CENVAT - Removal of inputs as such - Appellant not reversing credit at time of removal - interest demanded - expression "on the date of such removal " is referable to rate applicable to such goods and it cannot be understood to mean that duty should be paid at time of removal: High Court
By TIOL News Service
CHENNAI, FEB 07, 2014: DURING the period from April 2003 to March 2004, the assessee removed CENVATTED inputs as such, but the credit was not reversed on the date of removal.
This lead to a SCN being issued to the assessee demanding interest of Rs.67,349/- u/s 11AB of the CEA, 1944.
Since the allegation in the SCN was confirmed the assessee preferred an appeal before the Commissioner (Appeals) and he held that the duty liability having been paid prior to the issuance of SCN, the question of imposing penalty or demanding interest does not arise.
As against this order, the Department preferred appeal to the Tribunal and this appeal was dismissed on the ground that there is no enabling provision in the Statute for recovering interest.
So, now the Revenue is in appeal before the High Court and the same was admitted on the following questions of law:
1. Whether in the facts and circumstances of the case, the Tribunal is right in law in holding that there is no provision in the statute for enabling the recovery of the interest in case of delay in reversal/payment of the duty relatable to inputs removed as such, when there is an express provision in Section 11AB of Central Excise Act read with Rule 12 of the CENVAT Credit Rules, 2002 providing for recovery of interest when the conditions specified therein are satisfied?
2. Whether in the facts and circumstances of the case, the Tribunal is right in following the decision of the Tribunal in the case of Commissioner of Central Excise vs. MachinoMontell (I) Ltd., reported in (2004-TIOL-423-CESTAT-DEL-LB) when the decision has been reversed by the jurisdictional High Court in the case of Commissioner of Central Excise, Delhi III vs. MachinoMontell (I) Ltd. (2006-TIOL-276-HC-P&H-CX), wherein it was held that mere deposit of duty before issuance of show cause notice will not suffice for not invoking interest and penalty under Section 11AB and Section 11AC of the Central Excise Act?
It is submitted by the Revenue that as per Rule 3(4) of the CCR, 2002 when inputs or capital goods on which CENVAT credit was taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7. Therefore, it is contended that the Tribunal erroneously held that there was no provision for payment of interest, especially, when there is a specific provision contained in Section 11AB of the Act.
The High Court extracted the provisions of sub Rule (3) and (4) to Rule 3 of the CCR, 2002 and also the sub Rule (4) after it was substituted by Notification No.13/2003-CE(N.T.,) dated 01.03.2003and observed -
++ Sub Rule (4) to Rule 3 of the CENVAT Credit Rules, 2002 prior to its substitution states that the inputs or capital goods on which CENVAT credit has been taken, are removed from the factory as such, the manufacturer of the final product shall pay an amount equal to the duty of excise, which is leviable on such goods at the rate applicable to such goods on the date of such removal.
++ Therefore, the expression "on the date of such removal" is referable to the rate applicable to such goods and it cannot be understood to mean that the duty should be paid at the time of removal in terms of substituted provisions. The expression "on the date of such removal" stands deleted in the new Sub Rule (4) to Rule 3 of CENVAT Credit Rules,2002.
After adverting to Rule 8 of the CER, 2002 which deals with a manner of payment of duty, the High Court further held -
++ It is not in dispute that the assessee has paid the duty at the end of the month, i.e., much prior to the 5th day of the following month or in case where the removal had taken place in March before 31st March of the relevant year. In such circumstances, it cannot be said that there has been delay in payment of duty so as to invoke Section 11AB of the Central Excise Act,1944. Even though the Tribunal has proceeded on the basis that the deposit was made prior to the issuance of show cause notice, on facts, we found, such a contention is not tenable.
++ It is evidently clear that the assessee has deposited the amount before the issuance of show cause notice, yet we do not think, we need to enter into the said question since essentially the assessee's case falls within the scope of Rule 3(4) r/w Rule 8 of the CENVAT Credit Rules, 2002.
In fine, the appeal filed by the Revenue was rejected.
In passing : Incidentally, rule 8 of the CER, 2002 has an explanation inserted by notification 8/2007-CE(NT) dt. 01/03/2007 and which reads - Explanation.- For the purposes of this rule, the expressions 'duty' or 'duty of excise' shall also include the amount payable in terms of the CENVAT Credit Rules, 2004 .
(See 2014-TIOL-163-HC-MAD-CX)
