2014 (2) TMI 358 - HC - Central Excise

Use of common inputs plastic crates and Furnace Oil in the manufacture of dutiable aerated waters and exempted fruit pulp based drink Slice - it was not possible for the appellant to ascertain the quantum of input relatable to clearance of exempted Slice appellant reversed the entire credit availed Whether the first respondent is right in recalling its order in the guise of exercising power under Section 35C(2) of the Central Excise Act, which provides for error apparent on the face of the record - Held that - mistake apparent on record must be an obvious and patent mistake and the mistake should not be such which can be established by a long drawn process of reasoning. In the case of T.S. Balram v. M/s. Volkart Brothers (supra), this Court has already decided that power to rectify a mistake should be exercised when the mistake is a patent one and should be quite obvious - mistake cannot be such which can be ascertained by a long drawn process of reasoning - while rectifying a mistake, an erroneous view of law or a debatable point cannot be decided - when the error pointed out is evidently of a disputed nature, the order of rectification being on an arguable issue, we have no hesitation in allowing the appeal filed by the Revenue to that extent - Decided partly in favour of Revenue.

Summary

Issues:
- Appeal against order of Customs, Excise and Service Tax Appellate Tribunal
- Application of Rule 6 of Cenvat Credit Rules, 2004
- Rectification of mistakes in the order by the assessee
- Tribunal's reconsideration of the claim and subsequent judgment
- Dispute on reversal of Cenvat credit and applicability of Rule 6
- Legality of Tribunal's rectification order based on arguable issues

Analysis:
1. The High Court of Madras heard an appeal challenging the order of the Customs, Excise and Service Tax Appellate Tribunal regarding the application of Rule 6 of the Cenvat Credit Rules, 2004. The case involved an assessee engaged in manufacturing aerated waters and fruit-based soft drinks, availing Cenvat credit on inputs like furnace oil. The Tribunal had initially upheld a demand on the assessee based on Rule 6(3)(b) for not maintaining separate accounts for dutiable and exempted products.

2. The assessee sought rectification of the Tribunal's order, pointing out errors in the application of Rule 6. The Tribunal accepted the rectification application, considering the issue of reversal of Cenvat credit and its impact on Rule 6. Relying on legal precedents, the Tribunal recalled its earlier order and passed a final judgment in favor of the assessee, stating that the reversal of the entire credit on furnace oil nullified the demand under Rule 6(3)(b).

3. The Revenue appealed the Tribunal's decision, arguing that the rectification amounted to a review of the order, which lacked a legal basis. The Revenue contended that the reversal of credit did not exempt the assessee from Rule 6(3)(b) liability. Additionally, the Revenue highlighted pending legal disputes on the interpretation of credit reversal and its implications on duty payment.

4. The High Court analyzed the scope of rectification under Section 35C(2) and cited Supreme Court decisions emphasizing that rectification should address obvious and patent mistakes, not debatable issues. The Court agreed with the Revenue that the rectification order was based on an arguable issue, thereby allowing the appeal in part and setting aside the Tribunal's decision on the rectification of mistakes.

5. Ultimately, the High Court's judgment focused on the legal principles governing the rectification of errors in judicial orders, emphasizing the need for clarity and non-debatable nature of mistakes for effective rectification. The Court's decision highlighted the importance of adhering to established legal standards in addressing errors in tribunal judgments.