Gujarat High Court
Lonsenkiri Chemicals Industries vs Commissioner Of Central Excise Customs ... on 14 September, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/TAXAP/1133/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1133 of 2018
With
CIVIL APPLICATION NO. 2 of 2018
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LONSENKIRI CHEMICALS INDUSTRIES
Versus
COMMISSIONER OF CENTRAL EXCISE CUSTOMS AND SERVICE TAX
VADODARA I
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Appearance:
MR HASIT DAVE(1321) for the PETITIONER(s) No. 1
MR ANKIT SHAH(6371) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 14/09/2018
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. This Tax Appeal is filed by the assessee challenging the judgment of Customs Excise and Service Tax Appellate Tribunal ('CESTAT' for short) dated 09.10.2017. Following questions are presented for our consideration:
"3.1 Whether the Tribunal was in error in Law to dismiss a neat issue of law on merits by misinterpreting the Relevant Rules of CCR and the Applicable Exemption Notifications and also to confirm interest and penalty?
3.2 Whether the Tribunal was in error in Law to confirm the Recovery of Cenvat Credit of CVD availed onImported Non Coakingcoal by applying the restriction of Rule 3 (i) of the Cenvat Credit Rules 2004?
Page 1 of 5
C/TAXAP/1133/2018 ORDER 3.3 Whether the Tribunal was in error in Law in applying the restriction of Rule 3(i) of the Cenvat Credit Rules 2004 as applicable to Excise Duty Credit to the Additional Customs duty paid by the Appellant r/w Notifications 1/2011CE & 12/2012CE?
3.4 Whether the Tribunal was in error in Law to invoke the extended period of demand in this Case?
3.5 Whether the Tribunal was in error in Law in Confirming Penalty u/R 15 (2) of the CC Rules R/w S.11 AC of the Central Excise Act in case of pure interpretation and clear absence of any mensrea?"
2. The appellant imports coal on which ordinarily countervailing duty in the nature of excise duty would be payable. However, by virtue of notifications 1 of 2011 dated 01.03.2011 and Sr.No.67 and 128 of exemption notification 12 of 2012 dated 17.03.2012, the assessee would either pay duty at the reduced rate or Nil rate of duty. In this context, the question of allowing the assessee to claim CENVAT credit arose. The Revenue authorities and the Tribunal held that by virtue of proviso to rule 3(1) of CENVAT credit Rules, 2004, ('the Rules' for short) in view of the benefit availed by the assessee and the said exemption notifications, CENVAT credit would not be allowable. It is this view which the assessee Page 2 of 5 C/TAXAP/1133/2018 ORDER has challenged before us. Relevant portion of Rule 3(1) of the CENVAT Credit Rules reads as under:
"Rule 3(1) A manufacturer or producer of final products or a [provider of output 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;
[Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods
(a) in respect of which the benefit of an exemption under notification No.1/2011CE, dated the 1st March, 2011 is availed; or
(b) specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Notification No.12/2012 CE,dated the 17th March, 2012 is availed]"
3. It is not in dispute that the assessee has availed of the benefit of exemption notification 1 of 2011 and also the benefits under Sr.No.67 and 128 of exemption notification 12 of 2012. In that view of the matter, the above noted proviso of the Rules, would disentitle the assessee from claiming CENVAT credit. Counsel for the assessee however submitted that this proviso refers to CENVAT credit of "such duty of excise". In the present case, what the assessee has paid was the countervailing duty. The same may have been computed in terms of excise duty Page 3 of 5 C/TAXAP/1133/2018 ORDER payable on local manufacturers, nevertheless, the same cannot be treated as duty of excise perse. He however candidly agreed that the facility for getting CENVAT credit in the case of the present assessee flows from rule 3 of the Rules. As per subrule (1) of rule 3, a manufacturer or producer of a final product or a provider of output service would be allowed to take the CENVAT credit on the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act. Subrule (1) of rule 3 which gives the concession of availment of CENVAT credit of the duty paid, also uses the same expression "duty of excise" as is used in the proviso which restricts or limits the right of availment of such facility under certain circumstances. The expression "duty of excise" used in clause (i) of subrule (1) of rule 3 and the above noted proviso to the said rule, must receive same interpretation. The term "duty of excise" cannot have different connotations for the purpose of subrule (1) of rule 3 and for the purpose of proviso to the rule 3.
Thus, if we accept the contention of the counsel for the assessee that the countervailing duty would not Page 4 of 5 C/TAXAP/1133/2018 ORDER be included in the expression "duty of excise" for the purpose of the said rule, the assessee's very foundation of claiming the benefit of CENVAT credit would disappear.
4. Counsel for the appellant however submitted that at least so far as the penalty is concerned, since the assessee has not availed the credit, the same should be deleted. We notice that the Appellate Authority had noted that correct facts were suppressed by the assessee from the department and the reversal of payment of duty was made only after it was pointed out by the audit.
5. In the result, we find no error in the view of the authorities below.
6. Tax Appeal is dismissed along with Civil Application.
(AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 5 of 5