High Court Of Uttarakhand
Hero Motocorp Ltd. Vs.Commissioner of Central Excise, Dehradun
Section 16
K.M Joseph, C.J. And V.K. Bist, J.
Central Excise Appeal Nos. 14 To 18 And 23 Of 2017
January  11, 2018
JUDGMENT
K.M. Joseph, C.J. – Since common questions arise in these Appeals, we are disposing of the same by a common judgment.
2. Appellant is a manufacturer of motor cycles, which is the final product. The unit of the appellant is located in the State of Uttarakhand and at an area, which entitled it to the benefit of exemption under Exemption Notification No. 50 of 2003 dated 10.06.2003. The final product, namely, the motor cycle produced by the appellant was, however, also subject to the National Calamity Contingent Duty (in short NCCD), Education Cess (EC) and Secondary and Higher Education Cess (SHEC). The appellant availed of the benefit of the exemption provided under Notification No. 50 of 2003. It did not pay the NCCD, EC or SHEC, and cleared the final product. The Authorities issued show cause notices, in which NCCD, EC and SHEC were demanded along with interest and also penalty under Section 11AC of the Central Excise Act, 1944 (hereinafter referred to as the Act).
3. The show causes from which the Appeals ultimately arise are related to various periods. The first period was from April, 2008 to 2009 and finally, the last period was from September, 2011 to 2012. The Appellant has a case that the appellant, for various periods, made payment of NCCD, EC and SHEC in some cases prior to issuance of the notices and in other cases, immediately, on receipt of the notice.
4. In short the case of the appellant appears to be that it was entitled to exemption in respect of NCCD, EC and SHEC under Notification No. 50 of 2003. Alternatively, it appears also the appellant set up a case that it is anyway entitled to avail the benefit of CENVAT Credit in the form of basic excise duty and additional duty paid on the inputs for payment of NCCD, EC and SHEC on the final product and thus resisted the notices. The Authority repelled the contentions and passed orders calling upon it to pay NCCD, EC and SHEC along with the interest and also penalty in a sum representing 100 per cent of the duty purporting to act under Section 11AC of the Act. Finally, the Appeals filed before the Tribunal were also unsuccessful and hence, the Appeals.
5. We heard Mr. S. Ganesh, learned Senior Counsel for the appellant and Mr. H.M. Bhatia on behalf of the Revenue.
6. The Court has issued notices on the following substantial questions of law:
“4(a) Whether the Hon’ble Tribunal was justified in holding that National Calamity Contingent Duty (NCCD), Education Cess (EC) and Secondary & Higher Education Cess (SHEC) are not “duties of excise”?
4(c) Whether the Hon’ble Tribunal was justified in applying the bar under Rule 6 of CCR, 2004 and consequently, holding that the Appellant is not entitled to utilize CENVAT Credit of duties paid on inputs to pay NCCD, EC and SHEC?
4(f) Whether the penalties confirmed vide the respective Orders-in-Original by the adjudicating authority and not interfered with by the Hon’ble Tribunal are at all sustainable in law considering that the appellant had already deposited the entire disputed amount of duty under protest?
4(g) Whether the penalties imposed on the Appellant were at all warranted in law, considering that the Appellant had only raised a pure contention of law and had not engaged in any misrepresentation or suppression of facts or any other dishonest or improper conduct, whatsoever?”
In Central Excise Appeal No. 23 of 2017, the substantial questions of law are 8(b), 8(j), 8(g) and 8(e), which correspond to the aforesaid.
7. Mr. S. Ganesh, learned Senior Counsel would draw our attention to the judgment of the Tribunal in the case of Tatra Trucks India Ltd. v. CCE 2008 (227) ELT 269 (CESTAT – Chennai). He also drew our attention to the judgment of the Tribunal in the case of Toyota Kirloskar Motor (P.) Ltd. v. CCE 2007 (217) ELT 403 (CESTAT – Bang.). Finally he drew our attention to the decision of the Tribunal in the case of J.B.F. Industries Ltd. v. CCE 2009 (246) ELT 286 (CESTAT – Ahd.). In the aforesaid decision, the Tribunal took the view that NCCD is covered by the Exemption Notification.
8. In the year, 2009, it is pointed out that the CESTAT took the view against the assessee in the cases of Paras Petrofils Ltd. v. CCE 2009 (237) ELT 367 (CESTAT – Ahd.) and Superfine Syntex (P.) Ltd. v. CCE 2009 (237 ELT 292 (CESTAT – Ahd.). It is contended that in neither of these judgments, there is any reference to the earlier judgments, which were in favour of the assessee. It is illegal on the part of the CESTAT to take a different view as compared to the earlier CESTAT judgments, without referring the matter to a larger Bench. However, in the case of Nava Petrochemicals Ltd. v. CCE 2010 (254) ELT 165 (CESTAT – Ahd.), the CESTAT took the view in an interim order that the subsequent CESTAT judgments, which were against the assessee, were per incuriam as they did not consider the earlier judgments of the CESTAT.
9. It is the case of the counsel for the appellant that the appellant always bona fide entertained the belief that the appellant was entitled to the benefit of exemption under Exemption Notification No. 50 of 2003 in regard to NCCD, EC and SHEC. He would submit that, however, at the subsequent stage of litigation, the claim for exemption in regard to NCCD and the cesses was not pursued in the light of the judgment of the Gauhati High Court in the case of CCE v. Prag Bosimi Synthetics Ltd. [2014] 46 taxmann.com 179/46 GST 127 (Gau.) and the judgment of this Court in Bajaj Auto v. Union of India 2017 (1) U.D. 375. The decisions of these Courts make it clear that the exemption, which is granted under Exemption Notification No. 50 of 2003 is only available in regard to the basic excise duty and other duties specifically mentioned therein. In other words, exemption is not available in regard to NCCD and cesses under Exemption Notification No. 50 of 2003. He would point out that the matter is not being pursued any further in this regard. However, he would submit that this aspect is of great significance in deciding the question, whether the appellant is to be visited with penalty and that too at 100 per cent as provided under Section 11AC of the Act. He would, therefore, characterize the order imposing penalty as totally unwarranted in law and on facts. He would further submit that the Tribunal in this case has declined to grant benefit of CENVAT credit in the form of basic excise duty paid on the inputs for the payment of duty under the NCCD and the cesses.
10. The Authorities have declined to give benefit of CENVAT credit on the basis that Rule 6 of the CENVAT Credit Rules prohibits grant of CENVAT credit on inputs when the final product is exempted from the duty. Mr. Ganesh, learned Senior Counsel would submit that the approach of the Tribunal in this regard may not be sustainable having regard to the scheme of the CENVAT Credit Rules.
11. Mr. H.M. Bhatia, learned counsel for the Revenue, on the other hand, would draw support from the following judgments to contend that mere deposit of the duties, either before or after issuance of the notice, would not absolve the assessee from the liability to pay penalty under Section 11AC of the Act:
| “(1) | Sony India Ltd. v. CCE 2004 taxmann.com 892 (SC). |
| (2) | CCE v. Prabhat Zarda Factory (I) (P.) Ltd. 2012 (281) ELT 665 (Delhi). |
| (3) | CCE v. Mefco Engg. (P.) Ltd. 2015 (317) ELT 461 (Mad.). |
| (4) | CCE v. Him Chemicals & Fertilizers Ltd. 2010 (256) ELT 363 (HP).” |
He would further rely on the judgment of the Hon’ble Apex Court in the case of Union of India v. Modi Rubber Ltd. 1986 taxmann.com 537. It is his contention that the Hon’ble Apex Court in the aforesaid judgment has categorically declared that when exemption is granted from duty of excise, the words “duty of excise” can only be understood as the duty of excise under Section 3 of the Act and it would not include any other duty. Therefore, he would submit that in the definition of the words “exempted goods” in Rule 2(d) of the CENVAT Credit Rules, it refers to the goods being exempted from excise duty leviable thereon. The words “duty of excise” must be understood as imposing basic duty of excise. Therefore, and so understood having regard to the unambiguous terms of Rule 6 of the CENVAT Credit Rules, insofar as under Notification No. 50 of 2003, the products of the appellant had been exempted from the basic excise duty and the appellant also availed of the benefit of the Notification, the inquiry ends there. He would submit that the decision of the Gauhati High Court cannot be enlisted in support of the appellant’s contention as it did not consider the effect of Rule 6 of the CENVAT Credit Rules. He also adopted the line of reasoning of the Tribunal in these cases that even the Notification, which arose in the case before the Gauhati High Court was qualitatively different from Notification No. 50 of 2003. Unlike the situation in the Gauhati High Court, where the Notification contemplated payment and refund, in this case the Notification in question, namely, Notification No. 50 of 2003 provides for an absolute exemption from the basic excise duty.
12. He would also take us to the 5th proviso to Rule 3(4)and point out that after the amendments in 2016, the intention of the Rule-maker has been made clear that the person would not be entitled to make use of the CENVAT Credit in the form of basic excise duty paid on inputs for payment of NCCD on the final product. He would also take us to the notice issued by the original authority and the reply give by the appellant and he would point out that in response to the specific allegation that the appellant has not paid duty on NCCD and the cesses and had the intention to avoid payment, there was no response.
13. It is necessary to first set out the terms of the Exemption Notification No. 50 of 2003, which read as follows:
“In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the goods specified in Annexure-I appended hereto, and cleared from a unit located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area, as the case may be, specified in Annexure-II appended hereto, from the whole of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts.
2. The exemption contained in this notification shall apply only to the following kinds of units, namely:—
| (a) | Â | new industrial units which have commenced their commercial production on or after the 7th day of January, 2003; |
| (b) | Â | industrial units existing before the 7th day of January, 2003, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty five per cent, on or after the 7th day of January, 2003. |
3. The exemption contained in this notification shall apply to any of the said units for a period not exceeding ten years from the date of publication of this notification in the Official Gazette or from the date of commencement of commercial production, whichever is later.”
14. There is no dispute that the appellant has availed the benefit of said Notification. It be noted that under the same, the Authority has granted exemption from the whole of the duties payable under the enactments mentioned therein. In other words, it is not a case of partial exemption. There is no dispute that the appellant proceeded to clear the final products without payment of NCCD, EC and SHEC.
14. The first question, which we must decide, is whether the appellant is justified in contending that the appellant is entitled to get the benefit of CENVAT credit in respect of the basic excise duty paid on the inputs used in production of the final products. The principal barrier posed before the appellant in claiming the said benefit is Rule 6 of the CENVAT Credit Rules.
The Tribunal, in its order, has found that in view of the exemption granted vide Notification No. 50 of 2003, Rule 6 would be insuperable obstacle in the appellant’s claiming the benefit of CENVAT Credit. It has further proceeded to distinguish the decision of the Gauhati High Court in the case of Prag Bosimi Synthetics Ltd. (supra) on the score that the Notification in the said case, namely, Notification No. 32/99-C.E. was not exactly an exemption Notification. The Notification in the said case, it would appear, contemplated paying the duty in the first place and claiming refund thereafter. The Tribunal reasoned that whereas the Notification in question, namely, Notification No. 50 of 2003 contemplates complete exemption from payment of duties mentioned in the Notification; under Notification No. 50 of 2003, in other words, the assessee is freed from the liability to make any payment and it did not involve paying first and then claiming refund.
15. As far as this aspect is concerned, Mr. S. Ganesh, learned Senior Counsel would contend that the judgment of the Tribunal is flawed, insofar as it seeks to draw a distinction between Notification No. 32/99-C.E. and Notification No. 50 of 2003. He would submit that Notification 32/99-C.E. also provided for exemption, no doubt, in the manner, which was explicitly specified therein. Ultimately and in short, his submission is that under the terms of Notification 32/99- C.E., there is exemption from duty, though it assumes the form of paying the duty first and claiming the refund thereafter. No doubt, he does admit that the Gauhati High Court did not consider Rule 6 of the CENVAT Credit Rules. In regard to Rule 6, his contention is that Rule 6 would be an impediment in the appellant’s claiming the benefit of CENVAT credit, only if all the duties had been exempted and in short, in other words, indisputably, under the terms of the Notification No. 50 of 2003, NCCD, EC and SHEC, which are to be treated as duties of excise, have not been exempted. Though the appellant did have the case before the Authorities that the appellant was entitled to exemption from paying NCCD and cesses under Notification No. 50 of 2003, appellant does not persevere in the said line of argument, obviously having regard to the judgment of the Gauhati High Court in Prag Bosimi Synthetics Ltd.(supra) and of this Court in the case of Bajaj Auto (supra).
16. Therefore, he would submit that the Court may proceed on the basis that he is not entitled to exemption from payment of NCCD and the cesses, but that would axiomatically involve resurrect of the levy of NCCD and the cesses on the final product. This would mean that the final product of the appellant is not exempted from NCCD and other cesses. Necessarily, this would render the provision of Rule 6 inapplicable. In this regard, he drew our attention to the definition of the word “exempted goods” in 2(d), which reads as under:
“2(d) “exempted goods” means excisable goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods which are chargeable to “Nil” rate of duty;
17. He would also submit that a survey of the provisions contained in Rules 3 and 4 of the CENVAT Credit Rules would show that the expression ‘duties of excise’ as such is not used, but he poses a question with regard to Rule 3(1)(vii), as to whether the words ‘duty of excise’, which are used to describe the duties in Rule 3(1)(i) to (vii) would not be duties of excise? Similar line of argument is employed with reference to Rule 3(2) and Rule 3(4)(a). He also reminds the Court that the intent of the Rule-maker was to avoid the effect of cascading of taxation, both at the stage of inputs and also the final products. He would submit that the acceptance of his argument would not involve applying principles of equity in a law relating to taxation. It does not even involve calling in the purpose test, though he does submit that the intent of the law giver is avoidance of cascading effect of taxation and the court may not be oblivious to the same. He would submit that, in fact, on conjoint reading of the provisions of CENVAT Credit Rules, the result is inevitable that in interpreting the Rule, ‘duty of excise’ in Rule 2(d), which defines the words ‘exempted goods, the words ‘duty of excise’ must be interpreted as meaning duties of excise including NCCD and cesses, and therefore, inasmuch as NCCD and cesses are not the subject matter of Notification No. 50 of 2003 and are, therefore, not exempted, there is no exemption for the goods in question within the contemplation of Rule 6. He would join the issue with the learned counsel for the Revenue in the matter of drawing support from the decision of the Hon’ble Apex Court in the case of Modi Rubber Ltd.(supra). He would submit that the decision in Modi Rubber was rendered under the Central Excise Rules and it did not have anything to do with the CENVAT Credit Rules. He would submit that there is no direct decision on this point and, therefore, it involved a seminal issue. As already noted, Mr. H.M. Bhatia, learned counsel for the revenue would rely on Modi Rubber and would submit that the word ‘duty of excise’ mentioned in 2(d) read with Rule 6 would make it clear that in the case, as in this case, where the Notification provides for exemption from the whole of the basic excise duty and additional excise duty, there can be no question of the appellant’s claiming the benefit of the CENVAT credit.
18. Having set out the contentions, we may make the survey of the specific provisions.
19. Section 3 of the Central Excise Act, inter alia, reads as follows:
“SECTION 3. Duties specified in [First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985] to be levied.-
(1) [There shall be levied and collected in such manner as may be prescribed,-
| (a) | Â | [a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods [(excluding goods produced or manufactured in special economic zones)] which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);] |
| (b) | Â | a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods [(excluding goods produced or manufactured in special economic zones)] specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as, and at the rates, set forth in the said Second Schedule.]” |
20. Section 5A clothes the Authorities with the power of exemption and the same reads as follows:
“SECTION [5A. Power to grant exemption from duty of excise.-(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon:
Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured—
(i) in a [free trade zone [or a special economic zone]] and brought to any other place in India; or
(ii) by a hundred percent export-oriented undertaking and [brought to any place in India].
Explanation.-In this proviso, [“free trade zone” [“special economic zone”]] and “hundred per cent export-oriented undertaking” shall have the same meanings as in Explanation 2 to sub-section (1) of section 3.
[(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from payment of duty of excise, under circumstances of an exceptional nature to be stated in such order, any excisable goods on which duty of excise is leviable.]
(4) Every notification issued under sub-rule (1), and every order made under sub-rule (2), of rule 8 of the Central Excise Rules, 1944, and in force immediately before the commencement of the Customs and Central Excises Laws (Amendment) Act, 1988 (29 of 1988) shall be deemed to have been issued or made under the provisions of this section and shall continue to have the same force and effect after such commencement until it is amended, varied, rescinded or superseded under the provisions of this section.”
21. We have already noticed the terms of the exemption Notification, which is involved in this case, namely, Exemption Notification No. 50 of 2003. This Notification was issued invoking the power under Section 5A and sub-section 3 of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section 93 of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978). The Government granted area based exemption in respect of the goods specified in the first and the second schedule to the Central Excise Tariff Act, 1985, other than certain goods, which were mentioned, with which, we are not concerned. The exemption was from whole of the duty of excise or additional duty of excise, which were levied under the said Acts.
22. It is next important to immediately notice the judgment of the Hon’ble Apex Court in the case of Modi Rubber Ltd. (supra). The said case involved consideration of the expression ‘duty of excise’ employed in the Notification issued under Rule 8 of the Excise Rules. The question was, whether it was confined to the basic duty on excise under the Act or it covered special duty of excise levied under various Finance Acts, additional duty of excise levied under the Additional Duty of Excise (Goods of Special Importance) Act, 1957 and any other kind of duty of excise levied under a Central enactment. The Court proceeded to hold as follows:
“7. Both these Notifications, as the opening part shows, are issued under Rule 8(1) of the Central Excise Rules, 1944 and since the definition of ‘duty’ in Rule 2, Clause (v) must necessarily be projected in Rule 8(1) and the expression ‘duty of excise’ in Rule 8(1) must e read in the light of that definition, the same expression used in these two Notifications issued under Rule 8(1) must also be interpreted in the same sense, namely, duty of excise payable under the Central Excise and Salt Act, 1944 and the exemption granted under both these Notifications must be regarded as limited only to such duty of excise. But the respondents contended that the expression ‘duty of excise’ was one of large amplitude and in the absence, of any restrictive or limitative words indicating that it was intended to refer only to duty of excise leviable under the Central Excises and Salt Act, 1944, it must e held to cover all duties of excise whether leviable under the Central Excises and Salt Act, 1944 or under any other enactment. The respondents sought to support this contention by pointing out that whenever the Central Government wanted to confine the exemption granted under a notification to the duty of excise leviable under the Central Excises and Salt Act, 1944, the Central Government made its intention abundantly clear by using appropriate words of limitation such as “duty of excise leviable…..under section 3 of the Central Excises and Salt Act, 1944” or “duty of excise leviable…….under the Central Excises and Salt Act, 1944” or “duty of excise leviable………… under the said Act” as in the Notification No. CER-8(2)/55-C.E. dated 17th September 1955, Notification No. 255/77-C.E. dated 20th July 1977, Notification No. CER-8(1)/55-C.E. dated 2nd September 1955, Notification No. C.E.R.-8(9)/55-C.E. dated 31st December 1955, Notification No. 95/61 C.E. dated 1st April 1961, Notification No. 23/55-C.E. dated 29th April 1955 and similar other notifications. But here, said the respondents, no such words of limitation are used in the two Notifications in question and the expression “duty of excise” must, therefore, be read according to its plain natural meaning as including all duties of excise, including special duty of excise and auxiliary duty of excise. Now, it is no doubt true that in these various notifications referred to above, the Central Government has, while granting exemption under Rule 8(1), used specific language indicating that the exemption, total or partial, granted under each such notification is in respect of excise duty leviable under the Central Excises and Salt Act, 1944. But, merely because, as a matter of drafting, the Central Government has in some notifications specifically referred to the excise duty in respect of which exemption is granted as ‘duty of excise’ leviable under the Central Excises and Salt Act, 1944, it does not follow that in the absence of such words of specificity, the expression ‘duty of excise’ standing by itself must be read as referring to all duties of excise. It is not uncommon to find that the legislature sometimes, with a view to making its intention clear beyond doubt, uses language ex abundanti cautela though it may not be strictly necessary and even without it the same intention can be spelt out as a matter of judicial construction and this would be more so in case of subordinate legislation by the Executive. The officer drafting a particular piece of subordinate legislation in the Executive Department may employ words with a view to leaving no scope for possible doubt as to its intention or sometimes even for greater completeness, though these words may not add anything to the meaning and scope of the subordinate legislation. Here, in the present Notifications, the words ‘duty of excise leviable under the Central Excises and Salt Act, 1944’ do not find a place as in the other Notifications relied upon by the respondents. But, that does not necessarily lead to the inference tat the expression ‘duty of excise’ in these Notifications was intended to refer to all duties of excise including special and auxiliary duties of excise. The absence of these words does not absolve us from the obligation to interpret the expression ‘duty of excise in these Notifications. WE have still to construe this expression -what is its meaning?? And import-and that has to be done bearing in mind the context in which it occurs. WE have already pointed out that these Notifications having been issued under Rule 8(1), the expression ‘duty of excise’ in these Notifications must bear the same meaning which it has in Rule 8(1) and that meaning clearly is-excise duty payable under the Central Excises and Salt Act, 1944 as envisaged in Rule 2, Clause (v). It cannot in the circumstances bear as extended meaning so as to include special excise duty and auxiliary excise duty.
8. Moreover, at the date when the first Notification was issued, namely, 1st August 1974, there was no special duty of excise leviable on tyres. It came to be levied on tyres with effect from the financial year 1978 under various Finance Acts enacted from year to year. It is therefore difficult to understand how the expression ‘duty of excise’ in the Notification dated 1st August 1974 could possibly be read as comprehending special duty of excise which did not exist at the date of this Notification and came to be levied almost four years later. When special duty of excise was not in existence at the date of this Notification, how could the Central Government, in issuing this Notification, have intended to grant exemption from payment of special excise duty? The presumption is that when a Notification granting exemption from payment of excise duty is issued by the Central Government under Rule 8(1), the Central Government would have applied its mind to the question whether exemption should be granted and if so to what extent. And obviously that can only be with reference to the duty of excise which is then leviable. The Central Government could not be presumed to have projected its mind into the future and granted exemption in respect of excise duty which may be levied in the future, without considering the nature and extent of such duty and the object and purpose for which such levy may be made and without taking into account the situation which may be prevailing then. It is only when a new duty of excise is levied, whether special duty of excise or auxiliary duty of excise or any other kind of duty of excise, that a question could arise whether any particular article should be exempted from payment of such duty of excise and the Central Government would then have to apply its mind to this question and having regard to the nature and extent of such duty of excise and the object and purpose for which it is levied and the economic situation including supply and demand position then prevailing, decide whether exemption from payment of such excise duty should be granted and if so, to what extent. It would be absurd to suggest that by issuing the Notification dated 1st August 1974 the Central Government intended to grant exemption not only in respect of excise duty then prevailing but also in respect of all future duties of excise which may be levied from time to time.
9. We have already pointed out, and this is one of the principal arguments against the contention of the respondents, that by reason of the definition of “duty” in clause (v) of Rule 2 which must be read in Rule 8 (1), the expression ‘duty of excise’ in the notifications dated 1st August, 1974 and 1st March, 1981 must be construed as duty of excise payable under the Central Excise and Salt Act, 1944. The respondents sought to combat this conclusion by relying on sub-section (4) of section 32 of the Finance Act, 1979-there being an identical provision in each Finance Act levying special duty of excise-which provided that the provisions of the Central Excise and Salt Act, 1944 and the rules made thereunder including those relating to refunds and exemptions from duties shall, as far as may be, apply in relation to the levy and collection of special duty of excise as they apply in relation to the levy and collection of the duty of excise under the Central Excise and Salt Act, 1944. It was urged on behalf of the respondents that by reason of this provision, Rule 8(1) relating to exemption from duty of excise became applicable in relation to the levy and collection of special duty of excise and exemption from payment of special duty of excise could therefore be granted by the Central Government under Rule 8(1) in the same manner in which it could be granted in relation to the duty of excise payable under the Central Excise and Salt Act, 1944. The argument of the respondents based on this premise was that the reference to Rule 8(1) as the source of the power under which the notifications dated 1st August, 1974 and 1st March, 1981 were issued could not therefore be relied upon as indicating that the duty of excise from which exemption was granted under these two notifications was limited only to the duty of excise payable under the Central Excise and Salt Act, 1944 and the expression ‘duty of excise’ in these two notifications could legitimately be construed as comprehending special duty of excise. This argument is, in our opinion, not well-founded and cannot be sustained. It is obvious that when a notification granting exemption from duty of excise is issued by the Central Government in exercise of the power under Rule 8(1) simpliciter, without anything more, it must, by reason of the definition of ‘duty’ contained in Rule 2 clause (v) which according to the well-recognised canons of construction would be projected in Rule 8(1), be read as granting exemption only in respect of duty of excise payable under the Central Excise and Salt Act, 1944. Undoubtedly, by reason of sub-section (4) of section 32 of the Finance Act, 1979 and similar provision in the other Finance Acts, Rule 8(1) would become applicable empowering the Central Government to grant exemption from payment of special duty of excise, but when the Central Government exercises this power, it would be doing so under Rule 8(1) read with sub- section (4) of section 32 or other similar provision. The reference to the source of power in such a case would not be just to Rule 8(1), since it does not of its own force and on its own language apply to granting of exemption in respect of special duty of excise, but the reference would have to be to Rule 8(1) read with sub-section (4) of section 32or other similar provision. It is significant to note that during all these years, whenever exemption is sought to be granted by the Central Government from payment of special duty of excise or additional duty of excise, the recital of the source of power in the notification granting exemption has invariably been to Rule 8(1) read with the relevant provision of the statute levying special duty of excise or additional duty of excise, by which the provisions of the Central Excise and Salt Act, 1944 and the rules made thereunder including those relating to exemption from duty are made applicable. Take for example, the notification bearing No. 63/78 dated 1st August, 1978 where exemption is granted in respect of certain excisable goods “from the whole of the special duty of excise leviable thereon under sub-clause (1) of clause 37 of the Finance Bill, 1978”. The source of the power recited in this notification is “sub- rule (1) of Rule 8 of the Central Excise Rules, 1944 read with sub-clause (5) of clause 37 of the Finance Bill, 1978”. So also in the notification bearing No. 29/79 dated 1st March, 1979 exempting unmanufactured tobacco “from the whole of the duty of excise leviable thereon both under the Central Excise and Salt Act, 1944 and Additional Duties of Excise (Goods of Special Importance) Act, 1957”, the reference to the source of power mentioned in the opening part of the notification is “sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957”. The respondents have in fact produced several notifications granting exemption in respect of special duty of excise or additional duty of excise and in each of these notifications, we find that the source of power is described as sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 read with the relevant provision of the statute levying special duty of excise or additional duty of excise by which the provisions of the Central Excise and Salt Act, 1944 and the Rules made thereunder including those relating to exemption from duty are made applicable. Moreover the exemption granted under all these Notifications specifically refers to special duty of excise or additional duty of excise, as the case may be. It is, therefore, clear that where a notification granting exemption is issued only under sub-rule (1) of Rule 8 of the Central Excise Rules 1944 without reference to any other statute making the provisions of the Central Excise and Salt Act, 1944 and the Rules made thereunder applicable to the levy and collection of special, auxiliary or any other kind of excise duty levied under such statute, the exemption must be read as limited to the duty of excise payable under the Central Excise and Salt Act, 1944 and cannot cover such special, auxiliary or other kind of duty of excise. The Notifications in the present case were issued under sub-rule (1) of Rule 8 of the Central Excise Rules 1944 simpliciter without reference to any other statute and hence the exemption granted under these two Notifications must be construed as limited only to the duty of excise payable under the Central Excise and Salt Act, 1944. “
23. Having adverted to the said judgment, we must now proceed to advert to the claim for CENVAT credit. CENVAT Credit Rules 2004 have been made under Section 37 of the Act. They have been made in supersession of Rules of 2002, inter alia. Rule 2 (c) defines the “Excise Act”, which means the Central Excise Act, 1944. Rule 2(d) defines the “exempted goods”, which has already been extracted.
24. “Final product” is defined in Rule 2(h) as the excisable goods manufactured or produced from input or using the input service.
25. Rule 2 (k) defines the word “input”.
26. Rule 3 comes under the heading ‘CENVAT credit’. Relevant provisions of the said Rule read as under:
“3. CENVAT credit. – (1) A manufacturer or producer of final products or a [provider of output service] shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –
| (i) | the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act: |
| Â | [Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods- |
| (a) | in respect of which the benefit of an exemption under Notification No. 1/2011-C.E. dated 1st March, 2011 is availed; or |
| (b) | specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Notification No. 12/2012 C.E., dated the 17th March, 2012 is availed;] |
| (ii) | the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act; |
| (iii) | the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978); |
| (iv) | the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957); |
| (v) | the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); |
| (vi) | the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 (23 of 2004); |
| [(via) | the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);] |
| (vii) | the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) [, (vi) and (via)]; |
|  | Provided that CENVAT credit shall not be allowed in excess of eighty-five per cent of the additional duty of customs paid under sub-section (1) of section 3 of the Customs Tariff Act, on ships, boats and other floating structures for breaking up falling under tariff item 8908 00 00 of the First Schedule to the Customs Tariff Act;] |
| [(viia) | the additional duty leviable under sub- section (5) of section 3 of the Customs Tariff Act [***] |
|  | Provided that a provider of output service shall not be eligible to take credit of such additional duty;] |
| (viii) | the additional duty of excise, leviable under section 157 of the Finance Act, 2003 (32 of 2003); |
| (ix) | the service tax leviable under section 66 of the Finance Act; [***] |
| [(ixa) | the service tax leviable under section 66A of the Finance Act] |
| (ixb) | the service tax leviable under section 66B of the Finance Act; |
| (x) | the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (NO. 2) Act, 2004 (23 of 2004); |
| [(xa) | the Secondary and Higher Education cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and] |
| [(xi) | the additional duty of excise leviable under [section 85 of Finance Act, 2005 (18 of 2005),]]: paid on- |
| (i) | any input or capital goods received in the factory of manufacture of final product or [by] the provider of output service on or after the 10th day of September, 2004; and |
| (ii) | any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004, |
| Â | including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547(E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004: |
[Provided that the CENVAT credit shall be allowed to be taken of the amount equal to central excise duty paid on the capital goods at the time of debonding of the unit in terms of the para 8 of Notification No. 22/2003-Central Excise, published in the Gazette of India, part II, Section 3, sub-section (i), vide number G.S.R. 265(E), dated the 31st March, 2003.]
Explanation-Â For the removal of doubts it is clarified that the manufacturer of the final products and the provider of output service shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 9801 of the First Schedule to the Customs Tariff Act.
(2) Notwithstanding anything contained in sub-rule (1), the manufacturer or producer of final products shall be allowed to take CENVAT credit of the duty paid on inputs lying in stock or in process or inputs contained in the final products lying in stock on the date on which any goods manufactured by the said manufacturer or producer cease to be exempted goods or any goods become excisable.
(4) The CENVAT credit may be utilized for payment of–
| (a) | any duty of excise on any final product; or |
| (b) | an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or |
| (c) | an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such ; or |
| (d) | an amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002; or |
| (e) | service tax on any output service: |
Provided that while paying duty of excise or service tax, as the case may be the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be:
Provided further that CENVAT credit shall not be utilized for payment of any duty of excise on goods in respect of which the benefit of an exemption under Notification No. 1/2011-C.E., dated the 1st March, 2011 is availed;
Provided also that the CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used in the manufacture of final products cleared after availing of the exemption under the following notifications of Government of India in the Ministry of Finance (Department of Revenue),-
Notifications omitted.
shall, respectively, be utilized only for payment of duty on final products, in respect of which exemption under the said respective notification is availed of:
Provided also that no credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, [***] shall be utilized for payment of service tax on any output service:
Provided also that the CENVAT credit of any duty specified in sub-rule (1), except the National Calamity Contingent duty in item (v) thereof, shall not be utilized for payment of the said National Calamity Contingent duty on goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of the First Schedule of the Central Excise Tariff:]
Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Clean Energy cess leviable under section 83 of the Finance Act, 2010 (14 of 2010) :
Provided also that the CENVAT credit of any duty mentioned in sub-rule (1) other than credit of additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005), shall not be utilized for payment of said additional duty of excise on final products.
Explanation-CENVAT credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient.”
Rule 3(7)(b) of the CENVAT Credit Rules reads as under:
[(b) CENVAT credit in respect of –
| (i) | the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978); |
| (ii) | the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); |
| (iii) | the education cess on excisable goods leviable under section 91 read with section 93 of the Finance Act (No. (2) Act, 2004 (23 of 2004); |
| [(iiia) | the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);] |
| (iv) | the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under items (i), (ii) and (iii) above; |
| (v) | the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003); |
| (vi) | the education cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004 ( 23 of 2004); |
| [(via) | the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and] |
| (vii) | the additional duty of excise leviable under section 85 of the Finance act, 2005 (18 of 2005), |
[shall be utilised towards payment of duty of excise or as the case may be, of service tax leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), or the education cess on excisable goods leviable under section 91 read with section 93 of the said Finance (No.2) Act, 2004 (23 of 2004), or the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007) or the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003), or the education cess on taxable services leviable under section 91 read with section 95 of the said Finance (No.2) Act, 2004 (23 of 2004), or the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007), or the additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005) 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 or on any output service:]
[Provided that the credit of the education cess on excisable goods and the education cess on taxable services can be utilized, either for payment of the education cess on excisable goods or for the payment of the education cess on taxable services :]
Provided further that the credit of the Secondary and Higher Education Cess on excisable goods and the Secondary and Higher Education Cess on taxable services can be utilized, either for payment of the Secondary and Higher Education Cess on excisable goods or for the payment of the Secondary and Higher Education Cess on taxable services.]
Explanation – For the removal of doubts, it is hereby declared 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) paid on or after the 1st day of April, 2000, may be utilised towards payment of duty of excise leviable under the First Schedule or the Second Schedule to the Excise Tariff Act.]”
27. Finally, it is necessary to refer to Rule 6, which reads as follows:
“RULE 6. Obligation of a manufacturer or producer of final products and a [provider of output service.- (1) The CENVAT credit shall not be allowed on such quantity of [input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services except in the circumstances mentioned in sub-rule (2):
Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.”
28. From the aforesaid Rules, we may notice the following aspects. In the definition of the words “exempted goods” in Rule 2(d), the expression used is “the duty of excise leviable thereon, inter alia“. In Rule 3(1)(i) again, the words used are “the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act”. In Rule 3(1)(ii) again, the expression employed is “the duty of excise specified in the Second Schedule to the Excise Tariff Act”. Likewise, the preposition “the” precedes various duties / levies, which are mentioned in sub-rules (iii), (iv), (v), (vi) and (vii). It is in sub-rule (vii) that the words “the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i) to (via)” have been used. We do notice that instead of using the words “duties of excise”, the expression used is “the duty” and, therefore, in the singular. There are other duties also, with which, we may not be concerned. It is quite clear that all these imposts are component parts of CENVAT credit. In Rule 3(2) again, the expression used is “the duty paid”. Furthermore, in Rule 3(4)(a), which deals with how the CENVAT credit may be utilized, it is declared that it may be employed for payment of “any duty of excise”. In the first proviso to Rule 3(4), the words “duty of excise” are not preceded either by the word “the” or “any”. The proviso appears to declare that the CENVAT credit can be utilized only to the extent such credit is available on the last day of the month or quarter for payment of duty or tax. In fact, the words “duty of excise” are not repeated in the last portion of the proviso; it is abbreviated as “duty”. Similarly in the second proviso to Rule 3(4), the word “duty” is preceded by the word “any”. This is by way of proscribing utilization of CENVAT credit, where benefit of exemption under the Notification of 1/2011-C.E. dated 1.3.2011 is availed. In the third proviso again, the expression “CENVAT credit of the duty, inter alia, paid on the inputs in respect of certain products” is adverted to. Similarly, a perusal of Rule 3(7), which begins with a non-obstante clause viz-a- viz sub-rule (1) and sub-rule (4) limits availing of CENVAT credit in respect of the duties mentioned therein in the manner provided therein.
29. As far as the judgment of the Gauhati High Court in the case of Prag Bosimi Synthetics Ltd. (supra) is concerned, the Court did not consider the impact of Rule 6 of the CENVAT Credit Rules. The Court has proceeded to declare that CENVAT credit can indeed be claimed as laid down therein, but we are also called upon to rule on the effect of Rule 6.
30. It is true that the decision of the Hon’ble Apex Court in Modi Rubber revolved around the effect of the use of the words “duty of excise” in Exemption Notifications and the question was, whether it would be confined to basic excise duty or it would extend to other duties as well.
NCCD The National Calamity Contingent Duty was introduced by the Finance Act of 2001. it was provided for by virtue of Section 136 of the said Finance Act. Section 136 of the Finance Act, 2001 reads as under:
“136. National Calamity Contingent duty.-(1) In the case of goods specified in the Seventh Schedule, being goods manufactured or produced, there shall be levied and collected for the purposes of the Union, by surcharge a duty of excise, to be called the National Calamity Contingent duty (hereinafter referred to as the National Calamity duty), at the rates specified in the said Schedule.
(2) The National Calamity duty chargeable on the goods specified in the Seventh Schedule shall be in addition to any other duties of excise chargeable on such goods under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force.
(3) The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty, shall, as far as may be, apply in relation to the levy and collection of the National Calamity duty leviable under this section in respect of the goods specified in the Seventh Schedule as they apply in relation to the levy and collection of the duties of excise on such goods under that Act or those rules, as the case may be.
EC (Education Cess): It was levied by the Finance Act of 2004 vide Section 91 thereof. We may advert to Section 91 and 93:
“91. Education Cess.-(1) Without prejudice to the provisions of sub-section (11) of section 2, there shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for purposes of the Union, a cess to be called the Education Cess, to fulfil the commitment of the Government to provide and finance universalized quality basic education.
(2) The Central Government may, after due appropriation made by Parliament by law in this behalf, utilize, such sums of money of the Education Cess levied under sub- section (11) of section 2 and this Chapter for the purposes specified in sub-section (1), as it may consider necessary.
93. Education Cess on excisable goods.-(1) The Education Cess levied under section 91, in the case of goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), being goods manufactured or produced, shall be a duty of excise (in this section referred to as the Education Cess on excisable goods), at the rate of two per cent, calculated on the aggregate of all duties of excise (including special duty of excise or any other duty or excise but excluding Education Cess on excisable goods) which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 (1 of 1944) or under any other law for the time being in force.
(2) The Education Cess on excisable goods shall be in addition to any other duties of excise chargeable on such goods, under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force.
(3) The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944 or the rules, as the case may be.”
SHEC (Secondary and Higher Education Cess): This cess came to be levied by way of the Finance Act, 2007. We may advert to Sections 136 and 138 of the said Act:
“136. (1) Without prejudice to the provisions of sub- section (12) of section 2, there shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for purposes of the Union, a cess to be called the Secondary and Higher Education Cess, to fulfil the commitment of the Government to provide and finance secondary and higher education. (2) The Central Government may, after due appropriation made by Parliament by law in this behalf, utilize, such sums of money of the Secondary and Higher Education Cess levied under sub-section (12) of section 2 and this Chapter for the purposes specified in sub-section (1) as it may consider necessary.
138. (1) The Secondary and Higher Education Cess levied under section 136, in the case of goods specified in the First Schedule to the Central Excise Tariff Act, 1985, being goods manufactured or produced, shall be a duty of excise [in this section referred to as the Secondary and Higher Education Cess on excisable goods], at the rate of one per cent, calculated on the aggregate of all duties of excise [including special duty of excise or any other duty of excise but excluding Education Cess chargeable under section 93 of the Finance (No. 2) Act, 2004 and Secondary and Higher Education Cess on excisable goods] which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 or under any other law for the time being in force.
(2) The Secondary and Higher Education Cess on excisable goods shall be in addition to any other duties of excise chargeable on such goods, under the Central Excise Act, 1944 or any other law for the time being in force and the Education Cess chargeable under section 93 of the Finance (No. 2) Act, 2004.
(3) The provisions of the Central Excise Act, 1944 and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Secondary and Higher Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944 or the rules made thereunder, as the case may be.”
31. A perusal of Rule 3(1) unravels the mind of the Rule- maker as to the component parts of the CENVAT credit. In Rule 3(4)(a), the Rule-maker has unambiguously declared that the amounts standing to the credit of CENVAT can be utilized for payment of any duty of excise on any final product. No doubt, this is subject to the injunctions in the form of limitations and restrictions contained in the provisos, seven in number. Unless, the Revenue establishes the case within four walls of any of the provisos, in our view, there can be no embargo against utilization of CENVAT credit, which consists of duties and taxes paid on inputs, inter alia, for payment of any duty of excise on any final product. NCCD and the cesses, as we have noted from the Finance Acts, are undoubtedly surcharges by way of duties of excise. Undoubtedly, they are not levies under the Act. They are imposed under the respective Finance Acts, namely, Finance Act of 2001, Finance Act of 2004 and finally Finance Act of 2007 respectively. The provisions of the aforesaid Acts make it clear that the collection of the aforesaid levies can be made under the provisions of the Excise Act and the Rules. The power to exempt payment of NCCD and the cesses in terms of the Act and the Rules are certainly available in relation to NCCD and the cesses, but they remain levies under the concerned Finance Acts. Since they are part of the basket of levies embraced under Rule 3(1) making up the aggregate of the CENVAT credit, subject to any restriction or limitation, which may be found elsewhere, there can be no doubt that the assessee can make use of the basic excise duty under the Act for payment of the NCCD or the cesses on the final product.
32. In fact, we may dissect and break down the elements contained in the 5th proviso to Rule 3(4) as it stood prior to amendment in the year 2016, as also, the impact of the amended provisions of the proviso. Prior to its amendment, the 5th proviso to Rule 3(4) tabooed the utilization of any other part of the CENVAT credit, except the NCCD for payment of the NCCD on final products, which fell under tariff items 8517 12 10 and 8517 12 90 respectively of the First Schedule of the Tariff Act. Thus, this proviso purported to render impermissible utilization of the basic excise duty paid on any input for payment of NCCD on the final product, if the final product fell under tariff item 8517 12 10 and 8517 12 90 respectively of the First Schedule. The said proviso has already been quoted above. The provision after its modification by the amendment on 1st March, 2016 reads as follows:
“[Provided also that the CENVAT credit of any duty specified in sub-rule (1), except the National Calamity Contingent duty in item (v) thereof, shall not be utilized for payment of the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001):]”
33. After substitution of the said proviso in the year 2016, the rule-maker has totally proscribed the utilization of any part of the CENVAT credit, except the NCCD duty for payment of NCCD on any final product. Under Rule 3(7)(b), CENVAT credit, consisting of NCCD and the cesses, is to be utilized for payment of the corresponding duties on the final products only. No doubt, this is subject to the two provisos, which are contained therein. It is also true that the use of the word in singular need not be restricted to the singular and can comprehend also the plural. As to whether it would so embrace the plural, is a matter to be discerned from the context, as also, the purpose of the enactment, besides the phraseology of the statute otherwise.
34. Here, however, we are concerned with the import of the words “exempted goods” and the effect of the Notification issued under the Act granting absolute exemption from payment of the duty under Section 3 of the Act alone, read with certain other duties, but which admittedly do not comprehend the NCCD and the cesses. There is no equity about the tax. There is hardly any scope for intendment and they are by now platitudes in regard to taxing statutes.
35. No doubt, the learned counsel for the appellant sought to establish that the purport of the CENVAT Credit Rules with reference to the following case:
| “(i) |  | KCP Ltd. v. CCE [2013] 38 taxmann.com 352/42 GST 54 (SC). |
| (ii) |  | Escorts Ltd. v. CCE 2004 taxmannn.com 1332 (SC)” |
36. In the case of KCP Ltd. (supra), the appellant -assessee, who was a manufacture of machinery for sugar and his activities included setting up of manufacturing plant not only in India, but also abroad, manufactured certain machines in its own factory and also purchased certain items, which were necessary for the plant from other dealers and put them in a container and the containers were transported to Vietnam. On the plant, which was manufactured in the factory of the appellant, duty was not paid on it. It had also not used machinery manufactured by other manufacturers in its factory premises. The Court took the view that under the CENVAT / MODVAT scheme, two requirements were that the manufacturer must have paid duty on inputs, which have been used in the manufacture of the final products; and the excise duty must have been levied on the final product. The Court also proceeded to take the view as in regard to the object behind the grant of MODVAT credit in Paragraph 21 as follows:
“21. It is pertinent to note that the most important object concerning grant of the MODVAT credit is to see that cascading effect of the duty imposed on the final product cleared at the time of sale is removed. If some duty is levied on the inputs, raw materials, etc, and if the final product is also dutiable, then the duty levied on inputs i.e. raw material is to be reduced from the duty ascertained on the final product. Thus, there are two conditions for getting the MODVAT credit benefit:
| (i) | On the raw material i.e. on the inputs, the manufacturer must have paid duty and such raw material must have been used in the process of manufacturing the final product in his factory or premises. |
| (ii) | Excise duty must have been levied on the final product. If there is no duty levied on the final product, there would not be any question of grant of any relief because in that case there would not be any cascading effect on the duty imposed.” |
37. In the case of Escorts Limited (supra), the appellants were manufacturer of tractors. They paid duties on certain inputs used in the manufacture of certain parts. Those parts were then cleared to another factory of the appellants, without payment of duty, claiming benefit of Notification No. 217/86-C.E., dated 2nd April, 1986. The parts were then used to manufacture tractors on which duty was paid. The CESTAT took the view that as the parts were cleared from the factory, where they were manufactured, to another factory of the appellants, which was located in a different premises and was separately registered under the Central Excise Law, the finished products are the parts, and, therefore, as no duty was paid on the parts, MODVAT credit was not available. The Apex Court took the view that the intermediate products would be parts and in such a case, the parts would not be the final product and, therefore, Rule 57C, which provided for Credit of duty not to be allowed if final products are exempted, was not applicable. The Court proceeded, inter alia, to hold as follows:
“8. It is to be seen that the whole purpose of the Notification and the Rules is to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been paid on the intermediate product as it is exempted from whole of the duty or is chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product.”
38. Appellant also seeks to lay store by Rule 19 of the Central Excise Rules. Rule 19 of the Central Excise Rules, 2002 reads as follows:
“19. Export without payment of duty .-
| (1) | Any excisable goods may be exported without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, as may be approved by the Commissioner. |
| (2) | Any material may be removed without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, for use in the manufacture or processing of goods which are exported, as may be approved by the Commissioner. |
| (3) | The export under sub-rule (1) or sub-rule (2) shall be subject to such conditions, safeguards and procedure as may be specified by notification by the Board.” |
39. It is brought to our notice that Circulars have been issued. Appellant relies on Circular No. 641/32/2002/CX dated 26.06.2002 and other Circulars, which are dated 13.1.2006, 07.01.2009, and 11.12.1996. Reliance is placed on all these Circulars to demonstrate that the Authorities have understood that NCCD shall be treated as “duty of excise”, for the purpose of exemption on products meant for export within the meaning of Rule 19, from payment of NCCD and hence, the contention appears to be that the words “duty of excise” are to be appreciated as it occurs in the CENVAT Credit Rules also, having regard to the Finance Acts, under which NCCD and the cesses are imposed, whereunder they are referred to as the duties of excise. The NCCD and the cesses would also be part of duties of excise under Rule 2 (d) and also Rule 6 of the CENVAT Credit Rules.
40. It is undoubtedly true that if the basic excise duty is paid on inputs, then it can be used ordinarily to pay the basic excise duty on the final product. We must consider, what is the scope of the expression “exempt from whole of the duty”. We have noticed that Section 5A of the Act empowers the Authority to grant exemption from whole or part of the duties. The expression “whole of the duty” cannot, but be given its due importance. Rule 6 of the CENVAT Credit Rules, in our view, would not apply in a case, where the Notification granting exemption does not grant exemption from whole of the duty. In other words, if there is only a partial exemption, then Rule 6 of the CENVAT Credit Rules would not act as a bar to claiming of the CENVAT credit. One way of looking at the expression “whole of the duty” is that the word “duty” is also intended to apply only to a case, where there is a Notification granting exemption from the whole of the basic excise duty, which obviously is levied under Section 3 of the Act. In this case, there is no dispute that under Notification No. 50 of 2003, the Author of the Notification has granted exemption from whole of the basic excise duty on the final product. On our interpretation, there should be no difficulty or hesitation in concluding, therefore, that this is a case, where as there is an exemption notification granting exemption from whole of the basic excise duty, Rule 6 of the CENVAT Credit Rules is attracted. Therefore, the appellant cannot claim CENVAT credit on the basic excise duty paid on the inputs for the purpose of paying the NCCD and the cesses.
41. The other way to look at it is that since the words “duty of excise” are capable of comprehending all duties of excise and since the NCCD and the cesses are surcharges, which are treated as “duties of excise”, it would also fall within the expression “duty of excise” within the meaning of Rule 2(d) defining “exempted goods” and Rule 6, and since there is no exemption in respect of these imposts, there is no obstacle in the appellant’s claiming the benefit of CENVAT credit.
42. There can be no doubt that the expression “duty of excise” contained in Rule 3(1)(vii) would be the aggregate of the duties, which are mentioned in various clauses and in the said sense, it could be treated as a case of singular including the plural. When it comes to Rule 3(2) of the CENVAT Credit Rules, 2004, apparently, the intention is that having regard to the principle, which is self evident in Rule 6 of the CENVAT Credit Rules, namely, the non- availability of CENVAT credit on inputs when final goods are exempted, the rule maker intended that a manufacturer is entitled to CENVAT credit on the duty paid on the goods, which are lying in stock or in process or inputs contained in the final products lying in stock, when the shadow cast over the claim for the CENVAT credit in the form of an exemption is lifted, inter alia. We are not concerned with the clause, which also likewise applies when the goods become excisable otherwise.
43. For our purpose, there can be no doubt that the words “duty paid” may take in the whole of the duties, which are contemplated under Rule 3 (1). Likewise, the language of Section 3(4)(a) of the CENVAT Credit Rules, which provides that CENVAT credit may be utilized for payment of any duty of excise on any final product clearly indicates that CENVAT credit is available with reference to all its component parts for payment of any duty of excise on the final product, subject to the restrictions or limitations under the provisos or any other provision, as for instance, Rule 6. It is clear that with reference to the facts of this case, for instance under the law as stood then, basic excise duty paid would be available for payment of NCCD and the cesses as they would fall under the category of “any duties of excise”, which is imposed on the final product, which is no doubt subject to the provisos, which are mentioned. However, after 2016, it is clear that NCCD components of CENVAT credit paid on input alone can be used for payment of NCCD on the final product. No other part of duties is available for the said purpose. There is no case before us that the said proviso, which was substituted on 1st March, 2016, has retrospective effect or it is declaratory in nature and we need no explore the said aspect.
44. It is equally true that under Rule 3(7)(b) of the CENVAT Credit Rules, despite what is provided in Rule 3(4)(a), it is also subject to the restrictions and conditions contained in Rule 3(7)(b) as it opens with a non obstante clause and declares that notwithstanding any thing contained in sub rule 1 (1) and sub rule (4) inter alia, the CENVAT credit in respect of NCCD and the cesses are to be utilized only towards the payment of the NCCD and the cesses but it is true that there is no prohibition that the CENVAT credit consisting of basic excise duty paid on input is to be exclusively directed only for payment of basic excise duty on the final product.
45. Thus, as far as the periods relevant to these cases are concerned, the appellant would indeed have the right of basic excise duty paid on inputs adjusted against the charge under the NCCD and the cesses, but it is here that the shadow of Rule 6 looms large.
46. In our view, Rule 6 is intended to cover cases, where the main duty, which is the basic excise duty, is exempted. We are of the view that when Rule-maker made the CENVAT Credit Rules, it had before it the understanding of the phrase “the duty of excise” in terms of the judgment of the Hon’ble Apex Court in Modi Rubber case. Furthermore, the expression “whole of the duty” is appropriately traced to the provisions contained in Section 5A of the Act, which, as we notice, enabled the Authority to grant exemption from the “whole of the duty” or exemption, which is partial in nature. It is this concept, which is seen embedded in Rule 6 read with Rule 2(d) of the CENVAT Credit Rules. The substantial duty invariably will be the basic excise duty. NCCD and other cesses are essentially surcharges, calculated as percentage of the duty. Apparently, the intention was that when the final product is exempted from the payment of the substantial part of the aggregate of the levies in a case where apart from the excise duty, there are surcharges, as NCCD and cesses in this case, then when the assessee opts for the benefit of the exemption from the duty under Section 3, then it would not also, at the same time, claim further benefit by way of CENVAT credit. It is to be noticed that there is no case for the appellant that the appellant did not exercise his option in the matter of claiming benefit of Notification No. 50 of 2003. We would think that though, no doubt, Modi Rubber was rendered in the context of Excise Rules and it was not rendered in the scenario of the CENVAT credit, having regard to the language used in Rule 6 read with Rule 2(d) in conjunction with the language used in Section 5A of the Act, the conclusion would be that when there is exemption from the whole of the duty under Section 3 of the Act, the goods would be treated as exempted goods within the meaning of Section 2(d) of the Rules. As far as the case based on Rule 19 of the Central Excise Rules and the Circulars, which have been issued with reference to the same, whereunder NCCD, inter alia, has been treated as the duty of excise for the purpose of Rule 19, is concerned, we do not think that the principle on the basis of which, for the purpose of Rule 19, NCCD has been treated as the duty of excise, will assist the appellants when we are called upon the interpret the provisions of Rule 6 read with Rule 2(d) of the CENVAT Rules. We would think that the context and the purport of Rule 19 is different from setting of Rule 2(d) and Rule 6 of the CENVAT Rules, which we have already discussed. This would necessarily result in the appellant becoming disentitled from claiming of CENVAT credit consisting of basic excise duty paid on inputs for payment of NCCD and other cesses.
47. The remaining question is, whether the imposition of penalty under Section 11AC of the Act was justified.
48. Section 11AC, as stood at the relevant time, reads as follows:
“Section [11AC. Penalty for short-levy or non-levy of duty in certain cases –
(1) The amount of penalty for non-levy or short-levy or non-payment or short-payment or erroneous refund shall be as follows:—
| (a) | 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 or collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub- section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined. |
| (b) | where details of any transaction available in the specified records, reveal that any duty of excise [has not been levied or paid or has been] or short-levied or short- paid or erroneously refunded as referred to in sub-section (5) of section 11A, the person who is liable to pay duty as determined under sub section (10) of Section 11A shall also be liable to pay a penalty equal to fifty percent. of the duty so determined; |
| (c) | where any duty as determined under sub-section (10) of section 11A and the interest payable thereon under section 11AA in respect of transactions referred to in clause (b) is paid within thirty days of the date of communication of the order of the Central Excise Officer who has determined such duty, the amount of penalty liable to be paid by such person shall be twenty-five per cent. of the [duty so determined only in a case where the penalty is paid within the period so specified]; |
| (d) | where the appellate authority or tribunal or court modifies the amount duty of excise determined by the Central Excise Officer under sub-section (10) of section 11A, then, the amount of penalties and interest payable shall stand modified accordingly and after taking into account the amount of duty of excise so modified, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay such amount of penalty or interest so modified. |
Explanation – For the removal of doubts, it is hereby declared that in a case where a notice is served under sub-section (4) of section 11A and subsequent to issue of such notice, the Central Excise Officer is of the opinion that the transactions in respect of which notice was issued have been recorded in specified records and the case falls under sub-section (5), penalty equal of 50 percent. of the duty shall be leviable.
(2) Where the amount as modified by the appellate authority or tribunal or court is more than the amount determined under sub-section (10) of section 11A by the Central Excise Officer, the time within which the interest or penalty is payable under this Act shall be counted from the date of the order of the appellate authority or tribunal or court in respect of such increased amount.]”
49. If the ingredients mentioned therein are fulfilled, the Legislature contemplated the levy of penalty at the rate of 100 per cent of the duty paid. A perusal of the order of the Original Authority would show that the definite case, which was set up by the appellant was that the NCCD and the cesses were exempted under Notification No. 50 of 2003. In fact, the assessee sought to buttress his claim on the basis of orders passed by the Tribunal in the cases of Tatra Trucks India Ltd. (supra); Toyota Kirloskar Motor (P.) Ltd. (supra) and J.B.F Industries Ltd. (supra).
50. In Toyota Kirloskar Motor (P.) Ltd. (supra), which was pronounced in 2007, the Tribunal, consisting of two members, took the view that NCCD was covered by the Government of India Notification No. 108/95-Central Excise dated 28.8.1995, as amended. The reasoning of the Tribunal appears to be that a close reading of the above reveals that NCCD is indeed a duty of excise. Further, it is seen that the provisions of Central Excise Act, 1944 especially with regard to exemptions from duties would be applicable to NCCD leviable under Section 129. It is also noticed that CBEC has issued a Circular 60/01/06-CX dated 13.1.2006 with regard to export of goods and has clarified that none of the duties is chargeable under any Act of Parliament which provides that in relation to levy and collection of such duty, the provisions of the Act and the Rules shall as far as may be apply and it was noticed that the duties included NCCD. Thus, relying on Section 129 of the Finance Act and also from the above Circular, the Tribunal proceeded to take the view that it is very clear that Exemption Notification 108 / 1995 is applicable also to NCCD. The Tribunal also took note of the fact that the Notification issued under Rule 8(1) of the Rules exempted only basic excise duty. Therein, the Tribunal also took note of the decision of the Tribunal in the case of Gokak Mills v. CCE 2001 taxmann.com 1435 (CEGAT – Bang.), wherein it was held while interpreting Notification No. 214/86, Central Excise that the said notification issued under Rule 8(1) of the Rules exempts only basic excise duty and does not cover additional duty of excise; the same was set aside by the Hon’ble Apex Court in 2002 (146) E.L.T. A309 (S.C.). We must notice that we were not able to trace out the last mentioned decision.
51. Following the judgment passed in Toyota Kirloskar Motor (P.) Ltd. (supra), the judgment in Tatra Trucks India Ltd. (supra) was rendered on 23.04.2008. Therein, the Tribunal proceeded to take the view that NCCD is a duty of excise for the purposes of exemption notifications issued under Section 5A of the Act. In this case, the Tribunal proceeded to distinguish the decision of the Hon’ble Apex Court in Modi Rubber. Following is the reasoning of the Tribunal in not following the order of the Hon’ble Apex Court in Modi Rubber’s case:—
“The Revenue, in their appeal, has also claimed support from the Supreme Court’s judgment in Union of India & Ors. v. Modi Rubber & ors. [1986 (25) E.L.T. 849 (S.C.)], wherein it was held that exemption from duty of excise did not mean exemption also from Special Excise Duty, Additional Excise Duty or Auxiliary Duty. We find that this case law is not applicable to NCCD in view of sub-section(3) of Section 136 of the Finance act, 2001, which reads as under: —
“(3) The provisions of the Central Excise Act, 1944 and the Rules made there under, including those relating to refunds and exemptions from duties and imposition of penalty, shall, as far as may be, apply in relation to the levy and collection of the National Calamity duty leviable under this section in respect of the goods specified in the Seventh Schedule as they apply in relation to the levy and collection of the duties of excise on such goods under that Act, as the case may be.”
For the aforesaid reasons, the Revenue’s appeal is dismissed.”
52. The matter again came up before the Ahmedabad Tribunal in the case of J.B.F Industries Ltd. (supra). The question, which arose, was whether NCCD could be demanded in respect of POY cleared to other 100% EOU on the ground that such clearance has to be treated as deemed export, and as the same was not physically exported, the benefit of Circular No. 641/32/2002-CX., dated 26.06.2002 cannot be extended to the appellant. The Tribunal referred to the decision given in the case of M/s Modern Petrofills Ltd. dated 03.02.2008, which had held that NCCD is not leviable in respect of goods cleared to other 100% EOU and the demand of duty of NCCD was set aside.
53. Now we may refer to the decisions of the Tribunal, which took a different view. By order dated 07.01.2009, Ahmedabad Bench of the Tribunal in the decision reported in the case of Paras Petrofils Ltd. (supra) dealt with the issue whether Partially Oriented Yarn (POY) used within the factory for further manufacture is exempt from the payment of NCCD by virtue of Notification No. 67/95 dated 16.03.1995. The Tribunal took the view, inter alia, that in the absence of inclusion of NCCD under Notification No. 67/95 and in view of the similarity between Section 136 of the Finance Act, 2001 and Section 3(3) of both the enactments, the decision of the Commissioner (Appeals) has to be upheld. Still further in the case of Superfine Syntex (P.) Ltd. (supra), the same Tribunal, by its order of even date, namely, 07.01.2009, took the similar view. It is thereafter that the Tribunal at Ahmedabad in the year 2010 in the case of NAVA Petrochemicals Ltd. (supra), while passing an order in the Stay Application proceeded to consider the question as to whether demand for NCCD in respect of Partially Oriented Yarn for captive consumption to 100% EOU was justified. The Tribunal refers to the decisions in the Modern Petrofills Ltd. v. CCE & C 2009 taxmann.com 820 (Ahd. – CESTAT); Tatra Trucks India Limited (supra): J.B.F Industries Ltd. (supra) and, thereafter, it also referred to the decisions in the case of Paras Petrofills Ltd. (supra) and Superfine Syntex (P.) Ltd. (supra), all of which we have referred to, and held as follows:
“2. We have considered the submissions made by both the sides. As rightly pointed out by the learned advocate for the appellants, the two decisions wherein this Tribunal had taken a view that NCCD is payable were rendered because the other decisions holding a contra view were not brought to the notice at the time of hearing. Therefore, he submits that they are to be treated as per incuriam. We find considerable force in this view. Further, we also find that there are three Tribunal decisions in favour of the appellants. In view of the above discussion, we consider this to be an appropriate case for unconditional waiver of pre-deposit and grant of stay during the pendency of appeal. Accordingly, we allow the waiver of pre-deposit and grant stay against recovery of the duty demanded and interest during the pendency of appeal.”
54. It is here that the learned Senior Counsel for the appellant would contend that earlier two decisions, in which the Tribunal took the view that NCCD is not covered by the Notification, were treated as per incuriam. We must not also fail to notice that the order of the Tribunal was not a final one as it involved only a claim for waiver of pre-deposit and grant of stay, which indeed was allowed and granted. It is, therefore, that the learned Senior Counsel for the appellant would contend that the Authority was not at all justified in invoking power to impose penalty under Section 11AC. He would submit that indispensable ingredient to be fulfilled before penalty was imposed was the holding of an intention to remove the goods and evade the payment of duty. There could not be such intention attributable to the appellant as appellant bona fide acted on the basis of the orders passed by the Tribunal. This is, of course, besides genuinely entertaining the belief that the appellant was entitled to claim the benefit of CENVAT credit on the basic excise duty paid on the raw material for payment of NCCD and the cesses. A perusal of the order passed by the Commissioner would reveal that they had indeed set up the claim for exemption of NCCD and cesses under Notification No. 50 of 2003. This is besides setting up the claim of CENVAT credit. We notice their submission also to be that the appellant has not contravened any provisions of Rules, 6, 4 and 8 of the Rules and no penalty is imposable as alleged. They have specifically set up the case that the judgments in TATRA Trucks India Ltd. (supra) and Toyota Kirloskar Motor (P.) Ltd. (supra) have been accepted by the Revenue and have, accordingly, become final. Thereafter, it is that the Authority has entered the following findings under the head ‘PENALTY’ in its order (we are adverting to the order, which is annexed in CEXA No. 14 of 2017):
“PENALTY
From the above discussion and findings, it has become established that the party was required to pay NCCD and Ed. Cess S&HE Cess on NCCD and that as such non-payment of duty and Cesses were not on account of interpretation of relevant notification in any way. I also find that the colum No. 7 of the ER-1 returns submitted by the party revealed that they were well aware about all the duties of Excise including NCCD, Education Cess and Secondary & Higher education, which are leviable in their case, as same has been mentioned in the said column of the monthly returns submitted by them. Even then, they failed to make proper assessment of duty and willfully & deliberately chose not to pay appropriate duty leviable on them, thus contravening the provisions of Rule 6 read with Rule 8 of the Central Excise Rules 2002. This willful act made them liable to be penalized under Rule 25 of the Central Excise Rules 2002 read with Section 11AC of the Central Excise Act, 1944. As regards the quantum of penalty to be imposed in such cases, I find that the larger Bench of the Hon’ble Supreme Court in the case of Union of India v. Dharamendra Textile Processors [2008(231) E.L.T. 3(S.C.)] has held that penalty under Section 11AC of Central Excise Act, 1944 is mandatory and there is no discretion to the authorities on quantum of such penalty. Therefore, if penalty under Section 11AC is held imposable, then it cannot be less than duty amount as per 1st and 2nd proviso to Section 11AC.”
55. When the matter was taken before the Tribunal, the order of the Tribunal does not appear to deal with the issue relating to penalty at all. In fact, in the latest Appeal filed, namely, CEXA No. 23 of 2017, the order passed by the Tribunal, which is impugned, relates to the period from April, 2013 to February, 2014. We notice from the impugned order in the said Appeal, the following paragraphs:
“3. Learned Counsel confined his argument in the present appeal regarding the penalty by stating that this issue was also decided in the earlier appeal (supra). But he submits that during the period under consideration, the appellant has already paid the duty ‘under protest’ before issue of show cauee notice. He also submits that when the duty was paid before the issuance of show cause notice, then no question of penalty arises. So, there is no question of levy of penalty of Rs. 92,51,29,143/- (Rupees Ninety-two crores fifty-one lakh twenty-nine thousand one hundred forty-three only) under section 11AC of the Central Excise Act. It is the submission that there was no concealment so he made a request that penalty may kindly be set aside. To support his submission, learned Counsel relied on the ratio laid down in the following cases-
| (i) | CCE v. Rashtriya Ispat Nigam Ltd. [2004 (163) ELT A53(SC) |
| (ii) | CCE v. Galurav Mercantile Ltd. [2005 (190) ELT 11 (Bom.)] |
| (iii) | CCE v. Matsyodari Steel & Alloys (P.) Ltd. [2008 (225) ELT 176 (Bom.)] |
| (iv) | CCE, Rohtak v. SB Packaging Ltd. [2008 (223) ELT 360 (Punj. & Har.) |
4. But fact remains that in the above mentioned cases, the issue was regarding the payment of duty in cash but in the instant case, issue is not about the duty which was exempted. The issue is pertaining to National Calamity Contingent Duty (NCCD), Education Cess and Secondary Higher Education Cess which are neither created by the Ministry of Finance nor by the Central Excise Act, 1944. So, the above ratio is distinguishable.”
56. We may also notice paragraphs 7 & 8:
“7. After hearing both the sides and on perusal of record, it appears that in the instant case, for the earlier period, Tribunal has confirmed the demand as well as penalty in the assessee’s case of Hero Honda Motors Ltd. v. CCE, Meerut I (2017(348) ELT 737 (Tri. – Delhi). In the present case, the arguments are confined to ‘whether the penalty is imposable upon the assessee under Rule 25 of the Central Excise Rules, 2002, read with section 11AC of the Central Excise Act, 1944 for violation of provisions of Rule 4 & 8 of Central Excise Rules, 2002 and the provision of Notification No. 50/2003, with intent to payment of duty’.
8. From the record, it appears that the appellant has deposited the entire amount of demand for the period April, 2013 to February, 2014 through PlA under protest. Impliedly, the appellant has not accepted the contention regarding the demand and payment of NCCD, Education Cess and Secondary and Higher Education Cess.”
57. It is thereafter that the Tribunal has proceeded to refer to the judgment of the Bombay High Court in the case of CCE v. Hindustan Petroleum Corporation Ltd. 2017 (347) ELT 229 (Bom.), which has observed that “in case of non-payment or short payment of duty, penalty gets automatically attracted and the authority had no discretion. It is stated that the Bombay High Court adverted to the judgment of the Hon’ble Apex Court in the case of Union of India v. Dharmendra Textile Processors 2008 taxmann.com 1648 (SC). There is also reference to the judgment of the Delhi High Court in the case of Principal CST v. Tops Security Ltd. [2015] 64 taxmann.com 376/[2016] 54 GST 535 (Delhi) to observe that the benefit of reduced penalty is available only when such reduced penalty along with the due tax and interest is paid within thirty days of the communication of the order. It is stated that in the instant case, the payment is adjusted through PLA. The Tribunal also referred to the order of the Bombay High Court in the case of CCE v. Viraj Alloys Ltd. 2017 (346) ELT 192 (Bombay) and also the judgment in the case of Dharmendra Textile Processors (supra). Thereafter, the Tribunal proceeded to take the view that the case law relied on by the appellant is not applicable for the reasons that in the instant case, the issue is not about the duty as the appellant was exempted from duty. But the issue is relating to NCCD and the cesses, which were not created by the Act, nor a subject matter of the Ministry of Finance. It is further noted in Paragraph 15 that needless to mention that for the earlier period, in the case of the assessee, the Tribunal upheld the demand as well as penalty after discussing the ratio laid down in various case laws mentioned therein. This particular paragraph has come in for considerable criticism at the hands of the learned Senior Counsel for the appellant and he points out that the issue relating to penalty was not at all discussed with reference to case law in the order relating to other periods, which are the subject matter of other appeals before us. Thus, the penalty was sustained.
58. We must at this juncture also refer to an argument raised by Mr. H.M. Bhatia, learned counsel for the Revenue that in the reply to the notice given by the Commissioner, appellant has not denied the case with regard to penalty. We notice that in the reply, it is specifically stated that there is no contravention of any provisions of Rules 4 and 8 of the Rules. It is further stated that the facts and circumstances of the case do not call for any penalty. There is reference made to the judgment of the High Court of Gujarat in the case of IOC v. Union of India2005 (186) ELT 271 (Gujarat), wherein we notice the court had, inter alia, held that it would be necessary for the Assessing Authority or the Tribunal to consider before imposing or upholding penalty, whether the assessee’s case regarding its / his duty liability was bona fide, even if it was not accepted on merits. It is also stated that the noticee already paid the amount from PLA under protest. This is sufficient to drop the proceedings. It is also stated that the learned Commissioner has failed to notice that there could not have been any intention on the part of the Noticee to evade its duty liability. There is reference to the other units of the Noticee consistently paying NCCD and the cesses on the same. It is also stated that the appellant has gone by an interpretation, which was adopted by the Department in its Circular dated 13th January, 2006 regarding export of goods. Reference is made to the decisions in TATRA Trucks India Ltd. and Toyota Kirloskar Motor (P.) Ltd. (supra). Appellant has claimed the benefit of the Notification. That benefit would be available to the Noticee and it was not having any intention to evade duty at any point of time on any amounts paid through PLA under protest. It is also submitted that ER-1 returns submitted by the appellant during the relevant period clearly show that the appellant has been availing the benefit of the subject Exemption Notification and consequently no NCCD was being paid by the Noticee. The Department from the very beginning was aware that the appellant was availing the benefit of the exemption notification with regard to payment of NCCD and Education Cess on the same. It has been specifically stated that there is no ground for imposing penalty as the matter involves legal interpretation.
59. It is, therefore, clear that the definite case set up in regard to penalty for non-payment of NCCD and Education Cess is by seeking to point out that the appellant entertained the belief that it is entitled to exemption in regard to the said impost in Notification No. 50 of 2003.
60. We may now advert to some case law, which have been cited in regard to illegality in imposing penalty in certain situations:
| (i) | Hindustan Petroleum Corp. Ltd. v. Commissioner 2015 (320) ELT A344 (S.C.). |
| (ii) | Som Products v. Commissioner 2015 (321) ELT A141 (SC). |
| (iii) | CCE v. Grasim Industries Ltd. 2005 (183) ELT 123 (S.C.). |
| (iv) | Zodiac Clothing Co. Ltd. v. CCE, 2008 taxmann.com 1480 (Bang. – CESTAT). |
61. In Grasim Industries Ltd. (supra), the Apex Court was dealing with a case, in which the Tribunal held that the benefit of Notification No. 5 of 1998-C.E. is not lost by respondent therein because they show on their product the name of the holding company, namely, Grasim Industry. Hon’ble Apex Court took the view that the order of the Tribunal holding that the assessee was entitled to exemption could not be sustained. However, in regard to penalty imposed under Rule 173Q of the Central Excise Rules, the Apex Court held as follows:
“20. However, by this Order, the Commissioner has also imposed penalty in a sum of Rs. 10,00,000/- under Rule 173Q of the Central Excise Rules. While the conclusions of the Commissioner that the Respondents were not entitled to the benefit of the Notification are correct, the fact still remains that the Tribunal has in a number of matters given an interpretation as understood by the Respondent. It therefore cannot be said that the Respondents could not have taken the view they did. It cannot be said that they could never have concluded that they were entitled to the benefit of the Notification. We therefore feel that this is a case where penalty should not be imposed. We therefore delete the imposition of penalty on the Respondents.”
62. It is in this context that the orders of the Tribunal in the cases of TATRA Trucks India Ltd. and Toyota Kirloskar Motor (P.) Ltd. (supra) are apparently relied on.
63. We may now notice the judgment of the Hon’ble Apex Court in the case of Dharmendra Textile Processors (supra), wherein the learned Judges considered the question, whether Section 11-AC of the Central Excise Act, 1944 inserted by the Finance Act, 1996 with the intention of imposing mandatory penalty should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. The Hon’ble Apex Court took the view that, inter alia, mens rea may not be an essential element for imposing penalty and approved the principle that mens rea is not essential element for imposing penalty for breach of civil obligations or liabilities, and, inter alia, the Court finally held as follows:
“19. In Union Budget of 1996-1997, Section 11-AC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In Para 136 of the Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar indication has been given.”
64. A Bench of two learned Judged, however, came to consider the matter again in the case of Union of India v. Rajasthan Spg. & Wvg. Mills [2009] 20 STT 481 (SC). The Tribunal had, in the said case, taken the view that there was no warrant for levy of penalty as the assessee had deposited the balance amount of excise duty that was short-paid at the first instance, even before the show cause notice was issued. Thereafter, we may notice paragraph 4, which reads as under:
“4. On the other hand, on behalf of the Revenue, the appellants in the two appeals, it was contended, relying upon a recent decision of this Court in Union of India v. Dharmendra Textile Processors (2008) 13 SCC 369, that mere non-payment or short payment of duty (without anything else) would inevitably lead to imposition of penalty equal to the amount by which duty was short-paid.”
65. Thereafter, the Court referred to the relevant sections and, inter alia, held as follows:
“The main body of sub-section 1 lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced.”
66. Thereafter, the Hon’ble Apex Court held as follows:
“27. One can not fail to notice that both the proviso to sub section 1 of section 11A and section 11AC use the same expressions:
“. . . . by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, . . “
(Emphasis Supplied)
28. From the aforesaid discussion it is clear that penalty under section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section.
29. At this stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner.”
67. In Paragraph 32, the Hon’ble Apex Court, after referring to Paragraphs 19 & 20 of the judgment in Dharmendra Taxtile case, further proceeded to hold as follows:
“From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. There is another very strong reason for holding that Dharamendra Textile could not have interpreted section 11AC in the manner as suggested because in that case that was not even the stand of the revenue.”
68. Finally, we may notice paragraph 34, which reads as under:
“34. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. That is what Dharamendra Textile decides. It must, however, be made clear that what is stated above in regard to the decision in Dharamendra Textile is only in so far as section 11AC is concerned. We make no observations (as a matter of fact there is no occasion for it!) with regard to the several other statutory provisions that came up for consideration in that decision.
69. We may notice that in CC & CE v. Kannapiran Steel Re-Rolling Mills [2010] 15 SCC 161, in Appeals filed by the Revenue challenging the judgment of the Madras High Court dismissing its Appeal holding that a discretion is available to the authorities to impose reduced penalty under Rule 96-ZP (3) of the erstwhile Rules, the Hon’ble Apex Court referred to the judgment in Dharmendra Textile (supra). The Court, inter alia, held as follows:
“7. In Dharmendra case, this Court referred to the Union Budget of the year 1996-97 wherein Section 11-AC of the Act was introduced and therein the position was made clear that there is no scope for any discretion. This Court also referred in Para 136 of the Union Budget in which reference was made to the provisions stating that the levy of penalty is a mandatory penalty and that in notes on clauses also the similar indication has been given.
8. After considering all the aspects concerned, this Court finally held that the plea that Rule 96-ZQ and Rule 96-ZO have a concept of discretion inbuilt cannot be sustained meaning thereby that the said Rules are mandatory and there is no discretion available for reducing the penalty. The provisions of Rule 96-ZP being identical and in pari materia with that of Rule 96-ZQ and Rule 96-ZO, the ratio of the aforesaid decision rendered by a three-Judge Bench is squarely applicable to the facts and circumstances of the present case.”
70. In the case of CCE v. Pepsi Foods Ltd. [2011] 30 STT 284 (SC), we notice that a Bench of three learned Judges was dealing with imposition of penalty under Section 11-AC. We notice that there is no reference as such to Dharmendra Textile (supra), but it has adverted to the case of Rajasthan Spinning & Weaving Mills (supra) and held as follows:
“25. The aforesaid dictum of Lord Reid has been followed by this Court also. A reference in this connection may be made to Union of India v. Rajasthan Spg. & Wvg. Mills. This Court considering Section 11-AC of the Act held in ELT para 19 at p. 12 of the Report as follows: (SCC p. 459, para 29)
“29. From the aforesaid discussion it is clear that penalty under Section 11-AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section.”
71. We may also notice paragraph 22, which reads as under:
“22. It is well settled that when the statutes create an offence and an ingredient of the offence is deliberate attempt to evade duty either by fraud or misrepresentation, the statute requires “mens rea” as a necessary constituent of such an offence. But when factually no fraud or suppression or misstatement is alleged by the Revenue against the respondent in the show-cause notice the imposition of penalty under Section 11-AC is wholly impermissible.”
72. In the said case, the facts have been set out at Paragraphs 2 and 3, which read as under:
“2. The material facts are that the respondent assessee, M/s. Pepsi Foods Ltd. is engaged, inter alia, in the manufacture of edibles, marketed under the names of Potato Chips, Baked Cheetos Balls, Monster Munch, etc. These are covered under Chapter Sub-Headings 2001.10 and 1904.10 of the Central Excise Tariff Act, 1985 (Act 5 of 1986). Uptill 12th January, 1998, as much as 96% of these products manufactured by the respondent, were sold to M/s. Frito-Lay India, a ‘related person’, and the balance of 4% were sold to independent wholesale buyers. From 12th January, 1998, the sale pattern between the two was changed, wherein M/s. Pepsi Foods Ltd. started manufacturing the aforesaid products on behalf of M/s. Frito-Lay India.
3. By a communication dated 15th December, 1997 addressed to the Assistant Commissioner, Central Excise, Division Jalandhar, the respondent stated that it had been paying excise duty on its manufactured excisable goods after taking into account inter alia, the costs of raw materials, packing materials, conversions and their profit margin. Subsequently it calculated and paid the differential duty, on the price at which the final products were sold by M/s. Frito-Lay India to its wholesale dealers. It enclosed certificate of a chartered accountant in support of its calculations. In its submission of Annexure-A as required under Rule 173C (3A) of Central Excise Rules, 1944, it mentioned that the sale of the products occurred at its factory gate. It was also evident from the letter that the final products were entering the market stream when they were being sold by 3 M/s. Frito-Lay India to their wholesale dealers.”
73. It was essentially a case, which involved the Court taking note of the fact that the stand of the assessee in reply to the show cause notice that it had been paying the duty and there was no malafide intention on its part to evade the payment of duty was not found to be incorrect in the order-in-original. It was found that there was no finding of fraud or misstatement and, accordingly, the finding regarding levy of equal amount of penalty was interfered with.
74. In the case of CCE v. Sunil Silk Mills [2011] 15 SCC 164, we also notice that a Bench of two learned Judges referred to both the decisions in the cases of Dharmendra Textile (supra) and Rajasthan Spinning and Weaving Mills (supra). It involved the case, where the Tribunal took the view that Rule 96-ZQ of the Excise Rules applied and exercised the discretion in the matter of penalty. The Court proceeded to refer to the decision in the case of Dharmendra Textile (supra) and agreed that under sub-rule (5), the assessee is liable to pay penalty equal to an amount of duty outstanding from him at the end of such month or Rs. 5000, whichever is greater. Thereafter, the Hon’ble Apex Court proceeded to deal with Section 11-AC and held as follows:
“7. In the present case also, we are directly concerned with the provisions of rule 96-ZQ. So far as Section 11-AC of the Act is concerned, the scope of the said section was considered by this Court in Union of India v. Rajasthan Spg. & Wvg. Mills. That decision was rendered in the context of the said provision of Section 11-AC. Although, in the said decision reference was made to the decision in Union of India v. Dharamendra Textile Processors but the facts remain that in the said decision, particularly in para 34, this Court held that: (Rajasthan Spg. & Wvg. Mills case, SCC p. 461)
“34. The decision in Dharamendra Textile Processors case must, therefore, be understood to mean that though the application of Section 11-AC would depend upon the existence or otherwise of the conditions expressly stated in the section, [but] once the section is applicable in a case the Authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11-A.”
8. Here is a case where Rule 96-ZQ is directly applicable and, therefore, the three-Judge Bench decision in Dharamendra Textile Processors case squarely covers this case.”
75. We may now consider the findings of the Original Authority relating to the penalty, which we have already extracted earlier in the judgment. The Authority has proceeded to refer to the discussion and findings and, thereafter, it proceeds to hold that it is established that the party was required to pay NCCD and the cesses. It is found that it is not on account of interpretation of the relevant Notification in any way. The second aspect, which is taken into consideration, is that column No. 7 of the ER-1 returns submitted by the party revealed that they were well aware about all the duties of Excise including NCCD and the cesses, which are leviable in their case, as same has been mentioned in the said column of the monthly returns submitted by them and finally, it is stated that even then they failed to make proper assessment of duty and willfully & deliberately chose not to pay appropriate duty leviable on them, thus contravening the provisions of Rule 6 read with Rule 8 of the Central Excise Rules 2002. Finally it is found that this willful act made them liable to be penalized under Rule 25 of the Central Excise Rules 2002 read with Section 11AC of the Central Excise Act, 1944. Support is drawn from the case of Dharmendra Textile case to hold that the penalty is mandatory and there is no discretion to the authorities on quantum of such penalty.
76. Firstly, Mr. Ganesh, learned Senior Counsel would draw our attention to the impact of the entries in Column 7 of the ER-1 return. In Form ER-1 under Clause 3, which provides the details of manufacture, clearance and duty payable, Column 7 comes under the heading ‘duty’ and it provides for CENVAT and one other duty. He would submit that the Authority has not understood the scope of the contents. According to the appellants, it may be true that NCCD and the cesses were mentioned under the heading ‘other duties’, but that is not to say that the appellants were admitting their liability to pay the duty. They were under the impression that the duties of excise, namely, NCCD and the other cesses being duties of excise were exempt under the Notification No. 50 of 2003, and they were clearing the goods on the said basis. It is without appreciating this aspect that the contents of Column No. 7 were looked into. Furthermore, he would reiterate that the case involved interpretation of the Notification as the appellant was under the impression that the duties were exempt on the basis of the orders of the Tribunal. The matter was being contested also on the said line before the Authority. This is besides pressing the claim for CENVAT credit.
77. We may take the law to be that in proceeding under Section 11-AC, if a bonanfide impression is entertained by a party that it is not liable to pay the duty and the goods are cleared without payment of duty on the said basis, having regard to what is laid down in Rajasthan Spinning and Weaving Mills (supra), appellant may not become liable to penalty. It may happen that the case is fought before the Authority and the Court on the basis that the party is entitled to the benefit of Exemption Notification. In such cases, could it be said that there is intention to evade the duty. It is true that once the elements of Section 11-AC are established, there is no discretion regarding the quantum of penalty. The mandatory penalty, as provided, would undoubtedly apply.
78. Therefore, we have to consider, whether this is a case, which involved interpretation of the Notification and were the appellants justified in claiming the benefit of the orders of the Tribunal, which we have adverted to.
79. We notice the argument of the appellants that the Revenue accepted the decision of the Tribunal in the case of Toyota Kirloskar Motor Pvt. Ltd. (supra) and TATRA Trucks India Ltd. (supra).
80. Firstly, whether the appellant would be justified in contending that at the relevant time, when the goods were removed, there was a bonafide question for interpretation relating to Notification No. 50 of 2003 in regard to whether NCCD and the cesses are exempted from duty. In this regard, one way to look at it is to find that the orders of the Tribunal, which they purport to rely on, persuaded them to bonafide believe that they were exempt from the payment of NCCD and the cesses. On the other hand, could it be said that the orders of the Tribunal were on the face of it bad in not following the judgment in Modi Rubber case.
81. In regard to setting up of a plea before the Authorities or Tribunal or the Court, it may hardly be sufficient for the assessee to raise a contention that it was under the impression that it was entitled to the benefit of exemption. If the plea is foundationless in law and on facts, then we would think that such a plea is clearly not enough to extricate the party from the clutches of the law providing for penalty as Section 11AC provides. As far as the order in Toyota Kirloskar Motor Pvt. Ltd. (supra) is concerned, the Tribunal has proceeded on the basis that NCCD is indeed a duty of excise. Secondly, it proceeded to take note of Section 129 of the Finance Act. Thirdly, it referred to Circular, which is clearly traceable to Rule 19 of the Rules. We would think that the premise that it is a duty of excise and the matter is governed under Section 129 of the Act are both besides the point.
82. As far as the reference made to the Circular is concerned, it is related to the provisions of Rule 19 of the Central Excise Rules and it is in the said context that the Circular has to be understood and it cannot be given any meaning beyond the same. We may notice, at once, that in fact, the Hon’ble Apex Court, in the year 1986 itself in the case of Modi Rubber Ltd. (supra), in paragraph 9, had actually adverted to Section 32 of the Finance Act, 1979 and noted that there being an identical provision in each Finance Act levying special duty of excise, which provided that the provisions of the Central Excise and Salt Act, 1944 and the rules made thereunder including those relating to refunds and exemptions from duties will apply in relation to excise duty, the Court proceeded to reject the argument and, inter alia, took the view that sub-section (4) of section 32 of the Finance Act, 1979 and similar provision in the other Finance Acts, Rule 8(1) would become applicable empowering the Central Government to grant exemption from payment of special duty of excise, but when the Central Government exercises this power, it would be doing so under Rule 8(1) read with sub-section (4) of section 32 or other similar provision. It further refers to the source of power in such a case would not be just to Rule 8(1), since it does not of its own force and on its own language apply to granting of exemption in respect of special duty of excise, but the reference would have to be to Rule 8(1) read with sub-section (4) of section 32 or other similar provision. The order of the Tribunal is passed over a decade after the judgment of the Hon’ble Apex Court. We find absolutely no reference of the judgment of the Hon’ble Apex Court in the case of Modi Rubber and the reasoning of the Tribunal clearly flies in the face of the law unambiguously declared by the Hon’ble Apex Court. Equally, we have already found that there is no basis for invoking the provisions of Rule 19 of the Excise Rules or the Circulars for the purpose of claiming the benefit under Exemption Notification No. 50 of 2003. Certainly, as far as the question relating to exemption is concerned, it is the matter to be determined with reference to the terms of the exemption notification. It is in this regard that the decision of the Hon’ble Apex Court rendered in 1986 in Modi Rubber’s case assumed crucial significance. In terms of the said judgment, we do not see any scope at all for any interpretation for including NCCD or the cesses under the expression ‘duty of excise’. As far as the judgment of the Tribunal in TATRA Trucks India Ltd. (supra) is concerned, the Revenue correctly placed reliance on Modi Rubber. The Tribunal, however, did not follow the decision in Modi Rubber by merely referring to Section 136(3) of the Finance Act. We have noticed Paragraph 9 of the judgment of the Hon’ble Apex Court in Modi Rubber’s case. The said paragraph is a complete answer and the Tribunal did not even refer to the said paragraph. Therefore, we would think that it may not be a case, where the appellants could point out that they were entertaining a bonafide impression generated by the orders passed by the Tribunal in these cases. We say so as we would think that in the light of the pronouncement of the Hon’ble Apex Court in Modi Rubber’s case, it does not lie in the mouth of the appellant to contend that they still could draw support from the order of the Tribunal. We again reiterate that as far as the Circular extending the benefit of Rule 19 relating to export of goods without payment of duties of excise is concerned, it stood on a completely different footing and it cannot be mixed up with the issue relating to exemption from duties the question of exemption of duty being a matter exhaustively dealt with the judgment of the Hon’ble Apex Court in Modi Rubber’s case.
83. Therefore, we would think that the order passed by the Commissioner, which has been apparently approved by the Tribunal that this does not involve interpretation of the Notification, thus appears to be a view, which does not call for any interference. As far as placing reliance on the order of the larger Bench of the Tribunal is concerned, apparently it was an interim order and at any rate, it cannot advance the case of the appellant any further than the two orders of the Tribunal.
84. A perusal of the provisions of Section 11AC as it stood would show that the fact of payment of the duty may not help the appellant to contend that it can extricate itself from the liability to pay penalty under Section 11AC, if the appellant is otherwise liable to pay penalty under the said provision. The appellant has not paid the penalty. Therefore, if the provision relating to Section 11AC is otherwise applicable, appellant cannot lay store by payments, which it had made, be it under protest or without protest. Therefore, we reject the contention and also the question of law raised in this regard.
85. The other aspect, which remains, is the argument that independently, the appellant has also bona fide proceeded on the footing that the appellant is entitled to utilize the CENVAT credit arising out of the basic excise duty paid on its inputs, in order to pay the NCCD, EC and SHEC payable on the motorcycles manufactured by it. This claim was also raised by the appellant in the reply filed to the show cause notice. In fact, in the order of the Authority dealing with the penalty, this aspect has not received any attention as such. No doubt, the Authority has proceeded on the footing that in view of the exemption notification and in view of Rule 6 of the CENVAT Credit Rules, there cannot be any benefit of CENVAT Credit. We have, in our judgment, also taken the view that no CENVAT credit can be claimed, but this indeed was a truly pure question of law and we are also told that there was no decision of any other High Court on this matter. The matter was indeed res integra. In the light of this aspect, we would think that this question must be considered by the Tribunal, which has in fact not considered this aspect. Therefore, as far as the question of law no. 4(g) is concerned, we dispose of the Appeals by remitting them back to the Tribunal. The Tribunal will render finding on the effect of the claim for CENVAT Credit made by the appellant in regard to penalty with reference to the factual aspects as to what is also the amount, which was there to the credit of the appellant, the procedure, which was to be followed in this matter in this regard, whether the appellant has abided by the procedure in staking claim and it has indeed staked a claim in the matter as provided in law bearing in mind that it indeed was a pure legal issue and the bona fides also of the appellant cannot be doubted in this regard.
86. Accordingly, the resultant position is that we reject the case of the appellant that the appellant is entitled to claim the CENVAT Credit on the basic excise duty paid on the raw materials for payment of NCCD and the cesses. The question of law is answered against the appellant in all these Appeals in this regard. The fact of payment of the duties in question in all the Appeals, be it under protest or otherwise, cannot, in the light of the extant provisions, extricate the appellant from liability to pay the penalty, if it is otherwise found to be liable and the question of law raised in this regard is answered against the appellant. We also reject the case of the appellant that there was bona fide question relating to interpretation of Notification in the matter of whether NCCD and the cesses were duties of excise and were falling within the scope of exemption Notification, based on the orders of the Tribunal also and we reject the same. Finally, as far as the question relating to whether the appellant was entitled to make use of the basic excise duty paid on raw material for the payment of NCCD and the cesses and therefore, penalty should not be imposed, the matter is remitted back to the Tribunal and to the said extent, Question of Law No. 4(g) in Central Excise Appeal No. 14 of 2017 and corresponding Question of Law in all the other Appeals is answered by holding that there was a question of law and the Tribunal will go into the matter and render its findings. The Appeals are thus partly allowed as above and the orders of the Tribunal to the extent they affirm the imposition of penalty will stand set aside only to enable the aforesaid.
[Citation : 2018-Taxcaselaw-5-Uttarakhand-H.C-GST]
