Custom, Excise & Service Tax Tribunal
Hindustan Coca Cola Beverages Pvt Ltd vs Jaipur-I on 5 July, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi - 110 066.
Date of Hearing: 3.7.2018
Date of Pronouncement: 5.7.2018
Appeal No. E/51048/2018-SM
(Arising out of Order-in-Appeal No. 13(NG)CE/JPR/2018 dated 25.1.2018
passed by the Commissioner (Appeals), Central Goods & Service Tax & Central
Excise, Jaipur)
M/s Hindustan Coca-Cola Beverages Pvt. Ltd. Appellant
Vs.
CCE, Jaipur Respondent
Appearance Shri Monish Panda, Advocate - for the appellant Shri P. Junega, D.R. - for the respondent CORAM: Hon'ble Mr. Ajay Sharma, Member (Judicial) Final Order No. 52416/2018 Per Ajay Sharma:
This Appeal has been filed from the order dated 25.1.2018 passed by the Commissioner (Appeals) and while rejecting the contention of the Appellant that „Sugar Cess‟ is a duty of excise, the Commissioner (Appeals) held that the appellant is not entitled to Cenvat Credit under Rule 3 of the Cenvat Credit Rules, 2004.
2. The Appellant is engaged in manufacture of Aerated Water and Kinley Soda falling under Chapter Heading No.2202 and 2201 respectively of the first schedule to the Central Excise Tariff Act, 1985. While importing sugar in India during the F.Y. 2009-10, the Appellant had paid Additional Duty of 2 E/51048/18-SM Customs equivalent to Basic Excise Duty (CVD) and besides that, the Appellant had also paid „Sugar Cess‟. Sugar, being the basic input raw material for manufacture of beverage, was used by the Appellant in the manufacture of the excisable goods and at that time they took Cenvat Credit of CVD comprising of Basic Excise Duty. No Cenvat on Sugar Cess was available at that time.
3. The Hon‟ble High Court of Karnataka in the matter of CCE vs. Shree Renuka Sugar Ltd.; reported in 2014(302) ELT 33 (Kar.) vide order dated 6.8.2013 has held that Sugar Cess is duty of Excise and not fee and once the payment of duty is established, the assessee is entitled to take Cenvat Credit under Rule 3 of the Cenvat Credit Rules. Therefore in terms of the decision of the Hon‟ble High Court in Shree Renuka Sugar Ltd. (supra) the Appellant availed the Cenvat Credit of Sugar Cess amounting to Rs.1,79,610/- in the month of July, 2014 and informed the same to the department on 21.11.2014.
4. According to the department, the Appellant had wrongly availed and utilized Cenvat Credit of Sugar Cess which was not covered under Rule 3(1) of CCR, 2004 and therefore a show cause notice dated 23.1.2015 as to why:-
"(i) Cenvat credit amounting to Rs.179610/- as Sugar Cess wrongly availed by them should not be recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944;
(ii) Interest on wrongly availed Cenvat credit as sugar cess should not be recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944;
(iii) Penalty should not be imposed upon them under Rule 15(1) of the Cenvat Credit Rules, 2004 for contravention of Rule 3(1) of Cenvat Credit Rules, 2004."
5. The demand was confirmed by both the Adjudicating Authority as well as Appellate Authority. I have heard ld. Advocate for the Appellant and ld. AR 3 E/51048/18-SM for the department and perused the record. Ld. AR for the department reiterated the findings in the impugned order. According to him the decision of the Hon‟ble High Court has not attained finality and the same has been challenged by the department before the Hon‟ble Supreme Court and is pending before the Hon‟ble Supreme Court. He further submitted that sugar cess levied and collected under the Sugar Cess Act, 1982 does not partake the character of a duty of excise. It is in the nature of fee, for rendering specific service as contemplated under the Sugar Development Fund Act, 1982 and therefore the Appellant is not entitled for the benefit of Cenvat Credit on it. In support of his contention, the ld. AR relied upon the decision of the Hon‟ble High Court of Gujarat in the matter of Commissioner vs. Sahakari Khand Udyog Mandi Ltd.; reported in 2011 (263) ELT 34 (Guj.) and submitted that sugar cess imposed under the provisions of the Cess Act cannot assume the characteristic of central excise duty so as to warrant calculation of education cess on the amount of cess so collected.
6. The ld. Advocate for the Appellant submitted that his case is squarely covered by the decision of the Hon‟ble Karnataka High Court in Shree Renuka Sugar Ltd.'s case (supra). He further submitted that even when the Sugar Cess has been levied under the provisions of Sugar Act, the same has to be treated at par with the duty levied under Section 3(1) of the Customs Tariff Act, 1975. According to him the charging section 3(1) of the Sugar Cess Act, 1982 provides that there shall be levied and collected a cess, for the purpose of Sugar Development Fund Act, 1982, a duty of excise on all sugar produced by any sugar factory in India. Thus, the charging section clarifies that sugar cess levied on all sugar produced by any sugar factory in India is a "duty of excise". He further submitted that Section 2A of the Central Excise Act expressly provides that unless the context otherwise requires, reference to expression "duty", "duties", "duty of excise" and "duties of excise" shall be 4 E/51048/18-SM construed to include reference to „Central Value Added Tax (CENVAT)‟ and thus the duty of excise paid under Sugar Cess Act is also CENVAT. He has also submitted that the department has erred in relying upon the decision of Hon‟ble Gujarat High Court in Commissioner Vs. Sahakari Khand Udyog Mandli Limited - 2010 (263) ELT 34 (Guj.) in as much as decision of Karnataka High Court in Shree Renuka Sugars Ltd. has come later in point of time and it is settled law that the later the better principle. Appellant relied upon the following:
(i) Commissioner of Central Excise, Kol-IV Vs. Kusum Products Ltd.
- 2012 (283) ELT 433 (Tri.-Kolkata);
(ii) Commissioner of C. Ex., Ahmedabad-III Vs. Gujarat Ambuja Exports Ltd. - 2013 (297) ELT 577 (Tri.-Ahmd.);
(iii) Pee Jay International Vs. Commissioner of Customs, Amritsar - 2014 (312) ELT 464 (Tri.-Del.);
(iv) Yusuf Dhanani Vs. Commissioner of Customs (EP), Mumbai - 2008 (222) ELT 122 (Tri.-Mumbai);
(v) Commissioner of C. Ex., Ahmedabad-III Vs. Arvind Mills Ltd. - 2006 (204) ELT 570 (Tri.-L.B.);
(vi) Elgi Tread India Ltd. Vs. Commissioner of Central Excise, Coimbatore - 2005 (192) ELT 712 (Tri.-Chennai);
(vii) Dhrangadhra Chemical Works Ltd. and Others - 1988 (35) ELT 88 (Gujarat).
7. For proper appreciation of the case, it is relevant to go through Section 3 of the Sugar Cess Act, 1982, Sections 3 & 4 of the Central Excise Act, 1944 and Rule 3(1) of the Cenvat Credit Rules, 2004 which are reproduced as under:-
Sugar Cess Act, 1982
3. Imposition of Cess : (1) - There shall be levied and collected as a cess, for the purposes of the Sugar Development Fund Act, 1982, a duty of excise on all sugar produced by any sugar factory in India, at such rate not exceeding fifteen rupees per quintal of sugar, as the Central Government may, by notification in the Official Gazette, specify from time to time :5
E/51048/18-SM Provided that until such rate is specified by the Central Government, the duty of excise shall be levied and collected at the rate of fourteen rupees per quintal of sugar.
(2) The duty of excise levied under sub-section (1) shall be in addition to the duty of excise leviable on sugar under the Central Excises and Salt Act, 1944 (1 of 1944) or any other law for the time being in force.
(3) The duty of excise levied under sub-section (1) shall be payable by the occupier of the sugar factory in which sugar is produced.
(4) The provisions of the Central Excises and Salt Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duty, shall, so far as may be, apply in relation to the levy and collection of the said duty of excise as they apply in relation to the levy and collection of the duty of excise on sugar under that Act."
xxx xxx xxx Central Excise Act, 1944
3 Duties specified in the Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied. - (1) There shall be levied and collected in such manner as may be prescribed -
(a) a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones, which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods (excluding goods produced or manufactured in special economic zones) specified in the Second Schedule to the Central Excise Tariff.
4. Crediting proceeds of duty to Consolidated Fund of India. The proceeds of the duty of excise levied under Section 3 shall be credited to the Consolidated Fund of India."
xxx xxx xxx CENVAT Credit Rules, 2004
Rule 3. - (1) A manufacturer or producer of final products shall be allowed to take (1) credit (hereinafter referred to as the CENVAT credit) of, -
(i) the duty of excise specified in the First Schedule to the Tariff Act, leviable under the Act;
(ii) the duty of excise specified in the Second Schedule to the Tariff Act, leviable under the Act;
6
E/51048/18-SM
(iii) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978),
(iv) the additional duty of excise leviable under Section 3 of Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(v) the National Calamity Contingent duty leviable under Section 136 of the Finance Act, 2001 (14 of 2001), as amended by Section 169 of the Finance Act, 2003 (32 of 2003);
(vi) Education Cess on excisable goods leviable under Section 91 read with Section 93 of the Finance (No. 2) Act, 2004;
(vii) the additional duty leviable under Section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) and (vi) above; and
(viii) the additional duty of excise leviable under Section 157 of the Finance Act, 2003 (32 of 2003), paid on any inputs or capital goods received in the factory on or after the first day of March, 2002, including the said duties paid on any inputs used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86- Central Excise, dated the 25th March, 1986, published vide number G.S.R. 547(E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final products, on or after the first day of March, 2002".
The language of Section 3 of the Sugar Cess Act makes it clear that, although a cess is levied and collected for the purpose of the Sugar Development Fund Act, 1982, it is in the nature of a duty of excise on all sugar produced by any sugar factory in India. The duly of excise levied under sub-section (1) shall be in addition to the duty of excise leviable on sugar under the Central Excise Act or any other law for the time being in force as is clear from sub-section (2). Sub-section (2) makes it clear that what is levied and collected as a cess under sub-section (1) of Section 3 is characterized as a "duty of excise" levied under "the Central Excise Act". Further, Section 3(4) 7 E/51048/18-SM makes it clear that the provisions of the Central Excise Act and the Rules made thereunder including those relating to refunds and exemptions from duty shall, so far as may be, apply in relation to the levy and collection of the said duty of excise as they apply in relation to the levy and collection of the duty of excise on sugar under that Act. Therefore, although Sugar Cess has been levied under the provisions of Sugar Cess Act, the same has to be treated at par with the duty levied under Section 3(1) of the Customs Tariff Act, 1975.
8. There is no dispute that the appellant had imported sugar and had paid Additional Duty of Customs equivalent to Basic Excise Duty. Besides, CVD paid on importation of sugar, the appellant had also paid Sugar Cess and although the appellant had availed Cenvat credit of CVD but not on Sugar Cess. The issue involved in the matter is whether the appellant is entitled for Cenvat credit of Sugar Cess or not. According to me, the question whether sugar cess is a tax or fee, was specifically dealt with the Hon‟ble High Court of Karnataka in the matter of Shree Renuka Sugar Ltd. (supra) in which it was held by the Hon‟ble High Court that the sugar cess paid under the Sugar Cess Act is tax and to be precise it is duty of excise and not fee and therefore in view of it, the appellant is entitled for Cenvat credit of Sugar Cess. I have been informed by the Appellant that the Appeal filed by the department in the Hon‟ble Supreme Court against the said order of the Hon‟ble Karnataka High Court has been dismissed by the Hon‟ble Supreme Court. Otherwise also it was informed to me that no stay of the order of Hon‟ble Karnataka High Court in Shree Renuka Sugar Ltd.'s case (supra) has been granted by the Hon‟ble Supreme Court at any point of time. In view of the above, the present case is squarely covered by the decision of the Hon‟ble High Court in the matter of Shree Renuka Sugar Ltd. (supra) and the ld. Commissioner (Appeals) erred in not relying upon the said order 8 E/51048/18-SM merely by stating that it has not attained finality. While passing the order, the Hon‟ble Karnataka High Court took into consideration various decisions of the Hon‟ble Supreme Court and in particular the law laid down by the Hon‟ble Supreme Court in the matter of Barnagore Jute Factory Co. vs. Inspector of Central Excise; 1992 (57) ELT 3 (SC). In the said matter the Hon‟ble Supreme Court was considering the nature of a „cess‟ levied and collected under the provisions of the Jute Manufacturers Cess Act, 1983, where identical provision came up for consideration before the Hon‟ble Supreme Court. In that matter the Hon‟ble Supreme Court laid down as under:-
"17. It is then argued that if we arrive at the above conclusion on the basis of the language employed in Section 9, it would lead to an anomalous situation viz., while the jute yarn industry would not be within the purview of the Act (i.e., would not be subject to control and regulation provided by the Act) its products would be liable to pay cess under Section 9. This cannot be, says the learned Counsel. We are not impressed. Firstly, it is not the case of any of the petitioners that any of them is engaged in the production of jute yarn alone. All of them are engaged in manufacture of jute textile and are, therefore, scheduled industries. Jute yarn is an intermediate product for them. It is not even stated by the petitioners that there are any factories or industries engaged in production of jute yarn alone. In the circumstances, this argument of Mr. Salve is hypothetical in nature and need not detain us. We cannot also accede to Mr. Salve‟s argument that intermediate products of a scheduled industry cannot be subjected to cess on the ground that it would amount to multistage levy. Section 9 speaks of levy on all goods manufactured or produced in a scheduled industry. Jute yarn is goods known to market. Therefore, they are goods manufactured in a scheduled industry. The fact that such yarn is captively consumed in the manufacture of jute textile is of no relevance. In fact, this question is concluded by the decision of this Court in J.K. Cotton Spinning & Weaving Mills v. Union of India, 1988 (1) SCR 700, a decision rendered under the Central Excises and Salt Act ........".
18. But the language of Rule 3 of Jute Cess Rules is altogether different. It indicates a continuing applicability of the provisions of the Central Excise Act and the Rules. What was levied was a „duty of excise‟ and it was to be levied and collected in accordance with the provisions of the Central Excise Act and the Rules. The effect is as if the words "for the time being in force" were thereafter the words "the provisions of Central Excises and Salt Act, 1944 (1 of 1944) and the Rules made thereunder" in Rule 3. We are, therefore, of the opinion that the amendment of Rules 9 and 49 made in 1982 (with retrospective effect from 1944) is equally applicable in the matter of levy and collection of cess under the Act. The contentions urged by Sri 9 E/51048/18-SM Ganesan are accordingly rejected. In this view of the matter, it is not necessary to dwell upon the difference between cases where the provisions of another Act are incorporated by reference and cases where a mere reference is made to another Act a distinction pointed out in a recent decision of this Court in Bhatinda Improvement Trust v. Balwant Singh [1991 (4) SCC 368].
19. ..........The nature of the cess imposable under Section 9 is 19. really that of duty of Central Excise, as emphasised hereinbefore. Evidently, for that reason the principle obtaining under the Central Excise Act has been adopted by this Act in the matter of levy of cess. We cannot agree with Sri Salve that according to Section 9, the cess can be levied on the basis of value alone and on no other basis. The main limb of Section 9(1) does not indicate any particular basis for levy of cess. It is only the proviso which says, "no such rate shall in any case exceed two annas per cent of the value of the goods." Sri Salve wants us to read the proviso into the main limb and on that basis, hold that Section 9(1) contemplates levy of cess only ad valorem............"
9. I have also been informed that in an identical issue in Appellant‟s own case where also the department denied Cenvat credit paid on Sugar cess to the Appellant, this Tribunal-Bangalore Bench in the matter of Hindustan Coca Cola Beverages Pvt. Lld. Vs. Commissioner of Customs, C.E. & S.T., Guntur vide Final Order No. 22405/ 2014, dated 26.12.2014 allowed the Appeal filed by the Appellant by relying upon the decision of this Tribunal in Appellant‟s another case on identical issue decided by this Tribunal- Bangalore Bench in the matter of Hindustan Coca Cola Beverages Pvt. Lld. Vs. C.C.E., Guntur vide Final Order No. 26688/2014, dated 04.10.2013. Therefore, in view of the above, it is settled that Sugar Cess is a tax and not a fee and the ld. Commissioner (Appeals) has erred in holding that sugar cess is not a tax. So far as the decision of the Hon‟ble Gujarat High Court in the matter of Sahakari Khand Udyog Mandli Ltd. (supra) is concerned, while going through the same I found that the said decision has been passed without taking into consideration any of the decisions of the Hon‟ble Supreme Court and in particular the law laid down by the Hon‟ble Supreme Court in the matter of Barnagore Jute Factory Co. (supra), therefore the decision of the 10 E/51048/18-SM Hon‟ble Karnataka High Court in the matter of Shree Renuka Sugar Ltd. (supra) is more appropriate and is applicable on the facts of the present case.
10. In view of the discussions made hereinabove, the Appeal filed by the Appellant is allowed and the impugned order is set aside.
(Pronounced in open Court on 5.7.2018) (Ajay Sharma) Member (Judicial) RM