Supermax Personal Care Pvt. Ltd vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/85996/15

(Arising out of Order-in-Original No.270/Commr/WLH/LTU-M/CX/2014 dated 12/03/2015 passed by Commissioner of Central Excise & Service Tax, (LTU), Mumbai)

For approval and signature:

Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

Supermax Personal Care Pvt. Ltd., Appellant Vs. Commissioner of Central Excise & Service Tax (LTU) Mumbai Respondent

Appearance:

Shri.Prasad Paranjape, Advocate for appellant Shri.Hitesh Shah, Comm. (AR) for respondent

CORAM:

Honble Mr.Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

Date of Hearing : 20/08/2015 Date of Decision : /09/2015 ORDER NO

Per: Raju

1. The appellants are an LTU engaged in the manufacture of shaving systems and safety razor blades. They have six factories, located at among other places, in Thane and Hyderabad. The factory at Thane failed to pay a part of the duty amounting to Rs.1,92,64,263/ in the month of January 2013. Thereafter they paid Central Excise duty in cash on each clearance after 7th of March 2013. In the month of March 2013 the request of the appellants to get all the factories centrally registered as LTU was approved. As a result CENVAT credit available in various factories was combined into one account. Large amount of credit available in the Hyderabad factory became available for payment of duty in Thane factory. The appellants deposited the short payment of duty of their Thane unit, that is an amount of Rs.1,92,64,263/ through there common LTU CENVAT account on 26/03/2013. They paid the interest of Rs.4,56,009/ in cash. The revenue was of the view that the reversal of the credit made in the CENVAT account in the month of March was not a proper payment of duty and hence the default which started in January, continued. Accordingly, a demand notice under rule 8 (3A) was issued in respect of entire clearances from 26.03.2013 to 31.12.2013. An amount of Rs.31,85,56,189/ was demanded to be paid in cash. The appellants had already paid this amount in CENVAT account however under the said rule the entire amount was sought to be collected in cash. The said notice was confirmed by the Commissioner.

2. The appellants are in appeal against the said order. The appellants have not deposited the required pre-deposit under Section 35F of the Central Excise act 1944. Hence a notice for maintainability was issued by the Registry. The short issue before us is if this appeal is maintainable without the mandatory pre-deposit prescribed under section 35F of the Central Excise act 1944.

3. The appellants have pleaded that they have paid the entire amount from their CENVAT account and hence hundred percent of the duty demanded stands paid. In the circumstances they are not required to deposit any additional amount, i.e. amount required under Section 35F. For this purpose they relied on the circular of the CESTAT issued on 28.08.2014. In the said circular it is prescribed that if the mandatory deposit the duty confirmed is made from the CENVAT account the same can be considered as sufficient for the purpose of fulfillment under Section 35F. The appellant also relied on the decision of High Court of judicature at Allahabad in the case of India Casting Company 1998 (104)ELT 17, wherein the High Court has allowed deposit of an amount in the RG23A register where the Tribunal had ordered the same to be deposited in cash. The appellants also relied the decision of Tribunal in the case of PMT machines (order number M/4027/15/STB) where the tribunal had considered the debit in CENVAT account sufficient compliance for the purpose of section 35F. In the said case the Commissioner had ordered deposit of the said amount in cash. The appellants also relied on the decision of Tribunal in case of Meenakshi Associates - 2013 (295)ELT 578. In the said judgement following has been held

16.?For the sake of clarity we would like to add some more observations on this issue. Non-payment of excise duty arises often in administration of excise levy. Show Cause Notices are issued in such cases as per provisions of Section 11A of the Central Excise Act to recover duty short-paid. Normally such short-payment can be made good by paying duty through Cenvat credit as authorized by Central Excise Rules, 2002 and Cenvat Credit Rules, 2004. So there should be a reason why such payment cannot be accepted in this case. The reason being quoted is that this is a situation covered by Rule 8(3A) and the Rule prescribes that so long as the assessee is in default for any previous month payment through Cenvat credit is not a proper discharge of duty liability. This prohibition gets lifted the moment the default is made good along with appropriate interest on defaulted amount and normal situation is restored. So payments made through Cenvat credit during the defaulting period also becomes good payment once the default is made good by paying the defaulted amount along with interest. Interest on deemed non-payment of duty on clearances during the period of default is a separate consequence but not critical in deciding whether the assessees continues to be in default.

4. The appellants also relied upon the decision of Tribunal in case of Neesa infrastructure 2015 (321)ELT 328. they also relied on the decision of Honble Gujarat High Court decision in case of Indsur Global Ltd 2014 (310)ELT 833 wherein it has been held that rule 8 (3A) is unconstitutional.

5. The learned AR argued that in the stage of maintainability the merits of the case cannot be examined. He argued that for the purpose of maintainability only section 35F can be considered. He argued that in view of Section 35F (ii) the appeal of the appellants cannot be entertained unless appellants deposit specified amount in terms of Section 35F. He argued that if any cognizance is taken of the reversal of amounts made in the CENVAT account it would amount to entertainment of appeals and pronouncement on the merits of the appeal. For this purpose he relied on the decision of Tribunal in case of CIRON drugs and pharmaceuticals (order number M/4064/15/EB). In the said case the appellants had claimed that certain deposits were made by them during the investigation and the same should be considered towards the discharge of liability towards pre-deposit under section 35F. The revenue had argued that these so-called deposits are themselves part of the dispute and hence cannot be considered the words the liability of pre-deposit under section 35 F. After examining the section 35F and circular 984/8/2014CX dated 16.9.2014 the Tribunal came to the conclusion that since the said amounts claimed to be adjusted against the pre-deposit are themselves part of the dispute, the same cannot be considered towards as deposit under Section 35F. The learned AR also argued that no notice of the circular issued by the registrar of CESTAT can be taken as neither has authority to issue the same nor it says by which authority it has been issued. Learned AR also brought to our notice the judgement of Hon Supreme Court in case of Jayaswal Neco 2015 TIOL 176 SC.

6. We have examined the rival contentions and arguments. The present dispute is solely of the maintainability of the appeal. It has been argued that while considering the maintainability the merits of the case cannot be examined as the same cannot be done till the barrier of section 35F is crossed. The decision of the Honble High Court of Gujarat and the decision of Tribunal in case of Neesa infrastructure 2015 (321)ELT 328, are on the merits of the case. The decision of Hon Supreme Court in case of Jayaswal Neco 2015 TIOL 176 SC creates a doubt on the issue. In case of Jayaswal Neco 2015 TIOL 176 SC Hon Supreme Court has observed as under:

22. This provision came up for interpretation before at least four High Courts and all these Courts took the view that even when the facility is withdrawn for making payment in instalments, the excise duty can be paid through Cenvat Credit. It is not necessary to refer to all these judgments. Suffice it is to make a mention of the decision dated 26.10.2005 in C.E.Appeal No. 22 of 2005 rendered by Kerala High Court in Thanikkudam Bagawati Mills Limited, Thanikkudam v. The Commissioner of Central Excise, Calicut. In this judgment, the High Court after analysing the Rules as well as the provisions of Modvat scheme summed up the position as under:

"23. It is true that as per rule 173G (1)(b) also the payment utilising Cenvat credit is an approved manner of payment of duty by these rules. It is equally true that even in the absence of such a provision contained in Rule 173G (1)(b) accepting the mode of payment utilising Cenvat credit, an assessee, even by virtue of the provisions contained under Rule 49 read with Rule 57A, will be entitled to utilise such input credit. In other words, there is force in the contention of the assessee that Rule 173G does not give any benefit of any input credit and merely by referring to the entitlement of the assessee to use the Cenvat credit again under Rule 173G and further providing that the assessee has to pay the duty during the suspended period for each consignment by debit from the account current only in no way will have the effect of taking away the already conferred benefit by separate rule. So long as no amendment is brought out to Rule 49 or Rule 57A, as the case may be, the consequences of making an assessee a defaulter and to deny him the benefit of utilising the input credit will become unworkable and ineffective. It has to be noticed as rightly pointed by the counsel appearing for the petitioner that the rule making authority took notice of this lacuna and by the Central Excise Rules, 2002 - second amendment 2005, which came into force from 1st April, 2005, the Central Excise Rules 2002 was amended and Rule 3A was inserted which reads as follows:

"If the assessee defaults in payment of duty by the date prescribed in sub-rule (2) and the same is discharged beyond a period of thirty days from the said date, then the assessee shall forfeit the facility to pay the duty in monthly instalments under sub-rule (1) for a period of two months, starting from the date of communication of the order passed by the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, in this regard or till such date on which all dues including interest thereof are paid, whichever is later, and during this period notwithstanding anything contained in sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall be required to pay excise duty for each consignment by debit to the account current and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow."

24. It is for the first time that a non obstantive clause was added so as to take away the benefit under the Cenvat Credit rules and to utilise the input credit during the operation of the suspended period and requiring any duty by debit to the account current only. Until then, as is already referred to above, merely because rule 173G recognises the payment of duty utilising the Cenvat credit also and providing for payment of duty through open and current account only during the suspended period will not have the effect of taking away the benefit conferred by a separate rule since even without Rule 173G by virtue of Rule 49 read with Rule 57A a right has already conferred on the assessee to utilise the input credit for payment of duty at the time of discharging his liability to pay duty on the final product as provided for in the rules."

23. Not only we are in agreement with the aforesaid view taken by the High Courts, it is imperative to point out that even the Department accepted the aforesaid opinion of the High Courts. For this reason, judgments rendered by the High Courts were not challenged and instead to remedy the situation, Rule 8 of the Central Excise Rules, 2002 itself is amended by inserting sub-rule 3A vide Notification No.17/05-C.E.(N.T.) dated 31.03.2005 w.e.f. 01.04.2005. This Rule now specifically provides that in case of default in making payment of duty, the assessee shall be required to pay excise duty for each consignment by debit to the account current and not by utilising Cenvat Credit. This also lends credence to our view which we have taken in respect of unamended provision that was applicable at the relevant time.

From this it appears that the views of Hon Supreme Court on this issue are different from those of Hon High Court. Thus the law on the issue does not appear to be settled.

7. The short question to be decided is if the CENVAT debits made by the appellants during the period of default are sufficient for the purpose of section 35F. Tribunal, in the case of PMT machines (order number M/4027/15/STB), has considered the debit in CENVAT account sufficient compliance for the purpose of section 35F. A perusal of the said order shows that the same was not contested by the revenue and therefore cannot be relied as a precedent. In this case the revenue is a strongly contesting the same. Furthermore the facts in the said case are different from the present case. In this case the Rule 8 (3A) itself requires deposit of money in cash restricting payment from Cenvat. The appellants reliance on decision of Honble High Court of Allahabad in the case of Indian Castings (supra) is misplaced as it was an order of Honble High Court in exercise of its writ jurisdiction. The facts of the case in Meenakshi Associates (supra) are different as in that case the default was made good by payment in PLA (para 5 (ii) of the said order refers) unlike the present case, where it is made good by payment in CENVAT account.

8. The circular of the CESTAT issued on 28.08.2014 practically equates the cash payment of duty with the debits made in the CENVAT Registers. The said circular will apply to normal situations where the debit through CENVAT itself is not under challenge, as it is in impugned case. The impugned order disallows the debit in CENVAT and does not recognize it as payment of duty. The crux of the issue is validity of debits made in the CENVAT account as against demand of payment in cash.

The whole purpose of Section 35F is to ensure that the order issued by various authorities are complied with, at least in part, before the appeal against the same is entertained. The entire dispute in the case relates to the incorrectness of the utilisation of the amount used from CENVAT account. The order of the Commissioner clearly does not recognize the payments made through said account and orders payment in cash. In view of the fact that the Rule 8(3A) as well as the order of the Commissioner clearly distinguishing between the payment in cash with payment through CENVAT, the same can not be equated.

9. The appeal is therefore liable to be dismissed as non maintainable for lack of compliance of requirement of Section 35F. However, in the interest of justice, we grant four weeks time to pay 7.5% of the disputed amount and report compliance on  (Pronounced in Court on )

(Anil Choudhary) Member (Judicial) (Raju) Member (Technical)

pj

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Appeal No.E/85996/15