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2009 (4) TMI 381 - HC - Central ExciseCenvat Credit- 1. Whether Cenvat credit earned on account of Basic Excise Duty can be utilised towards payment of Additional Duty of Excise (ST) leviable under the Additional Duty of Excise (Goods of Special Importance) Act, 1957; 2. Whether Additional duty of Excise (S.T.) is included in the expression any duty mentioned in any duty of excise whereas the provisions of erstwhile Rule 57AB(1)(b) C.E. Rules, 1944 provide that the CENVAT credit can be used for payment of any duty of excise ? In the light of the various decisions, held that- It is, thus, evident that the revenue is precluded from challenging the correctness of the circular even on the ground of the same being inconsistent with statutory provisions. It goes further to limit the right of the revenue to file an appeal against the correctness of the binding nature of the circular. Therefore, there is no escape from the conclusion that the circular is binding on the revenue. As a sequel to the aforesaid discussion we answer both the questions in favour of the dealer-respondent and against the appellant-revenue. Accordingly, the appeals are dismissed.
Issues Involved:
1. Whether Cenvat credit earned on account of Basic Excise Duty (BED) can be utilized towards payment of Additional Duty of Excise (ST) leviable under the Additional Duty of Excise (Goods of Special Importance) Act, 1957. 2. Whether Additional Duty of Excise (ST) is included in the expression "any duty" mentioned in "any duty of excise" as per Rule 57AB(1)(b) of the Central Excise Rules, 1944. Issue-wise Detailed Analysis: 1. Utilization of Cenvat Credit for Additional Duty of Excise: The core issue revolves around whether the Cenvat credit earned from Basic Excise Duty (BED) can be used to pay Additional Duty of Excise (ST) under the 1957 Act. The dealer-respondent utilized Cenvat credit to pay excise duty on exported goods and additional excise duty during April and May 2001. The jurisdictional Deputy Commissioner initially sanctioned the rebate claims based on Rule 57AB(1)(b) of the Central Excise Rules, 1944. However, it was later realized that the statutory provisions limited the term "duty" to BED and Special Excise Duty (SED) only, making the use of Cenvat credit for Additional Excise Duty (ST) irregular. Consequently, show cause notices were issued to recover the erroneously sanctioned rebate claims. The Commissioner of Central Excise, Ludhiana, dropped the proceedings based on a Board letter dated 14-12-2000 and Rule 57AB(1)(b), which allowed Cenvat credit for payment of "any duty of excise." The Commissioner also referenced a Delhi High Court judgment in Parekh Prints v. UOI, which upheld the constitutional validity of AED (ST). 2. Interpretation of "Any Duty of Excise": The Tribunal rejected the revenue's appeal, stating that Rule 57AB does not specify that BED or SED cannot be used for paying Additional Duty of Excise. The revenue argued that BED, levied under the Excise Act, and Additional Excise Duty, levied under the 1957 Act, are distinct, and therefore, BED credit cannot be used for Additional Excise Duty. They contended that "duty" as defined in Rule 2(7) of the Rules refers to duty payable under Sections 3 or 3A of the Act, which does not include Additional Excise Duty. The dealer-respondent's counsel argued that credit on duties levied under the Excise Act, 1957 Act, and the Textile and Textile Article Act, 1978, could be availed under the Central Excise Rules, citing Notification No. 5/94-C.E. (N.T.), dated 1-3-1994, and subsequent Notification No. 21/99. They also referenced a CBEC circular clarifying that BED credit could be used for Additional Duty of Excise. Decision: The Court examined Rule 57AB(1)(b) of the Rules, which allows Cenvat credit for payment of "any duty of excise." The Court noted that the amendment to Rule 57AB with effect from 1-4-2000, using the term "any duty of excise," was intentional and significant, indicating that BED credit could be used for Additional Excise Duty. The Court also referenced the deletion of Article 272 of the Constitution and subsequent changes in the distribution of levy among the Union and States, which supported the utilization of additional excise duty credit for paying basic excise duty. The Court upheld the Tribunal's decision, stating that the amendment to Rule 57AB was intended to allow the use of BED credit for Additional Excise Duty. The Court also referenced the Gujarat High Court judgment in Maheshwari Mills Limited v. Union of India, which supported a broader interpretation of "duty" to include additional duty. The Court concluded that the circulars issued by the CBEC, which clarified the utilization of BED credit for Additional Duty of Excise, were binding on the revenue. The Court cited the Supreme Court's judgment in Paper Products Ltd. v. Commissioner of Central Excise, which held that circulars are binding on the department and preclude the revenue from challenging their correctness. Conclusion: The Court answered both questions in favor of the dealer-respondent and against the appellant-revenue, dismissing the appeals and upholding the Tribunal's order and the Commissioner's decision. The Court emphasized that the circulars issued by the CBEC are binding on the revenue, and the amendment to Rule 57AB was intended to allow the use of BED credit for Additional Excise Duty.
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