OSAKA ALLOYS AND STEELS P. LTD. Vs. COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
LAWS(CE)-2015-3-51
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on March 13,2015

Osaka Alloys And Steels P. Ltd. Appellant
VERSUS
Commissioner Of Central Excise And Service Tax Respondents


Referred Judgements :-

RECKITT BENCKISER VS. UNION OF INDIA [REFERRED TO]


JUDGEMENT

RAKESH KUMAR - (1.)THE facts leading to filing of these appeals are, in brief, as under:
(2.)The appellant having their manufacturing unit in IGC, Phase II, Samba, Jammu and Kashmir, manufacture lead ingots chargeable to Central excise duty under Chapter 78 of the Central Excise Tariff Act, 1985. They commenced commercial production on March 27, 2012. Notification No. , dated November 14, 2002 issued under section 5A(1) of the Central Excise Act, 1944 read with section 3(3) of the Additional Duty of Excise (Goods of Special Importance) Act, 1957 and section 3(3) of Additional Duty of Excise (Textile and Textile Articles) Act, 1978 exempts the goods other than those specified in annexure I of the notification, from the duty of excise chargeable under section 3 of the Central Excise Act, 1944 and additional duty of excise chargeable under the Additional Duty of Excise (Goods of Special Importance) Act, 1957 (hereinafter referred to as AED (GSI)) and under the Additional Duty of Excise (Textile and Textile Articles) Act, 1978 (hereinafter referred to as AED (T and TA)), to the extent these duties have been paid through PLA after utilising the Cenvat credit available at the end of the month for payment of duty to the extent possible. This exemption notification was, however, applicable to the eligible goods manufactured and cleared from the units located in the areas specified in annexure II of the exemption notification. This notification was applicable to the new industrial units which commenced commercial production on or after June 14, 2002 and also to the industrial units existing before June 14, 2002 Which had undertaken substantial expansion by the way of increase in installed capacity by not less than 25 per cent on or after June 14, 2002 or have made new investment on or after June 14, 2002 and such new investment is directly attributable to the generation of additional regular employment of not less than 25 per cent over and above the base employment limit subject to certain conditions mentioned in the notification. The exemption under this notification would apply to the eligible units for period not exceeding ten years from the date of publication of this exemption notification in the official gazette or from the date of commencement of commercial production, whichever is later. In this notification, there is no sunset provision. As per the conditions of this notification, a manufacturer eligible for this exemption notification who has opted for the same, is required to pay duty payable for a particular month, first by utilising to the extent possible the Cenvat credit available to him at the end of the month and only after payment of duty to the extent possible through Cenvat credit, if any duty is still to be paid, the same is to be paid through PLA, and it is this duty paid through PLA which is exempt under this notification. The exemption under this notification is granted by the way of refund and accordingly the assessee initially pays the duty required to be paid through PLA by debit entry in PLA and, thereafter, he can either apply to the Jurisdictional Assistant Commissioner for its refund and on his orders take credit in the PLA or he can take self -credit of the duty refundable in his PLA and inform the Jurisdictional Assistant Commissioner for ex post facto approval. Another feature of this notification is that while the manufacturer eligible for this exemption gets refund of the duty paid through PLA in the manner prescribed in this notification, his customer buying the goods from him and using the same as input for use in the manufacture of some other final products, would, in accordance with the provisions of rule 12 of the Cenvat Credit Rules, 2004, be eligible for Cenvat credit of full duty as if no duty exemption has been availed of. In this case, the goods being manufactured by them are other than those mentioned in annexure I and thus are cowed by this notification and according to the appellant their manufacturing unit is located in the area which is mentioned in annexure II and as such according to the appellant, the exemption Notification No. is applicable to them.
The above exemption notification was amended by Central Government by Notification No. , dated March 27, 2008 and Notification No. , dated June 10, 2008. In terms of these amendments the exemption was restricted to "the duty of excise or AED (GSD/AED (T and TA) payable on the value addition undertaken in the manufacture of the eligible goods or the duty paid through PLA in respect of the goods cleared during a month after payment of duty to the extent possible by utilising Cenvat credit available at the end of the month, whichever is lower". The notification also prescribed the percentage of value addition for different final products. Thus if the duty paid in respect of the clearances made during a month through PLA after payment of duty to the extent possible by utilising the Cenvat credit available at the end of the month, is more than the duty payable on the value addition at the rate prescribed in this notification, the benefit of exemption would be restricted to the duty of the value addition at the rate as prescribed in this notification. However, the amended notification also had a provision that a manufacturer availing of this exemption will have option not to avail of the rates of value addition as specified in this notification and apply to the Jurisdictional Commissioner of Central Excise for a higher value addition if he proves that his actual value addition is at least 115 per cent of the rate specified in the notification. The actual value addition was to be calculated in terms of the Explanation to clause 2.1 of the amended notification.

The above mentioned amendments made to Notification No. , by Notifications No. , dated March 27, 2008 and , dated June 10, 2008, which restricted the benefit available to an assessee availing of Notification No. were challenged by a manufacturer M/s. Reckitt Benckiser by filing a writ petition before the hon'ble Jammu and Kashmir High Court and hon'ble High Court vide order dated December 23, 2010 quashed Notifications No. , dated March 27, 2008 and Notification No. , dated June 10, 2008 in this regard the last paragraph of the judgment is reproduced below:

"In view of the above detailed discussion, I need not enter into this arena as the writ petitions are being disposed of without addressing this controversy.

For the reasons mentioned above, these petitions are allowed. Impugned notifications bearing Nos. , dated March 27, 2008 and , dated June 10, 2008, shall stand quashed. The petitioner -units shall continue to avail of the benefit of exemption from payment of excise duty as provided in terms of Notification No. , dated November 14, 2002. The respondent State, however, shall be at liberty to take appropriate action in accordance with the relevant rules against those unscrupulous manufacturers who are involved in illegal activities of alleged bogus production. Disposed of accordingly, along with connected CMPs".

In the meantime on February 6, 2010, the Central Government had issued another exemption Notification No. , dated February 6, 2010. This notification also exempted the goods other than the goods mentioned in annexure I to the notification from the duty of excise eligible under section 3 of the Central Excise Act, 1944 and also from AED (GSI) and AED (T and TA) to the extent these duties have been paid on the value addition in the manufacture of the goods, at the rates specified in this notification or the duty on the goods cleared during a month paid through PLA after utilising the Cenvat credit available at the end of the month to the extent possible for payment of duty, whichever is less. This exemption notification, however, was not restricted to the units located in any specified area and was applicable to the goods manufactured and cleared from any unit located in the State of Jammu and Kashmir. This exemption notification was applicable to the new industrial units which commenced production on or after February 6, 2010 and also to the industrial units existing before February 6, 2010 which had either undertaken substantial expansion of installed capacity by not less than 25 per cent, on or after February 6, 2010 or have made new investment on or after February 6, 2010 and such new investment has resulted in generation of additional regular employment of not less than 25 per cent, over and above the base employment limit, subject to the conditions mentioned in the notification. This exemption notification also had a provision that a manufacturer availing of this exemption may opt not to avail of the value addition rates as prescribed in this notification and may apply to the Jurisdictional Commissioner of Central Excise for fixing special rates of value addition if in his case the actual value addition is 115 per cent or more of the value addition specified in the notification. In this notification also the actual value addition was to be calculated in terms of the Explanation to paragraph 5 of the exemption notification. Under this notification also a manufacturer availing of this exemption was required to pay the duty to the extent possible through Cenvat credit available at the end of the month and only the duty payable through PLA was refundable subject to the cap of the duty payable on the value addition at the rate specified in this exemption notification or, as the case may be, at the special rate of value addition fixed by the Commissioner on the application of the manufacturer or the duty paid through PLA, whichever is less. Exemption notification dated February 6, 2010 was also available to a unit opting for this exemption for a period of ten years from the date of publication of the notification or from the date of commercial production, whichever is later.

In this case, as stated above, the appellant had commenced, commercial production in March, 2012. The appellant on March 30, 2012 addressed a letter to the Commissioner for exemption of 100 per cent of the duty paid through PLA under Notification No. , and requested the Commissioner to fix a special rate of value addition for 2012 -13. Thereafter, the appellant issued a reminder dated April 16, 2012 to the Commissioner and in this regard by another letter dated May 17, 2012 the appellant provided certain details in support of their claim for higher value addition for 2012 -13. The Commissioner vide order -in -original dated May 31, 2012 fixed the value addition as 69.27 per cent, for 2012 -13. Appeal No. E/2884/2012 -EX (DB) has been filed against order dated May 31, 2012 of the Commissioner challenging the percentage of value addition fixed by the Commissioner.

For the subsequent financial year 2013 -14, the appellant furnished their calculations of value addition under their letter dated May 14, 2013 and also enclosed a copy of their audited balance -sheet for 2012 -13. The Department sought certain clarifications and further information, but the appellant requested the Department, to keep their matter pending till their appeal against the Commissioner's order dated May 31, 2012 fixing their value addition as 69.27 per cent, is decided by the Tribunal. Since there was no response from the appellant, the Commissioner vide order -in -original dated April 1, 2014 rejected their application for fixation of special rate of value addition for 2013 -14 and accordingly the assessee for the financial year 2013 -14 have to avail of the value addition of 36 per cent, specified in the exemption notification. Against this order of the Commissioner, Appeal No. E/54271/14 -EX (DB) has been filed. In this appeal the appellant have also claimed to be eligible for Notification No. .

Heard both sides.

Shri Bipin Garg, advocate and Jatin Singhal, advocate, proxy counsel for Shri Rupesh Kumar, representing the appellant, pleaded that during the period of dispute, both Notification No. , dated November 14, 2002 as well as the subsequent Notification No. , dated February 6, 2010 were applicable to the units located in the areas specified in Notification No. , that the appellant's unit had commenced commercial production in March, 2012 and is located in the area specified under Notification No. , that just because by mistake the appellant wrote to the Jurisdictional Commissioner, Central Excise for fixation of special rate of value addition under Notification No. , they cannot be denied the benefit of Notification No. , that though the amending Notification No. , dated March 27, 2008 and , dated June 10, 2008 restricted the benefit of exemption Notification No. , only to the duty paid on the value addition at the rate specified in this notification or as the case may be, at the special rate fixed by the Commissioner, or the duty paid through PLA after utilising the Cenvat credit available at the end of the month to the extent possible for payment of duty, whichever is lower, the hon'ble Jammu and Kashmir High Court in respect of writ petition filed by Reckitt Benckiser v. Union of India vide its judgment dated December 23, 2010 reported in : [2011] 269 ELT 194 J & K) has quashed the amending Notification No. , dated March 27, 2008 and , dated June 10, 2008, that in view of this, an assessee manufacturing the goods covered by Notification No. , in the factory located in the areas specified in this notification, is eligible for exemption of 100 per cent of the duty paid through PLA in the manner specified in this notification and the benefit is not restricted to the duty on the value addition at the rate specified in this notification or at the special rate fixed by the Commissioner, that since after the judgment of the hon'ble Jammu and Kashmir High Court in the case of Reckitt Benckiser v. Union of India : [2011] 269 ELT 194 (J & K) Notification No. is more beneficial to the appellant and since the appellant are eligible for this exemption notification, Notification No. 1/2002 -CE, cannot be forced upon them and the benefit cannot be restricted accordingly, that in this regard they rely upon the apex court's judgment in the case of Share Medical Care v. Union of India reported in : [2007] 8 RC 382 : [2007] 209 ELT 321 (SC), wherein the apex court has held that even if an assessee does not claim the benefit under a particular notification at initial stage, he is not debarred, prohibited or estoppels from claiming such benefit at a later stage and that in view of this, the impugned orders denying the benefit of 100 per cent exemption of the duty paid through PLA in the manner specified in the notification is not correct.

(3.)SHRI R.K. Grover and Shri M.S. Negi, the learned Departmental representatives, defended the impugned orders by reiterating the finding of the Commissioner and emphasised that since the appellant from the very beginning had written to the Commissioner for fixation of the special rate of value addition under Notification No. , dated February 6, 2010, they cannot migrate to Notification No. , that in any case, even if it is held that Notification No. is applicable to them, they cannot get the benefit of the judgment of the Jammu and Kashmir High Court in the case, of Reckitt Benckiser v. Union of India : [2011] 269 ELT 194 (J & K) as that judgment is applicable only to those assessees who had set up the manufacturing unit in the specified areas during the period prior to the March 27, 2008, while this is not so in this case, that since in this case the appellant had commenced commercial production in March, 2012 and had opted for Notification No. , dated February 6, 2010 by requesting the Jurisdictional Commissioner to fix special rate, of value addition, they have to abide by the Commissioners decision and they cannot claim exemption equal to 100 per cent of the duty paid through PLA in the manner specified in this notification. He, therefore, pleaded that there is no infirmity in the impugned orders passed by the Commissioner.
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