Case Law Details

Case Name : CCE Vs Hindalco Industries Ltd. (CESTAT Ahmedabad)
Appeal Number : Excise Miscellaneous (CROSS) Application No. 10006 of 2017 in Excise Appeal No.11932 of 2016
Date of Judgement/Order : 12/03/2020
Related Assessment Year :

CCE Vs Hindalco Industries Ltd. (CESTAT Ahmedabad)

CESTAT Ahmedabad has upheld the Commissioner (A) Order allowing Cenvat credit of the duty paid on  provisionally assessed bill of entry in a case where the final assessment revealed that less duty was payable. The Tribunal in this regard relied upon number of case law and observed that it is settled that even though certain amount of excise duty/service tax is not payable as per law but the manufacturer/service provider pays it, Cenvat Credit cannot be denied at the recipient end only on the ground that the same was not payable by the manufacturer/service provider. 

FULL TEXT OF THE CESTAT JUDGEMENT

The brief facts of the present case are that the appellant have availed cenvat credit in respect of CVD paid on imported raw-material namely copper Concentrates based on provisionally assessed bills of entry. Since the value of the goods under Customs Act is based on copper Concentrate the bill of entry was initially provisionally assessed and on final assessment the value was determined on lower side, therefore, the duty paid on the basis of provisionally assessed bills of entry was found in excess as compared to the actual duty playable assessed finally. The case of the department is that the correct value of the goods is the value which was finally assessed, therefore, the respondent were not entitle for the cenvat credit paid in excess on the basis of provisionally assessed bills of entry. The department also contended that the amount of duty paid on the provisionally assessed bills of entry is deposit and not the duty actually payable as per the finally assessed bill of entry ,therefore, CVD paid as per provisionally assessed bill of entry is not admissible for cenvat credit to the appellant. The adjudicating authority dropped the proceeding of the show cause notice. Being aggrieved by the impugned order Revenue filed the present appeal.

2. Shri. Deepak kumar, Learned Special Counsel appearing on behalf of the Revenue reiterates the grounds of appeal. He submits that the appellant availed the cenvat credit of CVD based on provisionally assessed bill of entry. Since the payment under provisionally assessed bills of entry is provisional, therefore, the same cannot be considered the same as duty but it is considered as deposit ,therefore, the appellant were entitle to cenvat credit only on the CVD amount which has been determined in the finally assessed bill of entry. The adjudicating authority has erred in dropping the proceeding.

3. On the first date that is on 21.06.2019 the matter was heard in detail when the respondent was represented by Shri. V. Shridharan, Learned senior Counsel along with Shri. Anand Nainawati and shri. Ishan Bhatt, advocates, however for some clarification the matter was relisted and it was finally heard on 06.11.2019.

4. The respondent takes support of the adjudication order. They submits that the provisional assessment bill of entry is also with authority of law as provided that under Section 18 of the Customs Act, 1962, therefore, the duty paid at the time of provisional assessment of bill of entry cannot be said to be deposit but it is a payment of duty in terms of Section 18. For this reason the cenvat credit of CVD paid on provisional assessment is admissible. They alternatively submit that even if it is considered that the excess duty is not payable but since the same was paid the cenvat credit is admissible in terms of Rule 3 of Cenvat Credit Rules, 2004. He submits that the issue is squarely covered by the various judgments. They relied upon the following judgments:-

  • Kesarwani Zarda Bhandar V. CCE, Thane-I-2016-TIOL-1348-CESTAT­MUM
  • Sterlite Industries (I) LTD V. CCE, Tirunelveli-2011-TIOL-1463-CESTAT-MAD
  • Nahar Granites Ltd V. CCE & ST, Ahmedabad Order No. A/10878/WZB/AHD/2013 dated 23.07.2013.

Affirmed by High Court of Gujarat at 2014 (305) ELT 9 (Guj.)

  • MDS Switchgear Ltd. V. CCE, Aurangabad-2001 (132) ELT 405 (Tri. Mum)

Affirmed at 2008 ELT 485 (SC.)

5. We have heard both the sides and and perused the records. We find that the show cause notice proposed to deny the cenvat on the ground that the credit on the bill of entry can be taken only if it is finally assessed and credit cannot be taken on provisionally assessed bill of entry. The show cause notice also contended that the duty so paid on the basis of provisionally assessed bill of entry is not a duty but the same is deposit, therefore, the credit of such deposit is not admissible. We find that the provisional assessment is also provided under a statute i.e. under Section 18 of the Customs Act, 1962, therefore, the duty paid on the provisional assessment of bills of entry is also with authority of law. Therefore, it cannot be said that the payment made under provisionally assessed bills of entry is a deposit and not a duty. The provisionally assessed bills of entry is also valid document for availing the cenvat credit, for the reason that under Rule 9 of Cenvat Credit Rules only bill of entry is prescribed on the basis of which the payment of customs duty was made, therefore, bill of entry whether it is provisional of finally assessed, the Cenvat Credit is admissible. There is no bar in the law to restrict the Cenvat Credit on the CVD paid on the basis of provisionally assessed bills of entry. Therefore, merely because the Cenvat Credit was taken on provisionally assessed bills of entry, there is no reason to deny the Cenvat Credit. It is a settled law that even if any duty or excess duty paid which is otherwise not payable, and the recipient and Cenvat Credit cannot be disputed. On this issue the Tribunal has passed the various judgments which are reproduced below:

5.1 In the case of Kesarwani Zarda Bhandar(Supra) the Tribunal passed the following order paragraph-5.

5.1 I have carefully considered the Submissions made by both the sides. I find that there k no dispute that the appellant have paid the service tax on GTA service, which was performed for transportation of goods from their Allatiabad unit to KaihPr depot_ Therefore in my vlew the service tax paid In respect of certain service even if service was undertaken other than the appellants factory, the credit can be availed at, anyone place. In the present case, the credit was admittedly taken by the appellant and the same was not taken by any other unit, Without prejudice to the above, r also found that as per the judgments relied upon by tha Ld. Counsel, even if ft Is accepted that on the part of the appellant no service exist, the payment of service tax made by the appellant Is the service tax paid in excess, therefore the Credit of such excess paid service tax is allowable. The decisions relied upon by the Ld. Counsel’ are reproduced below:

(i) Bajaj Allianz General Industries Co. Ltd. (supra) has held as under‑

7.5 From the above discussion, it is very much clear that the Insurance auxiliary services provided by the agents in the State Of Jammu & Kashmir are not taxable. Therefore, the appellants are not liable to pay service tam for me said services of the insurance agents. In These terms, whatever credit is taken by the appellant is nothing but the refund of tax erroneously paid by them. Similar issue came before the Hon’ble Supreme Court in the case of  CIT v Mahalakshmi Textile Mils Ltd. – 1967 (66) ITR 710 (SC) wherein the Hon’ble Supreme Court held that –

“5. By the first question the jurisdiction of the Tribunal to alloy., a pica inconsistent with the plea raised before the departmental authorities is canvassed. Under sub-s. (4) or s. 33 of the Indian IT Act, 1922„ the Tribunal is competent to pass such orders on the appeal ‘as It thinks fit’. There is nothing in the IT Act Which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assesses may be raised before the Tribunal: If for reasons recorded by the departmental authorities in rejecting a contention raised by the assesses, grant of relief to him on anther ground is justified, it wovld be open to the department authorities and the Tribunal, and indeed they would be under a duty to grant that relief.”

7.6 We further find that in the case of Nitco Tiles Ltd. V. CCE Mumbai – 2007 (220) ELT 827 (Tri. Mum), this Tribunal observed as under:-

“Further, the bar of Unjust enrichment will also not apply in the present case. The appellants have taken credit of the tax paid by them; therefore the same cannot be said to be passed on to the customers.”

In these circumstances we hold that the CENVAT Credit taken by the appellant is nothing but refund of the service tax paid by them services on which they were not required to pay service tax.

8. With these observations, we hold that the appellant is entitled to take the CENVAT Credit in the facts and circumstances of the case. Accordingly, the Impugned order is set aside and the appeal is allowed with consequential relief, if any.-

(ii) Sarda energy & Minerals Ltd. (supra) has held as under‑

“2- As per facts on record, the appellant had availed Grit services during the month of December, 2004. However, as a recipient of such services, they were liable to pay Service tax w.e.f. 1-1-2005. The appellant paid the Service Tax in respect of the said services availed during the month of December, 2004 and took the credit or the same. The Revenue entertainer’ a view that the services availed in December, 2004 were not taxable and as such, there is no liability on the part of the appellant to pay the Service Tax_ Asa result, the credit of Service Tax availed by them is not admissible to them.

5. I agree with the learned Advocate that it is the credit of Service tax paid which is available to the assessed and nor credit of Service Tax payable. Admittedly tire appellants have paid the Service Tax- on the GTA services availed during December, 2004 though they were not liable to pay the same. Having paid the Service tax, they are entitled to the credit of the same. It is to be noted that no objection was raised by the Revenue at the time of payment of Service Tax by the appellant.”

(iii) Sterlite Industries (1) Ltd. (supra) has held as under‑

2. During March 2006 to April 2006, the appellants entered into a contract with the transport agencies to carry copper anodes from Tuticorin to Silvasa. For this period, the appellants paid Rs_85, 51,0331- towards transportation charges to the transport agencies and on such transport charges, as a service recipient, they paid service tax of Rs.2,25, 702/-. The appellants subsequently took credit of the service tax amount. During audit it was found that the transport of goods was done in container by rail. It is the contention of the Department that transport by rail was not liable for payment of service tax prior to 2.6.2006 and hence for the impugned period the appellants were not eligible for taking service tax credit for the service Which was not taxable.

5. It has not been contested by the appellants that service tax was not payable in respect of rail transport. The Department has also proceeded on the basis that rail transport service was not taxable prior to 1.5.2006. Hence., the tax amount of Rs. 225,7021- which was paid by the appellants was not at all due to the exchequer. However, the amount has been paid by the appellants mistakenly believing that the same was payable and they have also taken the credit of the same under the bonafide belief that such credit was available. Considering the fact that the appellants have taken only credit of tax paid by them which in the first instance was not payable, there can be no demand against them as no revenue has been lost to the exchequer by merely taking credit of the amount which in the first place was not recoverable from them. Hence, ends of justice would be met if the demand is set aside along with the demand of interest and penalty. The view taken by me above finds support from the decision of the Hon’ble High Court of Punjab and Haryana in the case of M/s. V.G. Steel Industry Vs. CCE = 2011- TIOL-338-HC-P-H-CX where it has been held that when duty was paid in excess of what was payable, CENVAT credit cannot be denied unless the excess duty paid has been refunded.

From the above judgments, it is clear that even if the service tax is not required to be paid and if the assessee pay the service tax, the same can be taken as Cenvat Credit. In the present case, since on the GTA service their Allahabad unit has already paid the service tax, the appellant was not required to pay the service tax once again therefore the service tax paid by the appellant is admissible as Cenvat Credit to the appellant. Following the ratio of the above judgment, I am of the considered view that the appellant is entitled for the Cenvat Credit. The impuged order is set aside and the appeal is allowed.

5.2 In the case of Sterlite Industries (I) Ltd.(Supra) on the similar issue following order was passed:-

“5. It has not been contested by the appellants that Service tax was not payable in respect of rail transport. The Department has also proceeded on the basis that rail transport service was not taxable prior to 1.05.2006. Hence, the tax amount of Rs. 2,25,702/- which was paid by the appellants was not at all due to the exchequer. However, the amount has been paid by the appellants mistakenly believing that the same was payable and they have also taken the credit of the same under the bonafide belief that such credit was available. Considering the fact that the appellants have taken only credit of tax paid by them which in the first instance was not payable, there can be no demand against them as no revenue has been lost to the exchequer by merely taking credit of the amount which in the first place was not recoverable from them. Hence, ends of justice would be met if the demand is set aside along with the demand of interest and penalty. The view taken by me above finds support from the decision of the Hon’ble High Court of Punjab and Haryana in the case of M/s. V.G. Steel industries vs. CCE.. 2011-TIOL­338-HC-P-H-CX where it has been held that when duty was paid in excess of what was payable, CENVAT Credit cannot be denied unless the excess duty paid has been refunded.”

5.3 This Tribunal in the case of Nahar Granites Ltd.(Supra) passed the following order:-

“4. We have heard both sides and perused the records. The issue involved in this appeal is whether cenvat credit can be taken by the recipient on the inputs on which no duty was payable at the supplier’s end. It is seen from the case laws relied upon by the appellant that this issue has been decided in favour of the recipient assessee when excess duty is paid or duty is paid under protest. In the case of MDS Switchgear Ltd vs. CCE Aurangabad[2001 (132) ELT 405 (Tri.- Mumbai)] following was held by CESTAT in paragraph-7 of the order.

“7. Reasons given by the appellants for the alleged inflation of the value of the intermediate goods are logical. What was required of the Commissioner was to examine the quantum of the loading of the assessable value by the Modvat credit on the earlier inputs. That exercise has nowhere been done. If the Department was of the opinion that the value of the final product was depressed, then they could have charged the Jalgaon unit with under-invoicing of their product. That has also not been done. The valuation as given by the Sinnar unit was duly approved by the Department and the payment of duty was also duly accepted. We find absolutely no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into “deposit of duty”. There is no legal basis for such presumption. The rules entitled the recipient manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers in charge of the recipient unit [2000 (120) E.L.T. 379(T) = 2000 (38) R.L.T. (179)].”

5. The above interpretation made by CESTAT was upheld by Hon’ble
Supreme Court in their judgment dated 07.08.2008 reported at 2008 (229) ELT-485 (S.C.). A similar view has been taken by Hon’ble High Court
of Mumbai in the case of CCE Pune vs. Ajinkya Enterprises [2012-TIOL­578-HC-MUM-CX.]. In view of the settled law it is held that appellant has correctly taken the CENVAT credit on the inputs received in the absence of any action taken by the revenue at the supplier’s end.”

5.4 The similar issue the Tribunal Mumbai Bench in the case of MDS Switchgear Ltd.(Supra) express the similar view which is as under:-

6. We have carefully considered the submission made before us.

7. Reasons given by the appellants for the alleged inflation of the value of the intermediate goods are logical. What was required of the Commissioner was to examine the quantum of the loading of the assessable value by the Modvat credit on the earlier inputs. That exercise has nowhere been done. If the Department was of the opinion that the value of the final product was depressed, then they could have charged the Jalgaon unit with under-invoicing of their product. That has also not been done. The valuation as given by the Sinnar unit was duly approved by the Department and the payment of duty was also duly accepted. We find absolutely no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into “deposit of duty”. There is no legal basis for such presumption. The rules entitled the recipient manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers in charge of the recipient unit [2000 (120) E.L.T. 379(T) = 2000 (38) R.L.T. (179)].

8. We find that the entire process from the issue of the show cause notice to the determination of the liability to be not based on the relevant law. The proceedings do not survive. The impugned order is set aside. The appeals are allowed with consequential relief.”

The above judgments was upheld by the Hon’ble Supreme Court reported at Commissioner of Central Excise and Customs Vs. MDS Switchgear Ltd. 2008 (229) ELT 485 (SC).

5.6 In view of the above judgments, it is settled that even though certain amount of Excise duty/service tax not payable as per law but the manufacturer/service provider paid the duty /service tax, at the recipient and Cenvat Credit cannot be denied only on the ground that the same was not payable by the Manufacturer/Service provider. On the same analogy in the present case also even though as per the final assessment there was excess payment of CVD which was otherwise not payable, the Cenvat Credit on the said excess paid CVD cannot be denied. The adjudicating authority has given a detailed finding. After considering all the legal provisions on the issue in hand which is reproduced below:-

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6. On carefully going through the above findings of the adjudicating authority, we find that the adjudicating authority has given proper reasoning and correctly interpreted the various provision of Customs Valuation, provisional assessment and Cenvat Credit Rules. We do not find any infirmity in the finding given by the adjudicating authority.

7. As per our above discussion and finding support with the settled legal position, We find that the order passed by the adjudicating authority is just and proper.

8. Accordingly, we uphold the impugned order and dismiss the Revenue’s appeal. Cross Objection also stands disposed of.

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