TaxTMI 
TaxTMI 
2026 (4) TMI 1427
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.... addition to basic excise duty, also attracts National Calamity Contingent Duty (NCCD) @ 1%. The respondent is availing Cenvat Credit of basic excise duty on various inputs viz. Polyester Chips falling under Chapter 39 which they have used for payment of NCCD on POY which according to revenue, was not admissible. Accordingly, three show cause notices dated 06.02.2007, 14.08.2007 and 18.02.2008 were issued to the respondent for disallowing utilisation of Cenvat Credit for payment of NCCD and it's recovery from the account current under Section 11A of the Central Excise Act, 1944 alongwith interest under Section 11AB (now 11AA) of the said Act and penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the said Act. The total amount involved in three show cause notices is Rs.4,53,12,025/-. The above issue was decided by the learned Commissioner vide impugned order wherein, she dropped the proceedings initiated against the party. 2 Revenue has taken the following grounds in their appeal:- * National Calamity Contingent Duty was imposed @ 1% vide Section 136 of the Finance Act, 2001. The Adjudicating Authority has dropped the department's case by re....
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....iworth case (cited supra), the decision cited by Learned Commissioner is not proper and therefore, he prayed that the impugned order be set aside and the department's allegation made in the show cause notice be upheld. He also relied on the decision of Hon'ble Supreme Court in the case of Union of India and Others Vs. Modi Rubber Limited and Others reported in 1986 (25) E.L.T. 849 (S.C.), Rita Textiles P. Limited and Others Vs. Union of India and Others reported in 1988 (35) E.L.T. 611 (S.C.) and the decision of Hon'ble Madras High Court in the case of M/s. Gemini Edibles and Fats India Pvt. Ltd. Vs. Union of India and Others reported in 2020 (1) TMI 212 - Madras. 4. Countering the arguments, learned Advocate mentioned that the scheme of Cenvat Credit was introduced with objective of avoiding cascading effect of duties. Rule 3(4) of the Cenvat Credit Rules (hereinafter referred to as CCR), 2004 provide for the manner in which credit availed under Rule 3(1) of the CCR can be utilised. As during the material time, rule 3(4) did not provide for any restriction, therefore, Cenvat Credit availed under Rule 3(1) by manufacturer/ service provider can be utilised for payment of any duty....
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....s been decided in party's favour by holding that Cenvat Credit of BED can be utilised for paying NCCD as there was no restriction in utilisation of credit of basic excise duty till 01.03.2008. We also find that the Tribunal while deciding Revenue's appeal in the case of M/s. Pamis Tex Pvt. Ltd. (cited supra) also considered the decision of Hon'ble Sikkim High Court in the case of M/s. Unicorn Industries which is regarding extending benefit of Notification issued under Section 5A of the Central Excise Act, 1944 for exemption of excise duty, to NCCD also. 5.1 We therefore find that the issue is no more res-integra. While hearing appeal of Hero Motocorp Ltd, Hon'ble High Court of Uttarakhand at Nainital vide their decision reported at 2018 (14) G.S.T.L. 200 (Uttarakhand) have held that for payment of NCCD and cesses- these were part of levies under Rule 3(1) for Cenvat Credit Rules, 2004 making up aggregate of Cenvat Credit. Hence, could make use of basic excise duty for payment of NCCD or cesses. It was after substitution of 5th proviso to Rule 3(4) ibid in 2016, this was proscribed and under 3(7)(b) ibid, Cenvat Credit on NCCD and Cesses has to be utilized for payment of correspo....
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....es mentioned therein in the manner provided therein. 30. It is true that the decision of the Hon'ble Apex Court in Modi Rubber revolved around the effect of the use of the words "duty of excise" in Exemption Notifications and the question was, whether it would be confined to basic excise duty or it would extend to other duties as well. NCCD The National Calamity Contingent Duty was introduced by the Finance Act of 2001. It was provided for by virtue of Section 136 of the said Finance Act. Section 136 of the Finance Act, 2001 reads as under : "136. National Calamity Contingent Duty. - (1) In the case of goods specified in the Seventh Schedule, being goods manufactured or produced, there shall be levied and collected for the purposes of the Union, by surcharge a duty of excise, to be called the National Calamity Contingent duty (hereinafter referred to as the National Calamity Duty), at the rates specified in the said Schedule. (2) The National Calamity Duty chargeable on the goods specified in the Seventh Schedule shall be in addition to any other duties of excise chargeable on such goods under the Central Excise Act, 1944 (1 of 1944) or any other....
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....ior to amendment in the year 2016, as also, the impact of the amended provisions of the proviso. Prior to its amendment, the 5th proviso to Rule 3(4) tabooed the utilization of any other part of the Cenvat credit, except the NCCD for payment of the NCCD on final products, which fell under tariff items 8517 12 10 and 8517 12 90 respectively of the First Schedule of the Tariff Act. Thus, this proviso purported to render impermissible utilization of the basic excise duty paid on any input for payment of NCCD on the final product, if the final product fell under tariff item 8517 12 10 and 8517 12 90 respectively of the First Schedule. The said proviso has already been quoted above. The provision after its modification by the amendment on 1st March, 2016 reads as follows : "[Provided also that the Cenvat credit of any duty specified in sub-rule (1), except the National Calamity Contingent duty in item (v) thereof, shall not be utilized for payment of the National Calamity Contingent duty leviable under Section 136 of the Finance Act, 2001 (14 of 2001).]" 33. After substitution of the said proviso in the year 2016, the rule-maker has totally proscribed the utilization o....
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....ayment of the NCCD and the cesses but it is true that there is no prohibition that the Cenvat credit consisting of basic excise duty paid on input is to be exclusively directed only for payment of basic excise duty on the final product. 45. Thus, as far as the periods relevant to these cases are concerned, the appellant would indeed have the right of basic excise duty paid on inputs adjusted against the charge under the NCCD and the cesses, but it is here that the shadow of Rule 6 looms large." 5.2 Prior to this decision, Hon'ble Gauhati High Court also ruled on similar lines in the case of Commissioner of C. Excise, Dibrugarh Vs. Prag Bosimi Synthetics Ltd. reported at 2013 (295) ELT 682 (GAU). Relevant para 16, 17 and 18 are reproduced below:- "16. We are in agreement with the view expressed by the CESTAT. In terms of Rule 3(1) a manufacturer or producer of a final product is allowed to take CENVAT credit of NCC duty. Since NCC duty is admittedly a duty of excise, Rule 3(4) provides that CENVAT credit may be utilized for payment of any duty of excise on any final product. Therefore, CENVAT credit of NCC duty may also be utilized for payment of any duty of exc....