Customs, Excise and Gold Tribunal - Bangalore
Cairn Energy India Pvt. Ltd. vs Commr. Of C. Ex. And Cus. on 12 September, 2006
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against Order-in-Original No. 18/2005 (V.R.), dated 11-11-2005 passed by the Commissioner of Central Excise & Customs, Visakhapatnam-II Commissioner-ate, Visakhapatnam.
2. The appellants are producers of petroleum crude from Ravva field. On the crude produced, they are paying Cess at the rate of Rs. 900/- per MT leviable under Section 15(1) of the Oil Industry (Development) Act, 1974 as duties of excise. Payment of Cess is done by way of debit entry in their PLA Account after the end of the month against the quantities of crude oil despatched to refineries by tanker vessels during that month. It was noticed that the appellant had provisionally debited an amount of Rs. 33,55,80,000/- in their PLA for the month of March, 2004 with a remark "towards provisional payment of Cess for the month of March, 2004". In April, 2004, they had taken re-credit of Rs. 6,69,61,181/- in their PLA with the remarks "Rs. 26,86,18,819/- actual Cess payable for the month of March, 2004", Rs. 33,55,80,000/- actual Cess paid provisionally for the month of March, 2004. The re-credited amount was used for discharging the liability for April, 2004. Revenue found that the above procedure of taking credit is not correct as per the instructions issued by CBEC. In the view of the Revenue, taking suo moto credit is in violation of the guidelines prescribed by the Commissioner in his letter dated 20-5-2004. In order to get the excess credit, a refund claim under Section 11B should have been filed by them along with a reconciliation statement for formal sanction, hence Show Cause Notice dated 11-5-2005 was issued to the appellants for recovery of the amount taken as credit under Section 11A of the Central Excise Act. Interest under 11AB was demanded. Penalty under Rule 25 of Central Excise Rules, 2002 was also proposed. The Adjudicating Authority after considering the submissions made by the appellant confirmed the demand. Interest was also demanded. However, no penalty was imposed. The appellants are highly aggrieved over the impugned order of the Commissioner.
3. S/Shri K. Kumar, Sr. Advocate and M.S. Krishna Kumar, Advocate appeared for the appellants and Shri R.K. Singla, Authorised Representative (JCDR) for the Revenue.
4. The learned Advocates urged the following points:
(a) The appellant has followed the procedure outlined in Trade No. 13/2001, dated 13-4-2001 prescribed by the Commissioner of Central Excise & Customs, Visakhapatnam. As per the Trade Notice, the appellant is directed to debit the amount of Cess payable during March every year in PLA provisionally on the basis of the quantities cleared by the 31st of that month itself. These provisional assessments should be finalised within a month by the proper officer. Therefore, Commissioner's finding in the impugned order that the assessment is not provisional is contrary to the Cess payment procedure prescribed under law.
(b) The Superintendent of Central Excise in his letter 4-3-2004 directed the appellant to debit the Cess amount payable provisionally and informed that the assessment will be finalised after obtaining necessary information from the refinery, which receives the crude. The above letter leaves no ambiguity that the Cess payment is under provisional assessment.
(c) The Show Cause Notice and the impugned order are contrary to the GOI's Circular/Trade Notice of jurisdictional authorities, as the assessments had not been completed. As per the Trade Notice, the appellant is supposed to file the monthly returns. On receipt of the said monthly return, the proper officer shall finalise the assessment and if the amount due has not been paid, the proper officer shall serve a Show Cause Notice requiring payment of amount assessed. The Cess assessments for the month of March - April, 2004 have not been completed. The Show Cause Notice has been issued even before the completion of assessment, which is contrary to Trade Notice and bad in law.
(d) The Commissioner, Visakhapatnam in response to the appellant's representation dated 4-3-2004 modified the existing procedure in his letter dated 16-4-2004 to the extent that "In case any excess payment of Cess is noticed as a result of the reconciliation done, you will adjust the excess payment in the next month against the Cess payable". However, the above procedure was modified on 20-5-2004 requiring the appellant to file a refund claim under Section 11B.
(e) The procedure dated 16-4-2004 is effective from 1-4-2004 and the appellant has rightfully adjusted the excess payment of Cess only on 5-5-2004, while discharging Cess liabilities for April, 2004 and the same is therefore, a permissible act and not a violation as alleged by lower authorities.
(f) The payments made in March are ad hoc payment as in previous years and PLA adjustments should not be construed as taking credit on their own. During the previous years, the Department had accepted such adjustments of excess payments. The appellant had received oral requests from the department during March, 2001/2002 to pay certain additional excess sums as Cess to help the department achieve their revenue targets and was allowed to adjust the same in April, 2001 /2002.
(g) The refund application is neither hit by time nor required to be filed in the instant case. The process of filing a refund application instead of making an adjustment entry in the PLA register is not applicable in the instant case. The following case laws were relied on:
(i) Visakhapatnam Steel Plant v. CCE, Visakhapatnam 2002 (149) E.L.T. 708 (Tri.-Bang.)
(ii) Sulekha Works Ltd. v. CCE, Calcutta
(iii) Motorola India (P) Ltd. v. CCE 2005 (71) RLT 334.
In present case the adjustment in PLA is a mere credit entry and will not be governed by Section 11B of The Central Excise Act, 1942. Reference is invited to CBEC Circular No. 67/99, dated 1-10-1999 in the context of DEPB scheme where the goods were assessed provisionally. The Board has clarified that equity would demand that wherever the final duty assessed is less than the provisional duty, the excess credit means the amount re-credited in the DEPB scrip. Secondly, DEPB scrips can be credited only to the extent of duty leviable. Since, this is only an adjustment in the original debit due to finalisation of assessment at a lower amount of duty, than the provisional assessment, the re-credit shall be made by the Custom House itself.
(h) The credit availed in PLA under provisional assessment is not liable for recovery under Section 11A of the Central Excise Act, 1944.
(i) The demand of interest under Section 11AB of the Central Excise Act, 1944 is not sustainable in law.
5. The learned JCDR while reiterating the impugned order relied on the case of Mittal Steel Ltd. v. CCE, Bangalore , wherein it is held that suo moto taking credit by the appellant is not sustainable and does not have any warrant or basis under provisions of law.
6. We have gone through the records of the case carefully. The appellant paid the Cess on crude oil produced and despatched by him to the refinery provisionally by debiting a sum of Rs. 33,55,80,000/- in the PLA Account for the month of March, 2004. This is in accordance with the Trade Notice issued by the Commissionerate. As per the Trade Notice, this assessment should be finalised within a period of one month after obtaining information from the appellant. The appellant has stated that Revenue has not at all finalised the assessment and issued the demand even before finalising the assessment. The refund arises on account of the fact that for the month of March the Cess as per the quantities actually despatched should be only Rs. 26,86,18,819/-. In other words, the appellant had paid an excess sum of Rs. 6,69,61,181/-. This amount has been taken as credit by the appellant subsequently and utilised to discharge the duty liability for the month of April, 2004. According to the Commissioner, this procedure is irregular and the correct course would be for the appellants to file a refund claim. He has also made the observation that no procedure has been followed for the provisional assessment. In view of this, he has confirmed the demand along with interest. He was gracious enough not to impose any penalty on the appellants.
6.1 The entire issue is purely procedural. The appellant has not committed any big crime in adjusting the excess amount paid for the Cess payable for the month of April, 2004. His action is perfectly in accordance with procedures followed in the earlier years. Moreover, the following letter is specifically addressed to the appellants on 16-4-2004. According to this letter in Para (ii) the excess payment made can be adjusted in the next month against the Cess payable.
This letter is reproduced below:
Office of the Commissioner of Customs & Central Excise Visakhapatnam II Commissinorate. Central Excise Building. Port Area Visakhapatnam 530035 C.No. V/30/253/2003-Tech-II Dt. 16-4-2004 To M/s. Cairn Energy India Pvt. Ltd.
Wellington Plaza, 2nd Floor, 90 Anna Salal, Chennai - 600002 Gentlemen, Sub : - Central Excise - Payment of Cess on Crude Oil - Regarding.
***** Please refer to your letter ref No. CBD/RV/CE/2004/124, dated 4-3-2004 on the above subject.
The matter has been considered. A modified procedure has been approved for payment of cess by the company. As per the same,
(i) You will make payment in the PLA by the due date, i.e. 5th of the following month as per the despatched data. On receipt of the quantity receipted data from the refineries, you will carry out reconciliation and in case, there is any short payment due to the difference in the quantity despatched and the quantity received, you will immediately pay the difference within the month of reconciliation along with interest for the delayed payment.
(ii) In case, any excess payment of cess is noticed as a result of the reconciliation done, you will adjust the excess payment made, in the next month against the cess payable. There shall be no interest on the excess payment noticed.
(iii) You will enclose to the reconciliation statement the details of the short or excess cess paid during the month.
This procedure will be effective from 1-4-2004.
Yours faithfully, (RAM PARKASH) COMMISSIONER 6.2 This procedure was subsequently revised on 20-5-2005 providing for filing of refund claim under Section 11AB in respect of the excess Cess paid. It is very clear that the authorities keep on changing the procedures. It is also a fact that during the month of March every year, the assessees are under great pressure to take maximum revenue to the exchequer for realisation of the Commissionerate's revenue targets. The excess amount paid is normally adjusted against the duty payable in the future. Every Superintendent of Central Excise is aware of this. Having paid an excess of more than Rs. 6 crores and when the same has been adjusted for Cess payable for the month of April, Revenue should not have taken such a harsh measure to demand that amount under Section 11A along with interest under Section 11AB. Strictly speaking Section 11A is not applicable here as contended by the appellant. The case law cited by the learned JCDR relates to a case where appellant took Modvat credit on the duty suffered by billets, which were used in the manufacture of MS rounds, which were exempted from duty. The facts of the case are distinguishable. The ratio of this judgment is not applicable here, especially when the Commissioner has permitted the adjustment in his letter 16-4-2004 and also in view of the previous practices. We do not find any merit in the Commissioner's Order-in-Original. Hence, we allow the appeal with consequential relief.
(Pronounced in open Court on 12-9-2006)