Whether section 11D applicable for 10% amount under Rule 6 collected from customers?

PJ/Case law/2014-15/2254

Case:-CCE, CHENNAI-IV VS M/s INVENSYS INDIA PVT LTD

Citation:- 2014-TIOL-1176-CESTAT-BANG

Brief facts:- The respondents were engaged in the manufacture of dutiable and exempted goods. They have not maintained separate accounts in respect of inputs meant for used in the manufacture of dutiable goods and exempted goods. They paid 10% on the value of total price of exempted final product in terms of Rule 6(3)(b) of CENVAT Credit Rules, 2002 and collected the same from their customers. A show-cause notice dated 22.5.2007 was issued proposing the demand of an amount of Rs.12,54,998/- in the month of December 2004 under Section 11D of Central Excise Act, 1944 along with interest and penalty. Adjudicating authority confirmed the amount of Rs.12,54,998/- along with interest and imposed a penalty of Rs.10,000/- under Rule 25 of the Central Excise Rules, 2002. Commissioner (Appeals) set aside the adjudication order.

Appellant’s contentions:- The learned AR on behalf of Revenue submits that Commissioner (Appeals) erroneously passed the order following the decision of the Larger Bench of the Tribunal in the case of Unison Metals Ltd. Vs. CCE - 2006 (204) ELT 323 (Tri.- LB) = 2006-TIOL-1337-CESTAT-DEL-LB. He submits that on perusal of the invoices, it is clear that the respondents collected this amount representing as duty which is squarely covered under Section 11D of the Central Excise Act. He further submits that the Larger Bench had given a clear observation that if the amount is collected as duty it will be debited to the Government under Section 11D of the Act. He further submits that the respondent should not mention the amount in their invoices as the goods are exempted by Notification No. 3/2004-CE dated 6.1.2004.

Respondent’s contentions:-In response, the learned counsel placed a copy of the invoice and reiterated the findings of the lower appellate authority.

Reasoning of judgment:- It is seen from the invoice that the respondents mentioned the amount with a note "materials cleared as per Notification No. 3/2004-CE dated 6.1.2004 CENVAT credit expunged at the rate 10% of the total value of the goods cleared on except sales tax and other taxes as per clause (3) of Rule 6(b)". The Larger Bench of the Tribunal in the case of Unison Metals Ltd. (supra), decided the question whether the amount of 8% debited from RG 23A Part - II in terms of the provisions of Rule 57CC(1) and collected from the customers is required to be debited with the Government in terms of the provisions of Section 11D of the Central Excise Act, 1944. In that case, the assessee had paid 8% of the value of the goods in terms of Rule 57CC at the time of removal of the goods from the factory. The amounts so paid were recovered by them from their customers. The
Larger Bench observed as under:-

"8. In the present case, it is not in dispute that the assessees had paid 8% of the value of the goods in terms of Rule 57CC at the time of removal of the goods from the factory. The amounts so paid are the amounts recovered by them from their buyers. Thus, in the present cases, no amounts collected from the buyers remain unpaid to the revenue, irrespective of whether those amounts were represented in the sales documents as duty or not. In fact, the invoices referred to the payment in different terms such as "8% reversal of assessable value", "8% value", "8% duty etc". As the amounts recovered from the buyers are not retained by the assessees, the question of deposit cannot arise, whether under Section 11D or any other provision. A reading of Section 11D makes it clear that what is required is that amounts collected as duty should not be retained by the manufacturers and should be deposited with the revenue. This was the view that Division Bench took in the case of Nu-Wave shoes . We may read the relevant part of that order:

"Admittedly, Rule 57CC(1) is applicable in the present case. It is not the case of the Department that the assessees have been charging an amount over and above 8 of the price of the exempted variety of footwear from their customers and in fact, the show cause notice proceeds on the basis that only the amount reversed by debit in the credit account from 1-9-1996 to April, 1997 has been charged from the customers. For the period 23-7-1996 to 31-8-1996, the show cause notice itself recognizes that the assessees have been reversing MODVAT credit proportionately on a pro-rata basis on inputs used in the manufacture of exempted variety of footwear and that the amount so reversed has been charged from the customers. A perusal of the invoices placed on record clearly shows that they have debited their RG 23A account while paying 8% under Rule 57CC and some invoices show debit entry in their PLA. This makes it clear that the appellants have not retained the amount collected from the customers and that they have passed on the amount to the Government as provided under Section 11D of the Central Excise Act. Hence the charge of contravention of the provisions of Section 11D is not sustainable. Accordingly, we set aside the impugned order and allow the appeal".

We find that the above view taken by the Tribunal is in conformity with the judgment of the apex Court in the case of Mafatlal Industries, that repeat payment of excise duty is not contemplated".

It has also observed that what is relevant is only whether the collection was represented as duty of excise. In the present case, they find that the amount mentioned in the invoice as stated above was debited in their CENVAT account under Rule 6(b) of CENVAT Credit Rules. So, it was not retained by them and paid to the Government. The present case is covered by the decision of the Larger Bench of the Tribunal in the case of Unison Metals Ltd. (supra).

In view of the above findings, the appeal was allowed.

Decision:- The appeal was rejected.

Comment:-The essence of the case is that the provisions of section 11D are not applicable if the amount of reversal at the rate of 10% of the value of exempted goods under Rule 6 is being debited from the cenvat account and is also collected from the customers because as per section 11D, every person, who has collected any amount representing the same as excise duty is mandatorily required to pay the amount so collected to the credit of the Central Government. However, if the amount of 10% as collected from the customers is debited from the cenvat credit account, the same does not amounts to “retention of the government money” and so the provisions of section 11D are not attracted in view of the larger bench decision in the case of Unison Metals Ltd.

Prepared by: Monika Tak

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PJ/Case law/2014-15/2254

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