Mode of Payment of duty recoverable under Section 11D of Central Excise Act, 1944

PJ/CASE STUDY/2011-12/44

02 October 2012

PJ/Case Study/2011-12/44

CASE STUDY

Prepared By:
CA Pradeep Jain and
Sukhvinder Kaur LLB [FYIC]

Introduction:-

The issue involved in this case was that if an assessee had charged duty from its customers on exempted goods which is recoverable under Section 11D of the Central Excise Act, can pay the said duty from its Cenvat Credit account which he has earned rightfully or he is required to pay the duty in cash only. The decision of the Tribunal was in favour of the assessee but Revenue went into appeal before the High Court.

Relevant Legal Provisions: -

Section 11D of the Central Excise Act, 1944 - Duties of excise collected from the buyer to be deposited with the Central Government

(1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, [every person who is liable to pay duty under this Act or the rules made thereunder, and has collected any amount in excess of duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods] in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.

[(1A) Every person, who has collected any amount in excess of the duty assessed or determined and paid on any excisable goods or has collected any amount as representing duty of excise on any excisable goods which are wholly exempt or are chargeable to nil rate of duty from any person in any manner, shall forthwith pay the amount so collected to the credit of the Central 30 Government.]

[(2) Where any amount is required to be paid to the credit of the Central Government under [sub-section (1) or sub-section (1A), as the case may be,] ^Old[ sub-section (1)] and which has not been so paid, the Central Excise Officer may serve on the person liable to pay such amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government.

(3) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom the notice is served under sub-section (2), determine the amount due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

(4) The amount paid to the credit of the Central Government under [sub-section (1) or sub-section (1A) or sub-section (3), as the case may be,] ^Old[ sub-section (1) or sub-section (3)] shall be adjusted against the duty of excise payable by the person on finalisation of assessment or any other proceeding for determination of the duty of excise relating to the excisable goods referred to in [sub-section (1) and sub-section (1A)] ^Old[sub-section (1)].

(5) Where any surplus is left after such adjustment under sub-section (4), the amount of such surplus shall either be credited to the Fund or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B and such person may make an application under that Section in such cases within six months from the date of the public notice to be issued by the Assistant Commissioner of Central Excise for refund of such surplus amount.]

Section 11D of the Central Excise Act, 1944 - Interest on the amounts collected in excess of duty

(1) Where an amount has been collected in excess of the duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the [buyer of such goods or from any person or where a person has collected any amount as representing duty of excise on any excisable goods which are wholly exempt or are chargeable to nil rate of duty, the person] ^Old[buyer of such goods, the person] who is liable to ay such amount as determined under sub-section (3) of section 11D, shall, in addition to the amount, be liable to pay interest at such rate not below ten percent and not exceeding thirty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first day of the month succeeding the month in which the amount ought to have been paid under this Act, but for the provisions contained in sub-section (3) of section 11D, till the date of payment of such amount:

Provided that in such cases where the amount becomes payable consequent to issue of an order, instruction or direction by the Board under section 37B, and such amount payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole amount, including the amount already paid.

(2) The provisions of sub-section (1) shall not apply to cases where the amount had become payable or ought to have been paid before the day on which the Finance Bill, 2003 receives the assent of the President.

Explanation 1. - Where the amount determined under sub-section (3) of section 11D is reduced by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, the interest payable thereon under sub-section (1) shall be on such reduced amount.

Explanation 2. - Where the amount determined under sub-section (3) of section 11D is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, the interest payable thereon under sub-section (1) shall be on such increased amount.]

Commissioner v/s M/s Unison Metal Ltd
[Order dated: 19.01.2012 in Tax Appeal No. 797 of 2010]

Brief Facts:-

- Respondent-assessee are engaged in the manufacture of Steel Patta Patti and they clear the same on the payment of duty. They were also clearing steel scrap which is exempted from payment of duty under Notification No. 3/2005-CE, dated 24.02.2005.

- Since the Respondents were not maintaining separate account in respect of inputs used in the manufacture of dutiable and exempted goods, they were required to pay 10% of the value as per the provisions of Rule 6 (3) of the Cenvat Credit Rules, 2004.

- Instead of paying 10%, the Respondents were paying duty at the rate 16% from the cenvat credit. The Department informed them that the procedure followed by them was wrong and the duty was recoverable in cash under the provisions of Section 11D of the CEA, 1944.

- A show cause notice was issued to the Respondent requiring them to show cause as to why the amount of Rs. 1, 13,092/- should not be recovered from them in cash under Section 11D of CEA, 1944 and the interest as applicable u/s 11DD of CEA, 1944.

- The Original Adjudicating Authority confirmed the demand and imposed penalty of equal amount demanded. He maintained that the amount is paid on exempted goods which were not payable. Hence, the Respondent cannot pay the same from Cenvat account and the same is recoverable in cash under Section 11D of Central Excise Act.

- In appeal filled by the respondent, the Commissioner (A) held that respondent were required to reverse the cenvat credit @ 10% from Cenvat credit as per Rule 6 of Cenvat credit rules. They need not to pay the duty in cash. As such, they could pay 10% by reversing the Cenvat credit but the balance amount is to be paid in cash. This is due to the fact that they are recovered the same amount from the customer.

- Accordingly, the respondent had filed further appeal against the impugned order before the Tribunal. The department has also filed the appeal against the said order.

- The Tribunal decided the matter in favour of the respondent by holding that there was no legal provision to require the manufacture to pay duty from PLA only and there were no such provision under Rule 6 of the Cenvat Credit Rules. Reliance was placed on the decision given in Shivam Metals vs. CCE, Jaipur [2009 (235) ELT 81 (Tri.-Del.)]. It was further held that in the absence of specific legal provisions and also in view of the fact that there was no proposal in the SCN to require the appellant to pay a portion from PLA, the impugned order cannot be sustained and was therefore set aside.

- Aggrieved by the Order of the Tribunal, Department had filed appeal before the High Court.

Appellant’s Contention:-

Revenue contended that the Tribunal committed an error. The respondent was not required to collect duty. Having done so, the amount should have been deposited in the Department and respondent should not have availed Cenvat Credit for the said purpose.

Respondent’s Contention:-

- Respondent contended that this issue was decided by the Tribunal in the case of Shivan Metals and earlier also thereto, in case of this very assessee, by the Larger Bench reported in 2004 ELT 323 [Tri-LB].

- It was submitted that the said issue was not carried in appeal by the Department and the decision was thus accepted by them.

Reasoning of the High Court:-

- The High Court noted that it is not in dispute that the present issue was decided in favour of the manufacturers by the Tribunal in case of Shivam Metals and in case of this very assessee in 2004 ELT 323 [Tri-LB].

- The High Court noticed that the decision in case of the present assessee by the Larger Bench was not carried in appeal.

- It was noticed additionally that the amount involved in the present appeal is also not very large. It was pointed out by respondent that the issue is non-recurring since the statutory provisions prevalent at the relevant time have undergone changes.

- In that view of the matter, the High Court did not entertain the appeal on this ground without commencing on legality of the Tribunal’s view.

Decision of the High Court:-

Appeal dismissed.

Conclusion:-

The High Court rightfully held that when once the issue was settled in favor of the assessee by the decision given by the Larger bench of the Tribunal and the said decision was not appealed against, then the Department should accept the same and not go into appeal challenging the well settled issue. Moreover, when not a large amount is involved, litigation should be avoided.

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PJ/CASE STUDY/2011-12/44
02 October 2012

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