Customs, Excise and Gold Tribunal - Delhi
Vikrant Tyres Ltd. vs Commissioner Of Central Excise on 11 September, 2003
Equivalent citations: 2004(91)ECC487, 2003ECR672(TRI.-DELHI), 2003(158)ELT251(TRI-DEL)
ORDER P.S. Bajaj, Member (J)
1. This matter has come up before the Larger Bench by virtue of a reference made by the referral Bench seeking decision on the following issue :-
"Whether the undertaking given by an appellant under Rule 224(2A) would cause levy of duty at the enhanced rates by a Notification dated 1-3-2000, when the clearances were effected on 29-2-2000 after 11.00 AM and before 5.00 PM."
2. The necessity for making this reference, as could be seen from the referral order, appears to have arisen on account of conflicting judgments of the different Benches of the Tribunal on the above said issue, involving interpretation of Rule 224(2A), in the following cases :-
(i) Manglam Cement Ltd. v. Collector of Central Excise, Jaipur [1999 (105) E.L.T. 463 (Tribunal)].
(ii) CCE, Raipur v. Universal Cables Ltd, [2000 (118) E.L.T. 386 (Tri.)
3. In these cases, it has been ruled that execution of the undertaking under Rule 224(2A) by an assessee would prevail and duty at the enhanced rate would be payable by him. But contrary view is said to have been taken in :-
(i) Union Carbide Ltd., Calcutta v. CCE, Madras [1983 (12) E.L.T. 549 CEGAT] (ii) Indian Explosives Ltd., Calcutta v. CCE, Kanpur [1985 (20) E.L.T. 139 (Tribunal)] (iii) CCE, Rajkot v. Devi Enterprises [1998 (97) E.L.T. 126 (Tribunal)] (iv) J.K. Synthetics Ltd. v. CCE [1993 (68) E.L.T. 246 (Tribunal) which had been referred in the referral order itself.
4. It would be beneficial and convenient for expressing final opinion on the above referred issue, to refer in nutshell to the facts of the case, which almost remains undisputed. Those are :-
The appellants who are engaged in the manufacture of excisable goods falling under Chapter 40 of Central Excise Tariff Act, 1985, cleared the goods on the eve of the budget day, after taking due permission of the Commissioner, by paying duty at the prevailing rate i.e.@ 24% BED & 6% SED. They also gave undertaking in terms of Rule 224(2A) for paying differential duty, in the event of enhancement in the rates of duty in the budget. On the presentation of the budget, the rates of duty stood changed to 16% BED and 16% SED vide Notification No. 6/2000 and 7/2000, dated 1-3-2000. The appellants accordingly paid the differential duty under protest. They thereafter lodged claim for the refund of the duty of Rs. 81,729/- by alleging that it had been wrongly recovered from them as the notification through which the duty was enhanced came into effect from 1-3-2000. Whereas the goods were cleared by them on 29-2-2000. The Assistant Commissioner rejected the claim of the appellants by holding that they were bound by the undertaking furnished by them while clearing the goods under Rule 224(2A). That order of the Assistant Commissioner was confirmed by the Commissioner (Appeals) by endorsing his view.
5. Thereafter, the appellants came up in appeal against the order of the Commissioner (Appeals) dated 18-10-2000, before the South Zonal Bench at Bangalore. The Bench after finding conflicting judgments of the Tribunal in the above-referred cases on the interpretation of Rule 224(2A), framed the above detailed issue, and referred the same to the Larger Bench.
6. The matter came up for hearing firstly on 8th September, 2003. At the time of hearing on that date the learned Counsel for the appellant referred to the judgment rendered by the Apex Court in Collector of Central Excise, Patna v. Tata Iron & Steel Co. Ltd. [2002 (143) E.L.T. 13]. Wherein it had been observed as under :
"Special excise duty is an annual levy, as has been explained in the judgment in Ponds. It ceases to have effect on the 28th of February of a given year and a new levy, distinct and different, comes into operation with effect from the 1st of March of that year. Therefore, goods manufactured during the earlier period must be deemed to have been cleared on the last day of that period and exigible to special excise duty at the rate, if any, prevalent during that period."
7. The learned SDR at that time was unable to make out a case for non-applicability of this judgment to the present case wherein also special excise duty at the enhanced rate, after the presentation of budget, had been recovered from the appellants and for the refund of which they had lodged the claim. Therefore, the Bench after finding no contest to the ratio of law laid down in the above said judgment of the Apex Court, from the side of the Revenue, observed that the reference shall stand decided in favour of the appellants. However, on the following date i.e. 9-9-2003 the learned SDR moved miscellaneous application seeking re-hearing of the matter on the ground that by virtue of the amendment of Section 3 of the Central Excise Act made in 1999 budget, the special excise duty is being levied as per Clause (1)(b) of this Section at the rates detailed in Second Schedule to Central Excise Tariff Act and not as per annual Finance Bill every year. The levy of special duty under this Section 3 of the Act, is on the same footing as that of of basic excise duty and as such legal provisions such as Rule 9A and Rule 224(2A) were applicable. The learned Counsel for the appellants to whom the copy of this application was supplied, did not contest this contention of the Revenue and consented to the re-hearing of the matter. The Counsel did not dispute that on account of the amendment of Section 3 of the Central Excise Act. The ratio of law laid down in Collector of Central Excise, Patna v. Tata Iron & Steel Co. Ltd. (supra) had no application to the present case. The matter was, therefore, ordered to be re-opened and re-heard.
8. That is how the matter has come up before the Bench again. This time, the learned Counsel has heavily leaned on the provisions of Rule 9A and contend that duty could be charged from the appellants, only at the rate which was prevalent at the time of clearance of the goods by them and not at enhanced rate, which came into force subsequently. After referring to the provisions of Rule 224(2A), the Counsel has emphasized that the relevant date for determining the duty payable by the assessee/manufacturer, is the date of removal of the goods and not any subsequent date. He has also referred to the observations of the Hon'ble High Court of Andhra Pradesh while dealing with the constitutionality of both these rules [Rule 9A and Rule 224(2A)], in New Tobacco Company Ltd. v. Superintendent, Central Excise [1990 (48) E.L.T. 338 (A.P.)] that both these rules are perfectly constitutional, there is no ambiguity, inconsistency between these rules and Section 3 of Central Excise Act.
9. However, after going through both the above-referred rules and the judgment, we are unable to subscribe to the contention of the Counsel. Rule 9A enacts that the rate of duty and tariff valuation if any, applicable to any excisable goods shall be the rate and valuation in force in case of goods removed from factory or a warehouse, on the date of actual removal of such goods from such factory.
10. Whereas, Rule 224 speaks of restrictions on the removal of the goods. Clause 2 of this Rule enacts that notwithstanding anything contained in these Rules, no goods shall be removed from the factory or warehouse on the date appointed for the presentation of the annual or any supplementary budget, of the Central Government to Parliament, unless an application for such removal in the prescribed form has been presented to the proper Officer before 5 P.M. on the working day immediately preceding the date aforesaid. Clause 2A of this Rule further stipulates, that where a registered person intends to remove goods from a factory or a warehouse, on the date appointed for presentation on annual budget in the Parliament, he may make an application in this behalf undertaking to pay duty at the enhanced rate if any, that may be applicable to such goods with effect from the date immediately following the date aforesaid and to comply with such conditions as the Central Govt. may specify and thereupon the Central Govt. may if it considers it necessary or expedient in the public interest so to do permit the removal of the goods.
11. From the conjoint reading of the above referred two Rules, it is evident that Rule 9A is a general rule, the object and scope of which is to determine the date for imposition of duty and tariff valuation. Such date, as per this rule, shall be the date of actual removal of goods from the factory or a warehouse. This rule comes into play when the goods are removed in normal routine by an assessee/manufacturer of the excisable goods. But this rule has got no application to the case, where the removal of the goods had been in terms of Rule 224, as Clause (2) of this Rule, opens with the words "notwithstanding anything contained in these rules".
12. The bare reading Rule 224 makes it clear that it had been enacted with a view to meet the exceptional situation, where the removal of the goods had been sought by an assessee/manufacturer from his factory or a warehouse, on the eve of the presentation of the annual/supplementary, Budget Introduction of Finance Bill or any Bill for the imposition or increase of any duty, on the goods. The assessee under Clause (2) of this rule, has to make an application in writing for seeking permission for the removal of goods on the eve of presentation of the Budget, otherwise the removal stands prohibited, completely by this rule. The assessee has also to give undertaking with that application to pay duty at the enhanced rate, if any that may be applicable to such goods immediately on the presentation of the Budget, as required by Clause 2A of Rule 224. This Clause 2A, has been held to be not unconstitutional, illegal and so also Rule 9A referred above being not inconsistent with Section 3 which is a changing Section, by the Hon'ble High Court of Andhra Pradesh in New Tobacco Company Ltd. (supra) referred by the Counsel. We do not find that any observations made by the Hon'ble High Court, in that case, advance the case of the appellants for claiming refund of duty paid by them as per their own undertaking to pay duty at enhanced rate while seeking permission to remove the goods on the eve of the Budget. In that case, the goods were manufactured prior to 28-2-83 and were removed on 12th, 14th, 15th of March, 1983. The Hon'ble High Court observed the assessees were liable to pay duty at the enhanced rate.
13. In the instant case, admittedly the permission to remove the goods on the eve of the presentation of the Budget of the year 2000-2001 was accorded to the appellants on their request in writing under this Rule 224(2A). They furnished an undertaking that duty at the enhanced rate shall be paid by them in case of any increase. It also remains undisputed that in the Finance Bill when presented, increase in the duty (SED) was proposed on the goods and notification in this regard was issued on 1-3-2000. The appellants were therefore liable to pay the differential duty on account of the increase and they even accordingly paid the same, though under protest, which in our view, did not carry any legal sanctity. After having availed the special concession/benefit of removing the goods on the eve of the budget, which they otherwise legally could not do because of the restriction imposed on the removal by Rule 224(2), the appellants could not raise protest while making payment of differential duty. The doctrine of estoppel stands in their way, to raise such a protest. They are legally debarred from disputing their liability, under the said doctrine, for payment of enhanced duty on the ground that the notification enhancing the duty was issued on the date subsequent to their removal of the goods i.e. on 1-3-2000. The removal of the goods by them has to be related to that date (1-3-2000) on which they could only remove the goods from the factory, in view of the complete ban imposed, under Rule 224(2) on such removal. They cannot be permitted to wriggle out of their own undertaking to pay duty at the enhanced rate, made applicable to the goods removed by them, after the presentation of the budget. Their undertaking had been rightly enforced by the Department and recovery of the differential duty from them on account of enhancement of rate of duty cannot be in any manner held to be illegal/non-justifiable, under the law.
14. Manglam Cement Ltd. v. Collector of Central Excise, Jaipur [1999 (105) E.L.T. 463 (Tribunal)] was an identical case and the issue involved therein was similar to the one referred in the present case. In that case it had been ruled, that, "having availed the relaxation under Rule 224(2A) the assessee could not be allowed to turn back and say that he was not bound by the undertaking given by him in view of the provisional collection of the Taxes Act." This view has been followed in Birla Jute Industries Ltd. v. CCE, Jaipur [1999 (111) E.L.T. 503]. This very view had been again reiterated in CCE v. Universal Cables Ltd. [2000 (118) E.L.T. 386], The view taken in all these cases, in our view is legally correct and we endorse the same. However, we also do not find any direct conflict between the view taken by the Tribunal in the above-referred cases, and the view expressed in Union Carbide India Ltd., Calcutta v. Collector of Central Excise, Madras [1983 (12) E.L.T. 549 (Tribunal), Indian Explosives Ltd., Calcutta v. Collector of Central Excise, Kanpur [1985 (20) E.L.T. 139 (Tribunal) & M/s. J.K. Synthetics Ltd. v. Collector of Central Excise [1993 (68) E.L.T. 246 (Tribunal) (supra) as observed in the referral order. In Union Carbide India Ltd., Calcutta (supra) the interpretation of Rule 224(2A) was not at all involved. The only issue under consideration was the date, which from the notification in question, in that case, was to take effect. The Bench took the view that Notification No. 118/75-C.E. was to take effect from the date of issuance and did not had retrospective effect. Similarly, in Indian Explosive Ltd., Calcutta (supra) Special Excise duty was introduced for the first time in 1978 Budget on the Urea Fertilizer and the assessee cleared those goods on the eve of the budget and thereafter they were called upon to pay the duty in terms of the undertaking furnished by them under Rule 224(2A). Since no special duty existed on the goods at the time of removal, any undertaking given by them under the said Rule, was not of any help to the Revenue for claiming the duty. It was under these circumstances, the Bench after commenting on the interpretation and scope of Section 4 of the Provisional Collection of Taxes and Rule 224(2A), came to the conclusion that special duty could be claimed only after the midnight hours of the date of budget onwards and not prior to that. But such is not the situation in the instant case, in the light of facts and circumstances referred above.
15. In Collector of Central Excise, Rajkot v. Devi Enterprises (supra) the applicability of Notification No. 172/84-C.E. was involved and interpretation of the provisions of Rule 224 were never in issue in that case. The Bench allowed the benefit of that Notification as well as Modvat credit under Rule 57F(4) to the assessee. Similarly, in J.K. Synthetics Ltd. the ratio of law laid down in Indian Explosives Ltd. referred above, had been followed, wherein the facts and the issue involved as observed above, were different.
16. Having regard to what has been discussed above, the reference on the issue referred by the referral Bench stands decided in favour of the Revenue.
17. With the consent of both sides, the appeal itself is also disposed of as nothing is left in the appeal for decision. The only issue involved is the one, which had been referred by the referral Bench. Since that issue stands answered against the appellants by observing that differential duty on account of enhancement in duty in the budget had been rightly recovered from them, they are not entitled to claim the refund of the same. The appeal of the appellants, accordingly stands dismissed.