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2015 (3) TMI 659 - HC - Central ExciseCross Utilization of CENVAT Credit - utilisation of AED (T&TA) - Demand of interest and penalty - contravention of the provisions of Rule 3(6)(b) read with Notification No. 24/99CE( NT) dated 1st March, 2000 - wrong utilization of Additional Duty of Excise (T&TA) for the payment of Basic Excise Duty and AED (GOSI) - Malafide intention of evasion of duty - Held that - any cross utilisation or cross availment is not permissible. Appellant would rely upon the words the Cenvat Credit may be utilised for payment of any duty of excise on any final products separated by further word or for payment of duty on inputs or capital goods themselves if the further condition stipulated thereunder is satisfied . The words any duty of excise on any final products cannot be read in such a manner as to enable cross utilisation. This subrule does not support the argument of Appellant that in payment of additional duties under the 1957 Act, the credit thereof can be obtained so as to enable payment of duty of excise specified under the 1978 Act. Appellant s argument, as already held above, fails to take note of the fact that one is the additional duty on goods of special importance, whereas later on is only additional duty on textiles and textile articles. Independent of this order, the Appellant has addressed us extensively on the construction/interpretation of the Rule 57AB. Once we are not in agreement with the Appellant, then, any further reference to these Rules or decisions of the Tribunal is unnecessary. We also need not enter into the controversy as to whether the Tribunal erred in not following or applying its decision in the case of Reliance Industries Limited and Ors. 2002 (7) TMI 168 - CEGAT, MUMBAI while deciding the Appeals by the impugned order. Once our independent satisfaction enables us to reach the conclusion as above, then, we are not required to go into this question any further. 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. 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. In fact subsection (3) of section 3 of Additional Duties of Excise (Goods of Special Importance) Act, 1957 was substituted by section 63(a) of the Finance Act, 1994. That clearly states 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). 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. There is no justification for imposition of the penalties. Merely because the orders have been challenged and right up to this Court does not mean penalties were imposable. The Penalties on the Appellant in each of these Appeals are therefore set aside. - Decided partly in favour of assessee.
Issues Involved:
1. Utilization of Additional Excise Duty (Textile and Textile Articles) [AED(T&TA)] credit. 2. Time period for utilization of AED(T&TA) credit. 3. Remanding of proceedings for duty recasting. 4. Imposition of penalty under Rule 25 of the Rules. Detailed Analysis: Issue 1: Utilization of AED(T&TA) Credit The core question was whether the Appellate Tribunal was correct in holding that the credit of AED(T&TA) paid on inputs was always allowed to be utilized only for the payment of AED(T&TA) and for no other purpose. The Tribunal concluded that AED(T&TA) could not be cross-utilized for paying Basic Excise Duty (BED) or Additional Excise Duty (Goods of Special Importance) [AED(GSI)]. The Tribunal's interpretation was based on the plain language of Rule 57AB(2)(b) and Rule 3(6)(b) of the Cenvat Credit Rules, which restricted the utilization of AED(T&TA) credit exclusively for AED(T&TA) payments. The court upheld this interpretation, emphasizing that the legislative intent was to maintain separate accounts for different types of excise duties, thus preventing cross-utilization. Issue 2: Time Period for Utilization of AED(T&TA) Credit The Tribunal held that AED(T&TA) credit was allowed to be utilized only during October 2000 to June 2001 and not beyond. The court noted that the credit balance as of April 1, 2000, and further credits taken up to June 30, 2001, were not utilized until January 2003. The court found that the Tribunal correctly interpreted the relevant rules and notifications, concluding that the utilization of AED(T&TA) credit beyond the specified period was impermissible. The court emphasized that the introduction of the word "respectively" in Rule 3(6)(b) from July 1, 2001, reinforced the restriction on cross-utilization. Issue 3: Remanding of Proceedings for Duty Recasting The Tribunal decided against remanding the proceedings for recasting the duty in cash as AED(GSI), concluding that no useful purpose would be served. The court upheld this decision, agreeing with the Tribunal's reasoning that the utilization of AED(T&TA) for AED(GSI) or BED was not permissible. The court emphasized that the legislative framework and the specific rules governing the utilization of excise duty credits did not support the appellant's contention for recasting. Issue 4: Imposition of Penalty under Rule 25 of the Rules The Tribunal imposed a penalty on the appellant under Rule 25 of the Central Excise Rules, 2001. However, the court found no justification for the imposition of penalties, noting that the challenge to the orders was pursued in good faith. The court observed that the Tribunal had already set aside the penalty imposed on the Deputy General Manager (Administration) of the appellant company, indicating no intentional or deliberate act on the part of the company or its officers. Consequently, the court deleted the penalties imposed on the appellant, answering this issue in favor of the assessee. Conclusion: The court dismissed the appeals, upholding the Tribunal's interpretation of the rules concerning the utilization of AED(T&TA) credit and the specified time period for such utilization. The court also agreed with the Tribunal's decision not to remand the proceedings for duty recasting. However, the court set aside the penalties imposed on the appellant, finding no intentional wrongdoing. The questions of law were answered in favor of the Revenue, except for the issue of penalties, which was decided in favor of the assessee.
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