cenvat credit by all categories of manufacturers or producers of final products or providers of taxable services, including 100% EOU, in respect of AED for payment of AED, NCCD for payment of NCCD, education cess for payment of education cess, etc. Rule 3(7)(b) also opens with the non-obstante clause. Therefore, if the interpretation canvassed by the Revenue is accepted as correct, there would have been no question of utilisation of education cess for payment of education cess if the taking of the credit itself, according to the Revenue, is barred by Rule 3(7)(a), and the provisions of Rule 3(7)(b) would, therefore, be rendered redundant.
7. In the light of the above discussion, I am of the view that credit of education cess is admissible to the appellants herein, and accordingly set aside the impugned order and allow the appeal.
(Pronounced in Court on 29.1.2008) (Jyoti Balasundaram) Vice President tvu 1 8