Custom, Excise & Service Tax Tribunal
Samsung India Elctronics Pvt Ltd vs Ce & Cgst Noida on 4 June, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.58374 of 2013
(Arising out of Order-in-Original No. 87/Commissioner/Noida/2012-13 dated
31.03.2013, of the Commissioner Customs, Central Excise & Service Tax,
Noida)
M/s Samsung India Electronics Pvt. Ltd., .....Appellant
(B-1, Sector-81, Phase-II, Noida-201305)
VERSUS
Commissioner of Customs, Central Excise &
Service Tax, Noida ....Respondent
(C-56/42, Sector-62, Noida) APPEARANCE:
Shri Atul Gupta, Advocate for the Appellant Shri Sandeep Pandey, Authorised Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.70292/2024 DATE OF HEARING : 26 February, 2024 DATE OF PRONOUNCEMENT : 04 June, 2024 SANJIV SRIVASTAVA:
This appeal is directed against the Order-in-Original No. 87/Commissioner/Noida/2012-13 dated 31.03.2013, of the Commissioner Central Excise, Customs & Service Tax, Noida. Vide the impugned order, following has been held:
"Order
(i) I confirm the demand of the NCCD amounting to Rs.
2,11,93,160.00 (Rupees Two Crore. Eleven lakh Ninety Three Thousand One Hundred Sixty only) and order for recovery of the same under the proviso to Section 11A of Central Excise Act 1944 2 Excise Appeal No.58374 of 2013
(ii) I order for recovery of interest at the appropriate rate on the above amount under the provisions of Section 11AB/11AA of the Central Excise Act,1944.
(iii) I impose a penalty of Rs. 2,11,93,160.00 (Rupees Two Crore, Eleven lakh Ninety Three Thousand One Hundred Sixty only) on the party, in terms of both Rule 15 of the Cenvat Credit Rules 2004 and Rule 25 of the Central Excise Rules, 2002 for contravention of sub-rule (4) of Rule 3 of CENVAT Credit Rules, 2004 and Rule 4 and Rule 8 of Central Excise Rules, 2002."
2.1 The Appellant was 100% EOU under the EHTP scheme. They manufacture Mobile Phone handsets classifiable under Tariff entry no. 85171210 of the First Schedule to the Tariff Act. The Appellant was availing CENVAT Credit of Service Tax paid on input services.
2.2 The Mobile handsets manufactured by the Appellant attract "Nil" rate of Excise duty. However, they chargeable to NCCD as they are included in the Seventh Schedule to the Finance Act, 2001.
2.3 Apart from export of mobile phones, the Appellant clears mobile phones to DTA on payment of NCCD 2.4 The Appellant filed refund claim on 7.12.2009 of the accumulated CENVAT Credit of Service Tax paid on input services for the period July, 2009 to September, 2009. Such Credit accumulated due to export of the goods. However, the same refund claim was rejected by the Assistant Commissioner, Customs and Central Excise, Division IV, Noida vide Order-in- Original No, 374 dated 16.09.2010 on the ground that the Appellant was liable to pay NCCD, thus, the Appellant was in a position to utilize such Credit of Service Tax for payment of NCCD.
2.5 Subsequenlty, the Appellant utilized such Credit of Service tax for payment of NCCD amounting to Rs. 2,11,93,160/- in the month of January, 2011 and February, 2011 3 Excise Appeal No.58374 of 2013 2.6 Proviso 5 inserted vide Notfn. No, 1012008-CE (NT) dated 01.03.2008 of sub-rule (4) of Rule 3 of CENVAT Credit Rules, 2004 clearly and expressly debar use of CENVAT credit of any duty or service tax, except credit of NCCD, for payment of NCCD on the goods falling under Central Excise Tariff chapter heading 85171210.
2.7 A Show Cause Notice dated 04.02.2012 was issued to them asking them to show cause as to why:
(i) The NCCD amounting to Rs. 2,11.93,160.00 (Rupees Two Crore. Eleven Lakh Ninety Three Thousand One Hundred Sixty only) as detailed in the Annexure A, should not be demanded and recovered under the provisions of Section 11A of Central Excise Act 1944
(ii) Interest on the above amount at the appropriate rate should not he charged under the provisions of Section 11AB/11AA of the Central Excise Act,1944.
(iii) Penalty should not be imposed in terms of Rule 15 of CENVAT Credit Rules, 2004 for contravention of sub- rule (4) of Rule 3 of CENVAT Credit Rules, 2004.
(iv) Penalty should not be imposed in terms of Rule 25 for contravention of Rule 4 and Rule 8 of Central Excise Rules, 2002.
2.8 Show cause notice has been adjudicated as per the impugned order referred In para 1 above. Aggrieved appellant have filed this appeal.
3.1 We have heard Shri Atul Gupta, Advocate for the appellant and Shri Sandeep Pandey, Authorized Representative for the revenue.
3.2 Arguing for appellant learned counsel submits:
The Show Cause Notice as well as the impugned order have not disputed the admissibility and availability of the CENVAT Credit of the Service Tax. Further, there is no demand under Rule 14 of the CENVAT Credit Rules, 2004 4 Excise Appeal No.58374 of 2013 of the CENVAT Credit of Service Tax availed by and available to the Appellant The show Cause notice and the impugned order dispute the utilization of such CENVAT Credit of Service Tax for payment of NCCD on the ground that the 4th proviso to Rule 3(4) of the CCR restricts the utilization of CENVAT Credit of any duty or service tax other than NCCD for payment of NCCD.
The SCN illegally inserts and reads the words „Service Tax‟ in such proviso, whereas the relevant proviso uses the words „CENVAT Credit of any duty specified in Sub-rule (1)‟. The said proviso does not refer to the CENVAT Credit of Service Tax.
It is a settled jurisprudence that the words cannot be inserted or read into a statutory provision, if the same were not present in such statutory provision, particularly, when the statutory provision uses the terms/ words distinctively for different provisions. Reliance is placed on Mathuram Agrawal v. State of Madhya Pradesh reported at ATR 2000 SC 109.
The word used any duty is significant as NCCD is also a duty, therefore, to clarify that any duty specified under rule 3(1) other than the duty specified at clause (v) cannot be utilized for payment of NCCD The impugned order illegally includes the words service tax m such proviso as well as in Rule 3(1). A bare reading of Rule 3(1) establishes that distinct words have been used „the duty of excise‟, the additional duty of excise‟, the education cess‟, „the secondary and education cess, „the addition duty‟, „the service tax‟, etc. alongwith the provisions under which such duties/ taxes levied. Therefore, the use of such distinct words has to be assigned the required meaning only.
Even under Rule 3(4), in 1st and 2nd provisos words used are „duty of excise or service tax‟ and „CENVAT Credit of 5 Excise Appeal No.58374 of 2013 the duty or service tax‟. Once such words are used, then the meaning is to be assigned accordingly. Reliance is also placed on the decision in the following matters, where demand of CENVAT Credit of service tax was raised in respect of inputs cleared as such, however, the Hon`ble High Court as well as the Hon‟ble Tribunal held that no such requirement exists in the rule as the rules restrict to the reversal of credit of Central Excise Duty only:
o Punjab Steels [2010 (260) E.L.T. 521 (P & H)] o Trimula Sponge Iron Pvt. Ltd. [2017 (48) S.T.R. 465 (Tri.- Del.) Apart from relying on such proviso to Rule 3(4), the department also does not dispute the eligibility to utilize the CENVAT Credit of service tax for payment of NCCD. As per the main provision contained in Rule 3(4)(a), the CENVAT Credit is allowed to be utilized for payment of any duty of excise and NCCD is a duty of excise. Hence, the Department should not presume any such limitation other than provided in such proviso.
In this regard the Appellant places reliance on the following cases wherein it is held that general presumption in case of a proviso is that the subject-matter excluded by way of a proviso will otherwise be included in the main section. Reliance is placed on Haryana State Cooperative Land Development Bank Ltd v Haryana State Cooperative Land Development Bank Employees Union (2004) 1 sec 574 wherein the principle has been reiterated. Further reliance is placed on Modern Homeopaths Society v. State of Karnataka 1992 (1) Kar 349.
The Hon"ble Supreme Court in the matter of CIT, Mysore v. Indo Mercantile Bank Ltd. AIR 1959 SC 713 observed that:
„„The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main 6 Excise Appeal No.58374 of 2013 enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment."
Further, reliance is placed on the decision in the matter of Lankashi Tea and Seeds Estates P. Ltd. and Anr. v. Commissioner of Taxes [2006] 284 ITR 5 15 (Gauhati). The Appellant relies on Order-in-Original dated 16.09.2010 wherein the Ld Assistant Commissioner has held that the Appellant is eligible to utilize the credit of service tax for payment of NCCD. The Order has already attained finality without any challenge. The Appellant cannot be deprived of benefits in an unjust manner by denying the refund adopting one interpretation and then denying the utilization of credit by adopting another contrary interpretation Department is estopped from denying utilisation of service tax credit after rejection of refund Without prejudice to the above submission, assuming that utilization of service tax for payment of NCCD is not permissible, the Appellant submits that the Department should allow of refund the credit with interest accumulated in its books of accounts with respect to service tax paid on input services. In terms of Section 140 of the Central Goods and Services Tax, 2017, the CENVAT Credit which is held to be admissible is required to be refunded in cash. The confirmation of demand under proviso to Section 11A(1) is illegal and unjustified when the department itself held that such CENVAT Credit of Service Tax can be utilized for payment of NCCD and refund of such accumulated CENVAT Credit was denied It is submitted that in the SCN, the Department did not invoke Section 11AC of the Excise Act. However, in the Order-in-Original, the Ld. Commissioner has held that 7 Excise Appeal No.58374 of 2013 there has been a deliberate act of contravention of law by the Appellant and therefore, penalty is imposable under Section 11AC of the Excise Act read with Rule 15 of the Credit Rules and Rule 25 of the Excise Rules for contravention of Rule 3(4) of the Credit Rules and Rules 4 and 8 of the Excise Rules, respectively. The Appellant submits that the Order-in- Original cannot go beyond the SCN and impose penalty under Section 11AC of the Excise Act when the said section was not even invoked in the SCN.
From a bare reading of Section 11AC it is evident that the said provision contemplates imposition of penalty when the ingredients such as suppression, Fraud, mis-statement, etc., are established on the part of the assessee. It is submitted that there has been no fraud, mis-statement, or suppression of facts in any manner by the Appellant and in fact the utilization of credit of service tax for payment of NCCD is only pursuant to Order-in-Original dated 16.09.2010.
3.3 Arguing for revenue learned Authorized representative reiterates the findings recorded in the impugned order.
4.1. We have considered impugned order along with submissions made in Appeal and during the course of arguments.
4.2 Impugned order records following findings:
"6.Discussion & Findings:
6.1 I have carefully gone through the facts and record of the case, the issues raised in the show cause notice and the defense submissions made by the party on 23.03.2012 in writing as well as during the course of the personal hearing held on 2901.2013 I observe that the issues to be decided in the present case are as under:
(i) Whether the amount of NCCD paid by utilizing the credit of service tax is recoverable?
(ii) Whether interest on the amount of NCCD paid by utilizing the credit of service tax is recoverable?8 Excise Appeal No.58374 of 2013
(iii) Whether penalty on the party is imposable?
6.2.1 I observe that the Noticee"s unit is a 100% EOU under the EHTP schema. The Mobile handsets manufactured by the Noticee attract "Nil" rate of excise duty. However, they are chargeable to NCCD as they are included in the Seventh Schedule to the Finance Act, 2001. Apart from export of mobile phones, the Noticee clears mobile phones to DTA on payment ot NCCD 6.2.2 I observe that during the scrutiny of ER-2 Returns for the month of January 2011 and February 2011 (RUD 1 & 2) filed by M/s SIEPL, it was noticed that the party had paid National Calamity Contingent Duty (NCCD) amounting to Rs. 2,11,93,160/- (NCCD Rs. 2,05.75.883/- Ed. Cess Rs. 4.11,518/- S&H Ed Cess Rs. 2,05,759/-) by utilizing credit of service tax availed in respect of input services, which was apparently found not permissible under the provisions of CENVAT Credit Rules. 2004. Accordingly, a show cause notice was issued to the party proposing recovery of the amount of service tax credit utilized for the payment of NCCD, as detailed above 6.2.3 I however, observe that the Noticee has mentioned in their defense that the Rules do not bar the utilization of Cenvat credit of service tax paid for payment of NCCD They submitted that the SCN is based on incorrect interpretation and the Department has also extracted the provisions wrongly in the SCN 6.3.1 I would like to go through the provisions of relevant statutes/tax laws to examine the proposed recovery of the service tax credit utilized for payment of NCCD Iobserve that under sub-rule (1) and sub-rule ,4) of Rule 3 of CENVAT Credit Rules, 2004. For reference the said sub- rules of Rule 3 are reproduced below RULE 3(1) - Manufacturer or producer of final product or a provider of taxable service shall he allowed to take credit (hereinafter referred to the CENVAT credit) of-
9 Excise Appeal No.58374 of 2013(i) the duty of excise specified in the first schedule of the Excise tariff Act. leviable under Central Excise Act.:
(ii) the duty of excise specified in the Second schedule of the Excise tariff Act, leviable under Central Excise Act.
(iii) the additional duty of excise leviable mulct- section 3 of Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978).
(iv) the additional duty 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)
(vi) the Education cess on excisable goods, leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004) (via) the Secondary and Higher Education Cess on excisable goods, leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007):
(vii) the Additional duty leviable under Section 3 of Customs Tariff Act equivalent to duty of excise under clause (i), (ii), (ii), (iv), (v), (vi) and (via).
(viia) the additional duty leviable under sub-section (5) of Section 3 of Customs Tariff Act:
(viii) the additional duty of excise leviable under section 15" of the Finance Act 2003 (32 of 2003).
(ix) the Service Tax leviable under Section 66 of the Finance Act.
(ixa) the Service Tax leviable under Section 66A of the Finance Act 10 Excise Appeal No.58374 of 2013
(x) the Education cess on taxable service, leviable under section 9l of read with section 95 (tithe Finance (No. 2) Act, 2004 (23 of 2004):
(xa) the Secondary and Higher Cess on laxable services. leviable under section 136 read with section 140 of the Finance Act. 2007(22 of 2004);
(xi) the additional duty of excise leviable under Section 85 of Finance Act 2005 (18 of 2005):
Paid on-
(i) any input or capital goods received in the factory of manufacture of final product or premises of provider output services on or after 10th day of September, 2004; and
(ii) any input service received by manufacturer of final product or provider of output services on or after 10th day of September, 2004 including the said duties.
Further the provisions contained under RULE 3 (4) of the CENVAT Credit Rules,2004 states as under;-
"....the Cenvat Credit may be utilized for payment of-
(a) any duty of excise on any final product; or
(b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or
(c) an amount equal to CENVAT credit taken on capital goods" if such capital goods are removed as such: or
(d) an amount under sub-rule (2) of Rule 16 of Central Excise Rules 2002: or
(e) service tax on any output service Provided that.
Provided further that Provided also that Provided also that.......
11 Excise Appeal No.58374 of 2013Provided also that the CENVAT credit of any duty ,specified in sub rule (1),except the NCCD in item (v) thereof shall not be utilized for payment f the said NCCD on goods falling under tariff items 85171210 and 85171290 respectively of the first schedule of Central Excise Tariff‟ 6.3.2 It may seen from the above provisions as contained in the law that while the proviso specifically bars the „Cenvat credit of any duty specified in sub- rule-(1) except the NCCD‟ for payment of the said NCCD on the goods being manufactured by the party. It is also seen from the above that the sub- rule(1) mentions the duties and taxes which are allowed to be taken as credit, the proviso inserted in the later part of the sub-rule specifically restrict the utilization of such credits availed, It has been more clearly mentioned about the payment of the said NCCD on the goods falling under tariff items 85171210 and 85171290 that except the said NCCD given in item (v) of sub-rule(1). no other credit is allowed to be utilized for payment of the said NCCD on these goods, including the items (ix) and (ixa) entries in respect of service tax. It may also be seen that there is no separate mention of service tax as being available, for the purpose of utilization towards the payment of NCCD 6.3.3 Thus it may be seen from the above that the proviso 5, inserted vide Notfn. No, 10/2008-CE (NT) dated 01,03.2008, of sub-rule (4) of Rule 3 of CENVAT Credit Rules, 2004 clearly and expressly debar use of CENVAT credit of any duty specified in sub rule (1), except_the credit of NCCD, for payment of NCCD on the goods falling under Central Excise Tariff chapter heading 85171210 and heading no, 85171290 6.3.4 It is observed that the fourth proviso to Rule 3(4) of the Rules clearly states that credit of any duty 12 Excise Appeal No.58374 of 2013 specified in sub-rule (1)‟ shall not be utilized for payment of NCCD. While according to the Department the said phrase also includes service tax, the noticee submits that the SCN wrongly refers to and interprets this clause to cover duty or service tax Thus the Department‟s case is that even credit of service tax cannot be utilized for payment of NCCD, whereas the party has pleaded otherwise 6.4.1 I however, find from the notice issued that the department has inferred the meaning of the above legal provisions to the effect that the Cenvat Credit of „any duty and service tax‟ specified in sub rule(1) of Rule 3 of the Cenvat Credit Rules 2004, cannot be used for payment of the NCCD on the goods falling under Central Excise Tariff chapter heading 85171210 and heading no. 85171290.Ifind that the expression given in the 5‟‟ proviso are very specific and clear about the scope and availability of only the credit of NCCD specified in item (v) thereof and there is therefore, no ambiguity in its interpretation 6.4.2 I observe that the Noticee has tried to drag the term „duty‟, as has been used in the statute to the effect that the abovementioned definition of duty apparently does not include service tax, I however, do not find any justification for going into such dispute on the interpretation of such a clearly worded provision of the law. I therefore, hold that it has been correctly interpreted in the notice issued that the the phrase any duty specified in sub rule (1) also includes service tax 6.4.3 Thus it may be seen from the above that while the different duties, taxes and cesses, derive their respective authorities from the different Sections/ Finance Acts. I find that it is a settled position of law a proviso to any statute, has to be strictly interpreted as 13 Excise Appeal No.58374 of 2013 per the wardings given therein only and nothing can be added to what is already provided therein. In fact the purpose of any given proviso is to restrict the general application of that statute, to be applied in accordance with the given / specified conditions of that proviso I observe that the Law Lexicon (Bennion on Statutory Interpretation )provides as follows „A proviso is a formula beginning Provided that...", which is placed at the end of a section or subsection of an Act, or of a paragraph or sub-paragraph of a Schedule, and the intention of which is to narrow the effect of the preceding words"
6.4.4 The party has also relied on the case of P.R.M.P.R. Perichiappa Chettiar v. Nachiappan -AlR 1932 Mad 46 It may however, be seen that in this case the Hon‟ble Madras High Court held that:-
„It is a rule of law that a proviso should receive a strict construction, It is not open to the Court to add words to a proviso with a view to enlarge the scope of the proviso. The proviso must be restricted to the scope reasonably conveyed by the words used therein.-"
6.4.5 Further the case of Mathuram Agrawal v. State of Madhya Pradesh - AIR 2000 SC 109 lays down as follows:-
".. The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute Equally impermissible is an interpretation which does not follow from the 14 Excise Appeal No.58374 of 2013 plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter."
6.4.6 Thus from the above and from the noticees contention in this regard observe that the legal position is, unless and until, the literal words lead to absurdity, it is not open to the department or the judiciary to supply words to the taxing statute. The proviso under reference says that „CENVAT credit of any duty specified in sub rule (1) except the NCCD in item(v)‟, which clearly means that it covers all the entries of sub rule (1) except the item (v) thereof and nothing more could be adduced out of it. Further. following the above guide lines of Hon‟ble Supreme Court, I observe that in the instant case, reading service tax into the phrase „any duty specified in sub- rule (1)‟ does not lead to any absurdity Therefore, when the legal provision is clear and plain / strict / logical interpretation thereof does not lead to any absurd conclusion, in such a scenario, it could be reasonably concluded that the intention of the legislature was ta include all the entries of sub rule (1) except item (v) thereof, as given in this proviso. Hence, following the ratio of the above cited cases, I find that that no additional interpretation is given by the department and the notice issued in this regard is perfectly in order and I hold accordingly 15 Excise Appeal No.58374 of 2013 6.5.1 Based on the discussions and findings in the foregoing paras, I find that the said proviso is to be interpreted to include the entries given in the items in respect of "service tax" also, as interpreted and extracted by the Department in the Show Cause Notice. Hence, l find that the Show Cause Notice issued in this case has put a strong case to present that the Noticee has wrongly utilized the input service credit for payment of NCCD. I, therefore, hold that credit of NCCD utilized in an irregular manner by the noticee is recoverable from them. amounting to Rs. 2,11,93,160/- (inclusive Ed. Cess and S& H Ed. Cess), in terms of Section 11A of Central Excise Act. 1944.
6.5.2 On the issue of the demand of interest I find that the issue stands settled as per many case laws on the subject. It has been held time and again that the payment of interest becomes due immediately, if the due payment of the duty is not made by the specified date. The cases cited by the party in their defense do not apply here, Further, I find that the law in this regard is very clear for the relevant period. The provisions contained in the Section 11-AB of the Central Excise Act, 1944 are very much applicable to the facts of the present case, The case of af CCE Bangalore-III Vs Presscom Products-2011 (268)ELT 344(Kar.) is relied here which held as under:
"9.Section 11A of the Act provides for recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded. However, by Act 14/2001 sub-section (2B) was inserted which came into effect from 11-5-2001. It reads as under : -
"(2B) Where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty on the basis 16 Excise Appeal No.58374 of 2013 of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid :
Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and then, the Central Excise Officer shall proceed, to recover such amount in the manner specified in this section, and the period of "one year"
referred to in sub-section (1) shall be counted from the date of receipt of such information of payment".
Explanation 1 : Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty.
Explanation 2. : For the removal of doubts, it is hereby declared that the interest under section 11AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the Central Excise Officer, but for this sub- section."
The words "on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer" in sub-section 2B was inserted by Act 32/2003 which came into effect from 14-5- 2003.
17 Excise Appeal No.58374 of 201310.Therefore, the legislature has not kept anyone in doubt. Section 11AB of the Act provides for interest on delayed payment of duty. It provides that, where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded the person who is liable to pay the duty as determined under sub-section (2), or has paid the duty under sub-section (2B), of Section 11A shall, in addition to the duty, be liable to pay interest at such rate not below [ten per cent] and not exceeding thirty six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of Section 11A till the date of payment of such duty. Therefore, Section 11AB provides for interest on delayed payment of duty. Explanation (2) makes it clear this provision regarding interest on delayed payment of duty equally applies to the payment of duty under sub- section 2B of Section 11A. Therefore, whatever may be the reason for the delay in payment of duty and even in a case where duty is paid even before the issue of a show cause notice claiming duty under sub-section (1) of Section 11A once the duty is not paid on the due date, the liability to pay interest on such delayed payment of duty becomes effective automatically. In the scheme of the Act, no provision is made or no circumstances is carved out for excluding the payment of interest on delayed payment of duty. In fact, this question arose for consideration before the Apex Court in the case of Commissioner of Central Excise v. SKF India Limited 18 Excise Appeal No.58374 of 2013 [2009 (239) E.L.T. 385 (S.C.). Dealing with these provisions, the Supreme Court held as under :-
Section 11A puts the cases of non-levy or short levy, "9. non-payment or short payment or erroneous refund of duty in two categories. One in which the non-payment or short payment etc., of duty is for a reason other than deceit the default is due to oversight or some mistake and it is not intentional.
The second in which the non-payment or short payment etc., of duty is "by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty" that is to say, it is intentional deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently Section 11A, however allow the assessees in default in both kinds of cases to make amends, subject of course to certain terms and conditions. The cases where the non-payment or short payment etc., of duty is by reason of fraud collusion etc., are dealt with under sub-section (1A) of Section 11A and the cases where the non-payment or short-payment of duty is not intentional under sub-section (2B).
Sub-section (2B) of Section 11A provides that the assessee 10. in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1). But, Explanation 2 to the sub- section makes it expressly clear that such payment 19 Excise Appeal No.58374 of 2013 would not be exempt from interest chargeable under Section 11AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to have been paid till the date of payment, of the duty. What is stated in Explanation 2 to sub- Section (2B) is reiterated in Section 11AB that states where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who has paid the duty under sub-section (2B) of Section 11A, in addition to the duty be liable to pay interest........It is thus to be seen that unlike penalty that is attracted to the category of cases in which the non-payment or short payment etc., of duty is "by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty" under the scheme of the four Sections (11A, 11AA, 11AB & 11AC) interest is leviable on delayed or deferred payment of duty for whatever reasons.
The payment of differential duty by the assessee at the time 11. of issuance of supplementary invoices to the customers demanding the balance of the revised prices clearly falls under the provision of sub- section (2B) of Section 11A of the Act."
11. Following the aforesaid judgment, the Apex Court in the case of Commissioner of Central Excise v. International Auto Limited [2010 (250) E.L.T. 3 (S.C.)] has held as under : -
"8. Section 11A of the Act deals with recovery of duty notlevied or not paid or short-levied or short- paid. The said section, which stood inserted by Act 25 of 1978, underwent a sea change when Parliament inserted major changes in that section 20 Excise Appeal No.58374 of 2013 vide Act 14 of 2001 with effect from 11th May, 2001 and Act 32 of 2003 with effect from 14th May 2003, It needs to be mentioned that simultaneously Act 14 of 2001 also made changes to Section 11AB of the Act. In the case of S.K.F. India Limited (supra), it has been, inter alia, held as can be seen from the above quoted paragraphs, that sub-section 2(B) of Section 11A provides that the assessee in default may make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and in that event, such assessee in default would not be served with the Demand Notice under Section 11A(1) of the Act. However, Explanation (2) to the sub-section makes it clear that such payment would not be exempt from interest chargeable under Section 11AB of the Act. What is stated in Explanation (2) to sub-section 2(B) is reiterated in Section 11AB of the Act, which deals with interest on delayed payment of duty. From the Scheme of Section 11A(2B) and Section 11AB of the Act, it becomes clear that interest is levied for loss of revenue on any count In the present case, one fact remains undisputed, namely, accrual of price differential. What does differential price signify? It signifies that value which is the function of the price, on the date of removal/clearance of the goods was not correct. That, it was understated. Therefore, the price indicated by the supplementary invoice is directly relatable to the value of the goods on the date of clearance, hence, enhanced, duty. This enhanced duty is on the corrected value of the goods on the date of removal When the differential duty is paid after the date of clearance, it indicates short- payment/short-levy on the date of removal hence, interest which is for loss of revenue, becomes leviable under Section 11AB of the Act. In our view, 21 Excise Appeal No.58374 of 2013 with the entire change in the Scheme of recovery of duty under the Act particularly after insertion of Act 14 of 2001 and Act 32 of 2003, the judgment of this Court in the case of M.R.F Limited (supra) would not apply."
12.However, this Court in the case of Bharat Heavy Electricals case (referred to supra) held as under : -
"6. Having heard the counsel on both sides and on perusal of the material on record, we find that the show cause notice issued on 19-10 2004 was not in respect of any demand made regarding non-payment of duty on account of there being a price variation, but the demand made was only with regard to delayed payment of duty and for payment of interest and penalty. To the said show cause notice, reply has been given by the assessee by contending that in the first place, when there was actual removal of the goods and the appropriate duty has been paid based on the price of the goods. In the second place, when there was a transaction when there was escalation in the cost of goods with regard to the said price variation also there had been a payment of duty and hence, there was no delay in payment of duty. Having regard to the contents of the show cause notice and the reply, we are of the view that in the first instance there has been no demand made for payment of duty. In fact such a demand could not have been made considering the fact that the respondent-assessee had paid the duty on the difference in the price and therefore, the differential duty was paid for the relevant period. In the circumstances, the provisions envisaged under Section 11AB of the Act are not applicable to the facts of the present case as in the instant case there 22 Excise Appeal No.58374 of 2013 has been no determination of the duty nor there has been short payment of duty under sub-section (2B) of Section 11A. Section 11AB is applicable and interest on delayed payment of duty arises only when any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded. The aforesaid circumstances are not applicable in the instant case. Therefore, the issuance of the show cause notice dated 19-10-2004 by invoking the provision of Section 11AB in the instant case is improper and not in accordance with the said section.
7. Learned counsel for the appellant has however relied upon the decision of the Apex Court in the case of Commissioner of Central Excise, Pune v. SKF India Ltd., [2009 (239) E.L.T. 385 (S.C.)] to contend that the said provision is applicable on the facts of the present case also. We have perused the said, decision and we find that we are unable to accept the contention of the learned counsel for the appellant that the said case applies to the facts of the present case. It is to be noted that in the said decision, the facts were that the assessee had demanded from its customers, the balance of the higher price by virtue of the retrospective revision of the price and therefore, on the date the goods were cleared, the differential duty had to be paid and the same had not been done which was held to be a short payment of duty as the differential duty was paid only later when the assessee issued supplementary invoices to the customers demanding the balance amounts. Under the said circumstances, the Apex Court held that it was a case of short payment of duty though it was not intentional and without any allegation of deceit. The facts of the present case are that after the goods were initially 23 Excise Appeal No.58374 of 2013 cleared and the appropriate duty had been paid subsequently, the price escalation was due to the increase in input labour and other costs which was determined by the All India Industrial Price Indices and by the Reserve Bank of India communicated by all India Electrical Manufacturers Association. In terms of the said direction, the supplementary invoices were issued to facilitate the recovery of the expenditure of cost escalation and the enhanced duty thereon was paid. Therefore, as on the date the goods were cleared initially, if such a price escalation had not taken place, then the assessee could not foresee, the subsequent escalation in price. However, in the instant case the assessee paid duty on the differential price also. Therefore, we cannot apply the said decision to the present case."
13.The said judgment rendered by this Court is contrary to the law declared by the Apex Court in the aforesaid two judgments. Further, the said Judgment does not take into consideration the explanation to sub-section (2B) of Section 11A and accordingly, it is a judgment "per incuriam". Therefore, the law laid down by this Court in the aforesaid judgment is not a good law.
14.The aforesaid statutory provisions and the law declared by the Apex Court in the aforesaid two judgments make it clear that, interest is leviable on delayed or deferred payment of duty for whatever reasons. Sub-section (2B) of Section 11A provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment, or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that 24 Excise Appeal No.58374 of 2013 event he would not be given the demand notice under sub-section (1). Non-issue of a demand notice under sub-section (1) is nothing to do with leviability of interest for delayed payment. Explanation 2 to the sub-section (2B) makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11AB. What is stated in Explanation 2 to sub-section (2B) is reiterated in Section 11AB which states where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who has paid the duty under sub-section (2B) of Section 11A, in addition to the duty, be liable to pay interest. Interest is levied for loss of revenue on any count. The enhanced duty is on the corrected value of the goods on the date of removal. When the differential duty is paid after the date of clearance, it indicates short-payment/short-levy on the date of removal, hence, interest which is for loss of revenue, becomes leviable under Section 11AB of the Act. The said non-payment or short payment of duty may be not intentional. Whatever may be the reason even if the assessee is not at fault on any count, as the duty payable in law is not paid on the value of the goods on the date of removal, the payment of interest is attracted to bridge the loss of revenue. When the legislature consciously inserted these provisions in Section 11AB, the legal effect flowing from such provisions is to be given effect to. Therefore, a harmonious reading of the aforesaid provision makes it clear that interest is leviable on the differential duty paid in pursuance of a subsequent invoice as the proper duty payable under the law had not been paid on the date of clearance."
25 Excise Appeal No.58374 of 20136.5.3 Further I observe that in the case of Neptune Spin Fab Pvt Ltd Vs CCE Ahemedabad-2009 (241)ELT 467(Tri-Ahmd.) it has been held as follows:
"4. Further, the appellants have paid duties so required to be paid by them not on the specified requisite date but subsequently. Admittedly, there was delay in deposit of such duties and hence gap in doing so. As such, we are of the view that the appellants would be liable to interest on the said delayed payments. The appellant‟s plea that the said duty was already assessed against them and was not required to be adjudicated in terms of Section 11A and hence would not attract the interest provisions, does not convince us inasmuch as, the non deposit of duty by the appellants on the specified date have resulted in loss to the Revenue, which is required to be compensated by way of payment of interest. As such, we hold that the appellants are liable to pay interest on the delay of payments."
In view of the above, I hold that the appropriate interest is recoverable from the party, as held here in above 6.5.4 As regards the imposition of penalty, I find that the party had deliberately failed to discharge the correct duty liability in respect of the amount of NCCD payable by wrongly utilizing the service tax credit for such payments, which was not available to them, as found in the discussion and findings made in the foregoing paras. This wrong utilization of service tax credit was done, clearly in contravention to the provisions of sub-rule (4) of Rule 3 of CENVAT Credit Rules, 2004, And for this deliberate act of contravention they are liable to penal action under Rule 15 of the Cenvat Credit Rules 2004 read with Section 11AC of the Central Excise Act 1944 and I hold 26 Excise Appeal No.58374 of 2013 accordingly. Further, it is observed that the notice also proposes penal action under Rule 25 of the Central Excise Rules, 2002 for contravention of Central Excise Rule 4 and Rule 8. It is however, observed that the nonpayment of the appropriate NCCD is limited to the extent of CENVAT credit of service tax credit utilized for payment of such NCCD only. It may thus be observed that both these actions and thereby resultant contraventions are interlinked in as much. Further, both Rule 15 of the Cenvat Credit Rules 2004 and Rule 25 of the Central Excise Rules, 2002 derive the authority of Section 11AC of the Central Excise Act 1944 for imposition of penalty. Hence, for these willful and deliberate acts to defraud the exchequer, with intent to evade payment of NCCD, though I hold the party liable to penal action under both Rule 15 of the Cenvat Credit Rules 2004 and Rule 25 of the Central Excise Rules, 2002, I however, refrain from imposing separate penalties as proposed in the notice"
4.3 From the facts as noted above it is evident that the only issue that merits consideration in the present case is whether the appellant could have utilized the Cenvat Credit availed by them in the respect of input services for payment of NCCD leviable on clearance of the Mobile Phones in DTA.
4.4 To understand the nature of the NCCD levied under Section 136 of the Finance Act, 2001 we refer to the decision of Hon‟ble Supreme Court in the case of Bajaj Auto Ltd. [2019 (366) ELT 577 (SC)] wherein following has been observed:
"16. The real bone of contention which survives for consideration is the NCCD. The reason for this is that while the two cesses discussed aforesaid were in the nature of levy on the excise duty payable, the NCCD is levied on the product itself, as per Section 136 of the Finance Act, 2001. It is this aspect, inter alia, which was canvassed by the Department to persuade this Court to 27 Excise Appeal No.58374 of 2013 take a different view from the one taken qua the other two cesses.
20. We may notice that the primary reasoning contained in the impugned order is common for the three cesses, i.e., NCCD; Education Cess and Secondary & Higher Education Cess. These were in the nature of surcharges levied in other Acts, which have not been specifically excluded under the Notification in question. That reasoning does not prevail, more so because of the judgment in SRD Nutrients Pvt. Ltd. (supra). The question, thus, is whether, even though the NCCD is in the nature of an excise duty, its incidence being on the product, rather than on the value of the excise duty, that itself would make any difference to the applicability of the NCCD to excise exempt units.
21. On a proper appreciation of the judicial pronouncement in SRD Nutrients Pvt. Ltd. (supra), we are not inclined to take a different view from the one taken for Education Cess and Secondary & Higher Education Cess, even while considering the issue of NCCD.
22. We may notice that this Court, in SRD Nutrients Pvt. Ltd. (supra) gave its imprimatur to the view expressed by the Rajasthan High Court in Banswara Syntex Ltd. (supra). The rationale is that while there may be surcharges under different financial enactments to provide the Government with revenue for specified purposes, the same have been notified as leviable in the nature of a particular kind of duty. In the case of NCCD, it is in the nature of an excise duty. It has to bear the same character as those respective taxes to which the surcharge is appended. NCCD will not cease to be an excise duty, but is the same as an excise duty, even if it is levied on the product. Thus, when NCCD, at the time of collection, takes the character of a duty on the product, whatever may 28 Excise Appeal No.58374 of 2013 be the rationale behind it, it is also subject to the provisions relating to excise duty, applicable to it in the manner of collection as well as the obligation of the taxpayer to discharge the duty. Once the excise duty is exempted, NCCD, levied as an excise duty cannot partake a different character and, thus, would be entitled to the benefit of the exemption notification. The exemption notification also states that the exemption is from the "whole of the duty of excise or additional duty of excise." We may also note that the exemption itself is for a period of ten years from the date of commercial production of the unit."
From the above decision it is quite evident that NCCD levied under Section 136 of the Finance Act, 2001 is essentially an "duty of excise" and all the provisions relating to the manner of collection as well as obligation of taxpayer to discharge the duty as applicable to payment of Central Excise duty shall apply. There is no restriction on payment of basic excise duty from the Cenvat Credit taken in respect of input services received by the appellant. Thus the view that credit of service tax could not have been utilized for payment of NCCD cannot be upheld.
4.5 In case of Parag Bosimi Synthetics Ltd. [2007 (216) ELT 254 (T-Kol)] following was held:
2. After hearing both sides for some time, we find that the issue involved in this case is whether the credit of basic duty earned by the appellants can be utilized for payment of NCCD on the final product. Hence, we are prima facie of the view that the decision of the Bangalore Bench cited above is not relevant to resolve the issue in hand. Accordingly, we allow the miscellaneous application for modification and waive the requirement of executing a Bank Guarantee and proceed to decide the appeal itself with the consent of both the sides.
3.The appellants are working under Notification No. 32/99 applicable to the goods manufactured in the North 29 Excise Appeal No.58374 of 2013 Eastern Region under which they are allowed to take refund of duty paid in cash through PLA. Ld. Consultant clarifies that they have not paid any NCCD by cash, nor they are seeking any refund of the same. As such, the appeal does not involve interpretation of Notification No. 32/99.
4.The ld. Consultant further clarifies that they are partly paying the NCCD on the final product by utilizing the credit of NCCD paid on the inputs. The remaining part of the NCCD has been paid by them by utilizing the credit of basic excise duty. Such utilization of the basic duty credit has been disallowed by the adjudicating Commissioner resulting in this appeal.
5.We find that under Sub-Rule 3(4) of the Cenvat Credit Rules, 2004, Cenvat credit can be utilized for payment of any duty of excise on any final product. As pointed out by the ld. Consultant, the adjudicating Commissioner herself has come to a finding in page 3 of her order that NCCD is a duty of excise. As such, the credit of basic duty of excise has to be allowed for payment of NCCD in view of aforesaid Rule 3(4) of the Cenvat Credit Rules, 2004.
6.There is a restriction under Rule 3(7) of the Cenvat Credit Rules, 2004, which applies to the credit of various duties, such as additional duties on textiles and textile articles, NCCD, Educational Cess, etc. In terms of this restriction, which overrides the provisions of Rule 3(4), the credit of the named of duties can only be utilized for payment of the said duties alone. As a result, the credit of NCCD can be utilized for only paying of NCCD and not other kind of duties. In the present case, there is no dispute in this regard, since the appellants have utilized the credit of NCCD for paying NCCD only. By no stretch of imagination, this restriction can be extended to credit of duties not specifically listed under Rule 3(7). The credit of basic excise duty is one such duty credit, which is not 30 Excise Appeal No.58374 of 2013 subject to restriction under the said Rule 3(7). Therefore, in the absence of any restriction and as provided under Rule 3(4) of the Cenvat Credit Rules, 2004, the credit of basic excise duty can be utilized for payment of any duty of excise and since the Commissioner herself has held that NCCD is a duty of excise, there can be no objection to the appellants utilizing the credit of basic duty for payment of NCCD.
4.6 Affirming the said order Hon‟ble Gauhati High Court as reported at [2013 (295) E.L.T. 682 (Gau.)] observed as follows:
"13. Insofar as the assessee is concerned the contention urged was that CENVAT credit in respect of NCC duty can be utilized only for payment of NCC duty. But this does not mean that CENVAT credit on basic excise duty cannot be utilized for payment of NCC duty on the final product. Simply put, the contention is that payment of NCC duty through utilization of CENVAT credit on basic excise duty is not prohibited. The question is whether this is permissible or not. According to the Revenue, CENVAT credit on NCC duty can be utilized only for paying NCC duty and CENVAT credit on basic excise duty cannot be utilized for paying NCC duty.
14. On the above broad facts, the matter was adjudicated before the Commissioner of Central Excise at Dibrugarh and he came to the conclusion that CENVAT credit of duty paid on inputs can be utilized only for payment of duty on the final product as per the second proviso to Rule 3(4) but CENVAT credit on any other duty could not be utilized for payment of NCC duty. Accordingly, the said Commissioner confirmed the demand of ` 82,07,125/- and passed an order for recovery of NCC duty from the assessee.
15. Feeling aggrieved, the assessee preferred an appeal before the Customs, Excise and Service Tax Appellate Tribunal at Kolkata. The appeal filed by the assessee was 31 Excise Appeal No.58374 of 2013 registered as Excise Appeal EDM 648/2006. The CESTAT noticed the provisions of Rule 3(4) as well as the provisions of Rule 3(7) of the CENVAT Credit Rules and held that though credit of NCC duty could be utilized for paying NCC duty only, the restriction would not extend to utilization of credit of duty which is not specifically listed in Rule 3(7). The corollary to this argument is that since credit on basic excise duty is not mentioned in Rule 3(7), CENVAT credit on basic excise duty could be utilized for payment of NCC duty.
16. We are in agreement with the view expressed by the CESTAT. In terms of Rule 3(1) a manufacturer or producer of a final product is allowed to take CENVAT credit of NCC duty. Since NCC duty is admittedly a duty of excise, Rule 3(4) provides that CENVAT credit may be utilized for payment of any duty of excise on any final product. Therefore, CENVAT credit of NCC duty may also be utilized for payment of any duty of excise on any final product in terms of Rule 3(4) subject to Rule 3(7).
17. Rule 3(7) limits the utilization of CENVAT credit in respect of NCC duty as also other duties mentioned in Rule 3(7)(b). It provides that CENVAT credit in respect of NCC duty and other duties shall be utilized towards payment of duty of excise leviable under various statutes respectively. The use of the word "respectively" in this regard is important inasmuch as it confines the utilization of CENVAT credit obtained to a particular statute and for utilization for payment of duty under that statute only. The converse, however, does not follow. That is to say that merely because CENVAT credit in respect of NCC duty can be utilized only for payment of NCC duty, it does not follow that any other credit of duty cannot be utilized for payment of NCC duty.
18. This being the position, in our opinion the Commissioner of Central Excise at Dibrugarh was in error 32 Excise Appeal No.58374 of 2013 in coming to the conclusion that CENVAT credit of basic excise duty cannot be utilized for payment of NCC duty on the final product.
19. Under the circumstances the second part of the substantial question of law must be answered in the affirmative and it must be held that while CENVAT credit of NCC duty can be utilized under the CENVAT Credit Rules only towards payment of such NCC duty, CENVAT credit obtained from other sources can be utilized for payment of NCC duty on the final product."
4.7 The principles laid down by the above decisions was rekied upon by the Hon‟ble Gauhati High Court in case of Kamakhya Cosmetics & Pharmaceutical Pvt. Ltd. [2015 (323) ELT 33 (Gau.)] and Dharampal Satyapal Ltd. [2015 (323) ELT 55 (Gau.)] 4.8 Hon‟ble Uttarakhand High Court has in case of Hero Motorcrop Ltd. [2018 (14) G.S.T.L. 200 (Uttarakhand)] held as follows:
"31. A perusal of Rule 3(1) unravels the mind of the Rule- maker as to the component parts of the Cenvat credit. In Rule 3(4)(a), the Rule-maker has unambiguously declared that the amounts standing to the credit of Cenvat can be utilized for payment of any duty of excise on any final product. No doubt, this is subject to the injunctions in the form of limitations and restrictions contained in the provisos, seven in number. Unless, the Revenue establishes the case within four walls of any of the provisos, in our view, there can be no embargo against utilization of Cenvat credit, which consists of duties and taxes paid on inputs, inter alia, for payment of any duty of excise on any final product. NCCD and the cesses, as we have noted from the Finance Acts, are undoubtedly surcharges by way of duties of excise. Undoubtedly, they are not levies under the Act. They are imposed under the respective Finance Acts, namely, Finance Act of 2001, 33 Excise Appeal No.58374 of 2013 Finance Act of 2004 and finally Finance Act of 2007 respectively. The provisions of the aforesaid Acts make it clear that the collection of the aforesaid levies can be made under the provisions of the Excise Act and the Rules. The power to exempt payment of NCCD and the cesses in terms of the Act and the Rules are certainly available in relation to NCCD and the cesses, but they remain levies under the concerned Finance Acts. Since they are part of the basket of levies embraced under Rule 3(1) making up the aggregate of the Cenvat credit, subject to any restriction or limitation, which may be found elsewhere, there can be no doubt that the assessee can make use of the basic excise duty under the Act for payment of the NCCD or the cesses on the final product.
32. In fact, we may dissect and break down the elements contained in the 5th proviso to Rule 3(4) as it stood prior to amendment in the year 2016, as also, the impact of the amended provisions of the proviso. Prior to its amendment, the 5th proviso to Rule 3(4) tabooed the utilization of any other part of the Cenvat credit, except the NCCD for payment of the NCCD on final products, which fell under tariff items 8517 12 10 and 8517 12 90 respectively of the First Schedule of the Tariff Act. Thus, this proviso purported to render impermissible utilization of the basic excise duty paid on any input for payment of NCCD on the final product, if the final product fell under tariff item 8517 12 10 and 8517 12 90 respectively of the First Schedule. The said proviso has already been quoted above. The provision after its modification by the amendment on 1st March, 2016 reads as follows :
"[Provided also that the Cenvat credit of any duty specified in sub-rule (1), except the National Calamity Contingent duty in item (v) thereof, shall not be utilized for payment of the National Calamity Contingent duty leviable under Section 136 of the Finance Act, 2001 (14 of 2001).]"34 Excise Appeal No.58374 of 2013
33. After substitution of the said proviso in the year 2016, the rule-maker has totally proscribed the utilization of any part of the Cenvat credit, except the NCCD duty for payment of NCCD on any final product. Under Rule 3(7)(b), Cenvat credit, consisting of NCCD and the cesses, is to be utilized for payment of the corresponding duties on the final products only. No doubt, this is subject to the two provisos, which are contained therein. It is also true that the use of the word in singular need not be restricted to the singular and can comprehend also the plural. As to whether it would so embrace the plural, is a matter to be discerned from the context, as also, the purpose of the enactment, besides the phraseology of the statute otherwise.
39. It is brought to our notice that Circulars have been issued. Appellant relies on Circular No. 641/32/2002/CX, dated 26-6-2002 and other Circulars, which are dated 13- 1-2006, 7-1-2009, and 11-12-1996. Reliance is placed on all these Circulars to demonstrate that the Authorities have understood that NCCD shall be treated as "duty of excise", for the purpose of exemption on products meant for export within the meaning of Rule 19, from payment of NCCD and hence, the contention appears to be that the words "duty of excise" are to be appreciated as it occurs in the Cenvat Credit Rules also, having regard to the Finance Acts, under which NCCD and the cesses are imposed, whereunder they are referred to as the duties of excise. The NCCD and the cesses would also be part of duties of excise under Rule 2(d) and also Rule 6 of the Cenvat Credit Rules.
40. It is undoubtedly true that if the basic excise duty is paid on inputs, then it can be used ordinarily to pay the basic excise duty on the final product. We must consider, what is the scope of the expression "exempt from whole of the duty". We have noticed that Section 5A of the Act empowers the Authority to grant exemption from whole or 35 Excise Appeal No.58374 of 2013 part of the duties. The expression "whole of the duty"
cannot, but be given its due importance. Rule 6 of the Cenvat Credit Rules, in our view, would not apply in a case, where the Notification granting exemption does not grant exemption from whole of the duty. In other words, if there is only a partial exemption, then Rule 6 of the Cenvat Credit Rules would not act as a bar to claiming of the Cenvat credit. One way of looking at the expression "whole of the duty" is that the word "duty" is also intended to apply only to a case, where there is a Notification granting exemption from the whole of the basic excise duty, which obviously is levied under Section 3 of the Act. In this case, there is no dispute that under Notification No. 50 of 2003, the Author of the Notification has granted exemption from whole of the basic excise duty on the final product. On our interpretation, there should be no difficulty or hesitation in concluding, therefore, that this is a case, whereas there is an exemption notification granting exemption from whole of the basic excise duty, Rule 6 of the Cenvat Credit Rules is attracted. Therefore, the appellant cannot claim Cenvat credit on the basic excise duty paid on the inputs for the purpose of paying the NCCD and the cesses.
41. The other way to look at it is that since the words "duty of excise" are capable of comprehending all duties of excise and since the NCCD and the cesses are surcharges, which are treated as "duties of excise", it would also fall within the expression "duty of excise" within the meaning of Rule 2(d) defining "exempted goods" and Rule 6, and since there is no exemption in respect of these imposts, there is no obstacle in the appellant‟s claiming the benefit of Cenvat credit.
42. There can be no doubt that the expression "duty of excise" contained in Rule 3(1)(vii) would be the aggregate of the duties, which are mentioned in various clauses and in the said sense, it could be treated as a case of singular 36 Excise Appeal No.58374 of 2013 including the plural. When it comes to Rule 3(2) of the Cenvat Credit Rules, 2004, apparently, the intention is that having regard to the principle, which is self-evident in Rule 6 of the Cenvat Credit Rules, namely, the non-availability of Cenvat credit on inputs when final goods are exempted, the rule-maker intended that a manufacturer is entitled to Cenvat credit on the duty paid on the goods, which are lying in stock or in process or inputs contained in the final products lying in stock, when the shadow cast over the claim for the Cenvat credit in the form of an exemption is lifted, inter alia. We are not concerned with the clause, which also likewise applies when the goods become excisable otherwise.
43. For our purpose, there can be no doubt that the words "duty paid" may take in the whole of the duties, which are contemplated under Rule 3(1). Likewise, the language of Section 3(4)(a) of the Cenvat Credit Rules, which provides that Cenvat credit may be utilized for payment of any duty of excise on any final product clearly indicates that Cenvat credit is available with reference to all its component parts for payment of any duty of excise on the final product, subject to the restrictions or limitations under the provisos or any other provision, as for instance, Rule 6. It is clear that with reference to the facts of this case, for instance under the law as stood then, basic excise duty paid would be available for payment of NCCD and the cesses as they would fall under the category of "any duties of excise", which is imposed on the final product, which is no doubt subject to the provisos, which are mentioned. However, after 2016, it is clear that NCCD components of Cenvat credit paid on input alone can be used for payment of NCCD on the final product. No other part of duties is available for the said purpose. There is no case before us that the said proviso, which was substituted on 1st March, 2016, has retrospective effect or it is 37 Excise Appeal No.58374 of 2013 declaratory in nature and we need not to explore the said aspect.
44. It is equally true that under Rule 3(7)(b) of the Cenvat Credit Rules, despite what is provided in Rule 3(4)(a), it is also subject to the restrictions and conditions contained in Rule 3(7)(b) as it opens with a non obstante clause and declares that notwithstanding anything contained in sub-rule (1) and sub-rule (4) inter alia, the Cenvat credit in respect of NCCD and the cesses are to be utilized only towards the payment of the NCCD and the cesses but it is true that there is no prohibition that the Cenvat credit consisting of basic excise duty paid on input is to be exclusively directed only for payment of basic excise duty on the final product.
45. Thus, as far as the periods relevant to these cases are concerned, the appellant would indeed have the right of basic excise duty paid on inputs adjusted against the charge under the NCCD and the cesses, but it is here that the shadow of Rule 6 looms large.
46. In our view, Rule 6 is intended to cover cases, where the main duty, which is the basic excise duty, is exempted. We are of the view that when Rule-maker made the Cenvat Credit Rules, it had before it the understanding of the phrase "the duty of excise" in terms of the judgment of the Hon‟ble Apex Court in Modi Rubber case. Furthermore, the expression "whole of the duty" is appropriately traced to the provisions contained in Section 5A of the Act, which, as we notice, enabled the Authority to grant exemption from the "whole of the duty" or exemption, which is partial in nature. It is this concept, which is seen embedded in Rule 6 read with Rule 2(d) of the Cenvat Credit Rules. The substantial duty invariably will be the basic excise duty. NCCD and other cesses are essentially surcharges, calculated as percentage of the duty. Apparently, the intention was that when the final product is exempted from 38 Excise Appeal No.58374 of 2013 the payment of the substantial part of the aggregate of the levies in a case where apart from the excise duty, there are surcharges, as NCCD and cesses in this case, then when the assessee opts for the benefit of the exemption from the duty under Section 3, then it would not also, at the same time, claim further benefit by way of Cenvat credit. It is to be noticed that there is no case for the appellant that the appellant did not exercise his option in the matter of claiming benefit of Notification No. 50 of 2003. We would think that though, no doubt, Modi Rubber was rendered in the context of Excise Rules and it was not rendered in the scenario of the Cenvat credit, having regard to the language used in Rule 6 read with Rule 2(d) in conjunction with the language used in Section 5A of the Act, the conclusion would be that when there is exemption from the whole of the duty under Section 3 of the Act, the goods would be treated as exempted goods within the meaning of Section 2(d) of the Rules. As far as the case based on Rule 19 of the Central Excise Rules and the Circulars, which have been issued with reference to the same, whereunder NCCD, inter alia, has been treated as the duty of excise for the purpose of Rule 19, is concerned, we do not think that the principle on the basis of which, for the purpose of Rule 19, NCCD has been treated as the duty of excise, will assist the appellants when we are called upon to interpret the provisions of Rule 6 read with Rule 2(d) of the Cenvat Rules. We would think that the context and the purport of Rule 19 is different from setting of Rule 2(d) and Rule 6 of the Cenvat Rules, which we have already discussed. This would necessarily result in the appellant becoming disentitled from claiming of Cenvat credit consisting of basic excise duty paid on inputs for payment of NCCD and other cesses."
4.9 The issue referred and decided in this case as in para 46 of this decision whereby restriction was imposed with regards to admissibility of CENVAT Credit has been set aside by the Hon‟ble 39 Excise Appeal No.58374 of 2013 Supreme Court as reported at [2019 (366) E.L.T. 807 (S.C.)] following the decision in case of Bajaj Auto Ltd. referred by us earlier, but not on the issue of utilization of the Cenvat Credit of Basic Excise duty for payment of NCCD. In any case there is no dispute with regards to the admissibility of the CENVAT Credit which has been utilized by the appellant for discharging the service tax liability. Hon‟ble Bombay High Court has in case of Mahindra & Mahindra [2020 (371) E.L.T. 481 (Bom.)] made similar observation in respect of the decision of Hon‟ble Uttarakhand High Court stating as follows:
"7(d) Having regard to (i) the nature of the various duties or cesses [which are in addition to the duty of excise leviable under the Act or additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957], which are nothing but levies of excise, and (ii) the overall scheme of Cenvat credit, as contained in the Rules of 2002 as well as 2004, there is no obvious or self-evident reason why the expression „duty of excise‟ used in the definition of "exempted goods" should not include these other levies. It matters not that these additional duties or cesses are not to be traced to the Act or are provided for by other enactments such as Finance Acts, or that they are levied as an increment, or are expressed as a proportion, to an existing tax (namely, basic duty of excise). After all, as the Supreme Court has explained in the case of Guruswamy & Co. v. State of Mysore [(1967) 1 SCR 548], „cess‟ means nothing but „tax‟ and must be judged of in the same way as the validity of the tax (here, excise duty) to which it is an increment; and as for the taxing power of the State for its levy, it can be traced only to Entry 84 of Schedule VII to the Constitution, which is „tax on manufacture of goods‟, i.e. excise duty. Besides, as explained in TVS Motor Co. Ltd. v. Union of India [2015 (323) E.L.T. 57 (Kar.)] , the phrase "duties of excise" and "duty of excise" were used originally in the Act inter-40 Excise Appeal No.58374 of 2013
changeably, namely, sometimes in plural and sometimes in singular. When the new term "Cenvat" came to substitute these terms as on 12 May 2000, in order to overcome the difficulty of replacing these words in the entire Act, Section 2A was introduced in the Act with effect from 12 May 2000 by Finance Act, 10/2000, whereunder the expressions "duty", "duties", "duty of excise" and "duties of excise" were to be construed to include a reference to "Central Value Added Tax (Cenvat)". As the Supreme Court said in TVS Motor Co. Ltd., this clearly indicated that there could be no distinction between the phrases "duty", "duties", "duty of excise" and "duties of excise".
7(e) The rationale of the Tribunal‟s decision in the present case that the expression used in the definition of "exempted goods" in Rule 2(d) being "duty of excise" and not "duties of excise", there being a distinction between them, the goods are to be treated as exempted if they are exempt from payment of basic excise duty as opposed to all excise duties, thus, holds no water. The singular use of the word "duty" cannot be considered as a decisive basis for construing the expression "exempt from the whole of duty of excise" in Rule 2(d). The only other reason cited by the Tribunal for its interpretation that Rule 3 of Cenvat Credit Rules, 2002/2004 allows a manufacturer credit of all duties of excise, i.e. basic duty of excise and additional duty of excise, and also of other duties and cesses such as education cess, national calamity contingent duty, etc., but "duty of excise" has been referred to Rule 3(1)(i) and 3(1)(ii) and nowhere else, whereas other cesses and duties have been separately referred to, is also neither here nor there. Once it is seen that these cesses and duties are also excise duties and on that basis are included in the Cenvat credit scheme, as indicated by Rule 3 itself, the fact that these are referred to as cesses or duties loses its 41 Excise Appeal No.58374 of 2013 significance altogether; it is hardly determinative for construing the expression "duty of excise".
7(g) We are in respectful disagreement with the judgment of Uttarakhand High Court in Hero Motorcorp Ltd., to the extent it holds that Rule 6 of Cenvat Credit Rules was intended to cover those cases, where the main duty, which is the basic excise duty, was exempted. The only reasons for this statement indicated in Hero Motorcorp Ltd. were that, firstly, when the rulemaker made the Cenvat Credit Rules, it had before it the understanding of the phrase "duty of excise" in terms of the judgment of the Supreme Court in Modi Rubber Ltd. and, secondly, the expression "whole of the duty‟ was appropriately traced to the provisions contained in Section 5A of the Act, which enabled the authority to grant exemption from the whole of the duty or exemption which was partial in nature. As we have noted above, the construction of the phrase "duty of excise" in Modi Rubber Ltd. was not a general construction of the words "duty of excise" wherever they were used. It was in particular reference to the expression "duty of excise" used in a subordinate piece of legislation, namely, a notification issued under Rule 8(1) of the Central Excise Rules. Rule 8(1) read with Rule 2(V) specifically covered only duty of excise "under the Central Excises and Salt Act"; and the expression "duty of excise" used in the notification could not be given any extended meaning beyond what it bore under Rule 8(1) itself. (Incidentally, when the case of Hero Motocorp was carried in appeal by the assessee, the Supreme Court allowed the appeal, though that was on the ground that NCCD, as held by the Supreme Court in Bajaj Auto Limited v. Union of India [2019 (5) SCALE 325] = 2019 (366) E.L.T. 577 (S.C.), was in the nature of excise duty and the assessee was, accordingly, entitled to the benefit of the exemption notification. The decision in Bajaj Auto Ltd. was, in turn, based on the case of SRD 42 Excise Appeal No.58374 of 2013 Nutrients Pvt. Ltd. v. Commissioner of C. Excise, Guwahati [2017 (335) E.L.T. 481 (S.C.)]. In that case, the Supreme Court had held that "Education cess" being a surcharge on excise duty, payable as a percentage of „value‟ of central excise duty, i.e. basic excise duty, would partake the character of that very excise duty and was, accordingly, exempt under the notification applicable to units in North-Eastern States, under which the assessee in that case was claiming exemption from excise duty.)"
4.10 In view of the discussions as above, we do not find any merits in the impugned order and set aside the same. Appellant counsel have during the course of arguments have referred to certain other decisions which we do not found relevant for arriving at the conclusion in the appeal and hence have avoided discussing them separately and individually.
5.1 Appeal is allowed.
(Pronounced in open court on-04 June, 2024) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp