Brief Facts of the Case
The Appellant manufactures final product, namely, blanket out of woollen fibres. The blankets attract only Basic Excise Duty (for short “BED”) and do not attract either Additional Excise Duty (Goods of Special Importance) [for short “AED (GSI)”] or Additional Excise Duty (Textiles and Textile Articles) [for short “AED (T&TA)]. Polyester top is not used in the manufacture of the blanket. Therefore, the polyester top as such is not an input for the blanket.
With effect from 1st April, 1994, the Appellant became entitled to avail credit of duty paid on the inputs (tops etc.) used in or in relation to the manufacture of manmade yarn. With effect from the said date, the Appellants became entitled to avail credit of duty paid on the inputs used in or in relation to the manufacture of blankets falling under Chapter 63.
Vide Notification No. 24/94CE (NT) dated 20th May, 1994 issued under Rule 57A, AED(T&TA) paid on input can be utilised for payment of AED(T&TA) on the final product. Similarly, AED (GSI) paid on the input can be utilised for payment of AED (GSI) on the final product. Similar provision contained in Notification No. 5/94(NT) dated 1st March, 1994 also issued under Rule 57A.
Fourth proviso was added to Rule 57F with effect from 16th March, 1995. This provision has nonobstante clause. This proviso applied notwithstanding anything contained in Rule 57A or Notification issued thereunder.
The fourth proviso to Rule 57F(4) of the erstwhile Central Excise Rules 1944, as inserted by Notification No. 11/95CE(NT) dated 16th March, 1995, reads as under:
“Provided that, notwithstanding anything contained in subrule (1) of Rule 57A and the Notifications issued thereunder the credit of specified duty allowed in respect of any inputs may be utilised towards payment of duty of excise on any other final product, whether or not such inputs have actually been used in the manufacture of such other final product, if such inputs have been received and used in the factory of production on or after the 16th day of March, 1995.”
When Modvat Rules were redrafted in lucid manner, similar provisions were contained in provisions to Rule 57F (12). With effect from 3rd September, 1996, the Appellants became entitled to avail credit of duty paid on the inputs used in or in relation to the manufacture of fabrics falling under Chapter 55. The Appellant, inter alia, took the credit of Basic Excise Duty and AED (T&TA) on one of the inputs viz. Manmade tops falling under Chapter 55 of the Tariff Act used in or in relation to the manufacture of yarn from 1st March, 1994. The yarn manufactured by the Appellants was subject to BED and AED (T& TA).
With effect from 3rd September, 1996, the Appellants were paying BED and AED (T&TA) on the yarn contained in the grey fabric at the time of clearance thereof by reason of the fact that the grey fabric was exempt from payment of duty, both under the Central Excise Act, and the Additional Duty of Excise payable under the Additional Duties of Excise (Goods of Special Importance) Act.
The Appellant started manufacturing processed fabrics with effect from March, 1998. The Appellant utilised the credit of BED paid under section 3 of the Act on the tops towards the payment of BED and the additional duty of excise payable under the Additional Duties of Excise (Goods of Special Importance) Act. However, under a mistake of law, the Appellant did not utilise the credit of AED (T&TA) on the tops towards the payment of duty on any other final products viz. Fabric, Blanket, Shawls etc.
By a Notification No. 27/2000C.E. (NT) dated 31st March, 2000, the Government of India amended the Central Excise Rules, 1944 by substituting the existing Rule 57A to 57V by Rules 57AA to 57AK.
Rule 57AB (1) provided for allowing and utilisation of the credit of various duties paid on the inputs specified thereunder and described as CENVAT Credit. Subrule (2) of Rule 57AB allowed the utilisation of the Cenvat Credit (duty paid under various Acts specified in Subrule (1) of 57AB) towards the payment of duty, inter alia, on any final product manufactured by a manufacturer. This also allowed utilisation of the credit of additional duty of excise paid under T&TA Act on the inputs towards payment of other specified duties on any other final products.
Rule 57AB (2) (b) provided that AED (T&TA) and AED (GSI) paid on input can be utilised for payment of AED (T&TA) or AED (GSI). This position contained upto 30th June, 2001. Construing this, the CEGAT in Reliance Industries Ltd. Versus CCE – 2002 (150) ELT 479 and Grasim Industries Ltd. Versus CCE – 2003 (54) RLT 288 (T) held that AED (T&TA) can be utilised for payment of AED (GSI) during this period.
The AED (T&TA) balance was not utilised by the Appellants till January, 2003. Between January 2003 to April, 2003, the Appellants utilised this AED (T&TA) credit for payment of BED and AED (GSI) to the extent of Rs.2.9 crores. The dispute in the present appeal relates to this utilisation of AED (T&TA), which was held to be impressible by the Respondent, is sustained by the Appellate Tribunal vide the impugned order.
By a notification No. 31/2001 dated 21st June, 2001, the Central Government promulgated the Cenvat Credit Rules, 2001 in substitution of Rule 57AA to Rule 57AV providing for Cenvat Credit on inputs.
Being aggrieved by the CESTAT order, the appellant preferred the present appeal.
Contentions of the Appellant
The Appellant relied upon Notification No. 21 of 1999 issued under Rule 57A of erstwhile Central Excise Rules, 1944 and submitted that in terms of this Notification AED (T&TA) paid on input can be utilised for payment of AED (T&TA) on the final product. Similarly, AED (GSI) paid on input can be utilised for payment of AED (GSI) on the final product. It was further submitted that similar provision was earlier contained in Notification No. 5 of 1994 (T&T) dated 1st March, 1994 which is also issued under Rule 57A. It was further contended that Rule 57AB(2) provided that AED(T&TA) or AED(GSI) paid on input can be utilised for payment of said AED(T&TA) or AED(GSI) on any final products manufactured and this position continued upto 30th June, 2001. It was submitted that construing these provisions, the Customs, Excise and Gold Control Appellate Tribunal (CEGAT), in the case of Reliance Industries Ltd. vs. Commissioner of Central Excise reported in 2002 (150) ELT 479 and Grasim Industries Ltd. vs. Commissioner of Central Excise reported in 2003 (54) ELT 288 held that AED (T&TA) can be utilised for payment of AED (GSI) during this period. By referring to transitional provision Rule 57AG the appellant pointed out that as on 1st April, 2000, the Appellant had approximately 1.7 crores as unutilised balance in AED (T&TA). Further credit of Rs.1.2 crores (approximately) was taken by the Appellant as AED (T&TA) on polyester top during the period from 1st April, 2000 to 30th June, 2001. The AED (T&TA) balance was not utilised by the Appellant till January, 2003. Between January, 2003 to April, 2003, the Appellant utilised this credit of AED (T&TA) for payment of BED and AED (GSI) to the extent of 2.9 crores. It is this utilisation which is held to be illegal.
The Appellant further submitted that the Notification dated 28th February, 1999 restricted utilisation of credit of duty paid on inputs under AED (T&TA) for payment of AED (T&TA) and duty paid on the inputs under AED (GSI) for payment of AED (GSI) and this is because of the two paragraphs, namely, 2(a) and 2(b) of this Notification.
It has been further submitted that Rule 57AB (1) and which has described various types of duties of Excise and additional duty of Customs under section 3 of the Customs Tariff Act, 1975 allowed vide clause (b) of SubRule (1) of Rule 57AB utilisation of Cenvat Credit for payment of any duty of Excise on any final products manufactured by the manufacturer.
It was submitted that addition of the word “respectively” in Rule 3(6)(b) of Cenvat Credit Rules, 2001 is w.e.f. 1st March, 2001. However the prefix “said” continues to figure in the Rule. This establishes the position that prefix “said” is not synonymous with word “respectively”. This argument is canvassed to fault the approach of the Tribunal in not following its earlier decisions in the impugned order and taking a contrary view. If the Tribunal wanted to differ from binding precedents, it ought to have referred the matter to the Larger Bench. In the impugned order, the Appellate Tribunal has relied upon the use of the phrase “under the said” twice in Rule 57AB(2) to hold that AED(T&TA) could not have been utilised for payment of AED(GSI) even during 1st April, 2000 to 30th June, 2000. In other words, the restriction having come by the insertion of the word “respectively” after 1st July, 2001, this view of the Tribunal cannot be sustained.
The Appellant referred to the Division Bench Judgment of this Court in the case of CEAT Limited vs. Union of India (Writ Petition No. 9996 of 2014), decided on 23rd December, 2014.
The Appellant relied upon the settled principle that in taxing statute, there is no room for intendment. In that regard, appellant relied upon several Judgments of the Hon’ble Supreme Court and which summarise the principles of interpretation of a taxing statute.
The Appellant has relied upon the following Judgments:
(i) Reliance Industries Ltd. vs. CCE 2002 (150) ELT 479 (T)
(ii) Grasim Industries Ltd. vs. CCE 2003 (54) ELT 288 (T)
(iii) Eicher Motors Ltd. vs. UOI 1999 (106) ELT 3 (SC)
(iv) Aunde Faze Three Autofab Ltd. vs. CCE 2009 (6) ELT 564
(v) Innamuri Gopalan vs. State of A. P. 1962 (2) SCR 888
(vi) V.V.S. Sugars vs. Government of A.P. (1999) 4 SCC 192
(vii) Hemraj Gordhandas 1978 (2) ELT (J250)
(viii) CCE vs. Dai Ichi Karkaria Ltd. 1999 (112) ELT 353
(ix) Silk Mills vs. UOI 1995 (80) ELT 507 (Del)
(x) CCE vs. Orient Fabrics Pvt. Ltd. (2004) 1 SCC 597
(xi) India Carbon Ltd. vs. State of Assam (1997) 6 SCC 479
(xii) Devi Dass Gopal Krishnan Ltd. 2002 (140) ELT 56 (P&H)
Contentions of Revenue
The Revenue contended that in each of these Appeals supports the order of the Tribunal and submits that the same records a conclusion which is imminently possible given the nature of the additional duties and their basic distinction. Secondly, the Tribunal has not proceeded by ignoring any binding decision but has given effect to the law which has been brought into effect. The Tribunal thought it fit not to send back the cases because they are fairly old. Once the legal position is clear, then, the Tribunal’s order cannot be faulted. The same does not give rise to any substantial question of law.
Held By Hon’ble High Court of Bombay
The Hon’ble High Court stated that a bare perusal of these two Acts would make it clear that the 1957 Act is to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of the part of the net proceeds thereof among the States, in pursuance of the principles of distribution formulated and the recommendations made by the Finance Commission report.
The Hon’ble Court stated when the Cenvat Credit Rules, 2001 came into force on 1st July, 2001, there as well, by Rule 3, Cenvat Credit was allowed to be taken.
A bare perusal thereof does not indicate that any cross utilisation or cross availment is permissible.
The Hon’ble court stated that it has been clarified by the legislature that availment of Cenvat Credit in respect of additional duty of excise under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, Additional Duties of Excise (Goods of Special Importance) Act, 1957 shall be utilised only towards duty of excise leviable under the said Acts. That means the respective Acts. The word “respectively” only denotes the duties of excise leviable under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, Additional Duties of Excise (Goods of Special Importance) Act, 1957 or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 and the additional duty under section 3 of the Customs Tariff Act, 1975. Therefore, it is not as if the word “respectively” having been inserted that the position prevailing prior to the said insertion or introduction was not the same but different and distinct. The word “respectively” being inserted or introduced thus does not make any difference.
The Hon’ble Court further stated that a reading of the Rule by the Tribunal in the case of Reliance Industries Limited (supra) was contrary to its plain language. The Hon’ble court is of the opinion that independent of this order, the Appellant has addressed us extensively on the construction/interpretation of the aforesaid referred Rules. Once the Court is not in agreement with the Appellant, then, any further reference to these Rules or decisions of the Tribunal is unnecessary.
The inputs and the final product dealt with by 1957 Act and the 1978 Act are not one and the same. This aspect is clear if note is taken of the nature of the goods specified in the Schedules to these Acts. As the title indicates one category is of goods of special importance whereas the other is textiles and textile articles. The fact that these goods are separately and distinctly classified in the Schedules to these Acts and equally in the Central Excise Tariff is enough to reject the submissions of the Appellant.
The Hon’ble Court further stated that the Division Bench Judgment of this Court in the case of CEAT Limited (supra) cannot be of any assistance and can be distinguished on facts.
The Hon’ble Court is of the opinion that there is no substance in the argument that between 1st March, 2002 to 9th September, 2004 the credit of AED(T&TA) can be used for payment of any of the specified duty referred to in SubRule (1) of Rule 3. Further, the nonobstante clause appearing in Rule 3(6) is so worded because the entitlement to credit is spelt out in Rule 3(1). Thereafter, Rules 3(2) and 3(3) sets out the mode and manner of availment thereof. It is clarified by Rule 3(3) that 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 even if the inputs are removed as such or after being partially procured or such capital goods are removed in that State. Hence, Rule 3(6) contains the nonobstante clause and read as above. It does not mean recourse to Rule 3(3) is permissible for cross utilisation.
The Hon’ble court stated that the provisions of Central Excise Act, 1944 (1 of 1944) and the Rules made thereunder including those relating to refunds, exemptions from duty, offences and penalties, shall, so far as may be apply, in relation to the levy and collection of the additional duties as they apply in relation to the levy and collection of the duties of excise on the goods specified in subsection (1). The decision in the case of Commissioner of Central Excise vs. Orient Fabrics Private Limited reported in (2004) 1 SCC 597 deals with a case of imposition of penalty or confiscation of goods for non payment of AED(GSI). Recourse to these powers was taken on the basis that provisions of Central Excise Act, 1944 and the Rules made thereunder apply to the levy and collection of AED (GSI). Such is not the case in the present appeal. Merely because the language of subsection (3) of section 3 of both Acts has undergone some change does not mean that interest is not leviable and recoverable. In fact, the provisions of Central Excise Act, 1944 and the Rules made thereunder including those relating to refunds, exemption from duty, offences and penalties, shall, so far as may be, apply in relation to levy and collection of the additional duties of excise on the goods specified in section 3(1). Such broad and wide stipulation would definitely include interest. The Hon’ble Court stated that how any assistance can be derived from the Judgment of the Hon’ble Supreme Court, which holds that in the absence of any substantive provision, interest cannot be levied and charged on delayed payment of tax. The language of section 9A of the Customs Tariff Act and particularly section 9A (8) and section 9(7A) of the said Act cannot be of any assistance. The word “interest” specifically having not been included, the argument is that no interest was payable by the Appellant on AED (GSI) paid by the Appellants by utilisation of credit of AED (T&TA). Once the controversy has been understood in proper perspective and of lack of any provision in the statute enabling availing of such credit between January, 2002 to April, 2003 and this utilisation by the Appellant was held to be illegal by concurrent orders, then, interest was leviable.
In this regard, the legal position as emerging from the following observations of the Hon’ble Supreme Court in the case of South Eastern Coalfields Ltd. vs. State of M. P. and Ors. Reported in AIR 2003 SC 4482 is eloquent enough.
In view of the above, the appeal has been dismissed.