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TAXAP/920/2008 10/ 13 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 9 of 2008
With
TAX
APPEAL No. 11 of 2008
=========================================================
COMMISSIONER,
CENTRAL EXCISE, AHMEDABAD-II - Appellant(s)
Versus
OMKAR
TEXTILE MILLS PVT. LTD. - Opponent(s)
=========================================================
Appearance
:
MR
YN RAVANI for
Appellant(s) : 1,
None for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 23/09/2008
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE K.A.PUJ)
The Commissioner of
Central Excise has filed these two Tax Appeals under Section 35G of
the Central Excise Act, 1944 proposing to formulate the following
substantial questions of law for determination and consideration of
this Court.
(a) Whether in the
facts and circumstances of the case, the Tribunal was justified in
confirming the order of the Commissioner (Appeals) holding that
Deemed Credit earned by the respondent in terms of Notification
No.6/02-CE(NT) dated 1.3.2002 had not lapsed despite the said
notification having been withdrawn vide Notification No.08-03-CE(NT)
dated 1.3.2003 ?
(b) Whether in the facts
and circumstances of the case, the Tribunal was justified in placing
reliance on the ratio of its judgment rendered in the case of M/s.
S.V.Business (P) Ltd. Vs. CCE vide judgment and order dated 6.12.2003
holding that Cenvat Credit once earned legally does not lapse and
there can be no objection to its utilization even after withdrawal of
Deemed Credit of that commodity ?
Since identical questions
are proposed in both the Tax Appeals, the above questions are
reproduced from the Tax Appeal No.9 of 2008. The facts are also
taken from the said Tax Appeal.
It is the case of the
Department that as per Notification 6/2002-CE(NT) dated 1.3.2002 as
amended by Notification No.8/2003-CE(NT) dated
1.3.2003, Deemed Credit Scheme was withdrawn with effect from
1.4.2003. In the alternative, the facility for the Cenvat Credit
facility under Rule 3 of the Cenvat Credit Rules, 2002 has been
extended for the textile industries, under which, the manufacturers
could avail the benefit of Cenvat credit on actual basis under Rule
3 of the Cenvat Credit Rules, 2002, in respect of the inputs used in
the manufacture of the final products. It was noticed by the
Assistant Commissioner of Central Excise that the respondent had
commenced to avail the benefit of the Cenvat credit on actual basis
on the inputs used in the manufacture of the final products, in
light of the amended Cenvat Credit Rules, 2002 effective from
1.4.2003 and had utilized the said credit against payment of central
excise duty as the respondent assessee had also simultaneously
continued to avail the benefit of the Deemed Credit Scheme for
payment of Central Excise duty at the time of clearance of the final
products, as per the provisions of the erstwhile Notification
No.6/2002-CE(NT) dated 1.3.2002. The show cause notice was,
therefore, issued on the respondent assessee and after its
adjudication an order in original was passed on 30.4.2005 wherein it
is recorded that the earlier Notification was having validity period
upto and inclusive of 31.3.2003 only. That the respondent had
simultaneously availed Cenvat credit on actual basis under Rule 3 of
Cenvat credit Rules 2002 in respect of inputs used in the
manufacture of final products i.e. fabrics and that the facility of
deemed credit during the period of April 2003 was not available to
the respondent-assessee. He has, therefore, taken the view that
such an act of the respondent was against the interest of the
Revenue as it amounted to wrongful availment of credit and
utilisation leading to clearance of the goods without payment of
duty in contravention of provisions of the Act and the rules and,
therefore, deemed credit was confirmed against the respondent under
the provisions Section 11A of the Central Excise Act, 1944 read with
Rule 12 of Cenvat Credit Rules, 2002. The respondent was also held
liable for interest at the prescribed rate for the amount of duty
short paid (equivalent to the amount of deemed credit utilised
wrongly) under the provisions of Section 11AB of the Central Excise
Act, 1944 and penalty was also imposed on the respondent assessee
under Rule 25 of the Central Excise Rules, 2002.
Being aggrieved and
dissatisfied with the order in original, the respondent filed Appeal
before the Commissioner (Appeals). The Commissioner (Appeals) in his
order dated 17.11.2005 held that the issue to be decided is as to
whether the unutilised deemed credit earned upto 31.3.2003 before
withdrawal of the deemed credit scheme with effect from1.4.2003 vide
Notification No.8/2003-CE(NT) dated 1.3.2003 and lying balance on
the date of deemed credit scheme on 31.3.2003 is lapsed or not.
While deciding this issue he referred to the decision of the Bombay
High Court in the case of TATA Engineering and Locomotive Co.
Ltd., Vs. Union of India reported in 2003 (159) ELT 129 (Bom.),
the decision of Hon’ble Supreme Court in the case of Eicher
Motors Ltd., Vs. Union of India, reported in 1999 (106) ELT 3 (SC)
and this Court’s decision in the case of Dipak Vegetable Oil
Industries Ltd., Vs. Union of India, reported in 1991 (52) ELT
222(Guj.).
Placing reliance on the
ratio of the above decisions of the Tribunals, High Courts and the
Hon’ble Supreme Court, the Commissioner (Appeals) has held that vide
Finance Act, 1999, Clause 2 (xxviii) was inserted in Section 37 of
the Central Excise Act giving power to Central Government to make
rule for providing for lapsing of credit of duty lying in unutilised
with the manufacturer of the specified excisable goods as on
appointed date and also for not allowing such credit to be utilised
for payment of any kind of duty on any excisable goods on and from
such date, consequent to the same. He further held that no rule or
notification has been issued providing for lapsing of the deemed
credit rightly earned till the date the relevant Notification
No.52/2001-CE(NT) and 54/2001-CE(NT) both dated 29.6.2001 and
Notification No.6/2002-CE(NT) dated 1.3.2002 was enforced for not
allowing such credit to be utilised for payment of any kind of duty
on any excisable goods on and from such date. He has therefore held
that unutilised deemed credit earned upto 31.3.2003 before
withdrawal of the deemed credit Notification with effect from
1.4.2003 and lying in balance on 31.3.2003 will not be lapsed and
could be utilised for payment of duty on or before 1.4.2003.
Being aggrieved by the
said decisions the Department filed an Appeal before the Tribunal.
The Tribunal held that identical issue was considered by the
Tribunal in the case of M/s.S.V.Business Pvt. Ltd., Vs. Commissioner
of Central Excise, wherein, vide its order dated 6.12.2006, the
Tribunal held that once Cenvat Credit is earned legally, the same
does not lapse and there can be no objection to its utilization even
after withdrawal of deemed credit of that commodity.
It is this order of the
Tribunal which is under challenge in the present two Tax Appeals.
Mr. Y.N. Ravani, learned
Standing Counsel has submitted that the order passed by the Tribunal
is improper, erroneous, invalid, bad in law and proceeds on
misinterpretation of relevant Notification and provisions of law
and, therefore, the same deserves to be quashed and set aside. In
any case, according to Mr.Ravani, substantial question of law arises
out of the order of the Tribunal and there is no judgment of any
High Court or Hon’ble Supreme Court on this issue considering the
Notification in question. Hence, both the Appeals require to be
admitted. He has further submitted that deemed credit availed of by
the respondent was not admissible in view of the facility having
been withdrawn with effect from 1.4.2003, more particularly when
Notification granting deemed credit was not in force on the date on
which the respondent had availed of Deemed Credit alleged to be
lying unutilised in the balance on the duty of discharge/payment of
Central Excise Duty. He has further submitted that on scrutiny of
ER-1 returns for the month of April, 2003 it was clearly noticed
that the respondent had commenced to avail the benefit of cenvat
credit on actual basis of manufacture of finished product as per the
amended Cenvat Credit Rules, 2002 effective from 1.4.2003 and,
therefore, utilization of the Deemed Credit was wrongful. He has
further submitted that the first proviso to Clause 3 of the said
Notification provided that the credit of duty in respect of inputs
used in goods exported under bond shall be allowed to be utilized
towards payment of duty of excise on any final products cleared for
home consumption or for export under bond or be refunded to the
manufacturer in case such adjustment was not possible. He has,
therefore, submitted that the Appeals are required to be admitted.
Having heard Mr.Ravani,
learned Standing Counsel appearing for the Revenue and having
perused the order of the authorities below including the order
passed by the Tribunal in the case of S.V.Business Pvt.
Ltd.,(Supra) and judgment of this Court as well as Hon’ble
Supreme Court we are of the view that the issue is squarely covered
by the earlier decision. This Court in the case of Dipak
Vegetable Oil Industries Ltd. Vs. Union of India (Supra)
had clearly held that a right, which is acquired as a result of a
statutory provision cannot be taken away retrospectively unless the
statutory provision so provides or by necessary implication it has
the same effect. Even with regard to the proviso to Rule 3 support
can be derived from the observations made by the Hon’ble Supreme
Court in the case of Eicher Motors Ltd., Vs. Union of
India, 1999 (106) ELT 3 (SC),
the scheme sought to be introduced cannot be made applicable to the
goods which had already come into existence in respect of which the
earlier scheme was applied under which the assessees had availed of
the credit facility for payment of taxes. Any manner or mode of
application of the said rule would result in affecting the rights of
the assessees. The Hon’ble Supreme Court further observed that
Section 37 of the Act does not enable the authorities concerned to
make a rule which cannot be said to be applied to the goods
manufactured prior to 16.3.1995 on which duty had been paid and
credit facility thereto has been availed of for the purpose of
manufacture of further goods. The Court further observed that when
on the strength of the rules available certain acts have been done
by the parties concerned, incidents following thereto must take
place in accordance with the scheme under which the duty had been
paid on the manufacture products and if such a situation is sought
to be altered, necessarily it follows that right, which had accrued
to a party such as availability of a scheme, is affected and, in
particular it loses sight of the fact that the provision for
facility of credit is as good as tax paid till tax is adjusted on
future goods on the basis of the several commitments which would
have been made by the assessees concerned.
Considering above legal
position, we are of the view that the assessee’s case is squarely
covered by the decision of the Hon’ble Supreme Court and hence no
substantial question of law arises out of the order of the Tribunal.
Both these Appeals are accordingly dismissed.
(K. A. PUJ, J.)
(RAJESH H. SHUKLA, J.)
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