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1. Interest is required to
be paid even when differential amount is paid before finalization of assessment
in terms of Rule 7(4) of Central Excise Rules, 2002
Facts
The appellant was engaged in
manufacture of various kinds of cocoa and chocolate products at their factory
at Induri, near Pune. The interim products manufactured and captively consumed
by them were provisionally assessed for the period 1-1-2000 to 31-12-2000,
1-1-2001 to 31-12-2001, 1-1-2002 to 31-12-2002 and 1-1-2003 to 31-12-2003. The
assessments were finalized by the Assistant Commissioner by four orders dated
24th, 26th, 27th and 28th March 2007. Prior to the final assessment, the
appellant calculated and paid the entire differential duty on its own accord.
No further duty was payable on final assessment. However, the Assistant
Commissioner, while finalizing the assessment, charged interest as applicable
and the same was charged from the first day of the month succeeding the month
for which such amount was determined. Appellant preferred an appeal against
the aforesaid adjudication order; however, Commissioner (Appeals) passed an
adverse order. Feeling aggrieved with the order of Commissioner (Appeals), the
appellant moved the Hon’ble Tribunal. Hon’ble Tribunal referred the case to a
larger bench in view of several divergent judgments on the issue in question.
The following questions were framed for the consideration by the larger bench:
“1. Whether in case of
provisional assessment under the Central Excise Rules, 2002, interest is
required to be paid from the first day of the month ‘for which’ such amount is
determined (on finalization of assessment) or the interest is required to be
paid from the first day of the month succeeding the month ‘in which’ the
assessment is finalized?
2. Whether any interest is
required to be paid if the differential amount is paid before the order, under
Rule 7(3) of the said Rules, is issued finalizing the assessment?”
Held
Hon’ble Tribunal answered
both the aforesaid questions in affirmative based on the reasoning adopted by
the Apex Court in the case of CCE vs. ITC Ltd and the Larger Bench of the
Tribunal in the case of A Infrastructure Ltd. vs. CCE. It was categorically
observed that, although the above two decisions are in relation to erstwhile
Rule 9B of the erstwhile Central Excise Rules, 1944, yet the terms
‘provisional assessment’, ‘final assessment’, and ‘adjustment of duty’ are
statutory terms carrying the same connotation under the present set of Rules
i.e Central Excise Rules, 2002. On the argument as to whether the punctuation
can control the plain meaning of the language while interpreting the law, the
Tribunal while agreeing with the submissions of the Counsel for the appellant
that the same cannot, opined that this does not in anyway help the appellants
inasmuch as in view of the Larger Bench decision of the Tribunal in the case
of ETA Engineering Ltd. vs. CCE, the case of the department that the
disjunctive comma is important in controlling the interpretation of rule 7(4)
is buttressed. It was further observed that the same principles govern the
provisions contained in Section 18(3) of the Customs Act, 1962. The only
difference in the Customs Act and the Central Excise Act is that, while under
Customs Act the liability to pay interest arises from the month, in which
assessment was made provisional, whereas under the Central Excise Act, the
liability to pay interest arises from the first day of the month succeeding
the month for the assessment was finalized. This is in view of the fact that
under the Central excise Act, the duty liability can be discharged by the 5th
of the month following the month in which the goods were cleared, whereas
under the Customs Act, it has to be discharged before the clearance of the
goods
Cadbury India Ltd 2008(232) ELT 224
2. Whether the provision of
Rule 4(5)(a) of Cenvat Credit Rules, 2004 mandate the reversal of credit availed
on capital goods only if they are removed ‘as such’ as interpreted by Division
Bench in the case of Madura Coats (P) Ltd or reversal is required, as held in
the case of Bit Industrial Packaging Ltd.
Facts
The Larger Bench was
constituted to interpret the term ‘as such’ used in Rule 3(4) (c) of the
Cenvat Credit Rules, 2004 which provides that when a capital goods or input is
cleared “as such” from the factory then the manufacturer is required to pay an
amount equal to the credit availed.
Held
The Larger Bench held, in
context of expression ‘as such’, that from the time of inception of the Modvat/Cenvat
Scheme, capital goods whether used or not were allowed to be removed from the
factory on payment of duty or reversal of credit taken. Initially, used
capital goods could be removed after reversing proportionate credit, depending
upon period of use. Later on, duty was paid on transaction value and then in
2007 the system of proportionate credit was again reintroduced [“as such” does
not distinguish between new/unused and used product].
If the expression “as such”
is interpreted to mean new or unused capital goods, then the manufacturer
sending the goods to job worker for testing/repairing re-conditioning etc
would not be able to avail facility of Rule 4(5)(a) of the said rules.
Further, the question of sending goods for testing, repairing and
re-conditioning would become redundant and hence, such an interpretation
should be avoided. Therefore, the Cenvat credit availed on capital goods is
required to be reversed on the removal of the same, irrespective of whether
the capital goods removed are used or not.
Modernova Plastyles Pvt Ltd
vs. CC-2008(89) RLT 214 (CESTAT-LB)
3. No discretion to reduce
the penalty amount under section 11AC of the Central Excise Act, 1944; it has to
be equal to the duty amount
Facts
A Division Bench of the
Hon’ble Supreme Court referred the controversy involved in the subject matter
to the larger Bench of the Hon’ble SC doubting the correctness of the view
expressed in Dilip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai and
Anr. (2007 (8) SCALE 304). One of the issues for determination was whether
there is discretion for levying penalty below the prescribed amount. Before
the Division Bench, stand of the revenue was that said section should be read
as penalty for statutory offence and the authority imposing penalty has no
discretion in the matter of imposition of penalty and the adjudicating
authority in such cases was duty bound to impose penalty equal to the duties
so determined. The assessee on the other hand referred to Section 271(1)(c) of
the Income Tax Act, 1961 (in short the ‘IT Act’) taking the stand that Section
11AC of the Act is identically worded and in a given case it was open to the
assessing officer not to impose any penalty. The Division Bench made reference
to Rule 96ZQ and Rule 96ZO of the Central Excise Rules, 1944 (in short the
‘Rules’) and a decision of this Court in Chairman, SEBI v. Shriram Mutual Fund
and Anr. (2006 (5) SCC 361) and was of the view that the basic scheme for
imposition of penalty under Section 271 (1)(c) of IT Act, Section 11AC of the
Act and Rule 96ZQ(5) of the Rules is common. According to the Division Bench
the correct position in law was laid down in Chairman, SEBI’s case and not in
Dilip Shroff’s case. Therefore, the matter was referred to a larger Bench.
Held
The Hon’ble SC observed as
follows:
“11. The decision in Bharat
Heavy Electricals’s case cannot be of any assistance to the assessee because
the same proceeded on the basis of concession.
13. It is a well-settled
principle in law that the court cannot read anything into a statutory
provision or a stipulated condition which is plain and unambiguous.
15. The question is not what
may be supposed and has been intended but what has been said.
17. While interpreting a
provision the court only interprets the law and cannot legislate it.
21. The golden rule for
construing all written instruments has been thus stated:
“The grammatical and ordinary
sense of the words is to be adhered to unless that would lead to some
absurdity or some repugnance or inconsistency with the rest of the instrument,
in which case the grammatical and ordinary sense of the words may be modified,
so as to avoid that absurdity and inconsistency, but no further.” (See Grey
vs. Pearson.)
24. It is of significance to
note that the conceptual and contextual difference between Section 271(1) (c)
and Section 276C of the IT Act was lost sight of in Dilip Shroff’s case.
26. In Union Budget of
1996-97, Section 11AC 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.”
Finally, based on the
aforesaid observations, the Hon’ble SC concluded that there is no scope of
discretion embedded in Section 11AC and that the Dilip Shroff’s case was not
correctly decided but Chairman, SEBI’s case has analysed the legal position in
the correct perspectives. The reference was answered accordingly.
Union of India vs. M/s.
Dharamendra Textile Processors: 2008-TIOL-192-SC-CX-LB. (2008) 306 STR 277
(SC), (2008) 219 CTR 617 (SC)
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