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TMI Blog2007 (2) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... n the manufacture of dutiable and exempted goods and therefore in terms of Rule 6(2) of the Cenvat Credit Rules, 2002 and relevant Cenvat Credit Rules, 2004, they were required to pay an amount equal to 8% (paid 9-9-2004) and 10% from 10-9-2004 onwards on the total price excluding sales tax and other taxes if any paid on sale of such goods of the exempted final product i.e. tractors, cleared from home consumption as required under Rule 6(3)(b) of the Cenvat Credit Rules, 2002/2004. 3. The scrutiny of the records however revealed that appellants have also taken credit in respect of some inputs which were exclusively used for the manufacture of exempted products and since in terms of Rule 6(1) of the Cenvat Credit Rules, they were not entitled for credit in respect of inputs exclusively used for manufacture of exempted product and was entitled to take credit in respect of only that quantity of inputs which is intended for use in the manufacture of dutiable goods they were issued various show cause notices demanding credit so incorrectly taken by them on such inputs exclusively used for the manufacture of exempted products. 4. The other connected issue is that while paying 8% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise as it is levied by Ministry of Industry under Order No. 662(E) dated 10-9- 1985 which means that it is levied under an Act other than Central Excise Act, 1944. The Commissioner has further held that duty of excise is levied under Section 3 of the Central Excise Act, 1944 and Rule 2(e) of the Central Excise Rules, 2002 define duty as "duty means the duty payable under Section 3 of the Central Excise Act, 1944 and therefore once cess is not payable under Section 3 of the Central Excise Act, 1944 the same cannot be considered as a duty of excise and consequently the tractor cannot be considered as exempted goods merely be cause education cess as well as automobile cess is paid on the tractors. This argument has also been reiterated by the learned S.D.R. 8. It was submitted that the view taken by the Commissioner is not correct as Section 2(d) of the Cenvat Credit Rules, 2004 defines exempted goods to mean "excisable goods which are exempted from the whole of duty of excise leviable thereon and include goods which are chargeable to nil rate of duty." Thus in order to treat final goods as "exempted goods" as defined under Rule 2(d) of the Cenvat Credit Rules, the said final prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Central Excise v. Malwa industries Ltd., 2004 (171) E.L.T. 67(T). 10. Referring to the other plea of the learned D.R. that education cess and automobile cess is not in the nature of excise duty, as excise duty means duty as referred to an Entry 84 of the 7th Schedule to the Constitution of India and not to automobile cess which is charged under the relevant cess act and not under the Central Excise Act and further that the cess is meant for a specific purpose and as in the nature of sub-charge and education cess assumed the colour of the act under which it is levied, thus it has to be treated as excise duty, if collected on Central Excise as Customs duty if collected on Customs duty as Income-tax if it collected on income-tax and so on and that mere collection of duty under the Central Excise Act does not make it and excise duty, it was submitted that Section 9(1) of the Industrial (Development and Regulation) Act, 1951 read as under: "There may be levied and collected as a cess for the purpose of this act on all goods manufactured or produced in any such scheduled industry as may be specified in this behalf by the Central Government by notified order a duty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of licence fee the learned Advocate invited attention to Para 10 of the above decision, wherein it was observed that the levy of excise duty should be essentially linked with production or manufacture of an excisable article, though it may be recovered in the form of a licence fee. Where, however, the levy or tax has no nexus with the manufacture or production of an article, the impost or tax cannot be regarded to be one in the nature of excise duty. 14. Reference was also invited to the Supreme Court decision in the case of Jullundur Rubber Manufacturers Association v. UOI, 1999 (110) E.L.T. 339 (S.C.) wherein it was held that excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country and that the method of collection will not affect the essence of the duty. Therefore, even if levied and collected as a cess, the taxable even is manufacture and therefore it is a duty of excise. As cess under Section 90) of the Industrial (Development and Regulation) Act, is in relation to manufacturer production of goods it is clearly a duty of excise. 15. As regards the plea that education cess is in the nature of sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject-matter of the tax and the rates at which it has to be taxed. The term "assessment", on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate "levy" with an "assessment" as well as with the collection of a tax when it held that "when the payment of tax is enforced, there is a levy". We think that, although the connotation of the term "levy" seems wider than that of "assessment", which it includes, yet, it does not seem to us to extend to "collection". Article 265 of the Constitution makes a distinction between "levy" and "collection". We also find that in N.B. Santana, Assistant Collector of Central Excise, Bombay v. Elephantine Spinning and Weaving Mills Co. Ltd. this Court made a distinction between "levy" and "collections" as used in the Act and the rules before us". 18. Reference was also invited to the Supreme Court decision in the case of Somalia Organics v. State of U.P. -2001 (130) E.L.T. 3 (S.C.) = 2001 (5) SCC 519 where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been imposed under 1983 Act is nothing but an additional excise duty and is also therefore exempted under the notification issued under Section 5A, the court held that cuss leviable under the Jute Cuss Act, 1983 is not duty levied under Section 3 of the Central Excise Act, 1944 and is therefore not covered by the exemption notification issued under Section 5A of the Central Excise Act. The argument that it was surcharge on the main tractors was also rejected on the fact of that case. Similarly the decision in the case of Pasupati Fabrics Ltd. v. UOI - 2004 (165) E.L.T. 35 (P H) cited by learned S.D.R. in which it was held that merely because words "duty of excise" are used in Section 5A of the Act would not mean that what is charged is the excise and that cuss had traces of fee and was not tax which is charged under Central Excises and Salt Act, 1944. It was submitted that this decision has no binding effect inasmuch as the decision of the Hon'ble Supreme Court in the case of A.B. Abdul Kadir and Others v. State of Kerala, (1976) 3 SCC 219 and Baranagar Jute Mills v. Inspector - 1992 (57) E.L.T. 3 (S.C.) has not been considered by the Hon'ble Delhi High Court. 21. In the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in the case of Light Metal Industries v. Commissioner of Central Excise, Calcutta-IV [2000 (125) E.L.T. 678 (Tribunal)] and upheld by Supreme Court as reported at 2002 (140) E.L.T. A250. Similarly in Dai Ichi case upheld by Supreme Court in Para 14 reported at 1996 (81) E.L.T. 676 (Tribunal) it was held that the scheme is having the effect of neutralizing or limiting the cascading effect of taxation on a large number of excisable products, that are used in the manufacture of some other excisable products. In view of this the rule should be interpreted in a maimer as well not defeat the purpose or object of the scheme as held by the Tribunal in the case of Mahindra Mahindra v. Collector of Central Excise, Bombay-II - 1994 (70) E.L.T. 423 (Tribunal). 23. Reference was also invited to the Supreme Court decision in the case of Hashmatunnisa Begum Sarla Debi Birla v. Commissioner of Wealth-Tax - 1989 (176)-ITR-98-S.C. and Oswal Agro Mills Ltd. v. Collector of Central Excise - 1993 (66) E.L.T. 37 (S.C.) wherein it was held that when there is ambiguity in the word, statement and objects the legislative history, the memorandum appended to the bill and the speech of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate on which notification was published in Official Gazette. In support thereof he referred to the decision of the Tribunal in the case of Ester Industries v. C.C.E. - 1999 (108) E.L.T. 301 wherein it was held that the plea that the notification is to be treated as clarificatory and retrospective in operation was not accepted on the ground that notification itself specifically provides that it will come into force on the date of its publication in the Official Gazette. 26. Reference was also invited to the Supreme Court decision in the case of Commissioner of Central Excise v. Associated Cement Companies Ltd. - 2003 (151) E.L.T. 12 (S.C.) wherein it was held that the explanation added to Rule 57A will have the effect from the date of amendment, in the rule. A similar view was taken in the case of CIT v. Kerala Electric Lamp Works Ltd. - (2003) 261 ITR 721. 27. Dealing with the second issue as to whether the amount of 8/10% required to be paid under Rule 6(3)(b) of the Cenvat Credit Rules is to be considered as tax and therefore liable for deduction from the total price charged from the customer learned Advocate for the appellants referred to the decision of the Larger Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. Learned D.R. however submits that 8% amount of the price is not a duty or tax and that if the legislature had intention to exclude this amount, they could have expressly excluded from the price as has been done in Section 4(4)(d)(ii) of the Central Excise Act, 1944. There is no statutory provision requiring payment of 8% as a duty. It is only an adjustment of credit on account of credit being allowed even in respect of inputs used in the manufacture of exempted product which but for the fact of common inputs being used is otherwise not admissible. 29. We have considered the submissions. We find that the basic issue to be decided is that whether education cuss and automobile cuss paid on tractors is to be considered as duty of excise or not and whether tractors on which education and automobile cuss is required to be paid can be considered as exempted goods and thereby attracting the provision of Rule 6(2) of the Cenvat Credit Rules or not. The second issue to be decided is that if they are treated as exempted goods whether in terms of Rule 6(2) where common inputs are used along with non-common inputs in both exempted and dutiable final products whether credit can be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant that education cuss is levied and collected by Ministry of Finance and not by Ministry of Industry as contended by the learned D.R., as levy is always by Parliament and levy and collection of automobile cuss under Central Excise Act is very much provided under Rule 3 of Automobile Rules. In view of this both automobile cuss and education cuss are in the nature of excise duty. 31. The next question arises is whether tractors on which automobile cuss and education cuss is payable can be considered as exempted from the whole of duty of excise thereon or chargeable to nil rate of duty as required under Rule 2(d) of Cenvat Credit Rules. Here we find that the terms exempted goods has been defined under Section 2(d) of the Cenvat Credit Rules, 2002/2004 as under :- "Exempted goods" means goods which are exempt from whole of duty of excise leviable thereon and includes goods which are chargeable to nil rate of duty." It is pertinent to note that the word used is 'duty of excise' and not 'duties of excise'. The expression 'whole of duty of excise' and 'chargeable to nil rate of duty' is 'singular expression referring to one duty of excise' and not all duties of excise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, whether the appellants are eligible to take credit even in respect of non-common inputs i.e. inputs which exclusively go into the manufacture of exempted final products. We find that this issue has been dealt at length by the Tribunal in the case of Hetero Labs Ltd. (cited supra) and followed in other decisions in the case of Koya Company, Indian Hume Pipe, Escort Limited, Kumbhi Kasari SSK Ltd. and in all these decisions it has been held that the credit will be available even on non-common inputs used exclusively for the manufacture of exempted final products. We find no reason to differ with the same except for the fact that Explanation III has been added to Rule 6(3) of the Cenvat Credit Rules stating that the credit cannot be taken in respect of inputs exclusively used in the manufacture of exempted final products. Here also we are in agreement with the plea taken by the appellants that Notification 27/2005 under which the explanation was added will have effect from date of publication in the Official Gazette i.e. 16-5-2005 and not prior to that in view of fact that the notification itself states that it will come into force from the date of its publication in the Official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of any abatement does not arise. Further from the invoice, we notice that the automobile cuss is being charged by the appellant on the entire sale price without claiming any deduction of the so called duty (8% reversal) and therefore the question of its deduction for the purpose of reversal of credit @ 8% of the total sale price does not arise. 35. In view of above the appeals are disposed off as under: Appeal No. E/2184/06 :- It is held that the appellants are entitled to take credit on all inputs including inputs exclusively used in the manufacture of ex empted final product. Since there is no requirement of duty, the penalty imposed is set aside and appeal is allowed. Appeal No. E/3118/06 :- It is held that the appellants are entitled to take credit on all inputs including inputs exclusively used in the manufacture of ex empted final product. Since there is no requirement of duty, the penalty imposed is set aside and appeal is allowed. Appeal No. E/2183/06 :- It is held that the appellants will not be entitled to deduction of 8% from the total amount recovered from the customer and accordingly the appeal is dismissed. Appeal No. E/471/06 :- It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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