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TMI Blog2024 (7) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment of NCCD cannot be upheld. There are no merits in the impugned order and the same is set aside - appeal allowed. - MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) AND MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Shri Atul Gupta, Advocate for the Appellant Shri Sandeep Pandey, Authorised Representative for the Respondent ORDER This appeal is directed against the Order-in-Original No. 87/Commissioner/Noida/2012-13 dated 31.03.2013, of the Commissioner Central Excise, Customs Service Tax, Noida. Vide the impugned order, following has been held: Order (i) I confirm the demand of the NCCD amounting to Rs. 2,11,93,160.00 (Rupees Two Crore. Eleven lakh Ninety Three Thousand One Hundred Sixty only) and order for recovery of the same under the proviso to Section 11A of Central Excise Act 1944 (ii) I order for recovery of interest at the appropriate rate on the above amount under the provisions of Section 11AB/11AA of the Central Excise Act,1944. (iii) I impose a penalty of Rs. 2,11,93,160.00 (Rupees Two Crore, Eleven lakh Ninety Three Thousand One Hundred Sixty only) on the party, in terms of both Rule 15 of the Cenvat Credit Rules 2004 and Rule 25 of the Central Excise Rules, 2002 for cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed in terms of Rule 25 for contravention of Rule 4 and Rule 8 of Central Excise Rules, 2002. 2.8 Show cause notice has been adjudicated as per the impugned order referred In para 1 above. Aggrieved appellant have filed this appeal. 3.1 We have heard Shri Atul Gupta, Advocate for the appellant and Shri Sandeep Pandey, Authorized Representative for the revenue. 3.2 Arguing for appellant learned counsel submits: The Show Cause Notice as well as the impugned order have not disputed the admissibility and availability of the CENVAT Credit of the Service Tax. Further, there is no demand under Rule 14 of the CENVAT Credit Rules, 2004 of the CENVAT Credit of Service Tax availed by and available to the Appellant The show Cause notice and the impugned order dispute the utilization of such CENVAT Credit of Service Tax for payment of NCCD on the ground that the 4th proviso to Rule 3(4) of the CCR restricts the utilization of CENVAT Credit of any duty or service tax other than NCCD for payment of NCCD. The SCN illegally inserts and reads the words Service Tax in such proviso, whereas the relevant proviso uses the words CENVAT Credit of any duty specified in Sub-rule (1) . The said proviso does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded in the main section. Reliance is placed on Haryana State Cooperative Land Development Bank Ltd v Haryana State Cooperative Land Development Bank Employees Union (2004) 1 sec 574 wherein the principle has been reiterated. Further reliance is placed on Modern Homeopaths Society v. State of Karnataka 1992 (1) Kar 349. The Hon ble Supreme Court in the matter of CIT, Mysore v. Indo Mercantile Bank Ltd. AIR 1959 SC 713 observed that: The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. Further, reliance is placed on the decision in the matter of Lankashi Tea and Seeds Estates P. Ltd. and Anr. v. Commissioner of Taxes [2006] 284 ITR 5 15 (Gauhati). The Appellant relies on Order-in-Original dated 16.09.2010 wherein the Ld Assistant Commissioner has held that the Appellant is eligible to utilize the credit of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions made in Appeal and during the course of arguments. 4.2 Impugned order records following findings: 6. Discussion Findings: 6.1 I have carefully gone through the facts and record of the case, the issues raised in the show cause notice and the defense submissions made by the party on 23.03.2012 in writing as well as during the course of the personal hearing held on 2901.2013 I observe that the issues to be decided in the present case are as under: (i) Whether the amount of NCCD paid by utilizing the credit of service tax is recoverable? (ii) Whether interest on the amount of NCCD paid by utilizing the credit of service tax is recoverable? (iii) Whether penalty on the party is imposable? 6.2.1 I observe that the Noticee s unit is a 100% EOU under the EHTP schema. The Mobile handsets manufactured by the Noticee attract 'Nil rate of excise duty. However, they are chargeable to NCCD as they are included in the Seventh Schedule to the Finance Act, 2001. Apart from export of mobile phones, the Noticee clears mobile phones to DTA on payment ot NCCD 6.2.2 I observe that during the scrutiny of ER-2 Returns for the month of January 2011 and February 2011 (RUD 1 2) filed by M/s SIEPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the additional duty leviable under sub-section (5) of Section 3 of Customs Tariff Act: (viii) the additional duty of excise leviable under section 15 of the Finance Act 2003 (32 of 2003). (ix) the Service Tax leviable under Section 66 of the Finance Act. (ixa) the Service Tax leviable under Section 66A of the Finance Act (x) the Education cess on taxable service, leviable under section 9l of read with section 95 (tithe Finance (No. 2) Act, 2004 (23 of 2004): (xa) the Secondary and Higher Cess on laxable services. leviable under section 136 read with section 140 of the Finance Act. 2007(22 of 2004); (xi) the additional duty of excise leviable under Section 85 of Finance Act 2005 (18 of 2005): Paid on- (i) any input or capital goods received in the factory of manufacture of final product or premises of provider output services on or after 10th day of September, 2004; and (ii) any input service received by manufacturer of final product or provider of output services on or after 10th day of September, 2004 including the said duties. Further the provisions contained under RULE 3 (4) of the CENVAT Credit Rules,2004 states as under;- .the Cenvat Credit may be utilized for payment of- (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es service tax, the noticee submits that the SCN wrongly refers to and interprets this clause to cover duty or service tax Thus the Department s case is that even credit of service tax cannot be utilized for payment of NCCD, whereas the party has pleaded otherwise 6.4.1 I however, find from the notice issued that the department has inferred the meaning of the above legal provisions to the effect that the Cenvat Credit of any duty and service tax specified in sub rule(1) of Rule 3 of the Cenvat Credit Rules 2004, cannot be used for payment of the NCCD on the goods falling under Central Excise Tariff chapter heading 85171210 and heading no. 85171290.Ifind that the expression given in the 5 proviso are very specific and clear about the scope and availability of only the credit of NCCD specified in item (v) thereof and there is therefore, no ambiguity in its interpretation 6.4.2 I observe that the Noticee has tried to drag the term duty , as has been used in the statute to the effect that the abovementioned definition of duty apparently does not include service tax, I however, do not find any justification for going into such dispute on the interpretation of such a clearly worded provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter. 6.4.6 Thus from the above and from the noticees contention in this regard observe that the legal position is, unless and until, the literal words lead to absurdity, it is not open to the department or the judiciary to supply words to the taxing statute. The proviso under reference says that CENVAT credit of any duty specified in sub rule (1) except the NCCD in item(v) , which clearly means that it covers all the entries of sub rule (1) except the item (v) thereof and nothing more could be adduced out of it. Further. following the above guide lines of Hon ble Supreme Court, I observe that in the instant case, reading service tax into the phrase any duty specified in sub- rule (1) does not lead to any absurdity Therefore, when the legal provision is clear and plain / strict / logical interpretation thereof does not lead to any absurd conclusion, in such a scenario, it could be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid : Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and then, the Central Excise Officer shall proceed, to recover such amount in the manner specified in this section, and the period of 'one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment . Explanation 1 : Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. Explanation 2. : For the removal of doubts, it is hereby declared that the interest under section 11AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than deceit the default is due to oversight or some mistake and it is not intentional. The second in which the non-payment or short payment etc., of duty is 'by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty that is to say, it is intentional deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently Section 11A, however allow the assessees in default in both kinds of cases to make amends, subject of course to certain terms and conditions. The cases where the non-payment or short payment etc., of duty is by reason of fraud collusion etc., are dealt with under sub-section (1A) of Section 11A and the cases where the non-payment or short-payment of duty is not intentional under sub-section (2B). Sub-section (2B) of Section 11A provides that the assessee 10. in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and in that event, such assessee in default would not be served with the Demand Notice under Section 11A(1) of the Act. However, Explanation (2) to the sub-section makes it clear that such payment would not be exempt from interest chargeable under Section 11AB of the Act. What is stated in Explanation (2) to sub-section 2(B) is reiterated in Section 11AB of the Act, which deals with interest on delayed payment of duty. From the Scheme of Section 11A(2B) and Section 11AB of the Act, it becomes clear that interest is levied for loss of revenue on any count In the present case, one fact remains undisputed, namely, accrual of price differential. What does differential price signify? It signifies that value which is the function of the price, on the date of removal/clearance of the goods was not correct. That, it was understated. Therefore, the price indicated by the supplementary invoice is directly relatable to the value of the goods on the date of clearance, hence, enhanced, duty. This enhanced duty is on the corrected value of the goods on the date of removal When the differential duty i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and not in accordance with the said section. 7. Learned counsel for the appellant has however relied upon the decision of the Apex Court in the case of Commissioner of Central Excise, Pune v. SKF India Ltd., [2009 (239) E.L.T. 385 (S.C.)] to contend that the said provision is applicable on the facts of the present case also. We have perused the said, decision and we find that we are unable to accept the contention of the learned counsel for the appellant that the said case applies to the facts of the present case. It is to be noted that in the said decision, the facts were that the assessee had demanded from its customers, the balance of the higher price by virtue of the retrospective revision of the price and therefore, on the date the goods were cleared, the differential duty had to be paid and the same had not been done which was held to be a short payment of duty as the differential duty was paid only later when the assessee issued supplementary invoices to the customers demanding the balance amounts. Under the said circumstances, the Apex Court held that it was a case of short payment of duty though it was not intentional and without any allegation of deceit. The facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Section 11A, in addition to the duty, be liable to pay interest. Interest is levied for loss of revenue on any count. The enhanced duty is on the corrected value of the goods on the date of removal. When the differential duty is paid after the date of clearance, it indicates short-payment/short-levy on the date of removal, hence, interest which is for loss of revenue, becomes leviable under Section 11AB of the Act. The said non-payment or short payment of duty may be not intentional. Whatever may be the reason even if the assessee is not at fault on any count, as the duty payable in law is not paid on the value of the goods on the date of removal, the payment of interest is attracted to bridge the loss of revenue. When the legislature consciously inserted these provisions in Section 11AB, the legal effect flowing from such provisions is to be given effect to. Therefore, a harmonious reading of the aforesaid provision makes it clear that interest is leviable on the differential duty paid in pursuance of a subsequent invoice as the proper duty payable under the law had not been paid on the date of clearance. 6.5.3 Further I observe that in the case of Neptune Spin Fab Pvt Ltd Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th intent to evade payment of NCCD, though I hold the party liable to penal action under both Rule 15 of the Cenvat Credit Rules 2004 and Rule 25 of the Central Excise Rules, 2002, I however, refrain from imposing separate penalties as proposed in the notice 4.3 From the facts as noted above it is evident that the only issue that merits consideration in the present case is whether the appellant could have utilized the Cenvat Credit availed by them in the respect of input services for payment of NCCD leviable on clearance of the Mobile Phones in DTA. 4.4 To understand the nature of the NCCD levied under Section 136 of the Finance Act, 2001 we refer to the decision of Hon ble Supreme Court in the case of Bajaj Auto Ltd. [2019 (366) ELT 577 (SC)] wherein following has been observed: 16. The real bone of contention which survives for consideration is the NCCD. The reason for this is that while the two cesses discussed aforesaid were in the nature of levy on the excise duty payable, the NCCD is levied on the product itself, as per Section 136 of the Finance Act, 2001. It is this aspect, inter alia, which was canvassed by the Department to persuade this Court to take a different view fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above decision it is quite evident that NCCD levied under Section 136 of the Finance Act, 2001 is essentially an 'duty of excise and all the provisions relating to the manner of collection as well as obligation of taxpayer to discharge the duty as applicable to payment of Central Excise duty shall apply. There is no restriction on payment of basic excise duty from the Cenvat Credit taken in respect of input services received by the appellant. Thus the view that credit of service tax could not have been utilized for payment of NCCD cannot be upheld. 4.5 In case of Parag Bosimi Synthetics Ltd. [2007 (216) ELT 254 (T-Kol)] following was held: 2 . After hearing both sides for some time, we find that the issue involved in this case is whether the credit of basic duty earned by the appellants can be utilized for payment of NCCD on the final product. Hence, we are prima facie of the view that the decision of the Bangalore Bench cited above is not relevant to resolve the issue in hand. Accordingly, we allow the miscellaneous application for modification and waive the requirement of executing a Bank Guarantee and proceed to decide the appeal itself with the consent of both the sides. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the credit of basic duty for payment of NCCD. 4.6 Affirming the said order Hon ble Gauhati High Court as reported at [2013 (295) E.L.T. 682 (Gau.)] observed as follows: 13. Insofar as the assessee is concerned the contention urged was that CENVAT credit in respect of NCC duty can be utilized only for payment of NCC duty. But this does not mean that CENVAT credit on basic excise duty cannot be utilized for payment of NCC duty on the final product. Simply put, the contention is that payment of NCC duty through utilization of CENVAT credit on basic excise duty is not prohibited. The question is whether this is permissible or not. According to the Revenue, CENVAT credit on NCC duty can be utilized only for paying NCC duty and CENVAT credit on basic excise duty cannot be utilized for paying NCC duty. 14. On the above broad facts, the matter was adjudicated before the Commissioner of Central Excise at Dibrugarh and he came to the conclusion that CENVAT credit of duty paid on inputs can be utilized only for payment of duty on the final product as per the second proviso to Rule 3(4) but CENVAT credit on any other duty could not be utilized for payment of NCC duty. Accordingly, the said C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nswered in the affirmative and it must be held that while CENVAT credit of NCC duty can be utilized under the CENVAT Credit Rules only towards payment of such NCC duty, CENVAT credit obtained from other sources can be utilized for payment of NCC duty on the final product. 4.7 The principles laid down by the above decisions was rekied upon by the Hon ble Gauhati High Court in case of Kamakhya Cosmetics Pharmaceutical Pvt. Ltd. [2015 (323) ELT 33 (Gau.)] and Dharampal Satyapal Ltd. [2015 (323) ELT 55 (Gau.)] 4.8 Hon ble Uttarakhand High Court has in case of Hero Motorcrop Ltd. [2018 (14) G.S.T.L. 200 (Uttarakhand)] held as follows: 31. A perusal of Rule 3(1) unravels the mind of the Rule-maker as to the component parts of the Cenvat credit. In Rule 3(4)(a), the Rule-maker has unambiguously declared that the amounts standing to the credit of Cenvat can be utilized for payment of any duty of excise on any final product. No doubt, this is subject to the injunctions in the form of limitations and restrictions contained in the provisos, seven in number. Unless, the Revenue establishes the case within four walls of any of the provisos, in our view, there can be no embargo against utilizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aker has totally proscribed the utilization of any part of the Cenvat credit, except the NCCD duty for payment of NCCD on any final product. Under Rule 3(7)(b), Cenvat credit, consisting of NCCD and the cesses, is to be utilized for payment of the corresponding duties on the final products only. No doubt, this is subject to the two provisos, which are contained therein. It is also true that the use of the word in singular need not be restricted to the singular and can comprehend also the plural. As to whether it would so embrace the plural, is a matter to be discerned from the context, as also, the purpose of the enactment, besides the phraseology of the statute otherwise. 39. It is brought to our notice that Circulars have been issued. Appellant relies on Circular No. 641/32/2002/CX, dated 26-6-2002 and other Circulars, which are dated 13-1-2006, 7-1-2009, and 11-12-1996. Reliance is placed on all these Circulars to demonstrate that the Authorities have understood that NCCD shall be treated as 'duty of excise , for the purpose of exemption on products meant for export within the meaning of Rule 19, from payment of NCCD and hence, the contention appears to be that the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o obstacle in the appellant s claiming the benefit of Cenvat credit. 42. There can be no doubt that the expression 'duty of excise contained in Rule 3(1)(vii) would be the aggregate of the duties, which are mentioned in various clauses and in the said sense, it could be treated as a case of singular including the plural. When it comes to Rule 3(2) of the Cenvat Credit Rules, 2004, apparently, the intention is that having regard to the principle, which is self-evident in Rule 6 of the Cenvat Credit Rules, namely, the non-availability of Cenvat credit on inputs when final goods are exempted, the rule-maker intended that a manufacturer is entitled to Cenvat credit on the duty paid on the goods, which are lying in stock or in process or inputs contained in the final products lying in stock, when the shadow cast over the claim for the Cenvat credit in the form of an exemption is lifted, inter alia. We are not concerned with the clause, which also likewise applies when the goods become excisable otherwise. 43. For our purpose, there can be no doubt that the words 'duty paid may take in the whole of the duties, which are contemplated under Rule 3(1). Likewise, the language of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. Furthermore, the expression 'whole of the duty is appropriately traced to the provisions contained in Section 5A of the Act, which, as we notice, enabled the Authority to grant exemption from the 'whole of the duty or exemption, which is partial in nature. It is this concept, which is seen embedded in Rule 6 read with Rule 2(d) of the Cenvat Credit Rules. The substantial duty invariably will be the basic excise duty. NCCD and other cesses are essentially surcharges, calculated as percentage of the duty. Apparently, the intention was that when the final product is exempted from the payment of the substantial part of the aggregate of the levies in a case where apart from the excise duty, there are surcharges, as NCCD and cesses in this case, then when the assessee opts for the benefit of the exemption from the duty under Section 3, then it would not also, at the same time, claim further benefit by way of Cenvat credit. It is to be noticed that there is no case for the appellant that the appellant did not exercise his option in the matter of claiming benefit of Notification No. 50 of 2003. We would think that though, no doubt, Modi Rubber was rendered in the context of Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as contained in the Rules of 2002 as well as 2004, there is no obvious or self-evident reason why the expression duty of excise used in the definition of 'exempted goods should not include these other levies. It matters not that these additional duties or cesses are not to be traced to the Act or are provided for by other enactments such as Finance Acts, or that they are levied as an increment, or are expressed as a proportion, to an existing tax (namely, basic duty of excise). After all, as the Supreme Court has explained in the case of Guruswamy Co. v. State of Mysore [(1967) 1 SCR 548], cess means nothing but tax and must be judged of in the same way as the validity of the tax (here, excise duty) to which it is an increment; and as for the taxing power of the State for its levy, it can be traced only to Entry 84 of Schedule VII to the Constitution, which is tax on manufacture of goods , i.e. excise duty. Besides, as explained in TVS Motor Co. Ltd. v. Union of India [2015 (323) E.L.T. 57 (Kar.)] , the phrase 'duties of excise and 'duty of excise were used originally in the Act inter-changeably, namely, sometimes in plural and sometimes in singular. When the new term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Cenvat Credit Rules, it had before it the understanding of the phrase 'duty of excise in terms of the judgment of the Supreme Court in Modi Rubber Ltd. and, secondly, the expression 'whole of the duty was appropriately traced to the provisions contained in Section 5A of the Act, which enabled the authority to grant exemption from the whole of the duty or exemption which was partial in nature. As we have noted above, the construction of the phrase 'duty of excise in Modi Rubber Ltd. was not a general construction of the words 'duty of excise wherever they were used. It was in particular reference to the expression 'duty of excise used in a subordinate piece of legislation, namely, a notification issued under Rule 8(1) of the Central Excise Rules. Rule 8(1) read with Rule 2(V) specifically covered only duty of excise 'under the Central Excises and Salt Act ; and the expression 'duty of excise used in the notification could not be given any extended meaning beyond what it bore under Rule 8(1) itself. (Incidentally, when the case of Hero Motocorp was carried in appeal by the assessee, the Supreme Court allowed the appeal, though that was on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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