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PJ/CASE LAW/2014-15/2560

Whether credit can be utilised for payment of excise duty under Compound levy Scheme ?

Case:- COMMR. OF C. EX., LUDHIANA VERSUS PUNJAB CASTING PVT. LTD.
 
Citation:- 2014 (306) E.L.T. 612 (P & H)

Brief facts:- These two appeals under Section 35G of the Central Excise Act, 1944 (for short, the Act) are directed against common order dated 2-8-2011 (Annexure A-3) of the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for short, the Tribunal) [2011 (274)E.L.T. 554 (Tri.-Del.)] whereby order, dated 20-12-2004 (Annexure A-2) passed by the Commissioner (Appeals), Customs & Central Excise, was affirmed. Both these appeals have been taken up together for adjudication as the same question of law is involved therein. Respondents in both these appeals are engaged in manufacture of non-alloy steel ingots. In pursuance to floating of Compounded Levy Scheme w.e.f. 14-5-1997 by the Finance Act, 1997 in respect of furnace and hot steel re-roller units, the respondents opted to pay fix duty in terms of capacity of their induction furnaces. Consequently, each respondent was required to pay fixed duty of Rs. 5 lacs per month on three metric ton capacity of its induction furnaces. The respondents debited their Cenvat Credit Account of inputs for discharging their liability of payment of excise duty for the period under the Compounded Levy Scheme.
 
Appellant’s contention:- As per the department, the respondents could not have made use of Cenvat Credit Account and the duty was to be paid only through Personal Ledger Account (for short, PLA). Finding fault with the procedure of payment of duty, the Adjudicating Authority i.e. the Joint Commissioner, Customs & Central Excise confirmed the demand of Rs. 8,04,195/- against M/s. Punjab Castings Pvt. Limited and demand of Rs. 17,71,208/- against M/s. R. Ess Iron & Steel Private Limited via PLA along with interest, disallowing the duty discharged through Cenvat account. In addition, penalty of equal amount was also confirmed against them.

Respondent’s contention:- The respondents challenged this order of the Adjudicating Authority by way of separate appeals. Vide order dated 20-12-2004 (Annexure A-2), the Appellate Authority found that as arrears in question were on account of excise duty, there was no bar in paying the same through cenvat account. Appeals of the respondents were allowed. Dissatisfied with order Annexure A-2, the department went in appeal. In its joint order, the Tribunal, vide order dated 2-8-2011, confirmed the view taken by the Commissioner (Appeals) holding that excise duty liability on final products covered under Compounded Levy Scheme could be discharged through cenvat credit. Payment of duty through cenvat credit account thus was found to be in order. Levy of interest and imposition of penalty by the Adjudicating Authority was set aside.
 
Reasoning of judgment:- After considering the submissions produced by both the sides the Hon’ble High Court concluded on the part that plea of the department is that benefit of cenvat credit could not be availed by the respondents as they were required to discharge their duty liability only through PLA. It is claimed that payment of duty via cenvat credit does not discharge duty liability of the respondents. In short, it is claimed that first as also second Appellate Authority went wrong in approving the action of the respondents of payment of duty through cenvat credit. Seeking reversal of orders of the Appellate Authority, restoration of the order in original is sought.
 
When counsel for the appellant-department vociferously espousing the cause of the department has contended that strict compliance of rules was to be made by the respondents in discharging their duty liability and payment was to be made only through PLA, it has been conceded that there is neither evasion of duty nor any loss has been occasioned to the revenue.
 
Even if whole case of the department is considered in entirety, the only defect is in the procedure adopted by the respondents for discharging their duty liability. At this stage, findings of the Tribunal, are reproduced as below :
 
“On careful consideration of the submission made from both sides, we find that the case put against the assessee in the show cause notice clearly indicates that the demand, penalty and interest on the demand is only on the ground of discharge of duty liability on the final products covered under compounded levy scheme after 1-4-2000 through Cenvat Credit account. It is seen that the learned Commissioner (Appeals) has come to conclusion that such amounts which were duty from the appellants could be discharged through debit in Cenvat credit and were accordingly debited by them on their own. Such a debit through Cenvat credit account cannot be faulted with and there is no need for imposition of penalty and interest as Cenvat Credit Rules specifically indicate utilization of legit credit availed for discharge of duty liability. There is no dispute that the credit availed was eligible credit.”
 
It is evident from these findings that both the appellate authorities had found no fault with the mode of payment of excise duty by the respondents. Cenvat account of the respondents had sufficient credit and they discharged their duty liability through the same instead of making payment through PLA; there is neither loss to the revenue nor there is evasion of duty.
 
Consequently, the appeals being devoid of merits are dismissed in limine.
 
Decision:-Appeals dismissed.

Comment:- The crux of the case is that utilisation of cenvat credit for payment of excise duty under  Compound levy Scheme is proper discharge of liability on the premise that the notification of compound levy scheme only puts restriction on credit availment during the period of option. It does not restricts utilisation of rightly availed cenvat credit earned by assessee. Similar decision was given by Rajasthan High Court in the case of Shankeshwar Fabrics.

Prepared by: Kushal Shah

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