TaxTMI 
TaxTMI 
2024 (2) TMI 669
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....Nine) only on the wrongly availed credit, under Rule 14 of the Cenvat Credit Rules 2004 read with Section 11 AB of the Central Excise Act, 1944. 2. I impose a penalty of Rs.49,30,589/- (Forty Nine lacs Thirty Thousands Five Hundred and Eighty Nine) only upon them under Rule 15 of the Cenvat Credit Rules.2004. The dues so adjudged be paid forthwith." 2.1 Appellant is registered with the Central Excise and engaged in the manufacture of Parts of Vehicles, Parts of Air Conditioners, etc. falling under Chapter Sub-hearing No.8714990 & 8714900, 8415900, 85229000 of first schedule to Central Excise Tariff Act. 1985. They are also availing the benefit of Cenvat credit as provided in the law. During the course of scrutiny of the ER-1 returns anomalies in the closing and opening balance in the abstract of Cenvat Credit Account were noticed. On being asked appellant informed that- (i) the difference of an amount of Rs.6,40,00,000/- found in the opening balance of June, 2010 (Rs.3,91,64,719/-) and the closing balance of May, 2010 (Rs. 10,31 64,719/-), was caused due to clerical/typographical error in December 2009 return submitted in January, 2010. They have corrected the ....
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....aring for the appellant and Shri Santosh Kumar, learned Authorised Representative appearing for the revenue. 3.2 Arguing for the appellant learned Counsel submits that- • Show cause notice was issued beyond the normal period of limitation without alleging any evasion of tax by suppression of facts, fraud and in facts there cannot be any such factors exist. • Credit was never utilized and there was no case of demanding interest and imposition of penalties. Reliance is placed by the following rulings:- • M/s Steria India Ltd. Vs Commissioner of Customs, Central Excise & Service Tax, Noida, 2018 (11) TMI 758-CESTAT-Allahabad. • M/s Tirupati Structurals Ltd. Vs Commissioner of Central Excise & Service Tax, Ghaziabad 2019 (2) TMI 940 - CESTAT-Allahabad. • Credit before the utilization is in the existent of government hence there is no revenue loss to the government. Accordingly, the demand for interest of such excess credit cannot be sustained. • Rule 14, which was interpreted by the Hon'ble Supreme Court in the case of Union of India Vs Ind-Swift Laboratories Ltd. 2011 (265) ELT 3 (SC) amended vide Notific....
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....tatutory provisions prevailing at the relevant time. I find that the Hon'ble Supreme Court's order in the case of Ind-Swift Labs. v. UOI 2011 (265) ELT. 3 (S.C.) decided the issue of recovery of interest, on credit taken or utilized wrongly, under Rule 14 of the CENVAT Credit Rules, 2004. The Apex Court has ruled that "if the aforesaid provision is read as a whole we find no reason to read the word "OR" in between the expressions taken or utilized wrongly or has been erroneously refunded' as the word "AND" On the happening of any of the three circumstances such credit becomes recoverable along with interest." In view of above statutory provisions and rulings of the Apex Court in the case of Ind-Swift Lab. Vs. UOI the appellants are liable to pay interest in question under Rule 14, ibid. Thus, in view of above discussed legal position, I find merits in the findings of the adjudicating authority for demand of interest on the CENVAT credit taken or utilized wrongly and the same are upheld. 6.6 Regarding orders for recovery of interest on the credit of Service Tax of Rs.7,16,523/- the appellants contested that the amount of credit of Rs. 7,16,523/- pertains to CENV....
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....e not below ten per cent and not exceeding thirty-six per cent, per annum as is for the time being fixed by the Central Government, by the notification in the Official Gazette, from the first date of the month succeeding the month in which duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B) of section 11A till the payment of such duty:" 6.8 On a careful study of the Section 11 AB it has been observed that the person who is liable to pay duty as determined under sub-section (2) or has paid duty under sub- section (2B) of section 11A, shall in addition to the duty, be liable to pay interest at such rate fixed by the Government by the notification. I, further, observe that the said Section does prescribe any time limit for demand of such interest in addition to the duty, and prescribes that such interest shall be paid. On a comparative study of Section 11A and 11AB it has been observed that Section 11A prescribe that, "a Central Excise Officer may within one year from the relevant date, serve notice on the person chargeable duty which has not been l....
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....t be encroached upon by the judicial authorities". "Considering the facts as above and law laid down by the Apex Court, the action having been taken within a period of five years for recovery, it cannot be said that the action is even beyond the reasonable period for enforcing the recovery of interest" (Para- 14). 6.9.3 In the case of Abhinav Industries vs. CCE Jaipur-1-2011(264) ELT 538 (Tri- Del)the Principal Bench of CESTAT, New Delhi held that, "On the other hand, I find that the interest liability arises in terms of provisions of Section 11AB. The said section is to the effect that where any duty of excise has not been levied or paid, or has been short levied or short paid or erroneously refunded, the person who is liable to pay the duty as determined under sub-section (2) of Section 11A, shall in addition to the duty, being liable to pay interest at such rate............ till the date of payment of such duty. A reading of the above provision makes it clear that there is no time limit fixed by the legislation for payment of interest in respect of the duty confirmed against the assessee. In fact, the Hon'ble Bombay High Court in the case of CCE, Aurangabad....
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....pply for effecting such recovery. 12. We have very carefully read the impugned judgment and order of the High Court. The High Court proceeded by reading it down to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. Therefore, High Court on a conjoint reading of Section 11AB of the Act and Rules 3 & 4 of the Credit Rules proceeded to hold that interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is wrongly utilized. In our considered opinion, the High Court misread and misinterpreted the aforesaid Rule 14 and wrongly read it down without properly appreciating the scope and limitation thereof. A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically provides that where CENVAT credit has....
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....possible interpretations leads to such a result, howsoever attractive it may be. Thus, where there are two possible interpretations, one invalidating the law and the other upholding, the latter should be adopted. For this, the courts have been endeavouring, sometimes to give restrictive or expansive meaning keeping in view the nature of legislation, maybe beneficial, penal or fiscal etc. Cumulatively it is to sub-serve the object of the legislation. Old golden rule is of respecting the wisdom of legislature that they are aware of the law and would never have intended for an invalid legislation. This also keeps courts within their track and checks individual zeal of going wayward. Yet in spite of this, if the impugned legislation cannot be saved the courts shall not hesitate to strike it down. Similarly, for upholding any provision, if it could be saved by reading it down, it should be done, unless plain words are so clear to be in defiance of the Constitution. These interpretations spring out because of concern of the courts to salvage a legislation to achieve its objective and not to let it fall merely because of a possible ingenious interpretation. The words are n....
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....decision by referring to the amendment specifically by substituting the word "or" in Rule 14 by "and". They argued that amendment was brought to the said rule through substitution of the words 'taken and utilized wrongly', the rule was amended with retrospective effect, we do not find any merits in the said submissions. Appellant has relied upon the decision in case of Fosroc Chemicals (India) Pvt Ltd [2015 (318) ELT 240 (Kar)], holding as follows to argue that the effect of "substitution" done in Rule 14 by the Notification No had the impact to amend the provisions said rule retrospectively. 7. The contention of the revenue is, that the statutory provision of the notification referred to supra became effective from 31.12.2008 as per para 1(2) of the notification issued by the Government of India and therefore, the finding of the Tribunal that the notification is effective retrospectively from 10.9.2004 is beyond the scope of statutory provision and therefore, the impugned order is liable to be set-aside. 8. Per contra, the learned counsel appearing for the assessee supported the impugned order. 9. What is the effect of "substitution" of a provision in th....
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....e in place of another person or thing'; 'to replace (an atom or group in a molecule) with (another atom or group)"; or 'a person or thing that serves in place of another, such as a player in a game who takes the place of an injured colleague'. 16. By reason of the aforementioned amendment no substantive right has been taken away nor any penal consequence has been imposed. Only an obvious mistake was sought to be removed thereby. 17. There cannot furthermore be any doubt whatsoever that when a person is held to be eligible to obtain the benefits of an exemption notification, the same should be liberally construed." 13. The Parliament has enacted the Special Economic Zones Act 2005 (The SEZ Act for short) to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Section 53 of the Act declares that a special economic zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. The word "export" has been defined under Act at section 2....
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....has to be extended to the goods cleared to a "developer" of a Special Economic Zone for their authorized operations. Therefore, we do no see any merit in these appeals. made to cease to exist and, next, the new rule is brought into existence in its place." 4.5 Notification No 18/2012-CE (NT) reads as follows: G.S.R. (E).-In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely : - 1. (1) These rules may be called the CENVAT Credit (Third Amendment) Rules, 2012. (2) Save as otherwise provided in these rules, they shall come into force on the 1st day of April, 2012. 11. In rule 14 of the said rules, with effect from the 17th day of March, 2012,- (a) for the words "taken or utilised wrongly", the words "taken and utilised wrongly" shall be substituted; (b) for the word, figures and letters "and 11AB", the word, figures and letters "and 11AA" shall be substituted" From the perusal of the above notification it is quite e....
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....after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not- (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered there under; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 6A. Repeal of Act making textual amendment in Act or Regulation.-Where any Central Act or Regulation made after the commencem....
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....mere repeal of an existing provision. 25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (See Principles of Statutory Interpretation, ibid, p.565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. and Ors. Vs. State of U.P. and Ors.: (2002) 2 SCC 645, State of Rajasthan Vs. Mangilal Pindwal: (1996) 5 SCC 60, Koteswar Vittal Kamath Vs. K. Rangappa Baliga and Co.: (1969) 1 SCC 255 and A.L.V.R.S.T. Veerappa Chettiar Vs. S. Michael & Ors.: AIR 1963 SC 933. In West U.P. Sugar Mills Association and Ors.'s case (supra) a three-Judges Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centering around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal's case (supra) this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that....
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.... 7 SCC 358, may be noticed : "... A statute is an edict of the Legislature and in construing a statute, it is necessary, to seek the intention of its maker. A statute has to be construed according to the intent of them that make it and the duty of the Court is to act upon the true intention of the Legislature. If a statutory provision is open to more than one interpretation the Court has to choose that interpretation which represents the true intention of the Legislature. This task very often raises the difficulties because of various reasons, inasmuch as the words used may not be scientific symbols having any precise or definite meaning and the language may be an imperfect medium to convey one's thought or that the assembly of Legislatures consisting of persons of various shades of opinion purport to convey a meaning which may be obscure. It is impossible even for the most imaginative Legislature to forestall exhaustively situations and circumstances that may emerge after enacting a statute where its application may be called for. Nonetheless, the function of the Courts is only to expound and not to legislate. Legislation in a modern State is actuated with some policy to ....
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....he hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation. 21. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision-making. Insofar as taxation statutes are concerned, Article 265 of the Constitution [265. Taxes not to be imposed save by authority of law - No tax shall be levied or collected except by authority of law.] prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, whic....
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....inst the applicability of the statute to the particular case.' Wiliam M. Lile et al., Brief Making and the use of Law Books 343 (Roger W. Cooley & Charles Lesly Ames eds., 3d ed. 1914). "Strict interpretation is an equivocal expression, for it means either literal or narrow. When a provision is ambiguous, one of its meaning may be wider than the other, and the strict (i.e., narrow) sense is not necessarily the strict (i.e., literal) sense." John Salmond, Jurisprudence 171 n. (t) (Glanville L. Williams ed., 10th ed. 1947). 24. As contended by Ms. Pinky Anand, Learned Additional Solicitor General, the principle of literal interpretation and the principle of strict interpretation are sometimes used interchangeably. This principle, however, may not be sustainable in all contexts and situations. There is certainly scope to sustain an argument that all cases of literal interpretation would involve strict rule of interpretation, but strict rule may not necessarily involve the former, especially in the area of taxation. The decision of this Court in Punjab Land Development and Reclamation Corporation Ltd., Chandigarh v. Presiding Officer, Labour Court Chandigarh and Ors.,....
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.... Interpretation' (14th ed. 2016 p.-879) after referring to Re, Micklethwait, (1885) 11 Ex 452; Partington v. A.G., (1869) LR 4 HL 100; Rajasthan Rajya Sahakari Spinning & Ginning Mills Federation Ltd. v. Deputy CIT, Jaipur, (2014) 11 SCC 672, State Bank of Travancore v. Commissioner of Income Tax, (1986) 2 SCC 11 and Cape Brandy Syndicate v. IRC, (1921) 1 KB 64, summed up the law in the following manner - "A taxing statute is to be strictly construed. The well-established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY AND LORD SIMONDS, means : 'The subject is not to be taxed without clear words for that purpose : and also that every Act of Parliament must be read according to the natural construction of its words. In a classic passage LORD CAIRNS stated the principle thus : "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In ot....
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....scapes by not being brought within the letter of the law, no question of unjustness as such arises [CIT v. Jalgaon Electric Supply Co., AIR 1960 SC 1182]. But equitable considerations are not relevant in construing a taxing statute, [CIT, W.B. v. Central India Industries, AIR 1972 SC 397], and similarly logic or reason cannot be of much avail in interpreting a taxing statute [Azam Jha v. Expenditure Tax Officer, Hyderabad, AIR 1972 SC 2319]. It is well-settled that in the field of taxation, hardship or equity has no role to play in determining eligibility to tax and it is for the Legislature to determine the same [Kapil Mohan v. Commr. of Income Tax, Delhi, AIR 1999 SC 573]. Similarly, hardship or equity is not relevant in interpreting provisions imposing stamp duty, which is a tax, and the Court should not concern itself with the intention of the Legislature when the language expressing such intention is plain and unambiguous [State of Madhya Pradesh v. Rakesh Kohli & Anr., (2012) 6 SCC 312]. But just as reliance upon equity does not avail an assesse, so it does not avail the Revenue." The passages extracted above, were quoted with approval by this Court in at least two d....
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....ication or clause, same is to be allowed based wholly by the language of the notification, and exemption cannot be gathered by necessary implication, or on a construction different from the words used by reference to the object and purpose of granting exemption [See Hansraj Gordhandas Vs. H.H. Dave, Assistant Collector of Central Excise Customs, Surat & Ors., AIR 1970 SC 755]. Further it's for the assessee to show by construction of the exemption clause/notification that it comes within the purview of exemption. The assessee/citizen cannot rely on ambiguity or doubt to claim benefit of exemption. The rationale is not to widen the ambit at the stage of applicability. However, once the hurdle is crossed, the notification is constructed liberally [See Collector of Central Excise, Bombay-I & Anr. vs. Parle Exports (P) Ltd., (1989) 1 SCC 345 and Union of India & Ors. vs. Wood Papers Ltd. & Anr., (1998) 4 SCC 256]. Thus, distinction can be made between the substantive requirements that require strict compliance - non-compliance of which would render the assessee ineligible to claim exemption, and the procedural or compliance provision which can be interpreted liberally [See paragraphs 64....
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....d that the strict interpretation to the exemption provision is to be accorded. It is observed that the purposive interpretation can be given only when there is some ambiguity in the language of the statutory provision or it leads to absurd results. In paragraph 16, it is observed and held as under:- "16. We have already pointed out that on the plain language of the provision in question, the benefit of the said clause would be applicable only in respect of the building "which has been constructed". The expression "has been constructed" obviously cannot include within its sweep a building which is not fully constructed or in the process of construction. The opening words of clause (ii) also become important in this behalf, where it is stated that "the land occupied by any building". The land cannot be treated to be occupied by a building where it is still under construction. If the contention of Mr Jain is accepted, an assessee would become entitled to the benefit of the said clause, at that very moment, the commencement of construction even with construction the moment one brick is laid. It would be too far-fetched, in such a situation, to say that the land stands occupied....
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....of credit would amount to "no credit" being taken. In this regard, reliance has been placed on the decision of Allahabad High Court in the case of Hello Minerals Water (P) Ltd., vs. Union of India reported in 2004 (174) ELT 422 (All.) = (2004-TIOL-57-HC-ALL-CX) , the decision of the Karnataka High Court in the case of Commissioner of C.Ex . & S.T., LTU. Bangalore vs. Bill Forge Pvt. Ltd reported in 2012 (279) ELT 209 ( Kar .) = 2011-TIOL-799-HC-KAR-CX and the decision of the Hon'ble Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. vs. Collector of C.Excise , Nagpur reported in 1996 (81) ELT 3 (SC) =(2002-TIOL-41-SC-CX). 10. We do not agree with the submissions made by the learned counsel for the assessee, as the decisions rendered in the aforesaid cases by the Allahabad High Court as well as the Karnataka High Court as well as the Hon'ble Supreme Court, arose out of a case where the assessee claimed benefit of an exemption notification. The question which fell for consideration in those cases is as to whether reversal of credit after the removal of the final product would entitle the assessee therein to the benefits of exemption notification, which states....
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....tation thereof. A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word "OR" appearing in Rule 14, twice, could be read as "AND" by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole, we find no reason to read the word "OR" in between the expressions 'taken' or 'utilized wrongly' or 'has been erroneously refunded' as the word "AND". On the happening of any of the three circumstances such credit becomes recoverable along with interest". 12. In the light of the above findings of the Hon'ble Apex Court, particularly with regard to Rule 14 of the Act, we do not find any justifiable ground to accept the plea of the assessee based on the decisions relied on by the assessee reported in 1996 (81) ELT 3 (SC) = (2002-TIOL-41-SC-CX), 2004 (174) ELT 422 (All....
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....the plea of the revenue that interest on the wrong credit is called for, as per Rule 14 read with Section 11AB and the circumstances on the aspect of leviable interest, we set aside the order of the Tribunal and allow the appeal." 4.13 In the case of Padmashri V.V. Patil SSK Ltd. 2007 (215) ELT 23 (Bom.) Hon'ble Bombay High Court has held as follows:- 10. So far as interest Under Section 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the official gazette from time to time. There would be discretion, if at all the same is incorporated in such notification in the gazette by which rates of interest chargeable Under Section 11AB are declared. The second aspect would be whether there is any discretion not to charge the interest Under Section 11AB at all and we are afraid, language of Section 11AB is unambiguous. The pers....
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....ot even a whisper of the word interest' in the said section so as to indicate that the limitation, as contained in the said section, applies to interest. 6. On the other hand, I find that the interest liability arises in terms of provisions of Section 11AB. The said section is to the effect that where any duty of excise has not been levied or paid, or has been short levied or short paid or erroneously refunded, the person who is liable to pay the duty as determined under sub-section (2) of Section 11A, shall in addition to the duty, being liable to pay interest at such rate.................... till the date of payment of such duty. A reading of the above provision makes it clear that there is no time limit fixed by the legislation for payment of interest in respect of the duty confirmed against the assessee. In fact, the Hon'ble Bombay High Court in the case of CCE, Aurangabad v. Padmashri V.V. Patil S.S.K. Ltd. reported in 2007 (215) ELT 23 (Bom.) = (2007-TIOL-419-HC-MUM-CX) has held that even if no notice is issued, interest is liable to be paid for the delayed payment of duty. Use of words shall' and be liable' appearing in the relevant section indicate ....