Custom, Excise & Service Tax Tribunal
M/S. Dharampal Satyapal Ltd vs Commr. Of Central Excise, Shillong on 23 February, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EAST REGIONAL BENCH : KOLKATA
Excise Appeal No. 103/2008
(Arising out of the Order-in-Original No.29/2007 dated-22/11/2007 passed by the Commissioner of Central Excise, Shillong)
For approval and signature of:
DR.D.M. MISRA, HONBLE JUDICIAL MEMBER
SRI H.K. THAKUR, HONBLE TECHNICAL MEMBER
======================================================
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should 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 Departmental :
Authorities ?
M/s. Dharampal Satyapal Ltd.
APPELLANT(S)
VERSUS
Commr. of Central Excise, Shillong
RESPONDENT(S)
APPEARANCE
Sri T.R. Rustagi, Advocate
FOR APPELLANT(S)
Sri B.N. Pal & Sri R.K. Choudhary,
Spl. Counsel
FOR THE RESPONDENT(S)
CORAM:
DR.D.M. MISRA, HONBLE JUDICIAL MEMBER
SRI H.K. THAKUR, HONBLE TECHNICAL MEMBER
DATE OF HEARING : 23/02/2016 Date of Pronouncement:29/04/16
ORDER NO :FO/A/75294/2016
Per SRI H.K. THAKUR
This appeal has been filed by the appellant against Order-in-Original No. 29/2007 dated 22/11/2007 passed by Commissioner of Central Excise, Shillong as Adjudicating authority.
2. Shri T.R. Rustogi (Advocate) appearing for the appellant and through written submissions argued that appellants are the manufacturer of Gutka classifiable under Chapter 24 of the schedule to Central Excise Tariff Act, 1985. That officers of Central Excise, Guwahati during a visit on 16/3/2006 observed that appellant is taking CENVAT credit of National calamity Contingent Duty (NCCD) paid on panmasala which was received from other units as input on which NCCD was paid. That it is the case of the Revenue that appellant is not eligible to NCCD paid on inputs as appellant is availing the benefit of area based exemption under Notification No. 32/1999-CE or 33/1999-CE both dated 8/7/99 and that CENVAT Credit under Rule 10 of CENVAT Credit Rules 2001/2002, as well as under Rule 12 of the CENVAT Credit Rules, 2004, is admissible only if raw material supplier is availing exemption under Notification No.32/99-CE or 33/99-CE and not for NCCD paid/exempted as per Notification No. 27/2001-CE dated-11/5/2001.
2.1 Learned Advocate made the bench go through the provision of Rule 3 (1) (V) of the CENVAT Credit Rules 2001/2002 or 2004 to argue that credit of NCCD paid on the inputs is admissible. That provisions contained in Rule-10 of CENVAT Credit Rules 2001/2002 or Rule 12 of CENVAT Credit Rules, 2004 have been made as an abundant caution and cannot take away the credit admissibility as per Rule 3 (1) (V) of the CENVAT Credit Rules.That Notification No. 27/2001-CE has to be considered as an integrated part of incentives granted under Notification No. 32/99-CE and 33/99-CE which are specified under Rule 10 and 12 of the CENVAT Credit Rules 2001/2002 and 2004 respectively as per clause 2 of Notification No. 27/2001-CE. That Rules 10/12 of the Cenvat Credit Rules are only clarificatory and do not debar NCCD credit to the appellant. Learned Advocate relied upon the case law of Welspun Gujarat Stahl Rohren Ltd. Vs. UOI [2010 (254) E.L.T. 551 (Guj.)] to argue that ratio of this case law is squarely applicable to the present facts. That SLP filed by the Revenue against this order has been dismissed by Apex Court as per citation 2010 (256) ELT a 161 (S.C.). That as per the following case laws the duty is deemed to be paid even if subsequently refunded under an area based exemption notification:-
(i) CCE, Jallandhar Vs. Kay Kay Industries [[2013 (295) E.L.T. 177 (S.C.) (II) CCE, Chennai-I Vs. CEGAT, Chennai [2006 (202) ELT 753 (Mad.)] 2.2 That as per case law CCE, Mumbai Vs. Indorama Synthetics (I) Ltd. [2014 (307) ELT 805 (Tri-Mumbai)] if there is a conflict between the provisions of the Rules & the provisions of a notification then the provision of Notification will prevail and this it is a settled proposition that law cannot be interpreted in such a way to defeat its object.
2.3 That demand is partly time barred as extended period of five years cannot be invoked in the present proceedings. It was his case that statutory returns were regularly filed by the appellant indicating the NCCD credit taken and also the address/registration number of the Panmasala suppliers. Learned Advocate made the bench go through illustrative copies of such returns on page 72,75 & 76 of the appeal. That penalty is not invokable as extended period is not invokable and also due to the fact that it was a case of genuine legal interpretation.
2.4 That credit of NCCD utilized by debiting NCCD credit from RG-23 of the CENVAT credit of the appellant cannot be denied which is not refunded under area based exemption.
3. Shri R.K. Choudhary (Spl. Counsel) and Sri B.N. Pal (Advcate) appeared on behalf of the Revenue. Shri R.K. Choudhary during the course of the hearing and through written submissions made following arguments for the Revenue:-
(i) That the supplier unit has availed the benefit of NCCD as per area based exemption Notification No. 27/2001-CE dated-11/05/2001.
(ii) That Notification No. 27/2001-CE is an independent area based exemption notification with respect NCCD and only procedures of Notification No. 32/99-CE & 33/99-ce have been made applicable to implement Notification No. 27/2001-CE.
(iii) That Notification No. 27/2001-CE dated 11/5/2001 does not find mention in Rule 10 and Rule 12 of the CENVAT Credit Rules 2001/2002 or CENVAT Credit Rules 2004 which only make CENVAT credit admissible even if the end products stand exempted.
(iv) That there is nothing in the CENVAT Credit that Rule 3 of the CENVAT Credit will prevail over Rules 10 or Rule 12 of the CENVAT Credit Rules applicable.
(v) Ld. Spl. Counsel relied upon the case law of Shree Rama Multi-Tech Ltd. Vs. CC & Cus [ 2016 (331) ELT 348 (Guj)] to argue that there is no room for ascertaining the intendment of the legislature when the provision of law are clear and unambiguous.
(vi) That Rule 10 & Rule 12 of the CENVAT Credit Rules 2001/2002 CENVAT Credit Rules 2004 are special provisions, making CENVAT Credit admissible made in notifications where full exemption of PLA paid duty is granted, by making specific mention in these Rules.
(vii) That the word Notwithstanding used in the opening paragraph of Rule 10 or Rule 12 of the CENVAT Credit Rules will mean that special provision of Rule 10 or Rule 12 will prevail over general provisions of Rule 3 or Rule 10 of CENVAT Credit Rules. Learned Special Counsel relied upon Gujarat High Courts decision in the case of Adani Power Ltd. Vs. U.O.I. [2015 (330) ELT 883 (Guj.)]
4) Heard both sides and perused the case records. The issue involved in the present proceedings is whether appellant will be eligible to take CENVAT Credit of NCCD paid on input Panmasala received by the appellant from the suppliers who availed the benefit of Notification No. 27/2001-CE dated-11/5/2001.It is the case of the appellant that CENVAT Credit on NCCD is admissible as per Rule 3 (1) (v) of the CENVAT Credit Rules and that provision of Rules 10 or Rule 12 of the CCR 2001/02 & CCR 2004 being clarificatory, will not have any application as Notification No.27/2001-CE is also issued to extend area based benefit to the manufacturer. Appellant has claimed that CENVAT Credit of NCCD is admissible to them as per the provisions of Rule 3 (1) (V) of the CENVAT Credit Rules.It is also observed that as per Rule 6 of the CENVAT Credit Rules, no credit of the duty on inputs is admissible if the end product stands exempted. Under area based exempted notification No. 32/99-CE and 33/99-CE, both dated 8/7/1999, as well as Notification No. 27/2001-CE dated-11/5/2001 whole duty paid through PLA /Cash is fully exempted by way of refund. These notifications have been issued under Section 5A (1) of the Central Excise Act, 1944. A conjoint reading of these area based exemptions, providing complete exemption from duty paid through PLA and the provisions contained in Rule 6 of the CENVAT Credit Rules will give an impression/doubt that CENVAT Credit on duty paid on inputs under these exemption notifications may not be admissible. Therefore, the argument of the appellant that CENVAT credit of NCCD is admissible as per Rule 3 (1) (v) of CENVAT Credit Rules is not absolute and cannot be appreciated. Rule 3 (1) (v) cannot be read in isolation when other Rules like Rule 6 of CENVAT Credit Rules are also existing in the scheme of taking CENVAT credit. Admissibility of CENVAT Credit under Rule 3 of the CENVAT credit is also subject to fulfillment of other conditions specified elsewhere in the CENVAT Credit Rules. Rule 10 of CENVAT Credit Rules 2001/2002 (CCR 01/02) or Rule 12 of CENVAT Credit Rules 2004 (CCR 04) is thus a mandatory condition for availing CENVAT Credit on inputs received by the manufacturers of final products exempted under area based exemptions specified in Rule 10 or Rule 12 of CCR 01/02 or CCR 04 respectively.
4.1 Rule 12 of the CCR 04, which is similar to Rule 10 of CCR 01/02, is relevant and is reproduced below:
Rule 12. Special dispensation in respect of inputs manufactured in factories located in specified areas of North East region, Kutch district of Gujarat, State of Jammu and Kashmir and State of Sikkim-Notwithstanding anything contained in these rules, where a manufacturer has cleared any inputs or capital goods, in terms of notifications of the Government of India in the Ministry of Finance(Department of Revenue) No. 32/99-Central Excise, dated the 8th July, 1999 or No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509 (E), dated the 8th July, 1999] or No. 39/2001-Central Excise, DATED THE 31ST July, 2001 [G.S.R. 565 ( E ), dated the 31st July, 2001] or notification of the Government of India in the erstwhile Ministry of Finance and Company Affairs (Department of Revenue) No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764 ( E ), dated 14th November, 2002] or No. 57/2002-Central Excise, dated the 14th November, 2002 [ GSR 765 ( E ) dated the 14th November, 2002] or notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513 ( E ), dated the 25th June, 2003] or 71/2003-Central Excise, dated the 9th September, 2003 [ G.S.R. 717 ( E ), dated the 9th September, 2003, the CENVAT credit on such inputs or capital goods shall be admissible as if no portion of the duty paid on such inputs or capital goods was exempted under any of the said notifications. 4.2 A plain reading of the above Rules reveal that area based exemptions 32/99-CE & 33/99-CE, both dated 8/7/1999, are mentioned alongwith other area based exemptions. Some of the exemption notifications specified in these Rules are issued much after Notification No. 27/2001-CE dated-11/5/2001. The exclusion of Notification No. 27/2001-CE from Rule 12 of CCR 04 is thus deliberate. Further Notification No. 27/2001-CE is an independent exemption Notification and not an amendment to Notification No. 32/99-CE or 33/99-CE. The provision of Rule 12 of CCR 04 is a special dispensation with respect of inputs manufactured in specified areas for the purpose of taking CENVAT Credit. The argument taken by the appellant, that these provisions are made as an abundant caution or are clarificatory and has no relevance, is thus required to be rejected. On the contrary the opening phrase of this Rule 12 containing the words Notwithstanding anything contained in these Rules has to be interpreted to mean that in spite of the provisions contained in Rule 3 & Rule 6 of the CENVAT Credit Rules, credit of whole of duty paid through PLA will be admissible even if the same stands fully exempted by exemption notifications specified in these Rules. As notification No. 27/2001-CE dated 11/5/2001 is not mentioned, in these Rules, it is held that though area based exemption is admissible to NCCD but its CENVAT Credit has not been made available by a deliberate omission from the provisions of Rule 10 or Rule 12of the CCR 01/02 or CCR 04.
5. Reliance of the appellant on the case law of Welspun Gujarat Stahl Rohren Ltd. Vs. UOI (supra) and others are not relevant as none of these case laws are with respect to admissibility of CENVAT credit under special provisions contained in Rule 10 and Rule 12 of CCR 01/02 and CCR 04 respectively. In view of the above on merit, CENVAT credit of NCCD, refunded under area based exemption No. 27/2000-CE, is not admissible to the appellant.
6. However, the contention raised by the appellant, that NCCD duty credit utilized by debiting the CENVAT Credit account, cannot be denied for units not availing area based exemption, is acceptable as these amounts are not hit by the CENVAT Credit Rules. The amount of such NCCD Credit rejected, if any is required to be quantified by the Adjudicating authority and the same will be admissible to the appellant.
7. So far as the invocation of extended period under Rule 14 of the CENVAT Credit Rules, read with Section 11A of the Central Excise Act, 1944 is concerned, it is argued by the appellant that NCCD credit taken was duly reflected in their periodical returns filed with the department alongwith a list of raw materials supplied with their address and registration numbers. It is observed from the ER-1 return copies for the month of March, 2002, March, 2003 and March, 2004 that appellant has indicated the NCCD CENVAT Credit taken by the appellant. Appellant has also given a list of all the input materials and their registration numbers. It is also observed from the covering letters filing ER-1 returns that even photo copies of Cenvatable invoices were also submitted to the department by the appellant. In view of the existing factual matrix, five years extended period of demand cannot be invoked against the appellant. However, the entire demand is not time barred as the period of demand is 11/5/2001 to 31/3/2006 and the show cause notice is issued on 10/08/2006. The CENVAT credit taken within the normal period of limitation is not admissible to the appellant and is required to be paid alongwith appropriate interest under Section 11AB of the Central Excise Act, 1944.
8. So far as imposition of penalty upon the appellant is concerned, it has already been observed above that extended period is not invokable. Further, the issue involved in the present appeal was a case of interpretational dispute. All the relevant facts and provisions of CENVAT Credit Rules were known to the department also. Periodical audits of the appellants unit were also done by the Internal Audit parties of the department. If department could not raise doubts about the admissibility of credit then Appellant cannot be held responsible for taking a deliberately wrong credit for imposing penalty. Accordingly, it is held that penalty under Rule 15 of the CENVAT Credit Rules, 2004 cannot be imposed and is set aside.
9. Appeal filed by the appellant is thus disposed off in terms indicated in paras 6,7 & 8 above.
( Pronounced in the Court on 29/4/2016) Sd/- Sd/-
(D.M. MISRA) (H.K.THAKUR) JUDICIAL MEMBER TECHNICAL MEMBER k.b/- Excise Appeal No. 103/2008 10