2015 (12) TMI 1211 - HC - Central Excise

100% EOU - payment of duty at the time of debonding - Revenue directs Assessee to pay duty in cash whereas assessee wants to pay through CENVAT Credit - Held that - In case of similarly situated persons, namely, M/s Alps Chemicals Pvt. Ltd. and others, as stated in paragraph-9 of the memorandum of petition, the respondent authorities have permitted them to discharge the excise duty foregone from the Cenvat credit account instead of the cash payment. The petitioners have produced on record a copy of a communication dated 21.11.2014 of the Assistant Commissioner, Central Excise, Division-II, Ahmedabad addressed to the Deputy Development Commissioner in connection with the request for No Due Certificate for debonding of Exit out of 100% EOU Scheme by one M/s Alps Chemicals Pvt. Ltd., which clearly shows that the said unit has been permitted to discharge excise duty for indigenously procured duty paid raw materials lying in stock in their factory from the Cenvat credit account. In paragraphs 9 and 14 of the memorandum of petition, the petitioners have clearly stated the names of various parties in whose cases the Ahmedabad Commissionerate has permitted payment of excise duty from the Cenvat credit account. - Besides, the petitioner company is a reputed well established Pharmaceutical Company and hence, the interest of the revenue is in no manner jeopardized if the interim relief, as prayed for, is granted, whereas the petitioner company would have to face a cash crunch if called upon to pay the excise duty foregone in cash, whereas its Cenvat credit account would remain unutilized. Besides, as pointed out by the learned counsel for the petitioners, ultimately the excise duty foregone which is to be paid in cash, is going to be added back to the amount of Cenvat credit lying in the account of the petitioners, under the circumstances, the petitioners have clearly made out a prima facie case in their favour. When different companies situated in different regions of the country, are granted a particular benefit, the petitioner therein which was situated in Gujarat, was also entitled to the similar treatment. As noted hereinabove, various assessees, including the assessees situated within the jurisdiction of Ahmedabad Commissionerate have been given benefit of paying the excise duty foregone from the Cenvat credit account. Under the circumstances, prima facie, there appears to be no reason to deny such benefit to the petitioners. - petitioners are permitted to pay the excise duty foregone from the legally availed Cenvat credit account. Upon the excise duty being paid through the Cenvat credit account, the second respondent shall issue No Due Certificate to the petitioners for debonding out of 100% EOU Scheme. - Decided in favour of assessee.

Summary

Issues:
1. Dispute over payment of excise duty from CENVAT credit or in cash.
2. Applicability of Central Excise law to Export Oriented Undertakings (EOUs).
3. Prima facie case for interim relief.
4. Balance of convenience and irreparable injury.
5. Jurisdictional disparity in treatment of similar cases.
6. Alternative remedy under section 35 of the Central Excise Act, 1944.

Issue 1: Dispute over payment of excise duty from CENVAT credit or in cash:
The petitioners contested orders directing them to pay excise duty in cash instead of utilizing legally availed CENVAT credit. The petitioners argued that as manufacturers, they should be allowed to use CENVAT credit for discharging excise duty liabilities on goods proposed for de-bonding. The respondents cited rule 3(4) of the CENVAT Credit Rules, 2004 to support their position. The petitioners presented cases of other EOUs permitted to pay from CENVAT credit, alleging discrimination in the current directive.

Issue 2: Applicability of Central Excise law to Export Oriented Undertakings (EOUs):
The petitioners contended that EOUs are entitled to benefits under Central Excise law similar to other manufacturers. They emphasized the ability of EOUs to avail CENVAT credit on duties paid on goods and services, asserting their right to use such credit for excise duty payment during de-bonding. The petitioners highlighted instances where EOUs in different regions were allowed to discharge excise duty from CENVAT credit.

Issue 3: Prima facie case for interim relief:
The petitioners argued for interim relief, citing a substantial amount in their CENVAT credit account and potential financial strain if forced to pay excise duty in cash. They referenced the benefit granted to similarly situated entities and sought intervention to prevent prejudice. The court acknowledged the prima facie case made by the petitioners based on parity with other cases and the potential financial impact on the petitioner company.

Issue 4: Balance of convenience and irreparable injury:
The petitioners highlighted the financial burden of paying excise duty in cash, affecting their working capital and liquidity. They argued that denying the use of CENVAT credit would lead to financial difficulties. The court noted the potential liquidity crunch for the petitioners if forced to pay in cash, supporting the grant of interim relief to avoid irreparable harm.

Issue 5: Jurisdictional disparity in treatment of similar cases:
The court observed instances where other EOUs were permitted to pay excise duty from CENVAT credit, creating a disparity in treatment. The court recognized the petitioners' argument regarding the benefit extended to EOUs in different regions and emphasized the need for consistent treatment across jurisdictions.

Issue 6: Alternative remedy under section 35 of the Central Excise Act, 1944:
The respondents raised a preliminary objection on the maintainability of the petition, suggesting an appeal under section 35 of the Central Excise Act, 1944 as an alternative remedy. They argued against the petitioners' entitlement to interim relief, asserting the absence of merit in their contentions. The court acknowledged the alternative remedy but considered the petitioners' case for interim relief based on the circumstances presented.

In conclusion, the court issued a rule returnable for further consideration, granting interim relief to the petitioners to pay excise duty foregone from the legally availed CENVAT credit account pending the final outcome of the petition. This decision aimed to address the disparity in treatment, uphold the petitioners' prima facie case, and prevent potential financial harm to the petitioners.