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TMI Blog2025 (1) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... til those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16-3-1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods.' Rule 3(4) of the Cenvat Credit Rules was an enabling provision for utilization of Cenvat credit. This Court has held in CCE Vs. Shilpa Copper Wire Industries [ 2010 (2) TMI 711 - GUJARAT HIGH COURT ] that there is no difference between 100% export oriented unit and a normal DTA Unit as regards the Cenvat scheme. In view of the provision of Section 142 (6) (a) of GST Act, also the petitioners will not be liable to pay the amount of excise duty in cash and would be entitled for refund of the outstanding credit in cash as per the aforesaid provisions. It will be seen on plain reading of section that any amount of credit found to be admissible to the claimant shall be refunded to him in cash . Therefore, there can be no arguments to the contrary that the legitimately availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty as well as additional duties when brought in connection with the manufacture and packaging of articles or job work for export goods into EOUs, subject to various conditions laid down under the Notification. 3.3 One of the conditions of the Notification is that the EOU should execute a Bond with the Deputy/Assistant Commissioner of Central Excise thereby agreeing to various undertakings, including an undertaking to pay an amount equal to the duty leviable on the goods and the interest in case of capital goods as well as goods other than capital goods, (i.e. inputs, raw materials, packaging materials, consumables etc.) if such goods were not proved to have been used in connection with the production or packaging of goods for export out of India. This Notification further allows an EOU to procure various inputs, raw materials etc. 3.4 By virtue of the above referred LOP and also the Bond executed by the Petitioner Company under Notification No. 22/2003-CE, the Petitioner Company had been procuring various capital goods and goods other than capital goods without payment of duty for utilizing all such goods in relation to manufacture of final products meant for export. 3.5 The offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h goods in eventualities like debonding, the EOU could discharge such duty liability in the same manner which was permissible to the manufacturer of such goods for discharging duty liability. Whereas in case of imported goods, the EOU was required to pay custom duties in the same manner (i.e. cash) that had to be adopted by an importer. 3.10 The petitioners have also brought to the notice of the respondent Excise authorities specific cases of debonding permitted to EOUs belonging to manufacturers like M/s. Alps Chemicals Pvt. Ltd. of Vatva, Ahmedabad, M/s. AIA Engineering Ltd., Odhav, Ahmedabad and also M/s. Harsha Engineering Ltd., where such payments were allowed from legally availed Cenvat credit. 3.11 The Assistant Commissioner has referred to Clause (i) of Notification No.46/2004-CE but this clause only lays down that debonding of capital goods may be allowed on payment of an amount equal to excise duty leviable on such goods on the depreciated value at the rate in force on the date of debonding; and thus it is nowhere laid down under this provision that payment of amount equal to excise duty leviable on such goods has to be made in cash, and not by utilizing legally availed C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ience is also in favour of the Petitioners in this case. Therefore, appropriate orders, directions or writ may be issued by this Hon'ble Court so as to set right the above referred situation that has occurred in the present case. 4. This petition is thus filed under Article 226 of the Constitution of India with a prayer to quash and set aside the direction to pay excise duty in cash conveyed by the respondent No. 2 vide letters No. F.No. VIII/48-08/Cus/Dishman/13-14 dated 3.8.2015 and 19.8.2015 thereby, allowing the petitioner -Company to pay such excise duty from legally availed Cenvat credit. Accordingly, the following prayers have been made :- (A) That Your Lordships may be pleased to issue a Writ of Certiorari or any other appropriate writ, direction or order. quashing and setting aside the direction to pay excise duty in cash conveyed by the Respondent No. 2 herein vide letters F.No.VIII/48-08/Cus/Dishman/13-14 dated 3.8.2015 and 19.8.2015 (Annexures- F and I ) thereby allowing the Petitioner Company to pay such excise duty from legally availed Cenvat credit: (B) That Your Lordships may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that all over the country, EOUs are permitted to discharge the central excise duty foregone from the Cenvat credit account. Thus, on the ground of parity alone, the petitioners have made out a strong prima facie case, inasmuch as, when similarly situated assessees have been permitted to pay the excise duty foregone from the Cenvat credit account, there is no reason as to why the petitioners should be denied such benefit. Besides, the petitioner company is a reputed well established Pharmaceutical Company and hence, the interest of the revenue is in no manner jeopardized if the interim relief, as prayed for, is granted, whereas the petitioner company would have to face a cash crunch if called upon to pay the excise duty foregone in cash, whereas its Cenvat credit account would remain unutilized. Besides, as pointed out by the learned counsel for the petitioners, ultimately the excise duty foregone which is to be paid in cash, is going to be added back to the amount of Cenvat credit lying in the account of the petitioners, under the circumstances, the petitioners have clearly made out a prima facie case in their favour. Besides, as noted hereinabove, in case the petitioner co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Article 226 of the Constitution of India is premature as the petitioners were issued a speaking order which was appealable in nature, therefore, the petitioners must be relegated to avail the alternative remedy. 8.2 Secondly, the issue that arises in the present case is that of debonding whereas the judgements cited by the petitioners pertain to the manner of payment of duty and therefore not applicable in the facts of the present case. 8.3 Thirdly, Mr. Khanchandani, learned advocate for the respondent No. 2 submitted that the manner of utilization of Cenvat by 100% EOU is prescribed in Rule 17 of the Central Excise Rules and therefore, the provisions of the said Rule had to be followed and therefore, the petitioners have to pay the excise duty forgone from their Cenvat credit account only by cash. In view of the above, the present petition deserves to be dismissed and interim relief granted on 30.10.2015 deserves to be vacated. 9. Discussion and Findings :- 9.1 The petitioner No. 1-Company is engaged in manufacturing of pharmaceutical and chemical products. The petitioners had their factory situated in village Lodriyal in Taluka Sanand, District Ahmedabad which was allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Heading No. 87.01 or motor vehicles falling under Heading Nos. 87.02 and 87.04 or chassis of such motor vehicles under Heading No. 87.06. However, credit taken on inputs which were lying in the factory on 16-3-1995 either as parts or contained in finished products lying in stock on 16-3-1995 was allowed. Prior to the 1995-96 Budget, the Central excise/additional duty of customs paid on inputs was allowed as credit for payment of excise duty on the final products, in the manufacture of which such inputs were used. The condition required for the same was that the credit of duty paid on inputs could have been used for discharge of duty/liability only in respect of those final products in the manufacture of which such inputs were used. Thus it was claimed that there was a nexus between the inputs and the final products. In the 1995-96 Budget, the MODVAT Scheme was liberalised/simplified and the credit earned on any input was allowed to be utilised for payment of duty on any final product manufactured within the same factory irrespective of whether such inputs were used in its manufacture or not. The experience showed that credit accrued on inputs is less than the duty liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and, in particular, it loses sight of the fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assesses concerned. Therefore, the Scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier Scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the basis of the earlier Scheme necessarily that the taxes have to be adjusted and payment made complete. Any manner or mode of application of the said Rule would result in affecting the rights of the assessees 6. We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these goods gets adjusted which are finished subsequently. Thus a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. It is, therefore, that in the case of Eicher Motors Ltd. vs. Union of India [1999(106) ELT 3] this Court said that a credit under the MODVAT scheme was as good as tax paid 10.3 In the case of Indsur global Vs. Union of India reported in 2014(310) ELT 833 (Guj.), this Court has held as under :- 34. By no stretch of imagination, the restriction imposed under sub-rule (3A) of rule 8 to the extend it requires a defaulter irrespective of its extent, nature and reason for the default to pay the excise duty without availing cenvat credit to his account can be stated to be a reasonable restriction. It leads to a situation so harsh and a position so unenviable that it would be virtually impossible for an assessee who is trapped in the whirlpool to get out of his financial difficulties. This is quite apart from being wholly reasonable, being irrational and arbitrary and therefore, violative of Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 2017 reads as under:- (6) (a) every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 (1 of 1944) and the amount rejected, if any, shall not be admissible as input tax credit under this Act: 14. In view of the provision of Section 142 (6) (a) of GST Act, also the petitioners will not be liable to pay the amount of excise duty in cash and would be entitled for refund of the outstanding credit in cash as per the aforesaid provisions. 15. It will be seen on plain reading of section that any amount of credit found to be admissible to the claimant shall be refunded to him in cash . Therefore, there can be no arguments to the contrary that the legitimately availed Cenvat credit could not be used for the payment of duties and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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