Advocate Anandaday Misshra
The Notification No. 12/2015-C.E(N.T) dated 30.04.2015 has created a havoc in the industry as to what to do with the unutilized Cess lying as on 28.02.2015 i.e before 01.03.2015.
Before attempting on this issue , I must share that the sole intention behind issuance of this notification had been only for allowing utilization of credit of unutilized cess , lying as on 28.02.2015 ,towards payment of excise duty . Otherwise , this notification has no implication if any other meaning is drawn and understood.
However, it is pertinent to refer to all the provisos which have been introduced after second proviso in clause (b) of sub-rule (7) of Rule 3 of Cenvat Credit Rules,2004 as below
3rd Proviso- Utilisation of Education Cess and SHE Cess
“Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on inputs or capital goods received in the factory of manufacture of final product on or after the 1st day of March, 2015 can be utilized for payment of the duty of excise leviable under the First Schedule to the Excise Tariff Act:
1. The expressions which have to be firstly understood are “cess paid , “goods received in the factory “. These expressions connote for a thing which had already been done .Therefore, the expressions like duty payable & goods to be received in the factory have not been used in this notification.
The expression “duty paid” and “not payable” can be well understood with respect to its significance in Cenvat Credit Rules,2004 from a quick reference to the ratio as laid down in Natco Pharma Ltd. v. Customs & C. Ex., Hyderabad-III reported in 2011 (274) E.L.T. 438 (T) wherein the Tribunal held that “Cenvat credit is not deniable alleging inputs being non excisable when duty has been paid on inputs. The Cenvat Credit Rule 3 is available for the duty “paid” and not duty payable.”
2. It is well known to all that from 01.03.2015, no cess is leviable on inputs and capital goods as it was subsumed in the excise duty .The excise duty structure was enhanced from aggregate of duty and cess @ 12.36% to a consolidated and subsumed duty of 12.50%.
Hence, inputs and capital goods would have suffered the incidence of cess prior to 01.03.2015 only .Such goods would have reached the factory of the manufacturer on or after 01.03.2015 .
Obviously , the goods under reference are those goods i.e inputs and capital goods which have already suffered cess prior to 01.03.2015 and they are referred here only .Hence, a different meaning cannot be drawn while interpreting this notification .
3. It is equally important that the text and context has to be understood to read the actual intention of the legislation.The ratio as laid down by Honourable Apex court in the case of Reserve Bank of India v. Peerless Co. reported in (1987) 1 SCC 424 needs to be quickly referred as below
“33. Interpretation must depend on the text and the context. They are the basis of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to any as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation, Statutes have to be construed so that every word has a place and everything is in its place.”
4. Going by the ratio as laid down under the aforesaid para, the 4rth Proviso clarifies the text and context as well .
5. Further, though it is the Courts which can apply the constructive interpretation however going by the doctrine of constructive interpretation read with practicality , the expression “on 01.03.2015” has to be read as “as on 01.03.2015 “ since any meaning other than the intended by the legislation will make this notification redundant .Even otherwise, the month of February ended on 28.02.2015 and balance left was be carried to 01.03.2015 and hence the expression “on or after 01.03.2015” has been used in the said notification .
4rth Proviso- Cess paid on capital goods
Provided also that the credit of balance fifty per cent. Education Cess and Secondary and Higher Education Cess paid on capital goods received in the factory of manufacture of final product in the financial year 2014-15 can be utilized for payment of the duty of excise specified in the First Schedule to the Excise Tariff Act:
1. Again the expression used here are similar to what is existing under 3rd proviso i.e “cess paid “ & “goods received in the factory”. Above all , they are used to refer to year 2014-2015 i.e 01.04.2014 to 31.03.2015 which includes situation as on 28.02.2015 as well.
I must quickly share a well laid ratio in Central Bank of India v. Ravindra & Ors. reported in JT 2001 (9) SC 101 that “Ordinarily, a word or expression used at several places in one enactment should be assigned the same meaning so as to avoid “a head-on clash” between two meanings assigned to the same word or expression occurring at two places in the same enactment.”
2. It must be noted that the 3rd proviso has allowed the utilization of the cess paid on goods i.e inputs and capital goods , which are received in the factory, towards payment of excise duty and 4rth proviso simply talks about the balance 50% of cess meant for capital goods and this itself clarifies the issue.
3. The 4rth Proviso is equally important to understand the intention which is clear by the ratio laid down by Honourable High Court of Andhra Pradesh in the matter of HYDERABAD ASBESTOS CEMENT PRODUCTS LTD. AND ANOTHER Versus UNION OF INDIA AND OTHERS -1987 (32) E.L.T. 28 (A.P.) to the effect that
“10.It would be relevant to refer to the proviso to clause (ii) of the proviso to the main sub-rule 56A(2). It provides that even in cases where specified goods are manufactured out of the material or component parts which may not be dutiable under the same Tariff Item, even then if the Central Government has specifically sanctioned remission or adjustment of duty paid on them the manufacturer of such specified goods can claim benefit of the procedure of proforma credit as per Rule 56A(2). If the main proviso to sub-rule (2) of Rule 56A is read conjointly with clauses (i) and (ii) and the proviso to clause (ii), the intention of the rule-making authority is clear that all exciable specified goods are liable to get the benefit of proforma credit procedure provided the raw materials and component parts used in the manufacture of finished products have borne the exise duty under the same Tariff Item under which finished excisable goods are dutiable or alternatively if such raw materials and component parts are conferred with the benefit of remission or adjustment of duty paid on them under sanction by the Central Government. In both types of cases the main provision contained in Rule 56A(1) and (2) will operate without any limitations. If, however, any of the two situations above referred does Not exist, then the duty paid on the raw materials and component parts will not get the benefit of proforma credit procedure. It is not, therefore, possible to accept the contention of Sri Srinivasa Murthy that the proviso to sub-rule (2) of Rule 56A cannot be held to be an exception to the main provision.”
Hence, the intention can be drawn and understood from 4rth proviso and all provisos have to be read together to understand the implication and intention of legislation in its true perspective.
4. It must be understood that the allowing proviso for utilization of cess on inputs and capital goods is 3rd proviso whereas, 4rth proviso talks about the left over 50% cess of F.Y 2014-2015 only.
5. In other way, it talks about all unutilized credit of cess lying unutilized as on 31.03.2015 which includes a period as on 28.02.2015 as well.
5th Proviso – Cess paid on input services
Provided also that the credit of Education Cess and Secondary and Higher Education Cess paid on input services received by the manufacturer of final product on or after the 1st day of March, 2015 can be utilized for payment of the duty of excise specified in the First Schedule to the Excise Tariff Act.”.
1. It has similar expression like what is existing under 3rd and 4rth proviso for utilization of cess paid on input services ,received by the manufacturer of final product on or after 1st day of March 2015, towards payment of duty .
Hence, the collective reading of all the proviso’s conclude that the notification is meant to allow unutilised cess lying as on 01.03.2015 including a period upto 28.02.2015 as well.
I hope the issue is clear as day light. However, it being a matter of an interpretation , it may interpreted differently amongst different school of thoughts .
(Advocate Anand Mishra, AMLEGALS– The author is a leading indirect tax advocate handling cases in CESTAT & High Courts of India. He can be contacted on firstname.lastname@example.org and for more please refer www.amlegals.com)