Whether Section 11D of CEA is applicable when credit was utilised for payment of duty on goods that were liable to Nil rate of duty?

PJ/Case Study/2013-14/67

CASE STUDY

Prepared by: CA Neetu Sukhwani &
Aashish Bohra

Introduction:- M/s SHIVAM METALS are manufacturer engaged in the manufacture of stainless steel cold rolled patta patti, stainless steel hot rolled patta, stainless steel scrap and waste falling under tariff sub heading no. 7219090 and 72042190 respectively. The core point of dispute was that the assessee was paying excise duty on clearance of stainless steel scrap that was actually chargeable to NIL rate of duty and thus was exempted. According to the department the assessee had contravened the provisions of rules 3 and 6 of CENVAT credit rules, 2004 as the assessee was required to pay 10% of the value of exempted goods while whole input credit was availed by the assessee with respect to inputs used in the manufacture of dutiable and exempted goods. Accordingly, it was alleged that the amount of Rs. 29, 342/- was recoverable along with interest under the provision of Rule 14 of the Cenvat Credit Rules, 2004. It was also alleged that as no excise duty was required to be discharged on the clearance of stainless steel scrap but as the assessee cleared the same on payment of duty and utilized the CENVAT credit of Rs 28,219/- under Rule 3(3) of the Cenvat Credit Rules, 2004 for payment of central excise duty on exempted goods i.e. Stainless Steel Scrap in order to pass the Cenvat credit benefit to the consignees, the amount so collected as central excise duty is required to be deposited in Government Account under Section 11D with interest under the Central Excise Act, 1944. The Adjudicating Authority although accepted the submission of the assessee that recovery of amount under Rule 6(3)(b) of the Cenvat Credit Rules, 2004 was not sustainable as the stainless steel scrap emerged as a ‘by-product’ during the process of manufacture and the provisions of Rule 6 does not apply to ‘by-products.’ However, the adjudicating authority confirmed the amount of Rs. 28,219/- collected from their customers in the guise of central excise duty in terms of Section 11D of the Act along with interest and imposed penalty of Rs. 5,000/- under Rule 25 of the Central Excise Rules, 2002. This order in original was upheld by the Commissioner (Appeals). However, the Tribunal set aside the demand confirmed vide the impugned order in original. It is against the said order of the Tribunal that the department is in appeal to the High Court.

UNION OF INDIA (COMMISSIONER, CENTRAL EXCISE, JAIPUR-II) V/S M/S SHIVAM METALS
[FINAL ORDER D.B. CENTRAL EXCISE APPEAL NO./2009 DATED 22/05/2013]

Relevant Legal Provisions:

SECTION 11D. Duties of excise collected from the buyer to be deposited with the Central Government.

(1) 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 there under, every person who is liable to pay duty under this Act or the rules made there under, and has collected any amount in excess of the duty assessed or determined and paid on any excisable Notwithstanding goods under this Act or the rules made there under 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.

(2) Where any amount is required to the credit of the Central Government under 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 to be paid show cause why they said amount, as specified in the notice, should not be paid by him to the credit of the Central Government.

(3)T he 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 (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).

(5) Where any surplus is left after adjustment the 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 the refund of such surplus amount.

RULE 3(3) OF THE CENVAT CREDIT RULES, 2004.

(3)   Notwithstanding anything contained in sub-rule (1), in relation to a service which ceases to be an exempted service, the provider of the output service shall be allowed to take CENVAT credit of the duty paid on the inputs received on and after the 10th day of September, 2004 and lying in stock on the date on which any service ceases to be an exempted service and used for providing such service.

Rule 6 Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services

RULE 15 OF CENVAT CREDIT RULES, 2004 Confiscation and penalty

Section 11A(1) in The Central Excises And Salt Act, 1944

(1) When any duty of excise has not been levied or paid or has been short- levied or short- paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short- levied or short- paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: (54 of 1963 ) Provided that where any duty of excise has not been levied or paid or has been short- levied or short- paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty, by such person or his agent, the provisions of this sub- section shall have effect, 3[ as if (5 xxx),] for the words" six months", the words" five years" were substituted. Explanation.- Where the service of the notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be.

SECTION 11AB Interest on delayed payment of duty

Issue Involved:-

The following substantial question of law was involved in this case before the High Court:-
Whether Section 11D of CEA is applicable when credit was utilised for payment of duty on goods that were liable to Nil rate of duty?

Brief Facts:-

1.   That the respondent, M/s Shivam Metals, 6. Industrial Area, Behind New Power House, Jodhpur (hereinafter referred to as the assessee also), having Central        Excise Registration No. AAAFS4536PXM001 are engaged in the manufacture of Stainless Steel Cold Rolled Patta Patti, Stainless Steel Scrap, stainless Steel Circles & Stainless Steel Circle Scrap falling under Tariff Sub- heading Nos. 7219.9090 & 7204.2190 respectively. The assessee had contravened the provisions of Rule 3 & 6 of CENVAT Credit Rules, 2004. The assessee had also evaded amount of Rs. 28219/- (CENVAT Rs. 27666/- and Ed. Cess Ps. 553/-) under Rule 6 of Cenvat Credit Rules, 2004 as per the facts stated below.

2.    That the assessee are engaged in the manufacture of dutiable final product i.e. Stainless Steel Cold Rolled Patta/Patti falling under Tariff sub heading no. 7219.9090 and exempted goods i.e., Stainless Steel Scrap falling under Tariff sub heading no. 7204.2190.

Rule 2 of the Cenvat Credit Rules, 2004, has defined “final products” and “exempted goods” as under:-

“ Final Products” means excisable goods manufactured or produced from the inputs.

“Exempted goods” means goods that are exempt from the whole of the duty of excise leviable thereon, and includes goods, which are chargeable to “NIL” rate of duty.

3.    The assessee had been availing cenvat credit on inputs namely, S.S. Flats and other inputs and manufactured Stainless Steel Cold Rolled Patta/Patti (7219.9090) and Stainless Steel Scrap (7204.2190). The Stainless Steel Scrap and waste manufactured and cleared by the assessee were leviable to Nil rate of duty.

4.    That as per Rule 6(1) of the Cenvat Credit Rules, 2004, the assessee was required not to avail Cenvat Credit on such quantity of inputs which was used in manufacture of stainless steel scrap (72042190).

5.    That the Rule 6(1) of the Cenvat Credit Rules, 2004 read as “The Cenvat Credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods except in the circumstances mentioned in sub rule (2). Rule 6(3)(b) says that if the manufacturer did not maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and inputs meant for use in the manufacture of exempted goods then the manufacturer shall pay an amount equal to 10% of the total price excluding sales tax and other taxes of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory. Further explanation I and explanation II to this Rule state that the amount under this rule shall be paid by the manufacturer by debiting the cenvat credit or otherwise and if the manufacturer fails to pay the said amount, it shall be recovered along with interest and the same manner, as prescribed in Rule 14 for recovery of Cenvat credit wrongly taken.

6.    The assessee did not maintain separate accounts and therefore they were required to pay an amount equal to 10% of the total price of the stainless steel scrap at the time of their clearance from the factory.

7.    The assessee had not paid the amount of Rs. 29,342/- on the clearances of SS Scrap during March, 2005 to November, 2005, in contravention of the provisions of Rule 6(3)(b) of Cenvat Credit Rules, 2004 which appeared recoverable from them under Rule 14 of Cenvat Credit Rules, 2004 read with section 11A & 11AB of Central Excise Act, 1944. The assessee also appeared liable for penal action under Rule 15 of Cenvat Credit Rules, 2004.

8.    Further, it also appeared that assessee had wrongly utilised the Cenvat Credit of Rs. 28,219/- for payment of Central Excise Duty on Stainless Steel Scrap which was chargeable to Nil rate of duty in order to pass on the Cenvat Credit benefit to the consignees.

9.    It was alleged that the assessee had wrongly assessed the duty on stainless steel scrap at the rates shown in their invoices with an intention to pass on the cenvat credit to the consignees and there by collected the central excise duty and encashed the cenvat credit in violation to Rule 6 of the Central Excise Rules. The amount so collected as central excise duty is required to be deposited in government account in cash under section 11D along with interest under section 11DD of the Central Excise Act, 1944. It appeared that the assessee had therefore violated the provisions of Rules 3(3) of Cenvat Credit Rules, 2004. The amount of Cenvat Credit of Rs. 28,219/- thus mis-utilised for payment of central excise duty on stainless steel scrap is recoverable from them under Rule 14 of the Cenvat Credit Rules, 2004 read with section 11D of the Central Excise Act, 1944 along with interest under section 11DD of the Central Excise Act, 1944.

10. Accordingly, notice dated. 17.01.06 was issued to M/s Shivam Metals, 6, Industrial Area, Behind New Power House, Jodhpur proposing:
·         Recovery of the amount of Rs. 29342/- not paid by the assessee in contravention of Rule 6 (3)(b) of the CENVAT Credit Rules, 2004 along with interest under the provisions of Rule 14 ibid read with provisions of Section 11A and 11 AB of Central Excise Act, 1944.

·         Recovery of the wrongly utilized CENVAT Credit of Rs.28219/- under Rule 3(3) of CENVAT Credit Rules 2004 by wrongly assessing duty on their product in contravention of Rule 6 of Central Excise Rules 2002 and amount of Rs. 28219/- collected from their customers in the guise of Central Excise duty from them in cash in terms of the provisions of Section 11D of the Central Excise act 1944 along with interest thereon in terms of Section 11 DD of the Central Excise Act, 1944.
·         Imposition of penalty in terms of the provisions Rule 15 of the CEN VAT Credit Rules 2004.
·         Imposition of penalty in terms of the provisions Rule 25 the Central Excise Rules, 2002.
11. That the case was decided by the Deputy Commissioner, Central Excise. Division, Jodhpur vide 010 No.83/2006-CE dated 22.03.2006, under which, an amount of Rs. 28219/- was ordered to be recovered in cash in terms of provisions of Section 11-D of Central Excise Act, 1944, along with interest under Section 11-DD ibid and penalty of Rs. 5,000/- was imposed upon the assessee. That the assessee filed appeal before Commissioner (Appeal-II) against Order-in-Original no. 83/2006-CE dated 22.03.2006 passed by Deputy Commissioner Central Excise Division Jodhpur. %Appeal of the assessee was decided by Commissioner (Appeal-II Jaipur vide 01A No. 4 17(HKS) .CE/JP-H/2006 dated 06.07.2006 in which, 010 was upheld.

12. That the assessee again aggrieved with OIA No. 417{HKS).CE/JP-11/2006 dated 06.07,2006 passed by Commissioner (Appeal-II, Jaipur again filed appeal before Hon’ble CESTAT New Delhi, which has been decided by CESTAT vide Final order dated 05.08.2008, in which impugned order has been set aside. The appeal of the assessee was allowed with consequential relief.

13. It is against the said final order of the Tribunal that the department is in appeal to the High Court.

Appellant’s Contention:- The department preferred appeal to the High Court on the following grounds:-

1.    The issue to be decided in this appeal is as to whether Stainless Steel Scrap, which are chargeable to nil rate of duty if cleared on payment of duty by debiting Cenvat account and such duty amount is collected In cash from their buyers then such encashed Cenvat amount can be recovered in the cash in the Provisions of Section 11D of Central Excise Act, 1944 or not since debit of duty from Cenvat account cannot be equated with the cash.

2.    That it is undisputed that SS Scrap falling under Central Excise Tariff sub heading No. 7204.21 was chargeable to nil rate of duty as per Tariff rate. Therefore, the assessee have wrongly utilized CENVAT Credit of Rs. 28219/- under Rule 3(3) of CENVAT Credit Rules 2004 by wrongly assessing duty on their product in contravention of Rule 6 of Central Excise Rules 2002 and amount of Rs. 28119/- collected from, their customers in the guise of central Excise duty is recoverable from them in cash in terms of the provisions of section 11D of the central excise Act 1944, along with interest thereon in terms of Section 11 DD of the Central Excise Act 1944. Further. the amount paid as Central Excise duty from Cenvat credit account on the clearance of SS Scrap which are chargeable to Nil rate of duty certainly Does not represent Central Excise duty rather than encashment of Cenvat credit. Accordingly the utilization of Cenvat Credit against the amount which does not represent duties is not in order as per the provisions of Rule 3 of Cenvat Credit Rules 2004, which allowed/allows      utilization of credit   for payment of duty. That as per the provisions of Rule 6 of Central Excise Rules, 200.2, the assessee himself is required to assess the duty payable on any excisable goods. Under para 3.1 of Ch. 3 of CBEC Excise Manual of supplementary instruction, it has been laid down that the assessee should apply correct classification & value (where duty is ad valorem) on the quantities being removed by him. In case the assessee fails to apply the correct value. it is always questionable by the department. Therefore, the goods, SS Scrap assessed wrongly by the assessee can't be accepted.

3. That as per provisions of Section 11-D of Central Excise Act, 1944 every person, who is liable to pay duty under this Act, or the rules made there under and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this rules made there under from the 'buyers 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, Here In this case the assessee were not liable to Day duty under the Central Excise Act, 1944 or the rules made there under on the SS Scrap, as being chargeable at Nil rate of duty under Central Excise Tariff Act, 1985. Hence primarily the debit of amount from Cenvat credit which was not required to be debited as per the Central Excise Act, 1944 or the rules made there under cannot be treated as legitimate Duty, for the purpose of appropriating/equating against the amount collected in cash from buyers under Section 11D of the Central Excise Act, 1944. Hence the amount collected by the assessee in excess of Nil rate on SS Scrap is required to be deposited in Central Govt. under Section 11-D, of the Central Excise Act, 1944.

4.    That in the instant case the assessee liability of duty was nil on SS Scrap(7204.21) as per Tariff rate. Thus the amount paid by the assessee, as duty from Cenvat credit account does not represent the central excise duty. As such the amount of Cenvat Credit utilized by the assessee for payment of the so called duty, which was otherwise not payable, shall not be treated as the amount paid to the Central Government. Therefore, the provisions of section 11-D ibid are explicit that any amount collected from the customers in excess of the duty is required to be credited to the central Government.

5.    That the goods have not been correctly assessed by the assessee as they paid duty on SS Scrap through Cenvat Credit account though the same were chargeable to nil duty as per tariff rate. Therefore, there was no justified reason for them to pay the duty on SS scrap. It is thus obvious that the goods have been over-assessed by the assessee just to encash the balance of modvat/cenvat credit account and appear to have contravened the provisions of rule 6 of central excise rules, 2002, therefore. Penalty is imposable upon the assessee.

6.    That besides above, provisions of section 11d do not envisage payment of excise duty collected by debiting the cenvat account. The manner of payment of amount collected in excess of duty assessed is indicated in section 11d(3) of the act and is to be treated by the assistant commissioner of central excise in terms of section 11d (5) of act, unless the said assessee make payment of excess amount collected in terms of provisions of section 11d of the act objectives set in section 11d of the act cannot be fulfilled. Therefore, payment made by debiting Cenvat account maintained under Cenvat Credit Rules referred herein above cannot be deemed as payment under Section 11D(3) of the Act.

7.    That the penalty is sought to be imposed on the assessee under Rule 15 of the Cenvat Credit Rules, 2004 for contravention of Rule 6 of the Cenvat Credit Rules 2004. They know legal provisions and have deliberately acted contrary to the legal provisions and are liable for penal action under Rule 15 of the Cenvat Credit Rules, 2004. The interest under Section 11 DD of the Central Excise Act, 1944 also becomes liable to be paid as the provisions of Section 11 DD provide for payment of interest on the amount that has been collected in excess of duty determined on the excisable goods. That moreover, the decision of the Hon'ble Tribunal in the case of M/s Sterlite Industries (India) Ltd v/s CCE Vapi and unison metals
(India) Ltd. Vs. CCE Ahmedabad-1, relied upon by the CESTAT are not relevant as much as the goods cleared by debiting the CENVAT CREDIT account by M/s. Sterlite Industries (India) Ltd. were not exempted goods, whereas the goods cleared in this case were chargeable to nil rate of duty. Similarly the case of M/s Union Metals Ltd. (Tri-LB) relied by Hon'ble Tribunal is also not relevant, as in this case assessee were manufacturing dutiable as well as exempted good. The assessee were paying 8% of the price of exempted goods under Rule 57 CC of the erstwhile Central Excise Rules, 1944 and were collecting the same from their buyers, whereas in the instant case Stainless Steel Scrap were cleared on payment of duty which was chargeable to nil rate of duty. In view of the above, the amount paid from the Cenvat Credit account as duty on the clearances of SS Scrap, in spite of that the same being chargeable to nil rate of duty is recoverable from the assessee In cash as per the provisions of Section 11-D of Central Excise Act, 1944, along with interest and penalty. That it appears that the Hon'ble CESTAT's Final Order dated 05.08.2008 Is not proper and legally correct. Therefore, the present appeal under Section 35G of the Central Excise Act, 1944 is being filed bore this Hon'ble High Court of Rajasthan as the case involves the following question of law:

"Whether the Hon’ble CESTAT is correct In holding that the provisions of Section 11-D of the Central Excise Act, 1944 are not applicable in the cases, where the assessee are engaged in the encashment of Cenvat credit by clearing the goods on payment of duty' from Cenvat credit account, which are otherwise chargeable to NIL rate of duty. "That the final order No.1247/2008-SM(BR) dated 5.8.2008 passed by the learned tribunal was received in the Commissionerate on 22.9.2008.

Respondent’s contention:- The respondent made following submissions for the two issues involved in their case:-

The respondent contested the amount of Rs. 29342/- on the ground that Rule 6(3) of the CCR are attracted only when they are manufacturing final products which are chargeable to duty as well as exempted final goods from the same inputs on which they are availing Cenvat credit of duty paid thereon and they are not maintaining separate records as stipulated under 6(3) (a) ibid. It is clear that the Rules contemplate two separate final products being manufactured by the assessee deliberately. However, in their case they are only manufacturing SS patta and not Scrap but it is naturally arising during manufacturing of SS Patta. Hence SS scrap is nothing but a by-product.

Rule 57 D (1)/(2)of the erstwhile CER,1944 provided that Credit of specified duty shall not be denied or varied on the grounds that part of the inputs is contained in any waste , refuse or by product arising during the manufacture of the final product or that the inputs have become wasted during the course of the manufacture of the final product, whether or not such waste or refuse or by- product is exempt from the Whole of the duty of excise leviable thereon or chargeable to NIL rate of duty or is not specified as a final product under Rule 57 A.

Simultaneously, Rule 57C(1) of the erstwhile Central Excise Rules, 1944 provided that an amount equal to 8% of the value of the exempted final products should be paid by the manufacturer at the time of clearances of exempted final products. Therefore the provisions of Rule 57CC (i) and Rule 57 D (1) /(2) of the above Rules are contradictory which was resolved by the Hon'ble Tribunal in the case of Aarti drugs ltd. vs. CCE, Mumbai-III reported at 2001 (133) ELT 385 (Tri.) wherein it has been held that Rule 57CC (1) of the Central Excise Rules , 1944 does not apply to by product and it was held that credit was permissible under rule 57 D (2) ibid on inputs contained in by product even if final product is exempted or is chargeable to Nil rate of duty.

Reliance was also placed on the following case laws.

Guardian Rubber private Ltd. Vs. CCE Cochin reported at 2005 (183) ELT 285 (Tri)

Panadey Micronutrients Vs, CCE„ Jaipur 1996 (87) ELT 19 (SC)

Usha Martin Industries Ltd. Vs. CCE 1997 (94) ELT 460 (SC)

Collector Vs, Kores (India) Ltd.„1997 (89) ELT 441 (SC)

Paper Products Ltd. Vs. CCE 1999 (34) RL T 365 (SC)

CCE Vs Dhiren Chemical Industries 2002 (143) ELT 19 (SC)

CCE Vs. Maruti Foam (P) Ltd. 2004 (164) ELT 394 (SC)

OIO no 52/HK5/CE/Jpr-II/2006 dtd. 24,01.06.

4.   It was also pleaded that as the demand is not sustainable, therefore, penalty is not imposable. Reliance was placed on CCE VS H.M.M. Ltd. reported at 1995 (76) E.L.T. 497 (SC).

5.   It was further contended that the amount of Rs. 28219/- is not recoverable on the following submissions. That they had already paid the amount so collected to the exchequer along with the duty payable for, the month, which is clear from the enclosed copies of monthly returns and from the perusal of records resumed by the officers. Moreover in all the months, they have paid duty through account current in cash also and duty paid in cash Is more than the duty paid on scrap. Total duty payable for a particular month, was paid by debiting RG 23A part II and by debiting PLA therefore revenue cannot now take plea that duty collected on scrap was not paid through PLA.

6.   Even otherwise also if revenue contention is accepted for the sake of argument that duty collected on scrap WQS debited only in RG 23A part II register therefore the same is recoverable in cash under Section 11D even then the amount is not recoverable in a cash as they hove already debited this amount in their RG 23A Part II Register and which is nor in dispute. Reliance was placed on Boards circular No. B-21/51/87 TRU dtd. 20.1.88 that debit in RG -23A Part -II is equivalent to payment of duty by Cash.

7.   Reliance was also placed on the following case laws:-

Silvassa Wooden drums Vs. 'CCE, Vapi 2005 (184) ELT 392 (Tri)

Vinayak industries Vs, CCE 2003 (159) ELT 456 (Tri).

8.   As the demand Is nut sustainable, therefore, penalty is not imposable. Reliance was placed on CCE VS H.M.M. Ltd. reported at 1995 (76) ELT 497 (SC) and CCE vs. Kundan industries Ltd. 2005(180) ELT 398(Tri).

Reasoning of Judgment adopted by the High Court:-

It was observed that the sole question for determination in the present case is as to whether the amount of Central Excise recovered by the assessee, where article was chargeable to Nil rate of duty deposited by way of debiting the same from Cenvat credit account is correct or not?

It was held that there is no dispute in the present case between the parties that the amount in question has already been deposited with the Department. The objection of the department is based on Section 11D of the Act. The said provision has been considered in detail by the larger bench of the Tribunal in Unison Metals Ltd. Vs. Commissioner of Central Excise, Ahmedabad-I (supra).

In this connection, reference was made to the Circular no. 651/42/2002-CX dated 07.08.2002 wherein it was clarified that section 11D of the Central Excise Act, 1944, requires a person liable to pay duty to deposit any amount so collected in excess of the duty assessed or determined or paid on any excisable goods from the buyer of goods in any manner as representing duty of excise. Therefore, in cases where duty so collected has been deposited with the government, section 11D shall not apply. This position shall not undergo any change if the money credit available with the manufacturer is utilised to pay duty on any finished excisable product and this duty is so collected from the buyer.

It was held that the learned counsel for the appellant has not disputed the issuance of the aforesaid circular dated 07.08.2002 by the department. He has also not disputed that the circular is applicable in the present case and it was not considered by the assessing officer as well as the appellate authority. As per this circular, the provisions of section 11D are not attracted, where amount of Central excise duty has been deposited by way of debiting the same from the Cenvat Credit account.

The High Court also examined the section 11D of the Act and found that recovery order issued by the department on the basis of section 11D of the Act was absolutely illegal and is liable to be quashed and the same has been rightly quashed by the learned Tribunal.

In view of the above discussion, we find no merit in this appeal.

Order of the High Court:-

The question framed in this appeal is decided in favour of the assessee and against the department.

Decision:-The appeal filed by the revenue was rejected as the same was devoid of merits.

Conclusion:- The analogy that can be drawn from this case is that the provisions of section 11D are attracted only when any amount is collected and represented as ‘excise duty ‘ from the customers and is being retained unauthorisedly by the assessee and is not deposited to the account of the government exchequer. However, the provisions of section 11D does not apply to the amount of excise duty debited vide cenvat credit balance as the debit of cenvat credit balance is also a mode of payment of duty and it cannot in any way amount to non-payment of the excise duty so collected that was not required to be collected. Therefore, the recovery of duty paid by way of debit of cenvat credit on goods chargeable to nil rate of duty cannot be recovered in cash on the allegation that it amounts to over-assessing the value of goods and also amounts to improper passing of cenvat credit to the buyers.

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24 August 2013

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PJ/Case Study/2013-14/67
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