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PJ/CASE LAW/2014-15/2414

Payment facility under Rule 8 is also applicable to input/capital goods removed as such.

Case:-CCE, CHENNAI – IV VERSUS INTERNATIONAL FLAVOURS & FRAGRANCES INDIA LTD

Citation:-2014-TIOL-1864-CESTAT-MAD

Brief Facts:-A common issue is involved in all these appeals and therefore all are taken up for disposal.
Revenue has filed these appeals against Orders-in-Appeal passed by the Commissioner (Appeals). The facts of the case, in brief, are that the respondents had availed CENVAT credit on inputs and capital goods. They cleared the CENVAT availed inputs and capital goods "as such" under the cover of invoice as prescribed under the Central Excise Rules, 2002 on payment of an amount equal to the CENVAT availed under Rule 3(4) of the CENVAT Credit Rules, 2002 / Rule 3(5) of the CENVAT Credit Rules, 2004. They debited the amounts in terms of Rule 8 of the Central Excise Rules, 2002 on the 5th day of the following month during which the said clearance was made instead of on the actual date of clearance. The adjudicating authority demanded interest under Section 11AB of the Central Excise Act, 1944 from the date of actual clearance and the date of reversal of the credit. Commissioner (Appeals) set aside the adjudication order. Hence, the revenue is in appeal before the Tribunal.

Appellant Contentions:-Revenue in these appeals contended that as per Section 11AB of the Act, if any duty of excise was not paid or short-paid, the person liable to pay interest for such belated payment from the date of such clearance.

Reasoning of Judgment:-Heard both sides and perused the records.
For proper appreciation of the case, the relevant portion of the findings of the Commissioner (Appeals) vide Order-in-Appeal dated 20.9.2006 are reproduced below:-
"5. I have carefully gone through the case records and submissions made, written as well as oral. The issue involved in the case is whether facility of payment of duty as provided under Rule 8 of Central Excise Rules, 2002 is available, to the clearance of inputs / capital goods as such from the factory of manufacture. During the impugned period, the appellants had cleared cenvated inputs and capital goods "as such" to some of their job workers, to the original raw material suppliers and also to their sister concerns in other locations under cover of invoice prescribed under Rule 11 of the Central Excise Rules, 2002. For such clearances, the appellants had paid an amount equal to the CENVAT credit availed, under Rule 3(4) / Rule 3(5) of the CENVAT Credit Rules, 2002/ 2004 by making debit entry in their CENVAT credit account, PLA by 5th of every following months.
Hon'ble CESTAT in the caseKLRF Textiles Vs. Commissioner of C.Ex. Tirunelveli - 2005 (188) ELT 169 (Tri- Chennai) = 2005-TIOL-937-CESTAT-MAD has held that:
"After examining the records and hearing both sides, I find that the assessee, during the material period, was paying duty on their goods on a fortnightly basis in terms of Rule 8 of the Central Excise Rules, 2002. According to the fortnightly system of duty payment, the duty for the first fortnight of a calendar month is to be paid on or before the 20th  day of that month and that for the second fortnight of the month is required to be paid on or before the 5th day of the succeeding month. On a conjoint reading of the relevant Rules, it is clear that this facility is available not only in respect of final products but also in respect of inputs and capital goods removed as such from the factory of production of final product."
The above view has also been affirmed by CESTAT in the case of Commissioner of C.Ex. Raigad Vs. M/s. Pidilite Industries Ltd. - 2006-TIOL-649-CESTAT-MUM. The relevant portion is reproduced as under:-
"The issue under consideration is that whether facility of distinguish payment of duty as provided under Rule 8 of Central Excise Rules, 2002, is available to the clearance of inputs/capital goods as such from the factory of manufacturer."
We find that on identical facts, the Hon'ble Madras High Court in the case of CCE, Chennai Vs. SS Lumax Ltd. vide order/judgment dated 10.1.2014 in Civil Appeal No.  1418/2009 rejected the Revenue's appeal. The relevant portion of the said judgment is reproduced below:-
"The respondent / assessee are the manufacturers of headlamp assembly and motor vehicles part falling under CETA Heading No. 8512 and 8705. The assessee has been availing CENVAT credit on inputs under CENVAT Credit Rules, 2002. During the period from April 2003 to March 2004, the assessee removed inputs as such, on which CENVAT credit was availed and the credit was not reversed on the date of removal. This lead to a demand being issued to the assessee demanding interest of Rs.67,349/- under Section 11AB of the Central Excise Act, 1994 on the ground that if the duty of excise has not been paid or has been short paid, the person liable to pay duty, has to pay interest on such belated payment.
xxxxx xxxxx xxxxx xxxxx
Therefore, the expression "on the date of such removal" is referable to the rate applicable to such goods and it cannot be understood to mean that the duty should be paid at the time of removal in terms of substituted provisions. The expression "on the date of such removal" stands deleted in the new sub-rule (4) to Rule 3 of CENVAT Credit Rules, 2002, as cited supra.
Rule 8 of the CENVAT Credit Rules, 2002, deals with a manner of payment of duty and it states that (1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by the 5th day of the following month. In terms of first proviso to Rule 8, in case of goods removed during the month of March, the duty shall be paid by the 31st day of March. For the purpose of this case, second proviso to Rule 8 would not be of relevance. Thus, in terms of Rule 8(1) r/w sub-rule (4) to Rule 3 of the CENVAT Credit Rules, 2002, the duty shall be paid by the 5th day of the following month and in case, the goods removed during the month of March, the duty shall be paid by the 31st day of March.
It is not in dispute that the assessee has paid the duty at the end of the month i.e. much prior to the 5th day of the following month or in case where the removal had taken place in March before 31st March of the relevant year. In such circumstances, it cannot be said that the there has been delay in payment of duty so as to invoke Section 11AB of the Central Excise Act, 1944. Even though the Tribunal has proceeded on the basis that the deposit was made prior to the issuance of show cause notice, on facts, we found, such a contention is not tenable.
In view of the above discussion and respectfully following the decision of the Hon'ble High Court, we do not find any reason to interfere with the orders passed by the Commissioner (Appeals). Accordingly, all the appeals filed by Revenue are rejected.

Decision:-  Revenue appeal rejected.

Comment:-The essence of this case is that facility of making payment under Rule 8 is not only available in respect of clearance of final product but is also admissible in respect of input/capital goods removed as such from the factory of production. Hence, there is no interest liability on the credit reversed on as such removal as far as the credit is reversed before the due date of payment of duty i.e., 5th day of the following month and 31st March in case of credit reversal for the month of March.

Prepared by: Hushen Ganodwala
 
 
 
 

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