Madras High Court
The Commissioner Of Central Excise vs Customs Excise And Service Tax on 10 January, 2014
Author: T.S.Sivagnanam
Bench: Chitra Venkataraman, T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 10.01.2014
Coram
The Honourable Mrs.Justice CHITRA VENKATARAMAN
and
The Honourable Mr.Justice T.S.SIVAGNANAM
Civil Miscellaneous Appeal No.1418 of 2009
---
The Commissioner of Central Excise
Chennai IV Commissionerate
M.H.U.Complex
No.692, Anna Salai
Nandanam, Chennai 600 035. .. Appellant
-vs-
1.Customs Excise and Service Tax
Appellate Tribunal
South Zonal Bench
Shastri Bhavan Annexe
I Floor, 26, Haddows Road
Chennai-600 006.
(R1 given up)
2. M/s.S.L.Lumax Limited
15, SIPCOT Industrial Park
Irungattukottai
Sriperumbudur 602 105. ..Respondents
Civil Miscellaneous Appeal filed under Section 35G of the Central Excise Act, 1944 against the Final Order No.1224 of 2008 dated 24.10.2008 on the file of the Customs, Excise and Service Tax Appellate Tribunal, Chennai.
For appellant : Mr.P.Mahaadevan
Standing counsel for Customs,
Excise and Service Tax
For respondent 2 : Mr.S.Jaikumar
R1- Tribunal (given up)
JUDGMENT
(The Judgment of the Court was made by T.S.SIVAGNANAM, J.) This appeal by the Revenue is directed against the Final Order passed by the Customs, Excise and Service Tax Appellate Tribunal [The Tribunal] dated 24.10.2008 in Final Order No.1224 of 2008.
2. The respondent/assessee are the manufacturers of headlamp assembly and motor vehicles part falling under Central Excise Tariff heading No.8512 and 8705. The assessee has been availing Cenvat Credit on inputs under Cenvat Credit Rules, 2002. During the period from April 2003 to March 2004, the assessee removed inputs as such, on which Cenvat Credit was availed and the credit was not reversed on the date of removal. This lead to a demand being issued to the assessee demanding interest of Rs.67,349/- under Section 11AB of the Central Excise Act, 1944 on the ground that if the duty of excise has not been paid or has been short paid, the person liable to pay duty, has to pay interest on such belated payment.
3. Aggrieved by such order, the assessee preferred appeal before the Commissioner (Appeals). The Commissioner (Appeals) held that the duty liability having been paid prior to the issuance of show cause notice, the question of imposing penalty or demanding interest does not arise. As against this order, the Department preferred appeal to the Tribunal and the Tribunal dismissed the appeal on the ground that there is no enabling provision in the Statute for recovering interest.
4. Challenging the same, the assessee has preferred this appeal, which has been admitted on the following questions of law:
1. Whether in the facts and circumstances of the case, the Tribunal is right in law in holding that there is no provision in the statute for enabling the recovery of the interest in case of delay in reversal/payment of the duty relatable to inputs removed as such, when there is an express provision in Section 11AB of Central Excise Act read with Rule 12 of the CENVAT Credit Rules, 2002 providing for recovery of interest when the conditions specified therein are satisfied?
2. Whether in the facts and circumstances of the case, the Tribunal is right in following the decision of the Tribunal in the case of Commissioner of Central Excise vs. Machino Montell (I) Ltd., reported in (2004 (168) E.L.T. 466 (Tri.L.B.) when the decision has been reversed by the jurisdictional High Court in the case of Commissioner of Central Excise, Delhi III vs. Machino Montell (I) Ltd. (2006 (202) E.LT.398 (P&H), wherein it was held that mere deposit of duty before issuance of show cause notice will not suffice for not invoking interest and penalty under Section 11AB and Section 11AC of the Central Excise Act?
5. Heard Mr.P.Mahaadevan, learned Standing Counsel appearing for the Revenue and Mr.S.Jaikumar, learned counsel appearing for the respondent/assessee.
6. It is fairly submitted by learned counsel appearing on either side that the issues raised before this Court in this appeal were not raised before the Tribunal or for that matter before the First Appellate Authority.
7. Learned Counsel appearing for the respondent/assessee also fairly submitted that the First Appellate Authority proceeded on the basis that the duty liability was paid prior to the issuance of show cause notice and therefore, the penalty and interest cannot be demanded when the facts of the instant case are totally different.
8. The contention of the Revenue is that as per Rule 3(4) of the Cenvat Credit Rules, 2002 when inputs or capital goods on which CENVAT credit was taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7. Therefore, it is contended that the Tribunal erroneously held that there was no provision for payment of interest, especially, when there is a specific provision contained in Section 11AB of the Act.
9. Rule 3 of the Cenvat Credit Rules, 2002 deals with the circumstances under which the manufacturer or producer of final products shall be allowed to take credit. Sub Rule (3) of Rule 3 of the Cenvat Credit Rules,2002 states that Cenvat Credit may be utilized for payment of any duty of excise on any final products or for payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed, or such capital goods are removed as such. The Proviso to Sub Rule (3) of Rule 3 of the Cenvat Credit Rules, 2002 provides that while paying duty, the Cenvat credit shall be utilized only to the extent such credit is available on the fifteenth day of a month for payment of duty relating to the first fortnight of the month, and the last day of a month for payment of duty relating to the second fortnight of the month or in case of a manufacturer availing exemption by a Notification based on value of clearances in a financial year, for payment of duty relating to the entire month.
10. Sub Rule (1) to Rule 3 of the Cenvat Credit Rules, 2002 would be of relevance in the instant case as the Revenue has placed reliance on such rule to justify the demand of interest. Sub Rule (3) and (4) to Rule 3 of the Cenvat Credit Rules, 2002 reads as follows:
"Rule 3 (3)- The CENVAT Credit may be utilised for payment of any duty of excise on any final products or for payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed, or such capital goods are removed as such:
Provided that while paying duty, the CENVAT credit shall be utilized only to the extent such credit is available on the fifteenth day of a month for payment of duty relating to the first fortnight of the month, and the last day of a month for payment of duty relating to the second fortnight of the month or in case of a manufacturer availing exemption by a Notification based on value of clearances in a financial year, for payment of duty relating to the entire month.
(4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under sub-section (2) of Section 3 or Section 4 or Section 4A of the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in Rule 7."
11. As noticed above, the case relates to clearances effected by the assessee during the period April 2003 to March 2004. Sub Rule (4) to Rule 3 of the Cenvat Credit Rules, 2002 was substituted by Notification No.13/2003-CE(N.T.,) dated 01.03.2003. The substituted rule reads as follows:
"(4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7."
Sub Rule (4) to Rule 3 of the Cenvat Credit Rules, 2002 prior to its substitution states that the inputs or capital goods on which CENVAT credit has been taken, are removed from the factory as such, the manufacturer of the final product shall pay an amount equal to the duty of excise, which is leviable on such goods at the rate applicable to such goods on the date of such removal.
12. Therefore, the expression "on the date of such removal" is referable to the rate applicable to such goods and it cannot be understood to mean that the duty should be paid at the time of removal in terms of substituted provisions. The expression "on the date of such removal" stands deleted in the new Sub Rule (4) to Rule 3 of Cenvat Credit Rules,2002 as cited supra.
13. Rule 8 of the Cenvat Credit Rules, 2002 deals with a manner of payment of duty and it states that (1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by the 5th day of the following month. In terms of first proviso to Rule 8, in case of goods removed during the month of March, the duty shall be paid by the 31st day of March. For the purpose of this case, second proviso to Rule 8 would not be of relevance. Thus, in terms of Rule 8(1) r/w Sub Rule (4) to Rule 3 of the Cenvat Credit Rules, 2002, the duty shall be paid by the 5th day of the following month and in case, the goods removed during the month of March, the duty shall be paid by the 31st day of March.
14. It is not in dispute that the assessee has paid the duty at the end of the month, i.e., much prior to the 5th day of the following month or in case where the removal had taken place in March before 31st March of the relevant year. In such circumstances, it cannot be said that the there has been delay in payment of duty so as to invoke Section 11AB of the Central Excise Act,1944. Even though the Tribunal has proceeded on the basis that the deposit was made prior to the issuance of show cause notice, on facts, we found, such a contention is not tenable.
15. It is evidently clear that the assessee has deposited the amount before the issuance of show cause notice, yet we do not think, we need to enter into the said question since essentially the assessee's case falls within the scope of Rule 3(4) r/w Rule 8 of the Cenvat Credit Rules, 2002.
16. In the circumstances, for the reasons given above, we reject the Revenue's appeal. No costs.
(C.V.,J) (T.S.S.,J) 10.01.2014
Index:Yes
Internet:Yes
vj2
CHITRA VENKATARAMAN, J.
and
T.S.SIVAGNANAM, J.
vj2
To
1.The Deputy Commissioner of Central Excise
Poonamallee Division, Chennai IV
Commissionerate, Anna Nagar, Chennai-40.
2. The Commissioner of Central Excise(Appeals)
26/1, Mahatma Gandhi Road, Chennai-600 034.
3.The Customs, Excise and Service Tax Appellate Tribunal
South Zonal Bench, I Floor, Shastri Bhavan Annexe
Haddows Road, Chennai-600 006
Civil Miscellaneous Appeal No.1418 of 2009
10.01.2014