By TIOL News Service

CHANDIGARH, MAY 09, 2018: THE appellant is located in the State of Jammu & Kashmir and engaged in the activity of manufacturing mentha oil, De-Mentholized Oil, Menthone etc. The appellant was availing the exemption under Notification No.56/02-CE dated 14.11.2002. As per the said notification, whatever duty is paid by the appellant through PLA, the same is entitled for self-credit.

SCN was issued for the period March, 2010 and June, 2010 on the ground that the appellant cleared their goods CSH 33012590 on payment of duty by forgoing the Exemption Notification 10/2010-CE dt. 27.02.2010 (Sl. No. 66A) which provided full exemption. Inasmuch as the amount of Rs.29,83,906/- taken as self-credit did not represent proper and lawful duty in terms of section 3 of the CEA, 1944, it was alleged.

The demand was confirmed along with equivalent penalty and interest. As the Commissioner(A) upheld this order, the appellant assessee is before the CESTAT.

It is submitted that both the notifications 56/2002-CE and 10/10-CE were in operation simultaneously and when two notifications are available, the appellant is entitled to avail the benefit of any of the notifications which is more beneficial[ HCL Ltd - 2002-TIOL-847-SC-CUS-LB, Share Medical Care - 2007-TIOL-26-SC-CUS & Bharat Prelam Industries Ltd - 2016-TIOL-3268-CESTAT-DEL relied upon.]. In the alternative, it is argued that if the appellant is not required to pay duty in terms of the notification 10/10-CE, then section 11A of the CEA, 1944 cannot be invoked as what has been paid is not duty of excise.

The AR justified the order passed by the lower authority.

The Member (Judicial) relied upon the case laws cited and recorded his findings thus –

(i) Whether in case Notification No.56/02-CE dated 14.11.2002 and Notification No.10/10-CE dated 17.2.2010 are in force during the relevant period whether the appellant can be forced to follow Notification No.10/10-CE dated 17.2.2010?

+ Admittedly, in the case in hand, both notification No.56/02-CE dated 14.11.2002 and Notification No.10/10-CE dated 17.2.2010 were available to the appellant, therefore, it is open to the assessee to choose which is more beneficial to him. Admittedly, when the appellant chooses notification No.56/02-CE, therefore, the same cannot be denied to the appellant.

+ The appellant has rightly claimed the benefit of Notification No.56/02-CE by paying duty through PLA and taken the self-credit which is permissible to the appellant. Therefore, the issue No.1 is answered in favour of the appellant.

(ii) Whether in terms of Notification No.10/10-CE dated 17.2.2010, the appellant is not required to pay duty and he has paid duty whether the provisions of section 11A of Central Excise Act, 1944 are applicable or not?

+ The allegation against the appellant is that the appellant is not required to pay duty and whatever amount paid by the appellant through PLA and taken self-credit is required to be refunded.

+ As the same is not duty, as per the provisions of section 11A of the Act, the provisions of section 11A are not applicable to the present case. Therefore, we hold that the show cause notice issued to the appellant in violation of the provisions of section 11A of the Act and the same is not sustainable.The issue No.2 is also answered in favour of the appellant.

Accordingly, it is concluded that the impugned order is not sustainable, same was set aside and the appeal is allowed with consequential relief.

The Member (Technical) disagreed.

Section 5A(1A) of the CEA, 1944 reads –

“1(A). For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the while of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods."

After adverting to the aforesaid provisions, the Member(T) observed –

Issue (i)

+ The above provision (s.5A(1A)) is in the statute itself whereas both the notifications which have been issued under Section 5A of the statute are delegated legislation. Hence, the essential question is whether the statutory provision of Section 5A(1A) would prevail over the delegated legislation in the form of notification. It is settled law that the statutory provisions have primacy over the delegated legislation.[ Corporation Bank Vs. Saraswati Abharansala - 2008-TIOL-258-SC-CT, Amrit Paper - 2006-TIOL-85-SC-CX relied upon]

+ Following the above principle, if the question of applicability between the two notifications is examined disregarding the provisions of Section 5A(1A), the provisions of Section 5A(1A) are rendered nugatory and redundant.

+ As a consequence, in a situation where an applicable notification exempts the goods unconditionally and absolutely, the manufacturer shall not pay duty on such exempted goods. Thus the appellants' contention that they have an option to pay duty in such a situation is completely untenable in view of the said statutory provision which would prevail over delegated legislation in the form of notification. The appellants are, therefore, required to follow the same and not to pay the duty.

Issue (ii)

+ The notification (56/2002-CE) itself in Para 2C(g) while dealing with irregular availment of self credit mention that "shall be recoverable as if it is a recovery of duty of excise erroneously refunded". Thus, even for self credit, which is a book entry instead of cash refund, deeming provision to treat it as duty has been created.

+ In view of above, the demand has been correctly raised under Section 11A of the Central Excise Act.

+ As for the penalty under Section 11AC, since the question involved is of interpretation of notifications vis-a-vis the provisions of the statute, penalty is not justified.

+ The order of Commissioner (Appeals) in relation to demand of duty & interest is upheld. Penalty imposed on appellant is set aside.

The following Points of Difference were, therefore, referred to the third Member –

(a) Whether in the facts and circumstances of the case, the appellant is entitled for the benefit of Notification No. 56/02-CE dated 14.11.2002 as held by Member (Judicial) or the appellant were required to comply with express provisions of sub-section 1A of Section 5A of Central Excise Act, 1944 and the Notification No. 10/10-CE dated 27.02.2010 is applicable in the facts and circumstances of the case as held by Member (Technical).

(b) In alternate, if it is held by the Member (Technical) that appellant is entitled for the benefit of Notification No. 10/10-CE dated 27.02.2010, wherein the appellant is not required to pay duty, therefore, inadmissible re-credit under Notification No. 56/2002-CE, taken by the appellant is recoverable under the provisions of Section 11A of the Central Excise Act, 1944, as held by Member (Technical). Or, the provisions of Section 11A of the Act are not applicable to the facts of this case as held by Member (Judicial) wherein he has held that, as no duty is payable in terms of Notification No. 10/10-CE dated 27.02.2010, therefore the provisions of Section 11A of the Act are not applicable.

The third Member(T) on reference considered the submissions made by both sides and observed thus -

"5. I have perused the findings recorded by both the Members. Having noted that both are exemption notifications issued under exemption 5A, I am in agreement with the findings recorded by Member (Judicial) based on the ratio of various decisions of the Hon'ble Apex court regarding the choice available to the claimant when more than one exemption is available on the same goods. The case laws referred to therein are relevant and applicable."

The second question, therefore, does not hold relevance, the third Member(T) on reference noted.

The Majority decision is –the appellant is entitled to benefit of Notification No. 56/2002-CE dated 14.11.2002. The appeal filed by the appellant was allowed with consequential relief.

(See 2018-TIOL-1461-CESTAT-CHD)