2024 (10) TMI 1542 - HC - Central Excise

Interpretation of Rule 6 of the Cenvat Credit Rules 2004 thereby equating the automobile cess under a different enactment to be part of excise duty - HELD THAT - Rule 6 of the CENVAT Credit Rules 2004 inter alia provides that CENVAT Credit shall not be allowed on such quantity of input as is used in or in relation to the manufacture of the exempted goods or for provisions of exempted services. In M/s Mahindra and Mahindra Ltd 2019 (12) TMI 230 - BOMBAY HIGH COURT , the controversy was whether auto cess and education cess could be regarded as duties of excise and based upon the same, the manufactured goods or the services provided could be regarded as exempted goods or exempted services - In M/s Mahindra and Mahindra Ltd, the Coordinate Bench held that having regard to the nature of the various duties or cesses, which are in addition to the duty of excise leviable under the Act or additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act 1957 which are nothing but levies of excise - The Court held that once it is seen that these cesses and duties are also excise duties and, on that basis, are included in the CENVAT credit scheme, as indicated by Rule 3 itself, the fact that these are referred to as cesses or duties loses its significance altogether. This was hardly determinative for construing the expression duty of excise . Thus, it was held that where cesses were paid on goods or services, such goods or services could not be regarded as exempted goods or services. Incidentally, Unicorn Industries 2019 (12) TMI 286 - SUPREME COURT was not even relied upon before the Tribunal, possibly realising the controversy in Unicorn Industries was not the same as the controversy involved before the CESTAT in the present case. There, the assessee insisted that there was no requirement to pay any cess or other duties like cess. Here, the Respondent has paid the cesses. Accordingly, we find no error in the impugned order made by the CESTAT, which, as noted earlier, is entirely based on the decision of this Court in M/s Mahindra and Mahindra Ltd. None of the substantial questions of law as urged arise in this appeal - appeal dismissed.

Summary

Issues: Appeal against CESTAT order on excise duty interpretation and CENVAT Credit Rules application.

Analysis:

1. Interpretation of Tribunal's Decision: The appeal challenged the CESTAT's order allowing the assessee's appeal arising from the original adjudication order by the Commissioner of Central Excise. The substantial questions of law raised in the appeal memo questioned the Tribunal's reliance on previous cases and the interpretation of Rule 6 of the CENVAT Credit Rules 2004.

2. Arguments by Appellant: The appellant contended that the decision in M/s Mahindra and Mahindra Ltd was specific to Rule 6, while the present matter concerned Rule 7. It was argued that the decision in M/s Mahindra and Mahindra Ltd was overruled by the Unicorn Industries case, which was not considered by the Tribunal.

3. Arguments by Respondent: The respondent defended the CESTAT's order, stating that the reasoning in M/s Mahindra and Mahindra Ltd applied to Rule 7 as well. The respondent emphasized that the appellant had paid the cess, distinguishing the present case from the Unicorn Industries case where no cess was paid.

4. Court's Determination: The Court analyzed Rule 6 of the CENVAT Credit Rules, emphasizing that the payment of cess on goods or services determined their exemption status. The Court referred to the decision in M/s Mahindra and Mahindra Ltd, which held that goods or services subject to cess payments could not be considered exempted. The Court found no error in the CESTAT's decision based on this precedent.

5. Application of Rule 7: The Court further discussed Rule 7 of the CENVAT Credit Rules, highlighting that the distribution of credit was restricted for units engaged in manufacturing exempted goods or services. The Court concluded that the observations from M/s Mahindra and Mahindra Ltd applied to Rule 7 as well, supporting the CESTAT's decision.

6. Dismissal of Appeal: The Court dismissed the appeal, stating that no substantial questions of law arose from the arguments presented. The Court found no basis for disputing the payment of cess by the respondent and upheld the CESTAT's order, which was solely based on the precedent set by M/s Mahindra and Mahindra Ltd.

7. Final Decision: The Court ruled in favor of the respondent, dismissing the appeal without any costs, as no substantial legal issues were found to warrant a different outcome based on the interpretation of excise duty and CENVAT Credit Rules.