HIGH COURT OF KARNATAKA
Commissioner of Central Excise, Bangalore – III
Himalaya Drug Co. Ltd.
CEA NO. 57 OF 2009
APRIL 1, 2011
1. This appeal is by the revenue challenging the order passed by the Tribunal holding that the assessee could not be denied the cenvat credit, when admittedly he has paid the excise duty.
2. The assessee has a factory at New Delhi where they manufacture semi-finished ayurvedic medicines. His understanding was the said products are not excisable. Therefore, the assessee cleared those goods to their sister unit at Bangalore without payment of duty. The Excise Department was of the view that it is excisable to tax and when it was demanded by the Excise officials, the assessee has deposited the said amount. After depositing the said amount, the assessee took cenvat credit at the Bangalore factory. However, they challenged the decision of the Commissioner of Central Excise, New Delhi, In appeal, the assessee’s contention was accepted and it was held that the case does not warrant imposing of penalty and set aside the penalty imposed and the said proceedings have reached finality. The excise authorities at Bangalore proceeded against the assessee on the ground that the credit taken by them is irregular. When the said decision was challenged by the assessee before the Commissioner of Appeals, the assessee was asked to pre-deposit the amount. After hearing the appeal, the appeal came to be dismissed. The reason assigned was that the assessee had not taken credit on the basis of the invoices issued at the time of clearance of the goods. It is at a later point of time, he has made certain deposits and therefore, he could not avail the Cenvat credit. Aggrieved by the said order, the assessee preferred an appeal to be Tribunal. The Tribunal on consideration of the aforesaid facts, held that this is an exceptional case and the assessee is entitled for the credit of duty deposited.
3. This appeal was admitted to consider the following substantial question of law:
“1. Whether the Tribunal is correct in law in allowing the credit of the duty taken on the basis of supplementary invoices which are raised consequent to the offence case registered and not in case additional amount of excise duties has been paid as required under Rule 57AE(i) of the Central Excise Rules, 1944?
2. Whether the Tribunal is correct in allowing the credit of duty on goods which were not received along with the prescribed documents under Rule 57AE of the Central Excise Rules, 1944?
3. Whether the credit of duty is admissible under Rule 57AC of the Central Excise Rules, 1944, on the goods which are held to be non-excisable by the same bench of CESTAT in their Order No. 915-916/2005 dated 03.06.2005 [(reported in 2005 (1.87) ELT 427 (Tri. – Bang)], relating to same assessee on the issue of excistability of goods manufactured at Delhi?
4. Whether the CESTAT’s order is in accordance with the then Rule 57AE of the Central Excise Rules, 1944, in allowing the credit of duty on such non-excisable goods, merely on the ground that the assessee have stated that they would withdraw their appeal relating to refund of duty paid on such non-excisable goods, pending before Commissioner (Appeals), Delhi?
5. Whether the CESTAT’s order is as per the provisions of section 11AB of the Act, in allowing the amount as refund of duty paid at Delhi to be refunded in Bangalore?”
4. Though the excise duty was not paid at the time of clearance strictly in accordance with rules governing the same, the assessee cannot be found fault with because according to the assessee the said goods were not excisable to tax. Now the said stand has been vindicated by the order of the Appellate Authority, which has become final. Because of the insistence of the Department in order to gain peace, he has deposited the said amount. Once he deposits the amount, in principle, he is entitled to avail the benefit of Cenvat credit, which he has done at Bangalore factory. The manufacturer has to Day tax at the point of clearance and then collect it from his customers. Once, he pays the tax, he is entitled to avail the credit and subsequently utilize the same. At any rate, for the fault of the department, the assessee cannot be made to suffer. In that view of the matter, the substantial question of law framed in this appeal are answered in favour of the assessee and against the revenue. No merit in this appeal and accordingly, it is dismissed.