Custom, Excise & Service Tax Tribunal
C.C.E.,& S.T.-Ludhiana vs Khanna Paper Mills Ltd on 2 July, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Court-III
Appeal No.E/54487/2014-EX(SM)
Cross Objection Appeal No. E/55849/2014
(Arising out of OIA No. LUD-EXCUS-000-APP-113-14-15 dated 13.5.2014 passed by Commissioner (Appeals), Central Excise, Chandigarh-I
Date of Hearing: 22/06/2015
Date of Pronouncement: 02/7/2015
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would 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 of the order?
4.
Whether order is to be circulated to the Department Authorities?
C.C.E.,& S.T.-Ludhiana Appellant
Vs.
Khanna Paper Mills Ltd. Respondent
Appearance:
Present for the Appellant: Shri R.K. Grover, DR Present for the Respondent: Shri B.L. Narasimhan and Shri Vipul Agarwal, Advocate CORAM: Honble Ms. Sulekha Beevi C.S., Member (Judicial) Final Order No.52075/2015 Per: Sulekha Beevi C.S. The above appeal filed by the Revenue (E/ 54487/2014) and the Cross Objections filed by the assessee (E/55849/2014) are together disposed by this Final Order.
2. The issue posing for consideration is whether the respondents are entitled to Cenvat credit of Education cess and Secondary & Higher Education cess when inputs are supplied by 100% EOU, paying duty under Sr. No. 2 Notification No. 23/2003-CE dated 31.3.2003.
3. The respondents are engaged in manufacture of paper & paper board and are also availing Cenvat credit of the duty paid on inputs and capital goods. They purchased input, viz; petroleum coke from Reliance Industries Ltd, Jamnagar , a 100% EOU, paying duty under Sr. No. 2 Notification No. 23/2003-CE dated 31.03.2003. Pursuant to an audit the Respondents were directed to deposit the excess Cenvat credit of Rs.37,45,509/- availed by them. The respondents issued letter disputing the same but however debited an amount of Rs.8,49,215/ on 23.08.2010 under protest. Later a show cause notice was issued and was finalized by the Order-in-Original which confirmed the demand and imposed penalty along with interest. Aggrieved the respondents filed appeal before the Commissioner (Appeals) who held the issue in favor of the Respondents and also set aside the imposition of penalty. However, the amount of Rs.8,49,215/- deposited under protest was appropriated as the Respondents had submitted that this amount was availed in excess due to mistake in calculation. The Revenue is in appeal challenging the impugned order passed by Commissioner (Appeals).
4. At the outset it has to be mentioned that the period in dispute is April 2007 to November 2008, which is prior to the date on which the second proviso to Rule 3(7)(a) was inserted i.e; by Notification No. 22/2009-CE(NT) dated 7.09.2009 (w.e.f.07.09.2009). According to Revenue, petroleum coke valued at Rs.51,80,56,513/- was supplied to the Respondents during the relevant period and they availed Cenvat credit of Rs.8,62,80,867/-. The respondents were entitled to avail Cenvat credit of only Rs.8,25,35,358/-. That therefore the Respondents have availed an excess Cenvat credit of Rs.37,45,509/-. The allegation of excess availment of Cenvat credit is on the premises that the Cenvat credit admissible should be calculated as per formula prescribed in Rule 3(7)(a)and that the Additional Customs duty/CVD mentioned in the Rule means only basic excise duty and does not include the Education Cess and SHE cess paid as part of CVD. That therefore no Cenvat credit can be availed for the part of Education Cess and SHE cess paid as part of Additional Customs duty. It has to be mentioned that out of Rs.37,45,509 an amount of Rs.8,49,215/- was debited by appellant under protest much before the show cause notice.
5. On perusal of records it is seen that, during the period 03.05.2007 to 12.05.2007 the supplier of inputs, RIL, had cleared the duty on payment of excise duty @16% as the goods were manufactured prior to conversion as an EOU. For the period 13.05.2007 to 17.07.2007 the said goods were cleared by RIL without availing exemption of duty under Sr.No.2 of Notification No.23/2003-CE dated 31.03.2003. Thus for the above two periods there was no need to resort to the Rule 3(7)(a) of the Cenvat Credit Rules. In this appeal, the Revenue has confined the allegation to the period 18.07.2007 to 1.11.2008 and the alleged excess availment of Cenvat credit is Rs.27,14,745/-. It is also the case of Revenue that Commissioner (Appeals) has wrongly accepted the contention of the respondent that the amount of Rs.8,49,214/- was availed in excess due to mistake in calculation and has erred in not imposing any penalty.
6. For proper appreciation of the issue the relevant provision is noticed as under.
Rule 3(7)- 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 per cent 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 and 7 of Notification No. 23/2003-Central Excise dated the 31st March, 2003 ----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-Central Excise, dated the 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003], shall be admissible equivalent to the amount calculated in the following manner, namely:-
Fifty per cent of X multiplied by {1+BCD/100) multiplied by (CVD/100)}, where BCD and CVD denote ad valorem rates, in percent of basis customs duty and additional duty of customs leviable on the inputs or the capital goods respectively and X denotes the assessable value.
Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after 1st March, 2006 from an export oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such unit pays excise duty under Section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003-Central Excise dated 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003] shall be equal to X multiplied by {1+BCD/400) multiplied by (CVD/100)}
7. As per proviso to Section 3(1) of Central Excise Act, 1944, if the goods are manufactured by an EOU and brought to any place in India, the excise duty levied shall be equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 on like goods produced or manufactured outside India if imported to India. The aggregate duties of Customs include Basic Customs Duty and Additional Customs duty. The Additional duty of customs in turn is equal to excise duty leviable on goods manufactured in India. Thus this Additional Duty of Customs (CVD) includes within it, Education Cess and SHE cess. All manufacturers, including EOU, are required to pay other duties of excise levied under different Acts like the Additional duty of Excise under Textile and Textile Articles Act, Goods of Special Inportance Act, NCCD, Education Cess and SHE Cess. Under the Notification No.24/2003(ibid) the levy of additional duty of excise under Textiles & Textile Articles Act and Goods of Special Importance Act are exempted when cleared from EOU. Consequently the other levies of NCCD, Education cess and SHE cess are applicable. The respondents have purchased Petroleum Coke from RIL, a 100% EOU by paying duty under Sr. No. 2 of Notification No. 23/2003 (ibid).
8. When goods have been removed from EOU to DTA, availing the exemption under Sr. No. 2 of Notification No. 23/2003 (ibid) there is a restriction carved out by the formula provided in the proviso to Rule 3(7)(a). This restriction is to prohibit taking credit on the BCD component. But credit is available on the Additional Customs duty (CVD) component. As already stated, Additional Customs duty includes excise duty as well as cess on this excise duty. Therefore the respondents are entitled to take credit of an amount equivalent to the Additional Customs Duty inclusive of excise duty and cess thereon.
9. The position has been well clarified and settled in Emcure Pharmaceuticals Ltd. Vs. CCE 2008 (225) ELT 513 (Tri.-Mum.) The respondents also relied on the judgements rendered in Jai Corp Ltd. Vs. CCE 2014-TIOL-2518-CESTAT-AHM, CCE Vs. Aarti Industries Ltd. 2014-TIOL-1638-CESTAT-AHM, Shreya Pets Pvt. Ltd. Vs. Commissioner 2009 (240) ELT 408 (Tri.-Bang.), CCE Vs. Jambo Bags Ltd. 2013 (296) ELT 142 (Tri.-Mad.).
10. The Commissioner (Appeals) has applied the ratio laid in Jumbo Bags Ltd. case (supra). In all the above cases it has been held in favour of the assessee. Though the decision in Emcure Pharmaceuticals Ltd case which has been followed in the later judgement noted above, was rendered prior to the amendment inserting the second proviso to Rule 3(7) (a), the principle enunciated therein alongwith the other judgments are correctly applicable to the present case. The legislature in its wisdom has brought forth the amendment of adding the second proviso to Rule 3(7)(a) w.e.f. 7.09.2009 to suppress the mischief, clear the confusion and resolve the same. Therefore I do not find any reason not to allow the Cenvat credit on the Education Cess and SHE Cess Component, Forming Part of CVD. In view of the above discussions, the appeal filed by the Revenue is dismissed.
11. In the Cross Objection filed, the respondents have prayed for refund of Rs.5,16,419/-. They debited Rs.8,49,214/- as excess availed due to mistake in calculation as found by the Commissioner (Appeals). According to respondents the Revenue has confined the challenge only to the period 18.7.2007 to 1.11.2008. That therefore they are entitled to refund of Rs.5,16,419 (8,49,214-3,32,795). I find no merits in this contention. The respondents admitted the mistake in calculation and debited the amount of Rs.8,49,214/- as excess availed by them. No further evidence is produced to disrupt the said findings of the Commissioner (Appeals). For such reasons, the Cross Objection filed by respondents is dismissed.
12. In the result, the impugned order is sustained. The Revenues appeal and cross objection of the respondent are dismissed.
(Pronounced on 02/07/2015) (Sulekha Beevi C.S.) Member (Judicial) K. Gupta 7