2015 (9) TMI 1267 - HC - Central Excise

Tribunal Upholds Restoration of AED Credit on Final Products

The Commissioner of Central Excise Customs And Service Tax Versus M/s Apollo Tyres Ltd.

The Tribunal upheld the respondents' actions in restoring and utilizing accumulated Additional Excise Duty (AED) credit for payments on final products. ... Utilization of CENVAT credit of the Additional Excise Duty - Assessee used accumulated credit of AED for payment of Basic Excise Duty (BED) and Special Excise Duty (SED) on their final product - Held that:- Reading of the Tribunal's order in CEAT Tyres' case [2010 (3) TMI 621 - CESTAT, MUMBAI] shows that the issues raised in these appeals, were exactly similar and therefore the Tribunal justified in proceeding on the basis that the controversy raised before it was covered by the Tribunal's order in CEAT Tyres case. It is also seen that the order of the Delhi Tribunal in Good Year India's case [2005 (10) TMI 400 - CESTAT, NEW DELHI] was confirmed by the High Court of Punjab and Haryana. Though, SLP was filed by the department against this judgment of the High Court that was rejected by the Apex Court on the ground of delay and keeping the question of law opened, by its order [2008 (3) TMI 672 - SUPREME COURT]. - credit of AED paid on or after 01.04.2000, is permitted to be utilized towards payment of duty of excise leviable under the first schedule or the second schedule to the Excise Tariff Act. In other words, the restriction introduced by the explanation was only in the utilization of the accumulated credit of AED towards payment of duty under the schedules of Excise Tariff Act. This means that this restriction applied only in the payment of BED and SED, which alone is payable under the Excise Tariff Act and not to AED payable under Section 3 of Act 58 of 1957 - Decided against Revenue. Issues Involved:1. Legitimacy of utilizing accumulated credit of Additional Excise Duty (AED) for payment of Basic Excise Duty (BED) and Special Excise Duty (SED) on final products.2. Impact of retrospective amendments to the CENVAT Credit Rules on the utilization of AED credit.3. Validity of the show cause notices issued for alleged wrong restoration and utilization of AED credit.4. Precedential value of prior Tribunal and High Court decisions in similar cases.Detailed Analysis:1. Legitimacy of Utilizing Accumulated Credit of AED:The respondents, engaged in the manufacture of automotive tyres, accumulated AED credit on Nylon Tyre Cord Fabric (NTCF) used in their production process. Initially, AED credit could only be used for AED payments on final products, which did not apply to tyres. Post 01.03.2003, an amendment allowed using AED credit for BED and SED payments on tyres. However, a subsequent amendment restricted this to AED paid on or after 01.04.2000. The respondents utilized the accumulated AED credit for BED and SED payments, leading to show cause notices from the department for recovery of the amounts utilized.2. Impact of Retrospective Amendments:The retrospective amendment by the Finance Act (No.2), 2004, restricted the use of AED credit accrued before 01.04.2000 for BED and SED payments. The respondents complied by repaying the amounts with interest in installments, and upon each repayment, equivalent AED credit was restored to their CENVAT account. The department later challenged this restoration, leading to further disputes.3. Validity of Show Cause Notices:Show cause notices were issued alleging wrongful restoration of AED credit and its utilization for AED payments on Dipped Nylon Tyre Cord Fabric (DNTCF). The respondents contested these notices, citing precedents from the Commissioner of Central Excise, Mumbai III, and the Tribunal's decision in Good Year (India) Ltd. v. CCE, Faridabad. The adjudicating authority confirmed the show cause notices, which were then challenged by the respondents before the Tribunal.4. Precedential Value of Prior Decisions:The Tribunal relied heavily on its previous decision in CCE Mumbai v. CEAT Ltd., which dealt with similar issues. The Tribunal in CEAT Ltd. allowed the restoration of AED credit used for BED payments, stating that the credit should be restored once the duty was paid from the Personal Ledger Account (PLA). The Tribunal also referenced other cases supporting the restoration of credit when duty was paid from PLA after being initially debited from AED credit.The Tribunal noted that the issues in the current case were similar to those in CEAT Ltd. and Good Year (India) Ltd., and upheld the respondents' actions based on these precedents. The High Court of Punjab and Haryana had confirmed the Tribunal's decision in Good Year (India) Ltd., and the Supreme Court dismissed the department's SLP against this judgment on the ground of delay, keeping the question of law open.Conclusion:The Tribunal concluded that the respondents were justified in restoring AED credit and utilizing it for AED payments on DNTCF. The Tribunal's reliance on prior decisions was deemed factually and legally tenable. The High Court dismissed the department's appeals, affirming the Tribunal's conclusions and the precedents cited. The appeals were dismissed, and the respondents' actions were upheld as compliant with the amended CENVAT Credit Rules and established legal principles.