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2015 (2) TMI 650 - AT - Central ExciseLevy of interest on wrong utilisation of Additional Excise duty(AED)- Held that -The Appellant immediately after amendment to Rule 3 (6) of Cenvat Credit Rules, 2002 had utilised the AED (GSI) credit of ₹ 8,71,12,812/- pertaining to the period prior to 01/04/2000 for payment of Basic Excise Duty and Special Excise Duty on tyres. However, Section 88 of the Finance Act, 2004 retrospectively amended Rule 3 (6) of the Cenvat Credit Rules, 2002 to provide that the AED (GSI) credit accrued prior to 01/04/2000 could not be used for payment of Basic Excise Duty and Special Excise Duty and sub-Section (4) of this section provided for recovery of the pre 01/4/2000 AED (GSI) credit wrongly utilised for payment of BED and SED. Thus in terms of Section 88 (4) of the Finance Act, 2004 in the cases of utilisation of AED (GSI) credit pertaining to the period prior to 01/04/2000 for payment of Basic Excise Duty and Special Excise Duty, its recovery could be made in terms Rule 12 of Cenvat Credit Rules, 2002 readwith Section 11A and interest on the same would be leviable under Section 11AB and for this purpose, the relevant date would be 10/09/04. This relevant date is obviously for the purpose of counting limitation period for the issue of show cause notice for recovery under Section 11A (1) not for counting the period for levy of interest. The interest under Rule 12 of Cenvat Credit Rules, 2002 would be leviable under Section 11AB and would start from 1st day of the month succeeding the month in which the credit was wrongly utilised for payment of BED and SED. The provisions of Section 88 of Finance Act, 2004 were amended by adding sub-Section (5) and sub-Section (6) by Section 124 of the Finance Act, 2005. Sub-Section (5) of the Finance Act, 2005 starts with the words notwithstanding anything contained in sub-Section (4) of Section 88 and prescribes a procedure for payment of the wrongly utilised AED (GSI) credit pertaining to period prior to 01/04/2000 in 36 instalments starting from July, 2005. Clause (V) of sub-Section (5) provides that the amount of interest on the amount of credit utilised for paying Cenvat duty shall be @ 13% per annum for the period beginning on and from the day when each time the amount of credit was so utilised and ending on the 10th day of September, 2004. Though, sub-Section (5) added to Section 88 of the Finance Act, 2004 by Section 124 of the Finance Act, 2005 is a non-obstinate provision and would override the provisions of sub-Section (4) of Section 88 of the Finance Act, 2004, this would be applicable only in those cases, where the wrongly utilised AED (GSI) credit had not been paid as on the date of the enactment of Finance Act, 2005, as it is not a retrospective provision and does not replace the sub-Section (4) of Section 88 with retrospective effect. In this case, the appellant had paid the entire amount of wrongly utilised AED (GSI) in December 2004 and, therefore, in our view, the provisions of Section 124 of the Finance Act, 2005 would not be applicable and as such their interest liability would be governed by sub-Section (4) of Section 88 of the Finance Act, 2004. Since, in this case the wrong utilisation of the AED (GSI) credit pertaining to period prior to 01/04/2000 has taken place in 2003 immediately after amendment to Rule 3 (6) of the Cenvat Credit Rules, 2002, the interest liability under Section 11AB would start from 1st day of the month succeeding the month in which the wrong utilisation had taken place till the payment of wrongly utilised credit. - Decided against the assessee.
Issues Involved:
1. Utilization of AED (GSI) credit for payment of Basic Excise Duty (BED) and Special Excise Duty (SED). 2. Retrospective amendment of Rule 3(6) of the Cenvat Credit Rules, 2002 by Section 88 of the Finance Act, 2004. 3. Interest liability on the wrong utilization of AED (GSI) credit. 4. Applicability of Section 124 of the Finance Act, 2005 to the interest liability. Detailed Analysis: 1. Utilization of AED (GSI) Credit: The appellant, a tyre manufacturer, utilized AED (GSI) credit amounting to Rs. 8,71,12,812/- accrued before 01/04/2000 for payment of BED and SED on tyres. This utilization was initially permissible under the amended Rule 3(6) of the Cenvat Credit Rules, 2002, effective from 01/03/03. However, Section 88 of the Finance Act, 2004, retrospectively amended Rule 3(6) to disallow the use of AED (GSI) credit accrued before 01/04/2000 for such payments. 2. Retrospective Amendment by Section 88 of the Finance Act, 2004: Section 88 of the Finance Act, 2004, retrospectively amended Rule 3(6) of the Cenvat Credit Rules, 2002, specifying that AED (GSI) credit accrued before 01/04/2000 could not be used for payment of BED and SED. Sub-Section (4) of Section 88 provided for the recovery of such credit along with interest under Section 11AB of the Central Excise Act, 1944. 3. Interest Liability on Wrong Utilization: The appellant reversed the wrongly utilized AED (GSI) credit in December 2004. The dispute centered around whether interest should be charged under Section 11AB or in terms of Clause (V) of Section 88(4) of the Finance Act, 2004, as introduced by Section 124 of the Finance Act, 2005. The appellant argued that interest should be charged only from 10/09/04, the date the Finance Act, 2004, received presidential assent, and at a rate of 13% per annum as specified in Clause (V). 4. Applicability of Section 124 of the Finance Act, 2005: Section 124 of the Finance Act, 2005, added sub-Sections (5) and (6) to Section 88, providing a new mode of recovery of the AED (GSI) credit in 36 installments starting from July 2005, with interest at 13% per annum. The appellant contended that since they had reversed the credit before the enactment of the Finance Act, 2005, these provisions should apply. However, the Tribunal held that these provisions were not retrospective and did not apply to cases where the credit was reversed before the enactment. Thus, interest liability was governed by sub-Section (4) of Section 88 of the Finance Act, 2004, and interest under Section 11AB was applicable from the first day of the month succeeding the month of wrong utilization until the credit was reversed. Conclusion: The Tribunal upheld the Commissioner's order, confirming the recovery of Rs. 8,71,12,812/- along with interest under Section 11AB of the Central Excise Act, 1944. The appeal was dismissed, and the provisions of Section 124 of the Finance Act, 2005, were deemed inapplicable to the appellant's case, as they had reversed the credit before the enactment of the Finance Act, 2005.
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