Customs, Excise and Gold Tribunal - Delhi
Unison Metals Ltd. vs C.C.E., Ahmedabad I on 31 July, 2006
Equivalent citations: 2006(105)ECC395, 2006ECR395(TRI.-DELHI), 2006(199)ELT312(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. The issue under reference to this Larger Bench may be noted first:
Whether the amount of 8% debited from the RG-23A part II in terms of the provisions of Rule 57CC(1) and collected from the customers is required to be deposited with the Govt. in terms of the provisions of Section 11D of the Central Excise Act.
2. The facts leading to raising of the reference are that the assessees are engaged in the manufacture of both cold rolled (dutiable) and hot rolled (non-dutiable) steel pattas and patties. Assessees producing non-dutiable final products are not entitled to modvat credit in respect of duty paid on inputs. However, the assessees producing both dutiable and non-dutiable final products can avail themselves of modvat credit on all inputs, (including the inputs going into the production of non-dutiable goods) subject to the condition that they shall "pay an amount equal to 8% of the price" of the goods which are not dutiable (Rule 57CC). In the present case, the assessees made payment at 8% while selling the non-dutiable goods. The assessees recovered that 8% from their buyers. The issue is whether that 8% recovery from the buyer is liable to be deposited with the Central Government in view of the provisions of Section 11D of the Central Excise Act. We may read that Section:
Section 11D. Duties of excise collected from the buyer to be deposited with the Central Government: (1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, every person who is liable to pay duty under this Act... and has collected any amount from the buyer of any goods in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.
3. The reference has arisen in the light of difference of opinion between Coordinate Bench on the aforesaid issue. While one Division Bench took the view in the case of Nu-Wave Shoes v. C.C.E., New Delhi 2001 (138) ELT 331 that no such payment under Section 11D is attracted, a contrary view was taken by another Division Bench in a later decision in the case of P.T. Steel Industries v. C.C.E. 2003 (58) RLT 335.
4. We have heard both sides and perused record.
5. The contention of the learned Counsel for the assessee is that the question of payment under Section 11D cannot arise in a case where the recovery from the buyer of the goods is in lieu of the amount paid to the revenue at the time of removal of the goods from the factory. The submission is that any deposit in such a case would amount to payment of duty twice over on the same goods, which is not contemplated in law. In support of this contention the appellants have cited the judgment of the Hon'ble Supreme Court in the case of M/s Mafatlal Industries.
6. There is also a submission that it is well settled that the amount paid in terms of Rule 57CC is not duty of excise and therefore, Section 11D cannot have any application inasmuch as that section refers to amounts collected by representing them as excise duty. A further submission is that Section 11D applies to any person liable to pay central excise duty and since the goods in question were not dutiable, a manufacturer of hot rolled pattas and patties would not fail in the category of any person liable to pay central excise duty. Learned Counsel would also submit that the decision of this Tribunal in the case of Nu-Wave Shoes is to be confirmed as that decision conforms to the ruling of the Hon'ble Supreme Court in the case of Mafatlal Industries that double taxation is not permitted.
7. Learned SDR would contend that Rule 57CC is in relation to "adjustment of credit on inputs used in exempted final products" and not in relation to payment of duty. It is his submission that since it is, thus, not a payment of duty, any recovery of that amount from the buyer, representing it as duty, would come within scheme of Section 11D. He has also referred to the Circular of the Board clarifying that since the payment made under Rule 57CC is not duty, no credit can be taken of the 8% payment. The submission is that once the amount is not duty, any recovery of the same from the buyer would be impermissible and (sic) attracted Section 11D. The submission of the learned SDR is that the decision of the Tribunal in the case of P.T. Steel Industries is the correct statement of law.
8. In the present case, it is not in dispute that the assessees had paid 8% of the value of the goods in terms of Rule 57CC at the time of removal of the goods from the factory. The amounts so paid are the amounts recovered by them from their buyers. Thus, in the present cases, no amounts collected from the buyers remain unpaid to the revenue, irrespective of whether those amounts were represented in the sales documents as duty or not. In fact, the invoices referred to the payment in different terms such as "8% reversal of assessable value", "8% value", "8% duty etc." As the amounts recovered from the buyers are not retained by the assessees, the question of deposit cannot arise, whether under Section 11D or any other provision. A reading of Section 11D makes it clear that what is required is that amounts collected as duty should not be retained by the manufacturers and should be deposited with the revenue. This was the view that Division Bench took in the case of NU-WAVE SHOES. We may read the relevant part of that order:
Admittedly, Rule 57CC(1) is applicable in the present case. It is not the case of the Department that the assessees have been charging an amount over and above 8% of the price of the exempted variety of footwear from their customers and in fact, the show cause notice proceeds on the basis that only the amount reversed by debit in the credit account from 1-9-1996 to April, 1997 has been charged from the customers. For the period 23-7-1996 to 31-8-1996, the show cause notice itself recognises that the assessees have been reversing Modvat credit proportionately on a prorata basis on inputs used in the manufacture of exempted variety of footwear and that the amount so reversed has been charged from the customers. A perusal of the invoices placed on record clearly shows that they have debited their RG 23A account while paying 8% under Rule 57CC and some invoices show debit entry in their PLA. This makes it clear that the appellants have not retained the amount collected from the customers and that they have passed on the amount to the Government as provided under Section 11D of the Central Excise Act. Hence the charge of contravention of the provisions of Section 11D is not sustainable. Accordingly, we set aside the impugned order and allow the appeal.
We find that the above view taken by the Tribunal is in conformity with the judgment of the Apex Court in the case of Mafatlal Industries, that repeat payment of excise duty is not contemplated. We read para 97 of that judgment [Mafatlal Industries Ltd. - :
MEANING AND PURPORT OF SECTION 11D
97. It was contended by the learned Counsel for the appellants-petitioners that Section 11D provides for double taxation. It was contended that Sub-section (1) of Section 11D makes the manufacturer liable to pay duty which he collects from the buyer as part of the price of goods even where the manufacturer has already paid the duty at the time of removal. We do not think that there is any foundation for the said understanding or apprehension. There are no words in the section which provide for payment of duty twice over. All that the section says is this : the amount collected by a person/manufacturer from the buyer of goods as representing duty of excise shall be paid over to the State even if the tax collected by the manufacturer from his purchaser is more than the duty due according to law, the whole amount collected as duty has to be paid over to the State; if on the assessment being made it is found that the duty collected and paid over by the manufacturer is more than the duty due according to law, such surplus amount shall either be credited to the Fund or be paid over to the person who has borne the incidence of such amount in accordance with the provisions of Section 11B. It is obvious that if in a given case, the manufacturer has collected less amount as representing the duty of excise than what is due according to law he is not relieved of the obligation to pay the full duty according to law. This is the general purport and meaning of Section 11D. These may be case where goods are removed/cleared without effecting their sale. In such a case Section 11D is not attracted. It is attracted only when goods are sold. The purport of this section is in accord with Section 11B and cannot be faulted.
9. The scheme of Central Excise duty payment is that a manufacturer removed goods from the factory of production after payment of duty. While selling the goods, the manufacturer recovered the duty so paid. In doing so, an assessee is recouping the tax already paid. The arrangement is not that the assessee first collected the tax from the buyer of the goods and then remits the amount to the government. Section 11D has to be read keeping this scheme in view. Therefore, the provisions for "every person who is liable to pay duty... and has collected any amount from the buyer of any goods in any manner representing as duty of excise, shall forthwith pay the amount so collected to the credit to the Central Government" has application only when equivalent duty had not been deposited at the time of removal of the goods. The scheme of the law is that manufacturers shall not collect amounts falsely representing them as central excise duty and retain them, thus, unjustly, benefiting themselves. In the present cases, (irrespective of whether the 8% payments were duty or not) since the 8% amount remain already paid to the revenue, and no amount is retained by the assessee, Section 11D has no application.
10. The real identity of the amount 'collected' (whether excise duty payable or not) is of no relevance for Section 11D. What is relevant is only whether the collection was 'represented' as duty of excise. The representation may as well be entirely false. The qualifying of the representation through the words 'in any manner' makes this clear. Therefore, the contentions of both sides on the question, as to whether deposits under Rule 57CC are excise duty or not, are beside the point.
11. In the result, this Larger Bench confirm the view taken by the Tribunal in the case of NU-WAVE SHOES.
12. Reference is answered as above and the appeals are returned to the original Bench for disposal.