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PJ/Case law/2013-14/1878

Whether credit of BED can be utilised for discharging duty liability with respect to SED & AED?

Case:- AAREN  SYNTEX PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, VAPI

Citation:-2013(294) E.L.T. 164 (Tri.-Ahmd.)

Brief Facts:-This appeal is filed against the Order-in-Appeal No. KS/62/Daman/2006, dated 27-3-2006.

The relevant facts that arise for consideration that the appellant here­inabove is a manufacturer of multifold yarn/twisted yarn and was discharging duty liability by availing benefit of Cenvat credit. The appellants claimed the benefit of Notification No. 6/2000-CE., dated 1-3-2000, wherein they were to reverse the MODVAT credit. It was noticed by the-lower authorities that during the period November, 2003 and December 2003, the appellants paid Central Ex­cise duty of Rs. 93,484/- (Rs. Ninety Three Thousand, Four Hundred and Eighty Four only) (Rs. 64,479/- Rs. Sixty Four Thousand, Four Hundred and Seventy Nine as SED and Rs. 29,005/- Rs. Twenty Nine Thousands and Five as AED (T&TA)] , through debits in BED of RG-23C Part II for clearances of finished goods/inputs, and during the same period cleared input by short-paying duty cleared on the finished goods by undervaluing the goods due to which there was a short-payment of Central Excise duty. Accordingly, a Show Cause Notice dated 9-11-2004 was issued for the demand of duty proposing penalty and recovery of appropriate interest. The adjudicating authority confirmed the demand and im­posed penalty of Rs. 10,000/- (Rupees Ten Thousands only) and also ordered for recovery of appropriate interest. Aggrieved by such order, the appellant pre­ferred an appeal before ld. Commissioner (Appeals), who did not agree with the contention of the assessee and upheld the order-in-original.
 
Appellant Contentions:-Ld. Counsel would submit that discharge of SED & AED by debits in RG-23C Part II by utilizing BED is not in violation of Cenvat Credit Rules. He would draw our attention to the provisions of Rule.3(6)(b) of Cenvat Credit Rules, 2002, which were there during the relevant period. He would also submit that judgment and order of the Tribunal in following cases, are directly on the point.

(i)          CCE, Siliguri v. Aryaman Tea Estate – 2007(216) E.L.T. 234 (Tri.-Kolkata)
(ii)         Euro Cotspin Ltd. v. CCE, Chandigarh – 2008(223) E.L.T. 618(Tri.-Del.)
(iii)        CCE, Siliguri v. Oodlabari Tea Estate – 2007 (215) E.L.T. 261 (Tri.-Kolkata)
As regards the demand of duty on the ground of undervaluation, it is his submission that the clearances were made post 2004. It is his submission that the transaction value which was indicated on the invoice is not doubted but the de­mand has been raised on the ground that these goods were declared as stock and that stock declaration was at higher value. It is his submission that transaction value was the value of goods, unless the transaction value is doubted, the same cannot be discarded. For this proposition, he relies upon the following decisions :
(i)          CCE, Vapi v. Hindustan Rubbers - 2011 (269) E.L.T. 376 (Tri.-Ahmd.)
(ii)           Maruti Udyog Ltd. v. CCE, New Delhi - 2002 (150) E.L.T. 1020 (Tri.- Del.)
 As regards 3rd. demand of removal of inputs, which deteriorated long standing, it is his submission that the inputs were lying for more than 5 years and that the said inputs could not be sold at their original price, as was purchased. It is his submission that once the inputs have deteriorated, they can­not be considered to be removal as such from the factory.
 
Respondent Contentions:- Ld. SDR, as regards issue No. 1 and 2, reiterates the findings of lower authority. As regards issue of reversal of Cenvat credit on the input, on which MODVAT Credit of Central Excise duty was taken, he submits that the inputs, whether deteriorated or not, were removed from the factory premises without any processing. It is his submission that there was no evidence brought on record by the appellant before lower authority or even before this Bench to hold that the inputs had deteriorated during storage.
 
Reasoning of Judgment:-We have considered the submissions made at length by both sides and perused the records.
As regards demand of duty of Rs. 93,484/- (Rs. Ninety Three Thousands, Four Hundred and Eighty Four only) being wrongly utilized for discharge of SED and AED (T&TA), through the debit in RG-23C Part II BED, we find that the provisions of Rule 6 of Cenvat Credit Rules, 2002, specifically sub-rule 6(d) reads as under :
"CENVAT credit in respect of -
the additional duty of Excise leviable under Section 3 of the Addi­tional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);
the National Calamity Contingent duty leviable under Section 136 of the Finance Act, 2001 as amended by Clause 161 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, the force of law; and
the additional duty leviable under Section 3 of the Customs Tariff Act, equivalent to the duty of Excise specified under clauses (i) and (ii) above,
 
shall be utilized only towards payment of duty of Excise leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, or the National Calamity Contingent duty leviable under Section 136 of the Fi­nance Act, 2001 as amended by Clause 161 of the Finance Bill, 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, the force of law, respectively on any final products manufactured by the manufacturer or for payment of such duty on inputs themselves if such inputs are removed as such or after being partially processed;

Explanation : For removal of doubts, it is clarified that the credit of the addi­tional duty of Excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), may be utilized towards payment of duty of Excise leviable under the First Schedule or the Second Schedule of the Central Excise Tariff Act, 1985."

It can be seen from the above reproduced statutory provisions of utilization of Cenvat credit that it relates for utilization of specific duties, and said rule specifically debar utilization of NCCD and additional duty leviable un­der Section 3 of Central Excise Tariff Act for the utilization of discharge of any other Excise duty other than AED or T&TA or NCCD. The said rule did not, at given point of time, debar the appellant from utilizing BED for discharge of SED and AED. We find strong force in the arguments of ld. Counsel that when there is no provision for non-utilisation of BED for discharge of SED & AED, there cannot be any demand. We also agree with the contentions of ld. Counsel that judgments as cited by him are squarely on the point. In view of this, we hold that the demand of duty of Rs. 93,484/- (Rs. Ninety Three Thousands, Four Hundred and Eighty Four only) as upheld by ld. Commissioner (Appeals) is incorrect and liable to be set aside and we do so.

As regards demand of duty of Rs. 1,24,564/- (Rupees One lakh, Twenty Four Thousands, Five Hundred and- Sixty Four only), we find that there is no dispute that the finished goods were removed from the factory premises of the appellant during the period November, 2003 and December, 2003. It is correct that during the relevant period, provisions of Section 4 were specifically discuss­ing about the transaction value to be considered for discharge of Central Excise duty liability. In the orders of lower authority, we find that there is no allegation or rejection of transaction value, on the invoices which were raised by the appel­lant for the clearance of the finished goods during November, 2003 and Decem­ber, 2003. The reasonings adopted by the lower authorities for confirming the demand on the ground of undervaluation is incorrect as the stock declarations made could be for specific purpose and during the relevant period, stock declara­tion was made, rate/value could be the said value as was declared and need not be the value on the date of clearances. But, on the date of clearance, what was considered for discharge of duty was transaction value which is in accordance with the provisions of Section 4 of Central Excise Act, 1944. We find that the de­cisions relied upon by ld. Counsel were, in fact, rendered in the case of Hindustan Rubbers (supra) was on an identical issue, which is holding that the transaction value is correct value for discharge of duty liability on the date of clearance. We find that the lower authorities have incorrectly upheld the demand of duty. In view of the above, we set aside the demand of duty of Rs. 1,24,564/- (Rupees One lakh, Twenty Four Thousands, Five Hundred and Sixty Four only) as con­firmed by the adjudicating authority and upheld by ld. Commissioner (Appeals).

As regards demand of duty of removal on deteriorated input from the factory premises of the appellant, we find that the provisions of Rule 3 of Cenvat Credit Rules specifically indicates that the inputs which are lying in stock if removed from the factory premises as such, Cenvat credit taken on such inputs and needs to be reversed. We find, as correctly contended by the ld. SDR, that the appellant had not produced any evidence as regards deteriorated condition of inputs. In the absence of any such evidence, we are unable to appreciate the con­tentions of the ld. Counsel that the inputs were deteriorated. In view of this, the orders of lower authorities confirming demand of duty on the appellant for re­versal of amount of Cenvat credit taken by the appellant on the inputs removed as such, are correct and do not suffer from any infirmity. In view of this, we up­hold that portion of the order which confirms the demand of reversal of Cenvat credit on the inputs removed as such. The lower authorities may re-quantify after considering the amount of duty paid by the appellant on the date of removal, on such inputs.

 As regards-penalty imposed on the appellant, we are of the consid­ered view that since major portion the demand has been set aside by us and reversal of Cenvat credit on the deteriorated inputs would have been question of interpretation, we do not find any reason to sustain the imposition of-penalty on the appellant as ordered by the lower authorities. Penalty imposed is set aside. But the appellant is liable to pay interest on differential amount of the demand con­firmed by this Court as indicated hereinabove.

The appeal is disposed off as indicated hereinabove.
 
Decision:-Appeal partly allowed.

Comment:-The gist of this case is that non-utilization of BED for the discharge of SED and AED is not contained in provision of Rule 6 (6d) of CCR, 2002 and so there is no bar in utilising cenvat credit of BED for discharging duty liability of SED and AED.   

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