2023 (8) TMI 991 - AT - Central Excise

Recovery of sugar cess wrongly collected from the customers - import of raw sugar - recovery of interest u/s 11DD of CEA - Sugar Cess Credit availed utilize by the Appellant towards clearance of final goods - double taxation. Whether the appellant is entitled for cenvat credit on sugar cess paid as part of CVD in respect of import of raw sugar? HELD THAT - This very issue has been considered by the Hon ble Karnataka High Court in the appellant s own case 2014 (1) TMI 1469 - KARNATAKA HIGH COURT , where it was held that At the time of importing raw sugar the assessee has paid the additional Customs duty or CVD (countervailing duty) as prescribed under Section 3 of the Customs Tariff Act of 1975 If the Article imported is a like article produced or manufactured in India and if excise duty on such like article is leviable, the assessee is liable to pay the additional duty. The Excise Duty on sugar is payable under two enactments, ie (1) Section 3 of Central Excise Act of 1944, at the rate prescribed in the Central Excise Tariff Act, 1985 In addition, the assessee is also liable to pay cess as a duty of excise under the Sugar Cess Act of 1982 On such additional duty or CVD paid at the time of import by the assessee, apart from the Basic Customs Duty, he is entitled to the Cenvat credit in terms of clause (vii) of Rule 3 of Cenval Credit Rules, 2004. In view of the above Karnataka High Court judgment which is in favor of the appellant in their own matter, the issue is no longer res-Integra. Accordingly the appellant is legally entitled for the cenvat credit on the sugar cess paid on import of raw sugar. In view of the forgoing and also the fact that Section 11D can be invoked only if duty is collected, but not paid, whereas in the instant case, same was paid from accumulated CENVAT Credit, it is found that the case of department has no legs to stand. Further, when levy i.e. Sugar Cess in this case has not been done away with, but has only been exempted vide Notification No. S.O. 102 (E), dated, 07.01.2009 by Ministry of Consumer Affairs, party always has the right to avail or not to avail exemption, as per the trite law relied upon by appellants. And all consequences regarding payment of duty as well as availing permissible credit will follow in such situation. Department cannot force availment of exemption as distinguished from withdrawal of levy in which case requirement of payment of tax becomes non-est. The impugned order set aside - appeal allowed.

Summary

Issues Involved:

1. Entitlement to Cenvat Credit on Sugar Cess.
2. Alleged contravention of Notification No. S.O. 102(E), dated 07.01.2009.
3. Recovery of wrongly collected Sugar Cess.
4. Levy of Interest under Section 11DD of Central Excise Act, 1944.
5. Invocation of Extended Period of Limitation.

Summary:

1. Entitlement to Cenvat Credit on Sugar Cess:
The primary issue was whether the appellant was entitled to Cenvat credit on sugar cess paid as part of CVD on imported raw sugar. The tribunal referred to the Karnataka High Court judgment in the appellant's own case, which held that "Sugar Cess being a duty of excise in terms of Section 3(4) of the Sugar Cess Act, Cenvat Credit Rules are also applicable to Sugar Cess and therefore Cenvat credit taken on Sugar Cess paid as countervailing duty or CVD is proper and the assessee is entitled to the said benefit of Cenvat credit." Thus, the appellant was legally entitled to the Cenvat credit on the sugar cess paid on import of raw sugar.

2. Alleged Contravention of Notification No. S.O. 102(E), dated 07.01.2009:
The department argued that the appellant contravened the provisions of Notification No. S.O. 102(E) by availing and utilizing Cenvat credit of sugar cess, which led to cascading of sugar cess. The appellant contended that the transaction was revenue neutral and no revenue loss occurred to the government. The tribunal found that the appellant's actions were in compliance with the law as the credit was taken and utilized correctly.

3. Recovery of Wrongly Collected Sugar Cess:
The department sought recovery of Rs. 74,39,954/- under section 11D of the Central Excise Act, 1944, alleging that the appellant wrongly collected sugar cess from customers. The tribunal, however, noted that the appellant had paid the sugar cess through accumulated Cenvat credit, and there was no loss of revenue to the government. Therefore, the recovery demand was not justified.

4. Levy of Interest under Section 11DD of Central Excise Act, 1944:
The department also sought interest on the alleged wrongly collected sugar cess. The tribunal held that since the sugar cess was not recoverable, the payment of interest was also not tenable. The tribunal referenced the Supreme Court judgment in the matter of Jayaswal Neco Limited, which supported the appellant's position.

5. Invocation of Extended Period of Limitation:
The department invoked the extended period of limitation, claiming suppression of facts by the appellant. The tribunal found that the appellant had disclosed all relevant details in their periodical returns and there was no suppression of facts or willful misstatement. Therefore, the invocation of the extended period was unwarranted and the demand was barred by limitation.

Conclusion:
The tribunal allowed the appeal by setting aside the impugned order, affirming that the appellant was entitled to Cenvat credit on the sugar cess paid on import of raw sugar. The tribunal also dismissed the department's claims for recovery and interest, and ruled that the extended period of limitation was not applicable. The appeal was pronounced in open court on 21.08.2023.