TaxTMI 
TaxTMI 
2016 (9) TMI 370
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....ompounding levy scheme. Two show cause notices were issued to the appellant on 24.03.1999, one for recovery of duty for the month of September, 1998 and the other, for recovery of duty for the period, from October, 1998 to February, 1999, both in terms of annual capacity of production and the consequential monthly duty liability fixed by the jurisdictional Commissioner. Both the notices also proposed penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 (hereinafter referred to the Rules). Proposals were contested. 3. For the show cause notice issued for recovery of duty for the period from October, 1998 to February, 1999, the Commissioner of Central Excise, vide Order-in-Original No.15/CLS/2001-Tech, dated 27.03.2001, confirmed the demand of duty, to an extent of Rs. 16,06,507/-, after dropping the demand for the earlier period, by granting abatement of duty during the period of closure of the furnace. The said order has been challenged in Appeal No.E/632/2001 before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Regional Bench, Chennai, 1st respondent. 4. The Commissioner of Central Excise, passed another Order-in-Original No.28 of 2002, dat....
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....itted that the Central Excise Tariff Act, 1985, prescribes rates of duty for various goods chargeable to duty of excise. Section 3 of the Central Excise Act, 1944, is a charging Section, which imposes duty. The taxable event in terms of Section 3 of the Act is manufacture of goods and excise duty is payable at the time of removal. 9. Learned counsel for the appellant further submitted that the Finance Act, 1997, brought about certain changes in the schedule of levying excise duty, in steel industry. A new provision, Section 3A came to be inserted in the Act, as an alternative method of taxation, for certain notified goods, keeping in mind, the likelihood of evasion by the manufacturers of such goods. He further submitted that the above provision changed the method of levy from quantity of goods actually manufactured to a method based on annual capacity of production fixed for the factory to be determined by the Commissioner of Central Excise, in the manner prescribed. 10. Learned counsel for the appellant further submitted that Section 3A did not provide for any exemption, incentive or benefit for any industries like, industries situated in backward areas, small scale industr....
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....07.2000, as there was no prohibition, under the Central Excise Rules, for such mode of payment. 14. He also submitted that on the date, when the compounded levy scheme was in force, there was arrears of duty and after the expiry of the scheme, the appellant earned cenvat credit, on the manufacture of goods. According to him, in the light of Section 3 of Central Excise Act, 1944, there was no prohibition for payment of duty by cenvat credit, during the period upto 15.07.2000. The assessees were prohibited in availing cenvat credit only during the period between 01.09.1997 and 31.03.2000. 15. Placing reliance on the decision of the Punjab and Haryana High Court in Commissioner of Central Excise, Ludhiana v. Punjab Casting Pvt. Ltd., reported in 2014 (306) ELT 612 (P & H), Mr.K.Jayachandran, learned counsel for the appellant submitted that before the Punjab and Haryana High Court, appellant therein assailed the correctness of the order of the Tribunal, which held that the benefit of cenvat credit cannot be availed by the respondents/assessees, after the period covered under the compounded levy scheme and that they were required to discharge their liability only through Personal ....
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....ns of law, in favour of the assessee. 18. Per contra, placing reliance on a decision of this Court in Kalaimagal alloys Steel Pvt. Ltd., v. CESTAT, Chennai reported in 2014 (303) ELT 44 (Mad.), Mr.A.P.Srinivas, learned Senior Standing Counsel appearing for the respondent submitted that during the period of compounded levy scheme, the question of adjusting cenvat credit, does not arise. He further submitted that when the scheme has taken away the right of the manufacturers to avail cenvat credit, the consequences thereof, is to make payment of duty only in cash, within the period provided therefor, under Rule 96ZO of the Central Excise Rules, 1944. 19. Placing reliance on the decision of the Hon'ble Apex Court in Hans Steel Rolling Mill v. Commissioner of Central Excise, Chandigarh reported in 2011 (265) ELT 321 (SC), it is the further submission of the learned counsel for the respondent that the compounded levy scheme, introduced in the Central Excise Act, 1944, is a comprehensive scheme, wherein, Rule 96ZO of the Rules, applicable to the case on hand, stipulate the method, time and the manner of payment and it also contains provisions, relating to payment of interest and....
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....to rival contentions, let us have a cursory look at the relevant rules and the Compounded Levey scheme, operational from 01.09.1997 to 31.03.2000. As per Rule 2(7) of the Central Excise Rules, duty means, duty payable under Section 3 of the Central Excise Act, 1944. Section 3 of the Central Excise Act, 1944, is as follows: Section 3. Duties specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985, to be levied:- 1) There shall be levied and collected in such manner as may be prescribed, - (a)a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); (b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods excluding goods produced or manufactured in special economic zones specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as, an....
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.... alter any tariff values for the time being in force. (3) Different tariff values may be fixed - (a) for different classes or descriptions of the same excisable goods; or (b) for excisable goods of the same class or description - (i) produced or manufactured by different classes of producers or manufacturers; or (ii) sold to different classes of buyers : Provided that in fixing different tariff values in respect of excisable goods falling under sub-clause (i) or sub-clause (ii), regard shall be had to the sale prices charged by the different classes of producers or manufacturers or, as the case may be, the normal practice of the wholesale trade in such goods. By Finance Act, 1997, Section 3A has been introduced, and it reads thus: Section 3A. Power of Central Government to charge excise duty on the basis of capacity of production in respect of notified goods: (1) Notwithstanding anything contained in section 3, where the Central government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such g....
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....s section shall not apply to goods produced or manufactured, by a hundred per cent export - oriented undertaking and brought to any other place in India. Explanation 1: For the removal of doubts, it is hereby clarified that for the purposes of section 3 of the Customs Tariff Act, 1975 (51 of 1975), the duty of excise leviable on the notified goods shall be deemed to be the duty of excise leviable on such goods under the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 0f 1986) read with any notification for the time being in force. Explanation 2: For the purposes of this section the expressions "hundred per cent export - oriented undertaking" shall have the meanings assigned to it in section 3. Explanation 3: For the purposes of sub-section (2) and (3), word "factor" includes "factors". 25. Between 3 and 3A of the Act, indisputably, there is a change in the method of arriving at the duty payable by the assessee. When Section 3 of the Act, speaks about excisable manufactured, in contrast, Section 3A, introduced by Finance Act, 1997, speaks about the annual production capacity of the manufacturer, determined by the Commis....
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.... or such capital goods are removed as such. Explanation. -When inputs or capital goods are removed from the factory, the manufacturer of the final products shall pay the appropriate duty of excise leviable thereon as if such inputs or capital goods have been manufactured in the said factory, and such removal shall be made under the cover of an invoice prescribed under rule 52A. (2) Notwithstanding anything contained in sub-rule (1) - (a) credit of duty in respect of inputs or capital goods produced or manufactured- (i) in a free trade zone and used in the manufacture of the final products in any other place in India; or (ii) by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park or Software Technology Parks and used in the manufacture of the final products in any place in India, shall be restricted to the extent which is equal to the additional duty leviable on like goods under section 3 of the Customs Tariff Act, 1975 paid on such inputs; (b) credit in respect of- (i) the additional duty of excise under section 3 of the Addition....
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...., under Section 3-A was in force, during the period from 01.09.1997 to 31.03.2000 and it was revoked from 01.04.2000. As per the submission of the learned counsel for the appellant, the total amount of duty payable for the period between October' 1998 and February' 1999, under the 2nd show cause notice, dated 24.03.1999, was Rs. 43,12,500/-. Out of this, a sum of Rs. 27,25,000/- was paid through Personal Ledger Account and the balance amount of Rs. 16,06,507/- can be through CENVAT account. 28. The Commissioner of Central Excise, Chennai II Commissionerate, Chennai, 2nd respondent, has accepted the payment of duty, by utilizing the cenvat credit, on the inputs received in the factory, on or after 01.04.2000. For payment of duty, on the final products manufactured, and cleared under the compounded levy scheme, the 2nd respondent, has also accepted the payment made through PLA, but disapproved the payment of Rs. 16,06,507/-, made through cenvat credit. Therefore, vide order, dated 27.03.2001, the 2nd respondent has demanded a sum of Rs. 16,06,507/-. By a separate order, dated 16.09.2002, the Commissioner of Central Excise, Chennai II Commissionerate, 2nd respondent, has im....
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.... questions of law, framed by this Court, on 24.06.2009, are as follows: (i) Whether on the facts and circumstances of the case, the Tribunal is right in holding that the appellant is not entitled to utilize the CENVAT Credit available for payment of duty on the products cleared under the compounding levy scheme? (ii) Whether the Tribunal is right in not appreciating the legal position that in terms of Rule 2(7) of Central Excise Rules, duty means duty payable under Sections 3 and 3A of the Act and in Rule 57AB(1B) of the Central Excise Rules, there is no prohibition to utilise the available CENVAT credit amount? 33. On the above, it is the case of both the parties that during the period between 01.09.1997 to 31.03.2000, when the compounded levy scheme was in force, the duty assessed under Section 3-A of the Central Excise Act, is on the basis of the annual capacity of production (ACP), determined by the Commissioner of Central Excise. Two show cause notices in O.C.No.Nil, dated 24.03.1999, dated 24.03.1999, for the period September' 1998 and O.C.No.166/99, dated 24.09.1999, for the period, October' 1998 to February' 1999, have been issued, dem....
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....rer fails to pay the total amount of duty payable under clause (a) by the 30th day of April, 1998, he shall also be liable to pay a penalty equal to the outstanding amount of duty as on 30th day of April, 1998 or five thousand rupees, whichever is greater. II. Total amount of duty liability for a financial year subsequent to 1997-98 (a) a manufacturer shall pay a total amount calculated at the rate of Rs. 750/- per metric tonne on the annual capacity of production of his factory as determined under the Induction Furnace Annual Capacity Determination Rules, 1997. This amount shall be paid by the 31st day of March of the financial year; (b) the amount of duty already paid, together with on-account amount paid by the manufacturer, if any, during the financial year shall be adjusted towards the total amount of duty liability; (c) if a manufacturer fails to pay the total amount of duty payable under clause (a) by the 31st day of March, of the relevant financial year, he shall be liable to, - (i) pay the outstanding amount of duty (that is the amount of duty which has not been paid by the 31st day of March of the ....
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.... the factory, intimate the reading of the electricity meter to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise1, with a copy to the Superintendent of Central Excise; (e) the manufacturer shall while sending intimation under clause (c), declare that his factory remained closed for a continuous period starting from --hours on -(date) to --hours on -(date). (3) Notwithstanding anything contained elsewhere in these rules, if a manufacturer having a total furnace capacity of 3 metric tonnes installed in his factory so desires, he may, from the first day of September, 1997 to the 31st day of March, 1998 or any other financial year, as the case may be, pay a sum of rupees five lakhs per month in two equal installments, the first installment latest by the 15th day of each month, and the second installment latest by the last day of each month, and the amounts so paid shall be deemed to be full and final discharge of his duty liability for the period from the 1st day of September, 1997 to the 31st day of March, 1998, or any other financial year, as the case may be, subject to the condition that the manufacturer shall not ava....
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.... Dated......... Sd............. Name and Designation (With Stamp)" 35. Reading of the rules, extracted supra, makes it clear that a manufacturer of non-alloy steel ingots and billets, falling under sub-heading Nos. 7206.90 and 7207.90 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), shall debit an amount calculated at the rate of Rs. 750 per metric ton, at the time of clearance of ingots and billets of non-alloy steel from his factory in the account-current maintained by him under sub-rule (1) of rule 173G of the Central Excise Rules, 1944, subject to the condition that the total amount of duty liability shall be calculated and paid in the manner, stated above. At this juncture, we have taken note of the indisputed fact, as to the method of calculation of duty and the manner, in which, payment of duty has to be made. 36. As per Rule 96ZO(I), the total amount of duty liability for the period from 1st September, 1997 to 31st March, 1998, as determined under the Induction Furnace Annual Capacity Determination Rules, 1997, shall be paid by 31st March, 1998. Similarly, as per Rule 96ZO(II), the total amou....
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....Therefore, the compunded levy scheme in force between 01.09.1997 to 31.03.2000, has to be held as a comprehensive scheme, which has carved provisions for payment of excise duty, on the products, (i) ingots and billets of non-alloy steel manufactured in an Induction Furnace and (ii) hot rolled products of non-alloy steel manufactured or produced in a hot re-rolling steel mill and accordingly, held by the Apex Court. 39. Though Mr.K.Jayachandran, learned counsel for the appellant submitted that sub-Rule (3) of Rule 96ZO(II) of the Central Excise Rules, 1944, opens with a notwithstanding clause and therefore, arrears of duty, payable between 01.09.1997 to 31.03.2000, can be paid through cenvat credit, earned after 31.03.2000 and that payment through personal ledger account, is not specifically provided for, in sub-rule (3) of rule 96ZO(II) of the Central Excise Rules, if the manufacturer desires to pay a sum of Rs. 5,00,000/- per month, in two equal installments, the first installment latest by the 15th day of each month, and the second installment latest by the last day of each month, and the amounts so paid shall be deemed to be full and final discharge of his duty liability for ....
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..... 42. Now let us consider the decisions relied on by the learned counsel appearing for both the parties. The main thrust of the appellant is on the decision of the Punjab and Haryana High Court in Commissioner of Central Excise, Ludhiana v. Punjab Casting Pvt. Ltd., reported in 2014 (306) ELT 612 (P & H), wherein, the respondent therein was engaged in the manufacture of non-alloy steel ingots. The assessee debited the Cenvat Credit Account of inputs for discharging their liability of payment of excise duty for the period under the Compounded Levy Scheme. The appellant therein contended that the respondent therein could not have made use of Cenvat Credit Account and the duty had to be paid only through Personal Ledger Account and finding fault with the procedure in payment of duty, the Adjudicating Authority i.e., the Joint Commissioner, Customs & Central Excise confirmed the demand and also imposed interest. He disallowed the duty discharged through Cenvat account. Penalty of equal amount was also confirmed. When the correctness of the same was tested by the respondent therein, the appellate authority confirmed the decision, excluding the levy of interest, and imposition of pena....
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....oods manufactured in the country. Under the same, Rule 96P of the Rules stipulate the method of payment and Rule 96P contains detailed provision regarding time and manner of payment and it also contains provisions relating to payment of interest and penalty in event of delay in payment or non-payment of dues. Thus, this is a comprehensive scheme in itself and general provisions in the Act and Rules are excluded. 13. The judgments of this court in the cases of Commissioner of C.Ex & Customs v. Venus Castings (P) Ltd., reported in 2000 (117) ELT 273 (SC) and Union of India v. Supreme Steels and General Mills reported in 2001 (133) ELT 513 (SC), has clearly laid down the principle that the, compound levy scheme is a separate scheme altogether and an assessee opting for the scheme is bound by the terms of that particular scheme. It is settled matter now that Section 11A of the Act has no application for recovery under different schemes. 14. In the case of Collector of Central Excise, Jaipur v. Raghuvar (India) Ltd reported in 2000 (118) ELT 311 (SC), this court has categorically stated that Section 11A of the Act is not an omnibus provision which stipulates limi....
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.... Ltd.,'s case (cited supra) shows that contentions have been made that the Hon'ble Supreme Court has held that the time limit prescribed under one scheme, could be unwarranted for another scheme and the time limit under Section 11A is not an exception and hence, the substantial questions of law, whether the Tribunal was justified in upholding the demand contrary to Section 11A of the Central Excise Act, 1994 on the ground that Rule 96ZP of the Central Excise Rule, 1944 contained where no period of limitation is prescribed? Should be answered as against the assessee. Yet another substantial question of law, raised therein was, whether Rule 96ZP of Central Excise Rule, 1944 and Section 3A of the Central Excise Act, 1944 are the charging provisions and also provide for machinery for recovery of due? Dealing the above substantial questions of law and on the facts and circumstances of the said case, a Hon'ble Division Bench of this Court, in Kalai Magal Alloys Steel Pvt. Ltd.,'s case (cited supra), at Paragraph 8, held as follows: The Hon'ble Supreme Court held that the appellant therein is availing facilities under the compounded levy scheme (as that of....