CX - Rule 8(3A) - It is settled law that no provision should be read in such manner so as to make it otiose - since appellant has defaulted in payment of duty for more than 30 days, appellant is not entitled to utilize CENVAT Credit - Pre-deposit ordered of Rs 7.4 Cr: CESTAT
By TIOL News Service
MUMBAI, DEC 20, 2013: DURING the period from April 2011 to March 2012 the appellant consistently defaulted in payment of Central Excise duty. The amount of defaulted duty during this period amounted to Rs.1,44,83,942/-. Therefore, a SCN was issued to the appellant on 16/05/2012 invoking the provisions of Rule 8(3A) of the CER, 2002 wherein it was proposed to deny the benefit of CENVAT Credit for payment of duty inasmuch as the default persisted more than 30 days.
Accordingly, a demand of duty of Rs.8,88,02,216/- was confirmed against the appellant for the period June 2011 to March 2012 which was appropriated from the payments made subsequently by the appellant. CENVAT Credit of Rs.7,36,74,043/ was sought to be denied during the impugned period and the adjudicating authority confirmed this duty demand. However, he allowed the appellant to take credit of the same in case this amount of Rs.7,36,64,043/- is paid in cash. In addition, interest is demanded and a penalty of Rs.35 lakhs was imposed under Rule 25 of CER, 2002.
Aggrieved by this order the appellant is before the CESTAT.
It is submitted that the appellant subsequent to the default has made good the payment.That the Tribunal in the case of Venkatesh Automobiles Pvt. Ltd. - (2013-TIOL-1319-CESTAT-MUM) and Solar Chemferts Pvt. Ltd. - (2011-TIOL-1968-CESTAT-MUM) has taken a view that if the defaulted payment is made good along with interest, then CENVAT Credit taken becomes proper even if it is availed before the date on which the defaulted amount is paid and accordingly, granted stay.
The Revenue representative supported the order of the adjudicating authority. Adverting to Rule 8(3A) of the CER it is submitted that the said Rule has to be given full effect to and cannot be rendered otiose. Reliance is placed on the decision of the High Court of Karnataka in the case of Manjunatha Industries - (2013-TIOL-285-HC-KAR-CX) wherein it was held that during the period of default, since the CENVAT Credit was unavailable, utilizing the same for payment of duty was an exercise in nullity and could not be recognized as payment towards duty and accordingly, the High Court had upheld the pre-deposit order by the Commissioner (Appeals). Therefore, in the present case also, the appellant be put to terms.
The Bench extracted the content of Rule 8(3A) and observed -
"5.1 Rule 8 (3A) as extracted above clearly lays down if the appellant defaults in payment of duty for a period more than 30 days, the appellant is not entitled for utilizing the Cenvat Credit for payment of duty liability. The provisions of the said Rule would be rendered otiose, if we accept the plea of Consultant for the appellant. It is a well settled principle of law that no provisions of law should be read in such a manner so as to make it ineffective or otiose. The Hon'ble Apex Court in the case of Balwant Singh vs. Jagdish Singh [2010 (262) ELT 50 (SC)] quoted with approval the principle of statutory interpretation as under:
"It must be kept in mind that whenever a law is enacted by the legislature, it is intended to be enforced in its proper perspective. It an equally settled principle of law that the provisions of a stature, including every word, have to be given full effect, keeping the legislative intent in mind, in order to ensure that the projected object is achieved. In other words, no provisions can be treated to have been enacted purposelessly. Furthermore, it is also a well settled canon of interpretative jurisprudence that the Court should not give such an interpretation to provisions which would render the provision ineffective or otiose."
Further, the Hon'ble High Court of Karnataka in the case of Manjunatha Industries (cited supra) has held that since Cenvat Credit was unavailable, the question of utilizing such credit would be an exercise in nullity. The decisions relied upon by the Consultant for the appellant are Tribunal's decisions and the decisions of the Hon'ble High Court of Karnataka, prevails over the Tribunal decision. Therefore, following the decision of the Hon'ble High Court of Karnataka in the case of Manjunatha Industries we direct the appellant to make a pre-deposit of Rs.7,36,74,043/- within a period of three months and report compliance on 01/01/2014…."
(See 2013-TIOL-1890-CESTAT-MUM)
