Whether monthly ER-1 return is required to be filed in respect of an assessee, who is operating under the compounded levy scheme?

PJ/Case Laws/2012-13/1147

Case: ZAIDAN METAL ROLLING MILLS PVT LTD V/S COMMISSIONER OF CENTRAL EXCISE, MUMBAI

Citation: 2012-TIOL-801-CESTAT-MUM

Issue:- Whether monthly ER-1 return is required to be filed in respect of an assessee, who is operating under the compounded levy scheme?

Brief Facts: - The appeal, condonation of delay and stay application are filed against order-in-appeal No.PKS/144/BEL/2010 dated 21/06/2010 passed by Commissioner of Central Excise & Customs (Appeals), Belapur. The condonation is for a period of 12 days and delay is due to the appellant's sickness. Considering the reasons stated by the appellant is satisfactory, the application for condonation of delay is allowed.

In the instant case, the appellant, M/s. Zaidan Metal Rolling Mills Pvt. Ltd., manufacture aluminium circles and operate under compounded levy scheme notified vide notification No.17/07-CE dated 01/03/2007, which prescribes a levy of Rs.12,000/- per cold rolling machine installed in the appellants factory premises. A notice was issued to the appellant proposing imposition of penalty under Rule 27 of the Central Excise Rules, 2002, for contravention of Rule 12 (1) of the Central Excise Rules, 2002 on the ground that the appellant did not file the monthly ER-1 returns in the prescribed form within 10 days of the close of the month. For such non-compliance a penalty of Rs.5,000/- was imposed on the appellant by the jurisdictional Assistant Commissioner vide order dated 13/08/09, which was appealed against before the lower appellate authority. The lower appellate authority vide the impugned order upheld the imposition of penalty on the ground that notification No.17/07-CE exempts the appellant only from the operation of Rule 8 of Central Excise Rules, 2002 and not from Rule 12.

Appellant’s Contention: - The appellants contended that Rule 2 (c) of Central Excise Rules, 2002 defines the assessee as:-
"The assessee" means any person who is liable for payment of duty assessed or a producer or manufacturer of excisable goods or a registered person of a private warehouse in which excisable goods are stored and includes an authorised agent of such person.
Further, Rule 2 (e) of Central Excise Rules, 2002 defines "duty" as:-
"duty" means the duty payable under Section 3 of the Act.
He contends that in respect of compounded levy scheme, the excise duty is levied under Section 3A of the Central Excise Act and not under Section 3. Therefore, the provisions of Central Excise Rules, 2002 would apply in respect of duty paid under Section 3 and not in respect of duty paid under Section 3A of the said Central Excise Act. Accordingly, they are not required to file the monthly returns as envisaged under Rule 12 of the Central Excise Rules, 2002. He further submits that under para 4 of the said notification 17/07-CE, the manufacturer operating under the compounded levy scheme has to make a declaration and maintain accounts as provided therein. The manufacturer has to make an application in the prescribed format seeking permission to remove the aluminium circles from his premises during the ensuing month declaring the maximum number of cold rolling machines installed by him or his behalf in one or more premises at any time during three calendar months immediately preceding the said calendar month in which such application is made. In the case under consideration, they have made such an application and, therefore, the compliance to statutory provisions have been met by them.

Respondent’s Contention: - The respondents reiterates the findings given by the lower authorities and submits that under Notification 17/07-CE, the appellant is exempted only from the provisions from Rule 8 of the said Central Excise rules, and not from the provisions of Rule 12.

Reasoning of Judgment: - The Hon’ble Tribunal held that the appeal itself can be disposed of at this stage. Therefore, after granting stay against the dues adjudged, he takes up the appeal for disposal. Rule 12 of the Central Excise Rules, 2002 applies to an ‘assessee' and as per the said Rule the assessee has to file monthly return in the prescribed format of the production or removal of the goods and give other particulars within 10 days of the close of the month to which the return relates. The assessee by definition under Rule 2 (c) is a person who is liable for payment of duty assessed and ‘duty’ means duty payable under Section 3 of the Central Excise Act. In the instant case the duty payment has been made under Rule 3A of the Act and not under Section 3. Therefore, the provisions of Rule 12 have no application whatsoever and there is no requirement on the part of the appellant to file a monthly return in ER1 form or in any other form. Notification No.17/07-CE is a complete code in itself and prescribes the duties and responsibilities that are required to be discharged by a person operating under the said notification and under the said notification an application has to be filed on a quarterly basis indicating the number of cold rolling machines installed and duty liability required to be discharged and actually discharged. Under compounded levy scheme, this is the statutory return which is required to be filed and not the return under Rule 12 of the Central Excise Rules, 2002. Inasmuch as the appellant has complied with the said procedure, he hold that the appellant has not violated the provisions of Rule 12 of the Central Excise Rule, 2002 and accordingly, the imposition of penalty on the appellant under Rule 27 for violation of Rule 12 is not correct in law.

Decision: - The appeal was allowed with consequential relief.

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