2005 (98) ECC 310 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(C)

Shri S.S. Kang, Member (J) and Shri V.K. Agrawal, Member (T)

Lakshmi Cement

Versus

Commissioner of Central Excise, Jaipur II

Appeal No. E/1127/2004-NB(C)

[Arising out of Order-in-Appeal No. 564/2003 dated 12.12.2003 passed by the Commissioner of Customs & Central Excise (Appeals), Jaipur]

Final Order No. 469/2004-NB(C), dt. 22.6.2004, Certified on 20.7.2004

Finance Act, 2000

Section 112(2) -- Specific provisions for recovery of interest on payments which are delayed beyond the period of said 30 days -- Mere fact that the show cause notice issued to them for disallowing the Modvat credit had not been adjudicated will not make the provisions of Section 112(2)(b) of the Finance Act, 2000 non-operative -- If any credit of duty paid on HSD oil had been taken, the same was liable to be recovered -- Once it is established that the payment has been delayed beyond the stipulated period of 30 days, interest liability accrues -- Appellants have not paid back the Modvat credit of the duty paid on HSD taken by them within 30 days from the date on which the Finance Act, 2000 receives the assent of the President. Therefore, the demand of interest in terms of clause (b) of sub-section (2) of Section 112 of Finance Act, 2000 has rightly been confirmed in the impugned order.

Interest

If any credit of duty paid on HSD oil had been taken, the same was liable to be recovered -- Once it is established that the payment has been delayed beyond the stipulated period of 30 days, interest liability accrues.

PRESENT :

Shri K.K. Anand, Advocate for the appellant.

Shri H.C. Verma, JDR for the respondent.

Cases Cited :

1. Maharaja Shree Umaid Mills Ltd. v. CCE, Jaipur Final Order No. A/504-508/03-NB(C) dated 1.10.2003 [Paras 3 & 4]

2. Poddar Pigments Ltd. v. CCE, Jaipur, 2003 (155) ELT 484 (Tri)................. [Paras 2 & 4]

Per : V.K. Agrawal

M/s. Lakshmi Cement have filed this Appeal against Order-in-Appeal No. 564/2003 dated 12.12.2003 by which the Commissioner (Appeals) has confirmed the disallowance of Modvat credit in respect of HSD oil and the demand of interest on the credit amount payable by them.

2. Shri K.K. Anand, learned Advocate submitted that the appellants manufacture cement; that they have installed a DG set for captive generation of electricity in their factory premises; that they have availed Modvat credit of the duty paid on HSD oil used as inputs for generation of electricity under Rule 57B of the Central Excise Rules, 1944; that the Inspector Central Excise under letter dated 30.4.97 advised them to reverse the Modvat credit taken by them in respect of duty paid on HSD oil as the same is not admissible; that they have filed writ petition in the High Court of Rajasthan agitating the Modvat credit has been specifically allowed to them on HSD oil under Rule 57B of the Central Excise Rules and the clarification issued by the Chief Commissioner is bad in law; that the High Court of Judicature for Rajasthan in its Order dated 28.8.1997 stayed the operation of impugned Circular and Trade Notice and allowed the Appellants to avail the Modvat credit of duty paid on HSD oil; that the Department issued regular show cause notices alleging wrong availment of Modvat credit during the period from July 1997 to March 2000; that when Rule 57B was amended by Notification No. 5/98-CE (NT) dated 2.3.98, they also amended their Writ Petition filed in the Rajasthan High Court and the stay already granted was confirmed vide Order dated 20.12.99; that vide Section 112 of the Finance Act, 2000, Parliament validated the recovery of Modvat credit availed on HSD oil during the period from 16.3.95 to 12.5.2000. Learned Advocate further submitted that the appellants are not pressing the Appeal as far as the disallowance of Modvat credit of the duty paid on HSD oil is concerned; that they are challenging the demand of interest from them; that they have paid/reversed the Modvat credit taken by them in respect of HSD oil well within the normal limitation period of three months from the date of confirmation of the demand by the original Authority; that the demand was confirmed by Order-in-Original dated 6.6.2002 and the payment was made by them on 31.7.2002, 9.8.2002 and 13.8.2002; that further there was High Court's Stay Order in their favour allowing them to avail the Modvat credit on HSD oil; that therefore, recovery of interest from 12.5.2000 that is, the date on which Finance Act, 2000 received the ascent of President is not justified and against the spirit of High Court's Stay Order dated 28.8.1997; that there is nothing on record to show that they had delayed the payment/reversal of the Modvat credit. Learned advocate emphasised again that as the show cause notice issued to them denying the Modvat credit has been adjudicated only on 6.6.2002, no interest is chargeable from them with effect from 12.5.2000. He relied upon the decision of the Tribunal in the case of Poddar Pigments Ltd. v. CCE, Jaipur, 2003 (155) ELT 484 (Tri) wherein it has been held by the Tribunal that interest is not payable under Section 112(2) of the Finance Act, 2000 when the demand has been made on 4.8.2000 and the credit has been reversed on 28.8.2000.

3. Countering the arguments Shri H.C. Verma, learned Departmental Representative submitted that Section 112 of the Finance Act, 2000 contains over-riding provisions for recovery of credit of the duty paid on HSD within 30 days of the day on which the Finance Act, 2000 receives the Presidents' ascent; that sub-section (2) of Section 112 of the Finance Act, 2000 also contains specific provisions for recovery of interest on payments which are delayed beyond the period of said 30 days. He relied upon the decision in the case of M/s. Maharaja Shree Umaid Mills Ltd. v. CCE, Jaipur Final Order No. A/504-508/03-NB(C) dated 1.10.2003 wherein it has been held by the Tribunal that "once it is established that the payment has been delayed beyond the stipulated period of 30 days, interest liability accrues."

4. We have considered the submissions of both the sides. As the appellants are not pressing the disallowance of the Modvat credit of duty paid on HSD oil, we uphold the disallowance of Modvat credit of Rs. 1,55,93,341. Sub-section (1) of Section 112 of Finance Act, 2000 provides that notwithstanding anything contained in any Rule of Central Excise Rules, 1944, no credit of any duty paid on high speed diesel oil during the period 16.3.95 and ending with the day the Finance Act, 2000 receives the assent of the President shall be deemed to be admissible. Clause (b) of sub-section (2) of Section 112 of the Finance Act, 2000 provides that recovery shall be made of credit of duty which have been taken or utilised within a period of 30 days from the date on which the Finance Act, 2000 receives the assent of the President and in the event of non-payment of such credit of duty within this period, interest at the rate of 24% per annum shall be payable from the date immediately after the expiry of the said period of 30 days till the date of payment. In view of the specific provisions for the recovery of payment of interest made by the Parliament in Finance Act, 2000, the Appellants were required to deposit the entire amount of Modvat credit of the duty paid on HSD oil taken by them and which was objected to by the Department from the very beginning which is apparent from the letter dated 30.4.97 addressed by the Inspector Central Excise. The mere fact that the show cause notice issued to them for disallowing the Modvat credit had not been adjudicated will not make the provisions of Section 112(2)(b) of the Finance Act, 2000 non-operative. While dismissing the Writ Petition filed by them, the Rajasthan High Court has also considered the submissions made by the Petitioners that the Movat credit taken by them had attained the finality in terms of Rule in the light of the judgment of the Tribunal and on availing the credit, they had priced their finished goods after taking into account the credit and did not pass on the duty on HSD oil to their consumers and therefore, upholding the validity of the Amendment imposing the levy on HSD oil will result in harshness to the petitioners company. The Rajasthan High Court has held that "In the instant case the consistent view of the department has been that the Modvat credit is not available on the HSD oil used in DG set for generation of the electricity. There have been conflicting decisions of the CEGAT. The period of recovery of duty is not large... Thus, we find no substance in this contention as well and the same is rejected". Thus, in terms of provisions of sub-section (2) of Section 112 of the Finance Act, 2000, the Appellants were to reverse the Modvat credit of the duty taken by them on HSD oil within 30 days of the enactment of the Finance Act, 2000. The learned Advocate has relied upon the decision in the case of Poddar Pigments Ltd. which, we observe, has been passed by a Single Member Bench. On the other hand, learned Departmental Representative has relied upon the decision in the case of Maharaja Shree Umaid Mills Ltd. (supra) which has been passed by a Division Bench of the Tribunal.

The Tribunal in the said decision has observed that "the extent of credit that has been taken or utilized does not require any determination by the Central Excise officers. The information is available in the Appellants own records........... The consequences of non-payment of credit of duty taken/utilized, within a stipulated period, are spelt out in sub-section (b) of Section 112(2). Therefore, it was incumbent on the part of the Appellants to make suo motu payment of Modvat credit taken on HSD oil within the stipulated period. Having not done so, they had incurred the interest liability as provided under Section 112(2)(b)." The Tribunal in the said decision also did not accept the contention of the appellants therein that unless and until the ineligible amount is quantified through the process of assessment, the liability to pay the interest does not accrue for the period prior to assessment. The Tribunal held that it is quite clear from Section 112(2)(b) that "if any credit of duty paid on HSD oil had been taken, the same was liable to be recovered. The aforesaid provision contains a clear mandate to the persons who have taken such credit to make payment as well as to the departmental authorities to effect recoveries. It is not as if the recovery action is stalled till the expiry of 30 days from the date of assent. Similarly for making payment also, issue of a communication or an order directing the payment of the credit taken is not a pre-condition ..... we hold that it was legally incumbent on the Appellants to pay back the credit without awaiting for confirmation of demand. Having delayed the payment interest is attracted. Therefore, we hold that once it is established that the payment has been delayed beyond the stipulated period of 30 days, interest liability accrues." In the present matter also, the Appellants have not paid back the Modvat credit of the duty paid on HSD taken by them within 30 days from the date on which the Finance Act, 2000 receives the assent of the President. Therefore, the demand of interest in terms of clause (b) of sub-section (2) of Section 112 of Finance Act, 2000 has rightly been confirmed in the impugned order. Accordingly, we reject the appeal.

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