Dismissed

The Principal Commissioner of Central GST Daman Commissionerate v. Patodia Filaments Pvt. Ltd.

Bombay HC25 Feb 2020CEXA/196/2019

Case brief

AI extract

What is this about?

The High Court discarded substantial questions of law framed by the appellant challenging the Tribunal's order. The court held that the distinction between sub-rules 11(3)(i) and 11(3)(ii) regarding lapsing of CENVAT credit is deliberate and not a draftsman error, thus dismissing the appeal.

What did the court decide?

The Appeal filed by the Principal Commissioner against the order of the Customs, Excise and Service Tax Appellate Tribunal is dismissed.

The Principal Commissioner of Central GST Daman… — GST and Indirect Tax | Bombay HC (2020)

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23 cexa 196-19.doc

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Pradnya Bhogale

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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CENTRAL EXCISE APPEAL NO. 196 OF 2019 The Principal Commissioner of Central GST Daman Commissionerate ..Appellant vs. Patodia Filaments Pvt. Ltd. ..Respondent

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Ms. Maya Majumdar for Appellant.

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Mr. Jas Sanghavi a/w Mr. Kartik Vig I/b. PDS Legal for Respondent.

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CORAM : NITIN JAMDAR & M.S.KARNIK, JJ.

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DATE : 25 FEBRUARY 2020

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P.C.:-

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The Appellant challenges the order dated 4 April 2019 passed by the Customs, Excise and Service Tax Appellate Tribunal in Appeal No.E/13744-13745, 14080/2013-DB.

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The Respondent is engaged in the manufacture of Polyester Texturised Yarn and Grey Fabrics. The Respondent was availing the CENVAT Credit for the input used in manufacturing final products. The Respondent took benefit of the Notification dated 9 July 2004 for the period between 9 July 2004 to February

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23 cexa 196-19.doc

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After 1 March 2007, the Respondent availed the benefit of Notification dated 9 July 2004 and reversed the balance CENVAT Credit. The Respondent paid duty on finished goods, reversal of credit on stocks and clearance of wastage and capital goods, from the CENVAT account. A Show cause notice was issued to the Respondent on 3 April 2012. The Appellant put the Respondent to the notice in respect of their failure to reverse the CENVAT Credit of Rs.2,86,83,157/- in terms of Rule 11(3). The adjudicating authority confirmed the demand and further demand of Rs.42,17,421/- and Rs.65,64,391/- was also confirmed along with penalty.

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The Tribunal, holding that Rule 11 (3)(i), which was put against the Respondent does not envisage lapsing of CENVAT Credit, allowed the Appeal of the Respondent. Hence the Appellant is in appeal.

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The following questions of law are framed as substantial questions of law for consideration in this Appeal by the Appellant :-

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“A. Whether the Tribunal has erred in holding that as all the conditions enumerated under sub rule 3 (i) of Rule 11 of Cenvat Credit Rules, 2004 has been followed by the Appellant, he is not required to reverse the entire credit lying in balance on the date of opting notification No.30/2004-CE dated 09.07.2004?

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B. Whether on availing benefit under Notification No.30/2004-CE dated 09.07.2004 and following the conditions prescribed under the sub-rule 3(i) of Rule 11 Cenvat Credit Rules, 2004 the balance cenvat credit available with assessee shall lapse and/or will be liable to be reversed and cannot be utilized for payment of duty on any other duty on final product will be liable to be reversed and cannot be utilized for payment of duty on any other duty on final product as enumerated in Rule 11(3) of Cenvat Credit Rules, 2004?

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C. Whether under the facts of the present case and in law assessee is entitled not to reverse but to carry forward the balance cenvat credit after following procedure prescribed under sub-rule 3(i) of Rule 11 Cenvat Credit Rules, 2004 and utilize it for payment of Central Excise Duty for subsequent period?

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D. Whether assessee was right in availing cenvat credit on capital goods while availing benefit of exemption notification No.30/2004-CE dated 9.07.2004?”

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The contention of the Appellant is that Rule 11(3) of the Cenvat Credit Rules, 2004 envisaged lapsing of remaining CENVAT Credit and that being the position it could not have been utilized by the Respondent and their action of doing so has resulted on a tax liability which is rightly to be enforced through the show cause notice. It is the contention of the learned counsel for the Appellant that the stipulation of CENVAT Credit lapsing enumerated under Rule 11(3)(ii) is applicable to both

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23 cexa 196-19.doc

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contingencies provided in Rule 11(3) and the inclusion of this stipulation in Rule 11(3)(ii) is only a draftsman error. Learned counsel for the Respondent submitted that there is a clear distinction between two categories under Sub Rule (3) and consciously the stipulation of lapsing of CENVAT Credit is omitted from Rule 11(3) (i). He also relied upon the decision in the case of M/s. Wearit Global Ltd. Vs. C.C.E., Udaipur¹ .

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6. Rule 11(3) reads thus :-

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“A manufacturer or producer of a fnaa product shaaa be required to pay an amount equivaaent to the CENVATcredit, if any, taken by him in respect of inputs received for use in the manufacture of the said fnaa product and is aying in stock or in process or is contained in the fnaa product aying in stock, if, -

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(i) he opts for exemption from whoae of the dutyof excise aeviabae on the said fnaa product manufactured or produced by him under a notifcation issued under section 5A of the Act; or

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(ii) the said fnaa product has been exempted absoauteay under section 5A of the Act, and after deducting the said amount from the baaance of CENVAT credit, if any, aying in his credit, the baaance, if any, stiaa remaining shaaa aapse and shaaa not be aaaowed to be utiaized for payment of duty on any other fnaa product whether caeared for home consumption or for export,or for payment of service tax on any output service, whether provided in India or exported.”

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The bare perusal of Sub Rule (3) of Rule 11 shows that stipulation of lapsing is included in Clause (ii) and not in Clause (i). These two clauses are separated by hyphen and use of the word ‘or’. Secondly in the Rule 11(3) (i) it is the option given

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1 Excise Appeal No.E/53094/2016.

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to the manufacturer or producer for obtaining exemption. In category (ii) there is no such option but a reference is made for final product which has been exempted absolutely under Section 5A of the Act. Therefore, these two categories being distinct, the placement of stipulation cannot be considered as a mere draftsman error. The similar interpretation has already been placed on this provision by the Rajasthan High Court in the case of Union of India vs. Kanchan India Limited.²

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In the circumstances, the questions as proposed do not give rise to any substantial question of law.

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The Appeal is dismissed.

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(M.S.KARNIK, J.)

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2 Excise Appeal No.15 of 2019.

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The Principal Commissioner of Central GST Daman Commissionerate v. Patodia Filaments Pvt. Ltd.

Case brief

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What did the court decide?

The Principal Commissioner of Central GST Daman Commissionerate v. Patodia Filaments Pvt. Ltd.

Case brief

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