2014 (11) TMI 621 - HC - Central Excise

High Court Upholds Tribunal's Revenue Neutrality Decision

The Commissioner of Central Excise, Pune-III Versus M/s. Siddheshwar Textile Mills Pvt. Ltd.

The Bombay High Court condoned a 972-day delay in restoring an Appeal and proceeded to hear the case due to both parties' readiness. The Appeal ... Demand of interest - revenue neutrality - Exemption by virtue of the Notification No.67/95-CE dated 16 March 1995 - Levy of Additional Excise Duty - Held that:- If the Assessee carries out bleaching, dyeing, printing and mercerizing of textile fabrics, which would invite levy of excise duty on each stage of manufacture, however, if the Assessee is also entitled to Modvat credit on duty paid at each stage, then something which is required to be paid or remitted at the final stage could be set off or there is a revenue neutrality. That approach is a permissible approach. If the component of interest is on the tax or duty demanded on the product and if that duty or tax is liable to be set off or adjusted against the credit available at the intermediate stage, then the demand itself was neutralised . Once it was so neutralised and in terms of the judgment of the Hon'ble Supreme Court [2008 (9) TMI 57 - SUPREME COURT], then, one cannot segregate or take out the interest component and call upon the Assessee to pay the sum demanded as interest. The approach of the Tribunal, therefore, in holding that there is a revenue neutrality cannot be termed as illegal or erroneous. The view taken is a possible and probable one. It is taken in the given facts and circumstances and peculiar to the Assessee. In such circumstances, the same cannot be termed as perverse or vitiated by any error of law apparent on the face of record enabling us to entertain this further Appeal. - Decided against assessee. Issues: Delay in restoration of Appeal, Substantial questions of law regarding exemption notification, Revenue neutrality and Cenvat credit, Legal interpretation of Supreme Court judgmentThe judgment by the Bombay High Court addressed the issue of condoning a significant delay of 972 days in applying for restoration of an Appeal that was dismissed due to non-compliance with procedural rules. The Court, under normal circumstances, would require a detailed explanation for such a delay but decided to condone it in this case as both parties were prepared to argue the Appeal upon restoration. The delay was condoned, and the Appeal was taken up for admission promptly.Regarding the substantial questions of law raised in the Appeal challenging the order of the Customs, Excise & Service Tax Appellate Tribunal, the Petitioner argued that interest demanded under Section 11AA of the Central Excise Act 1944 was not exempted by a specific Notification. On the other hand, the Respondent contended that the Tribunal's order and the Commissioner's decision were based on revenue neutrality principles, citing a Supreme Court judgment in favor of the Assessee. The Court examined the Tribunal's order, relevant Notification, and the Supreme Court judgment, ultimately dismissing the Appeal on the grounds that the Tribunal's view on revenue neutrality was valid and not legally erroneous.The Court delved into the concept of revenue neutrality and Cenvat credit, emphasizing that the duty paid by the Assessee could have been utilized as credit, leading to a balance payment. The Tribunal's reliance on a previous decision regarding a similar situation was deemed appropriate, and the Supreme Court's affirmation of the revenue neutrality principle was considered valid. The Court rejected the argument that the Supreme Court judgment did not apply to the interest component, stating that once the duty was neutralized, demanding the interest separately was not justified. The Appeal was deemed meritless and dismissed without costs.In conclusion, the judgment highlighted the Court's decision to condone a significant delay in the restoration of an Appeal, the arguments regarding substantial questions of law related to exemption notifications, the application of revenue neutrality principles and Cenvat credit, and the legal interpretation of a Supreme Court judgment in the context of interest components on demanded taxes or duties.