2023 (1) TMI 148 - HC - Central Excise

CENVAT credit of additional excise duty in lieu of Sales tax AED(GSI) (Additional Excise Duty (Goods of Special Importance) paid on Nylon Tyre Chord Fabric used in the manufacture of tyres - HELD THAT - Undisputed facts of the case are, pursuant to the first amendment of Rule 3(6) of CENVAT Credit Rules brought with effect from 01.03.2003, assessee utilized the credit for payment of duty on tyres by way of cross utilization of AED(GSI). With the subsequent amendment, the assessee re-credited the sum of Rs.9,51,11,316/-. In identical circumstances, in the case of THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III VERSUS M/S CEAT LTD. 2013 (7) TMI 568 - BOMBAY HIGH COURT , the Bombay High Court has upheld the order passed by the Commissioner of Central Excise dropping the show cause notice. The CESTAT has extracted the relevant passage from the judgment of Bombay High Court in CEAT Ltd. and allowed the appeal. We are in respectful agreement with the view taken by the Bombay High Court. There are no legal infirmity in the order passed by the CESTAT as it is in consonance with the judgment of Bombay High Court in CEAT Ltd. - appeal dismissed.

Summary

Issues:
1. Interpretation of CENVAT Credit Rules regarding the utilization of Additional Excise Duty (Goods of Special Importance) credit.
2. Application of retrospective amendment under Section 88(3) of Finance Act (No.2), 2004.
3. Validity of the CESTAT's decision in allowing the appeal against the Commissioner's order.

Interpretation of CENVAT Credit Rules:
The case involved a dispute regarding the utilization of Additional Excise Duty (Goods of Special Importance) credit by a tyre manufacturer. The respondent had taken credit of this duty for the period from 27.03.1995 to 31.03.2000, but subsequent amendments restricted its utilization. The CENVAT credit scheme initially allowed the credit to be used only for the duty on finished products where the inputs were used. However, an amendment in Rule 3(6) of CENVAT Credit Rules in 2003 permitted the credit to be utilized for any excise duty on finished products. The respondent then utilized the accumulated credit for excise duty on tyres from October 2002 to July 2004 through cross-utilization.

Retrospective Amendment under Finance Act (No.2), 2004:
A further amendment under Section 88(3) of Finance Act (No.2), 2004 allowed the utilization of AED(GSI) credit for other excise duties only if the duty was paid on or after 01.04.2000. This retrospective amendment led to a recovery order against the respondent for an amount previously credited. The respondent complied with the recovery order by crediting the sum in June 2008. However, a show cause notice was issued in 2009 for the recovery of CENVAT credit taken before 01.04.2000, which led to a penalty being imposed by the Commissioner. The respondent appealed to the CESTAT, which allowed the appeal against the recovery order.

Validity of CESTAT's Decision:
The Revenue challenged the CESTAT's decision, arguing that it lacked reasoning and required reconsideration. The respondent contended that the credit had been re-credited and utilized, making them entitled to the CENVAT Credit. The respondent also highlighted a judgment from the Bombay High Court in a similar case supporting their position. The High Court, after considering the facts and legal provisions, upheld the CESTAT's decision, citing the judgment from the Bombay High Court as a persuasive authority. Consequently, the High Court dismissed the appeal, answering the questions of law in favor of the assessee and against the Revenue.

This detailed analysis of the judgment provides insights into the interpretation of CENVAT Credit Rules, the impact of retrospective amendments, and the validity of the CESTAT's decision in light of legal precedents.