Custom, Excise & Service Tax Tribunal
Ennar Refineries (P) Ltd vs Commissioner Of Central Excise And ... on 22 January, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 20086 / 2014 Appeal(s) Involved: E/25/2008-SM [Arising out of Order-in-Appeal No. 252/2007 dated 29/11/2007 passed by the Commissioner of Central Excise, Bangalore] Ennar Refineries (P) Ltd. Sira Road, Tumkur 572 106 Appellant(s) Versus Commissioner of Central Excise and Customs - Bangalore-II PB 5400 CR Building, Queens Road, Bangalore - 560 001, Karnataka Respondent(s)
Appearance:
Mr M.A. Narayana, Advocate M/s. Cusecs Consultants Flat A Gr. Floor, Seven Hills Excellency, #33, 2nd Cross, SBM Colony, Brindavan Nagar, Mathikere, Bangalore - 560 054 For the Appellant Mr S. Teli, Deputy Commissioner (AR) For the Respondent CORAM:
HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER Date of Hearing: 22/01/2014 Date of Decision: 22/01/2014 1.1. The issue involved in this appeal is the date from which the interest under Section 11AB is to be calculated in the case of demand of differential duty on the product Refined Edible Oil (hereinafter also referred to as the said goods). The peculiar facts and circumstances leading to this question and the appeal are as follows.
1.2. M/s. Ennar Refineries Pvt. Ltd. (hereinafter also referred to as the appellant or the company) is a manufacturer of Refined Edible Oil falling under chapter 15 of the First Schedule to CETA, 1985. The process of manufacture involves the processes of saponification (removal of fatty acids), neutralization (treating with alkali), and deodorization (removal of bad odour) of the unrefined edible oil. In order to appreciate the contentious issue involved in this appeal it is necessary to trace the history of levy on the said goods.
1.3. Prior to June 2005, the said goods were ostensibly non-excisable as the process of refining the crude edible oil did not amount to manufacture in the absence of any specific provisions of deemed manufacturing either in the section note or chapter note, as held by the Honble Supreme Court in the case of Shyam Oil Cakes Ltd. Vs. CCE, Jaipur [2004 (174) ELT 145 (SC)]. However, the department having presupposed that the process of refining of crude edible oil would amount to manufacture appeared to have presumed that the said goods were classifiable under sub-heading nos. 1502.00 and 1503.00 of the tariff as it existed then. Till the year 2002-03, the tariff rates of duty against these entries were nil.
1.4. In the Finance Bill 2003, chapter note 4 was introduced in chapter 15 which read as follows:
4. In relation to products of S.H. No. 1502.00, 1503.00, 1504.00, and 1508.90 labelling, relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture. With the introduction of this note, a levy of 8% was prescribed against these two entries. Simultaneously under Notification No. 6/2002 as amended, an effective rate of nil was prescribed on all goods other than Refined Oils falling under these entries thereby subjecting the Refined Oil to a levy of duty. Further, the Honble Minister of Finance also in his speech had specifically mentioned about this new levy being introduced on Refined Oils. However, the benefit of general small scale exemption scheme was extended to this product. It was under these circumstances, assuming that the levy was constitutional the company had assessed and paid duty on the said goods during 2003-04 and 2004-05 at applicable rates from time to time. The company had availed the benefit of small scale exemption for the year 2003-04 as the value of clearances of all excisable goods for the year 2002-03 according to the company had not exceeded Rs. 300 lakhs.
1.5. During January 2005 the department initiated certain investigations into the companys transactions and raised a demand for an amount of Rs. 12,12,940.00 on the allegations of irregular availment of SSI exemption and clandestine removal during the period 2003-04 and 2004-05. The company conceded the liability and paid the said amount in 5 installments between the period January 2005 and February 2006. Out of these five installments more than 90% of the amount was paid in the first four installments much before the issue of show-cause notice. The fifth installment was paid immediately after issue of show-cause notice.
1.6. In the meantime, apparently realizing the lacuna in the law as pointed out by the Honble Supreme Court in the decision cited supra, the Government introduced chapter note 5 in the said chapter 15 with retrospective effect from 1.3.1986 vide Section 87 of the Finance Act, 2005 (the relevant extract of the provisions enclosed and marked as Annexure A). The note 5 introduced by Finance Act, 2005 in chapter 15 of the tariff with retrospective effect from 1.03.1986 rendered the said processes as amounting to manufacture from 1.3.1986.
1.7 Thereafter proceedings were initiated and in the impugned order learned Commissioner (Appeals) has taken a view that interest is payable from 1st April 2003, the date on which the appellant became liable to pay the differential duty which has not been contested. The only question that requires to be decided is whether the appellant is liable to pay interest from 1st April 2003 or from 1st July 2005, the date on which the Note 5 became part of the Act.
2. The learned counsel relies upon the decision of the Tribunal in the case of General Motors India Pvt. Ltd. Vs. CCE, Vadodara [2010 (253) E.L.T. 301 (Tri.-Ahmd.)]. In paragraph 3 the issue has been discussed and the same is reproduced below:
We have considered the submissions made by both the sides. Section 11AB is the provision under which interest has been demanded in this case. Section 11AB clearly provides that interest is liable from the first date of month succeeding the month in which they duty ought to have been paid under this act. Therefore, we agree with the learned advocate that duty is liable to be paid only after the period of 180 days are over from the date of issue of capital goods to the job worker. As regards penalty, we agree with the learned advocate that this is only a minor procedural omission and had happened because of mistake. Further, we also take note of the fact that on a similar issue, this Tribunal had set aside the penalty vide Order No. A/444/WZB/AHD/2009 dated 5.2.2009. Accordingly, appeal is allowed. For better appreciation provisions of Section 11AB which existed during the relevant time is also reproduced below:
Interest on delayed payment of duty. [(1) 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. From the reading of the Section and the decision cited by the learned counsel it becomes quite clear that the liability for interest arises from the first day of the succeeding month in which the duty ought to have been paid. In this case in my opinion, the differential duty became payable only after Note 5 was given retrospective effect and introduced as part of the Act. That being the position, it cannot be said that in 2003-04 and 2004-05 the differential duty ought to have been paid by the appellant. It became payable only when Note 5 came into existence. Therefore interest also will be liable to be paid only from the 1st day of the succeeding month and therefore I find that the contention of the appellant is in accordance with the statutory provision and also the precedent decision of the Tribunal cited by the learned counsel is applicable to the facts of this case.
3. Learned AR submitted that the decision of the Honble Supreme Court in the case of CCE, Pune Vs. SKF India Ltd. [2009 (239) E.L.T. 385 (S.C)] is applicable to the facts of this case and therefore interest becomes payable from the date on which clearance took place. He relies upon paragraph 14 of the decision of the Honble Supreme Court which is reproduced below:
We are unable to subscribe to the view taken by the High Court. It is to be noted that: the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of Section 11A and attracted levy of interest under Section 11AB of the Act.
4. I have considered the submissions made by the learned AR. In the case of transaction between two parties, at the time of removal of the goods, if the parties to that transaction are not sure as to what exactly should be the price at the time of removal, provided for change in such value. Even otherwise sometime subsequently the escalation in cost is claimed on the basis of the price of raw-material or labour charges as mutually agreed upon between the two parties. Invariably such revision of price whether it is upward or downward would always be based on certain factors relating to cost which can be of raw-material, labour etc. which is easily ascertainable or which can be based on some recognized bench mark by both the parties. Therefore what emerges from the discussion above is that even though a supplementary invoice is issued subsequently by the supplier of the goods to the buyer, in reality the price determined is the one which should have been the price at the time of removal. In my opinion this is the logic that is behind the decision of the Honble Supreme Court. A principle laid down or a ratio laid down in the case of transaction between two parties by the Honble Supreme Court cannot be applied to a situation where the law is amended with retrospective effect by the legislature. Therefore I am unable to find any merits in the argument made by the learned AR.
5. In view of the above discussion, the appeal filed by the appellant is allowed with consequential relief, if any, to the appellant.
(Order dictated and pronounced in open court) (B.S.V MURTHY) TECHNICAL MEMBER iss