Custom, Excise & Service Tax Tribunal
M/S Metaclad Industries vs Cce Mumbai Ii on 31 August, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPLICATION NO. E/S/1905 and 1908/12
IN APPEAL NO. E/1244 and 1247/12
(Arising out of Order-in-Appeal No. US/360 to 363/M-II/2012 dated 28.05.2012 passed by the Commissioner of Central Excise (Appeals), Mumbai)
For approval and signature:
Honble Shri. P.R. Chandrasekharan, Member (Technical)
1. Whether Press Reporters may be allowed to see : No
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 : Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Yes
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
M/s Metaclad Industries
Shri Suketu Vasant Jariwala
Appellant
Versus
CCE Mumbai II
Respondent
Appearance Ms. Padmavati Patil, Advocate for Appellant Shri V.R. Kulkarni, Dy. Commissioner (A.R.) for Respondents CORAM:
Shri. P.R. Chandrasekharan, Member (Technical) Date of Hearing : 31.08.2012 Date of Decision : 31.08.2012 ORDER NO.
Per P.R. Chandrasekharan The appeals and stay applications are directed against order-in-appeal No. US/360 to 363/M-II/2012 dated 28.05.2012 passed by the Commissioner of Central Excise (Appeals), Mumbai.
2. The main appellant, M/s Metaclad Industries availed CENVAT credit of the excise duty paid on the goods procured from a 100% EOU. The said duty comprises of various components such as Basic Customs duty, Additional Customs Duty leviable under sub-section (1) and sub-section (5) of Section 3 of Customs Customs Tariff Act, 1975, Education Cess and so on. The department was of the view that the appellant is not entitled to take CENVAT credit of the portion relating to Special Additional Duty of Customs leviable under sub-section (5) of the Section 3 of the Customs Tariff Act, 1975 and, accordingly, they denied the cenvat credit and confirmed a demand of Rs.4,09,379/- against the appellant. Apart from imposing a penalty of an equivalent amount on the main appellant, a penalty of Rs.25,000/- was imposed on the co-appellant Shri Suketu Vasant Jariwala, a partner of the appellant firm. The appellants preferred appeals before the lower appellate authority who vide the impugned order rejected the appeals and hence the appellants are before me.
3. Ms. Padmavati Patil, learned Advocate submits that under Rule 3 of the CENVAT Credit Rules, 2004 vide Clause (vii)(a) additional duty of customs leviable under sub-section (5) of the Section 3 of the Customs Tariff Act has been specified as a duty on which credit can be availed. In sub- rule (7) of the said Rule, in respect of excisable goods procured from a 100% EOU, a formula has been prescribed to arrive at the quantum of CENVAT credit that could be taken and in that formula it has been specified that the CVD mentioned therein refers to the additional duty of customs leviable on the inputs or capital goods, as the case may be. The expression used additional duty of customs does not restrict itself to the additional duty leviable under sub-section (1) of Section 3 of the Customs Tariff Act but also includes the additional duty leviable under sub-section (5) of the Section 3 of the said Tariff Act. Since there was a confusion in the matter, the CBEC vide Notification No. 22/2009-CE (NT) dated 7.9.2009 amended the formula wherein it was clarified that the CVD referred to comprises of both the additional duty leviable under Section (1) of Section 3 as well as under sub-section (5) of Section 3 apart from education cess and secondary higher edu. cess. She submits that this clarification should apply to the previous period also. She relies on the decisions of this Tribunal in the case of Sri Venkateshwara Precision 2010 (258) ELT 553 (T), Cello Plasto Tech 2011-TIOL-1707-CESTAT-AHM and Emcure Pharmaceuticals Ltd. 2008 (225) ELT 513 (Tri.) in support of her contention that they are rightly entitled for the CENVAT credit.
4. The learned Dy. Commissioner (A.R.) representing the Revenue on the other hand strongly opposes the contention. He submits that Notification No.22/2009-CE (N.T.) dated 7.9.2009 clarified the scope of the term CVD. The said benefit would be available only for the period on or after 7.9.2009 and in the instant case the period is prior to 7.9.2009. Therefore, the appellants are not entitled for the CENVAT credit of the excise duty paid on that portion of the additional duty levied under sub-section (5) of the Section 3 of the Customs Tariff Act. Accordingly, he supports the findings given by the lower authorities.
5. I have carefully considered the rival submissions. As the issue lies in the narrow compass, I am of the view that the appeals themselves can be disposed of at this stage itself. Therefore, after dispensing with the requirement of pre-deposit of the dues adjudged, I have taken up the appeals for consideration.
5.1 The levy on the goods cleared from a 100% EOU to DTA is an excise duty as provided for in section3 of the Central Excise Act. For the purposes of arriving at the rate of duty, it has been prescribed in the said section that the rate of excise duty on goods cleared from an EOU shall be the aggregate of the customs duties leviable on like goods imported into India. Nevertheless, the levy is an excise levy and it does not in any way gets converted into a customs levy. Once this position in law is clearly understood, the issue becomes simple and clear. The excise duty levied under Section 3 of the Central Excise Act is an eligible duty for CENVAT credit under Rule 3 of the Cenvat Credit Rules, 2004. Similarly in the case of imported goods, the additional duty paid under sub-section (1) of section 3 of the Customs Tariff Act as well as under sub-section (5) of the said section are duties specified for availment as credit under rule 3 of the Cenvat Credit Rules. If that be so, irrespective of the nature of the components of duty which is contained in the excise duty paid by an EOU, credit should be available under Rule 3 of the CENVAT Credit Rules, 2004.
5.2 There are two reasons for allowing such credit. One is economic and the other is legal. First the economic reason. Cenvat (value added tax) is an economic concept and the object is to minimize/eliminate the cascading effect of taxes. If this objective has to be realized, then full credit of the duties paid at the previous stage has to be allowed. Further, if credit of the entire excise duty paid by an EOU is allowed and the same is restricted, it creates discrimination between units in the DTA and units in the EOU Zone. That is to say, it will no longer be economically attractive to buy goods from the EOU because of lesser amount of credit that would be available. It also creates discrimination against the EOU vis-`-vis the imported goods. That is, cenvat credit being available in respect of additional duty paid under sub-section (5) of section 3 in respect of imported goods, if that is denied in the case of goods procured from an EOU, it will be a dis-incentive for procurement from EOU. The object and purpose of levy of special additional duty under section 3(5) of the Customs Tariff Act was to provide a level playing field for domestic units. That objective will be completely negatived, if the said duty is not available as credit for procurement from EOUs vis-`-vis imports. The Cenvat Credit Scheme is not intended to distortions in the market place and the law also should not be interpreted in such a way so as to create a distortion. It is an accepted legal principle that the law should be interpreted in a harmonious way so as to sub-serve the public policy.
5.3 Now coming to the legal aspect, the expression used in sub-rule (7) of rule 3 of the Cenvat Credit Rules is as follows:-
Fifty percent. of [X multiplied by (1+BCD/100)multiplied by(CVD/100), where BCD and CVD denotes of ad valorem rates, in percent, of basic customs duty and additional duty of customs leviable on the inputs or the capital goods respectively and X denotes the assessable value The expression additional duty of customs leviable is not qualified by any other term. Now there are two additional duties of customs leviable under section 3 of the Customs Tariff Act. Under sub-section (1), an additional duty of customs is levied which is equal to the excise duty levied on like articles produced in India. Under sub-section (5), another additional duty of customs is levied at a rate not exceeding four per cent. of the value of the imported article so as to counterbalance the sales tax/value added tax or any other charges on a like article on its sale, purchase or transportation in India. Both the levies are additional duty of customs and therefore, there is no warrant to restrict the scope of the term additional duty of customs occurring in the formula mentioned above to only the additional duty leviable under sub-section (1) of section 3 and not to the additional duty leviable under sub-section (5) thereof. As provided for in the General Clauses Act, in law, a reference to a singular term also includes a reference to the plural. Thus for the purposes of allowing the cenvat credit, both the additional duties have to be taken into account and restricting the benefit to only one additional duty is not warranted under the strict interpretation principle of statutory interpretation. Further, CENVAT is as beneficial provision for reducing the cascading effect of taxation and if the object of CENVAT has to be sub-served, the credit should be made available in respect of both the additional duty of customs. The economic rationale for the same has already been explained in the preceding paragraph.
5.4 The clarification/amendment made in the said Rule in 2009 is only for the purpose of removal of doubts and not for any other reason. Therefore, the revenues contention for restricting the credit has no rationale at all and has to be rejected outright.
5.5 Further this Tribunal in a number of cases relied upon by the appellants, namely, Sri Venkateshwara Precision (supra), Cello Plasto Tech (supra) and Emcure Pharmaceuticals Ltd. (supra) dealt with this issue and held that additional duty paid whether under sub-section (5) of Section 3 or under Section (1) of Section 3 are eligible as CENVAT credit as the expression used is additional duty of customs and it does not differentiate between the two additional duties. The Revenue has not been able to place before me any contrary decision in support of their argument that the additional duty paid under sub-section (5) of Section 3 is not available as cenvat credit. Therefore, the ratio of the decisions relied upon by the appellants, is squarely applicable to the facts of present case.
6. In the light of these discussions, I hold that the appellants are rightly entitled for the credit of all the additional duties of customs paid by the EOU under section 3 of the Customs Tariff Act even for the period prior to 7.9.2009. Thus I allow the appeals with consequential relief. The stay applications are also disposed of.
(Dictated in Court) (P.R. Chandrasekharan) Member (Technical) nsk 8