Custom, Excise & Service Tax Tribunal
M/S. Polypack Industries vs Cce, Belgaum on 13 August, 2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench SMB
Court I
Date of Hearing:13/08/2013
Date of decision:13/08/2013
Appeal No.E/26079/2013
(Arising out of Order-in-Appeal No.04/2013/BM dt. 23/01/2013 passed by CCE(Appeals), Mangalore)
M/s. Polypack Industries
..Appellant(s)
Vs.
CCE, Belgaum
..Respondent(s)
Appearance Shri S. Ramasubramanian, Advocate for the appellant.
Shri N. Jagdish, Superintendent(AR) for the respondent.
Coram:
Honble Mr. B.S.V. Murthy, Member(Technical) FINAL ORDER No.26330/2013 [Order per: B.S.V. Murthy] The appellant is a 100% EOU. During the period from June 2007 to March 2010, a dispute regarding the CENVAT credit availed by the appellant arose. The dispute can be, broadly, classified under the following categories in respect of the invoices on which CENVAT credit has been taken:-
a. In respect of Sl.No.1,2 and 96-145 in the show-cause notice issued to the appellant, issue involved is whether the appellant is eligible for CENVAT credit of education cess paid on overall excise duty arrived as equal to custom duty in terms of Section 3 of the Customs Tariff Act and paid by an EOU who has supplied the goods to the appellant. This is generally called as 3rd cess. The first cess is calculated on the Basic Customs duty portion and thereafter it is calculated on the CVD element and thereafter after arriving at the total duty payable, education cess is calculated for the 3rd time. Even though, there was a dispute in respect of some EOUs as to whether the cess is payable for the 3rd time or not which has finally been settled in favour of the EOUs, there were many EOUs which were discharging the cess for the 3rd time in respect of invoices issued for their DTA clearances. The supplier of the goods in this case belonged to this category who discharged the cess for the 3rd time also. The appellant took the credit of the education cess paid on the CVD portion as well as the education cess paid on the overall duty for the 3rd time. The Department took objection to the availment of credit in respect of the 3rd education cess only in respect of the invoices as mentioned above.
b. The second dispute is about CENVAT credit of education cess availed by the appellant in respect of invoices at Sl.No.3 to 95 in the show-cause notice. The objection in respect of these invoices is that the appellant took the CENVAT credit of the entire education cess paid by the EOU. The Department objected to it and took the stand that the appellant is not at all eligible to take CENVAT credit of education cess so paid in view of the fact that education cess is not mentioned under Rule 3(7) of CENVAT Credit Rules (CCR), 2004.
2. Heard both sides. The learned advocate submits that in respect of Sl.No.1,2 and 96-145, the proceedings initiated by the Department is totally against the settled principles. According to the settled law, there cannot be a reassessment at the end of the receiver of the goods. If education cess has been paid, the same cannot be denied. In the case of Emcure Pharmaceuticals Ltd. Vs. CCE, Pune [2008(225) ELT 513 (Tri. Mumbai)], it has been held that the education cess was allowed under Rule 3(7)(b) of CCR, 2004 and therefore the restrictions as regards formula prescribed for allowing education cess in respect of supplies from EOUs under Rule 3(7)(a) is not applicable to education cess and full amount of education cess paid would be admissible. In my opinion, the claim of the learned counsel that Emcure Pharmaceuticals decision would be applicable to the present case is correct. If education cess on CVD portion is admissible, 3rd time cess which is payable according to the Department on the ground that what is required to be paid by the 100% EOU is excise duty and the total excise duty arises only after calculation of equal amount to customs duty and therefore the 3rd time cess should be paid supports the assessees case. If the 3rd education cess is considered as a levy on total excise duty, the obvious conclusion would be that the credit also admissible. What is required under CCR is the payment of excise duty or education cess specified under Rule 3 and not whether it is payable or not. Looking from any angle, I am unable to find any ground to reject and in any case, the lower authorities also have not indicated any ground for rejecting the CENVAT credit on the 3rd education cess.
3. The next issue is whether the appellant is eligible for CENVAT credit on education cess paid to the extent of full amount or not. In the case of Emcure Pharmaceuticals Ltd. (supra), in para 5 & 6, this Tribunal has observed as follows:-
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-C.E. 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 Courts decision in UOI v. 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. v. 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 Poly Films Ltd. v. CCE, 2006 (198)ELT 3 (S.C.) 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.
The decision of the Tribunal in Emcure Pharmaceuticals Ltd. case is squarely applicable in respect of the CENVAT credit of education cess in respect of the appellant. In the result, the CENVAT credit availed by the appellant is in order and the demands confirmed against the appellant have to be set aside and accordingly set aside.
4. Another issue involved in the appeal is whether the appellant can take CENVAT credit of excise duty paid equal to the amount of cess paid on the additional customs duty or the amount calculated in accordance with formula as per Rule 3(7)(a) of CCR. When the statutory provisions clearly provide that appellant can take credit as per the formula, the question of availing the credit equal to the additional duty indicated in the invoice does not arise as far as credit of duty is concerned. The additional duty may be required to be taken into account by the supplier since while availing the benefit of Notification, the supplier is required to calculate the amounts payable as per the formula as well as the actual additional customs duty payable. However, in the case of the receiver of the goods, Rule 3(7)(a) of CCR is very clear. It does not give any option to take the credit by the receiver of the goods and he is required to take the credit as per the formula only. In such a situation, the credit of Rs.82,965/- availed by the appellant is clearly not admissible and therefore is required to be paid back. Even though, the learned counsel presented detailed arguments about limitation as to why they are not liable to pay this amount and why penalty should not have been imposed, finally since the amount involved is small, the appellant has no serious objection to pay the amount as well as penalty. Since this consent was made by the appellant, I am not going to the question of limitation and the liability of appellant for penalty.
5. In the result, the demand for education cess taken as credit is set aside. Demand for Rs.82,965/- with interest demanded is upheld as not contested by the appellant on the ground that amount is small.
(Pronounced and dictated in open court) (B.S.V. MURTHY) MEMBER (TECHNICAL) Nr 8