2019 (3) TMI 1825 - HC - Central Excise

Court overturns penalty, rules in favor of appellant for compliance with CENVAT Credit Rules

The Court set aside the order-in-original and ruled in favor of the appellant, finding the debiting of CENVAT credit sufficient to meet the excise duty ... Jurisdiction - the case made out by the appellant assessee is that the adjudicating authority acted in error of jurisdiction in passing the order impugned - HELD THAT:- Since the appellant in the present case adopted the scheme under Rule 6(3)(c) of the Rules of 2004 to which the first Explanation to the sub-rule was also attracted, there was an option available to the appellant to either make over the amount that was realised by the appellant by way of excise duty from the appellant’s purchasers or to debit the CENVAT credit obtained by the appellant by the equivalent amount. There is no dispute that the appellant did, in fact, debit the CENVAT credit by the equivalent amount. If the CENVAT credit can be seen as money in the hands of the assessee in some other form, the debiting of the CENVAT credit by an equivalent amount, tantamounts to such amount having made over to the excise authorities or refunded to the excise authorities or the like. It is evident that the adjudicating authority did not refer to the first Explanation to Rule 6(3) of the said Rules of 2004 while passing the relevant order. In such circumstances, the adjudicating authority committed an error of jurisdiction in failing to appreciate the extent to which the dictum in Unison Metals Limited bound the adjudicating authority - Since such jurisdictional error was amenable to correction within the scope of judicial review exercised in the extraordinary jurisdiction under Article 226 of the Constitution, there was no impediment to receiving the petition or adjudicating on such aspect notwithstanding the appeal from the order of the adjudicating authority not being entertained on the ground of limitation or the resultant appeal being withdrawn since the Commissioner (Appeals) had only acted within the bounds of his authority. The order of the adjudicating authority of May 7, 2008 is set aside and it is recorded that the excise claim stands satisfied upon the CENVAT credit of equivalent amount having been debited from the CENVAT credit account of the appellant - Appeal allowed. Issues:1. Proper interpretation of a judgment by the Tribunal by the adjudicating authority.2. Jurisdictional error in passing the order-in-original.3. Appeal filed beyond the permitted period.4. Challenge under Article 226 of the Constitution.5. Compliance with Rule 6 of the CENVAT Credit Rules, 2004.6. Interpretation of Rule 6(3)(b) and related Explanations.7. Application of Unison Metals Limited judgment.8. Circulars related to Rule 6 and their impact on the case.9. Debiting CENVAT credit instead of depositing excise duty.10. Failure to consider the first Explanation to Rule 6(3).11. Jurisdictional error and correction under Article 226.Analysis:1. The appellant contested the order-in-original, claiming a misinterpretation of a Tribunal judgment by the adjudicating authority, leading to a jurisdictional error. The Commissioner (Appeals) declined to entertain the appeal due to a delay, resulting in the withdrawal of the appeal before the Tribunal.2. The appellant challenged the order-in-original through a petition under Article 226 of the Constitution after exhausting available remedies. The Court clarified that approaching a constitutional Court under Article 226 does not require permission from another forum, especially in cases of jurisdictional errors or breaches of natural justice.3. The case involved Rule 6 of the CENVAT Credit Rules, 2004, concerning the maintenance of separate accounts for inputs used in taxable and exempted goods. The appellant's non-compliance with the rule led to a dispute regarding the payment of 10% on exempted goods.4. The judgment discussed the application of Rule 6(3)(b) and related Explanations, emphasizing the requirement to pay the 10% amount collected from buyers to the excise authorities. The adjudicating authority found the appellant's method of debiting CENVAT credit instead of depositing the amount to be incorrect.5. Reference was made to the Unison Metals Limited judgment, highlighting the importance of correctly handling amounts collected from buyers as excise duty. The appellant argued for the applicability of circulars supporting their actions, despite the authority's interpretation of the law.6. The Court noted the failure of the adjudicating authority to consider the first Explanation to Rule 6(3), leading to a jurisdictional error. The judgment in Unison Metals Limited was deemed relevant, and the authority's misinterpretation warranted correction under Article 226.7. Ultimately, the Court set aside the order-in-original, ruling in favor of the appellant. The debiting of CENVAT credit was deemed sufficient to satisfy the excise claim, absolving the appellant from penalties or interest. The judgment and order impugned were overturned, concluding the case without costs.