Nirma Limited VERSUS C.C.E.-Ahmedabad-ii

Customs, Excise & Service Tax

 Appellate Tribunal West Zonal

Bench At Ahmedabad

 

REGIONAL BENCH-COURT NO. 3

Excise Appeal No. 10931 of 2013- DB

(Arising out of OIO-18/COMMR/AKG/AHD-II/2013 dated 12/03/2013 passed by Commissioner of Central Excise-AHMEDABAD-II)

 

Nirma Limited

VERSUS

C.C.E.-Ahmedabad-ii

 

APPEARANCE:

Shri, Amal Dave, Advocate appeared for the Appellant

Shri Ghanshyam Soni, Additional Commissioner (AR) for the Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C.L.MAHAR

 

Final Order No. A/ 11246 /2023

 

 

 

 

 

RAMESH NAIR

DATE OF HEARING: 01.03.2023 DATE OF DECISION: 12.06.2023

 

 

Briefly stated the facts of the case are that during the course of audit conducted by the officers of Central Excise, Ahmedabad –II, it was inter alia, noticed that the Appellant had cleared certain medicaments on payment of duty whereas the said goods were exempted vide Notification No. 04/2006- CE dated. 01.03.2006. By virtue of the statutory bar provided under sub- section (1A) of Section 5A of the Central Excise Act, 1944 if an excisable products is unconditionally and wholly exempted from duty under any notification issued under Section 5A of the Act ibid, then the manufacturer shall have no option to pay duty on such goods at their own volition. The Central Board of Excise & Customs vide Circular No. 937/27/2010-CX dated. 26.11.2010 has also clarified that in view of the specific bar provided under sub-section (1A) of Section 5A of the Central Excise Act, 1944, the manufacturer cannot opt to pay duty in respect of the wholly exempted goods and cannot avail the cenvat credit of duty paid on inputs. As per the revenue, the amount so paid by the appellant on exempted goods and collected from the buyers by representing it as “duty of excise” will have to

 

be deposited with the Central Government in terms of Section 11D of the Central Excise Act, 1944.

 

2. Revenue also observed that Appellant having availed Cenvat Credit under Cenvat Credit Rules 2004 on inputs used in the manufacture of the said wholly exempted products, the appellant are also required to pay an amount equal to five percent of the value of such wholly exempted goods in terms of Rule 6(3) of the Cenvat Credit Rules, 2004 together with interest payable thereon.

 

3. On this basis a show cause notice dated 01-08-2012 was issued to the appellant proposing to recover the amount of  58,87,106/- representing

„duty of excise‟ charged and collected from customers under Section 11D of the Act and also an amount of Rs. 62,89,867/- being 5% of the value of exempted goods in terms of Rule 6(3) of the Cenvat Credit Rules 2004 along with interest and also for imposition of penalty on the appellant. Since the appellant had debited a sum of Rs. 12, 66,211/- and interest of Rs. 41,157, these amounts were proposed to be adjusted and appropriate against the impugned proposed demand. The show cause notice was adjudicated by the Commissioner of Central Excise who vide impugned Order-In-Original dated. 12.03.2013 confirmed the demand. Hence this appeal.

 

4. Shri, Amal Dave Ld. Counsel for the appellant submits that in the present case appellant availed cenvat credit of the inputs and cleared the final products on payment of 5% duty. The appellant recovered this 5% duty from the customers and deposited it with the government at the relevant time. It is settled legal position that demand under section 11D can only be made when the assessee recovers an amount representing duty but does not credit it to the Government and retains it unlawfully. The Appellant in the present case has not retained any amount collected from the customers and it is not even the case of the department that whatever amount was collected as duty was not paid to the Government. Therefore, the question of demanding duty under Section 11D does not arise. Hence impugned order confirming the demand of Rs. 58,87,106/- is patently illegal and liable to be set aside. He placed reliance on the Larger Bench decision of the tribunal in the case of M/s Unison Metals Ltd. Vs. CCE- 2006(4) STR 491.

 

• He also submits that during the relevant point of time, there were two notifications which were prevalent. Notification No. 4/2006-CE gave exemption to certain drugs and medicines from the whole of the duty of excise, while as

 

Notification No. 2/2011-Central Excise gave general exemption in the form of concessional rate of duty whereby duty in excess of 5% was exempt on all the medical preparations under chapter 30. At the relevant period of time, the tariff prescribed a rate of 10% Central Excise Duty for medicaments falling under CTH 3003 and 3004 and the Government vide Notification No. 2/2011- CE prescribed concessional rate of 5%. It is an undisputed facts that the medicines cleared by the appellant fall under CTH 3004 and were eligible to 10% Central Excise Duty which was reduced to 5% unconditionally vide Notification No. 2/2011-CE. The Appellant‟s goods were covered by 2 notifications operating at the same time and the appellant chose to pay duty under Notification No. 2/2011-CE at concessional rate. The Appellant hence availed cenvat credit of the inputs and subsequently used such credit to pay duty under Notification No. 2/2011-CE at concessional rate. The Appellant hence availed cenvat credit of the inputs and subsequently used such credit for payment of duty. When there are 2 separate notifications one on which is exempting duty fully and another one prescribes concessional rate of duty for the same goods, then the assessee had a right to choose the notification which is beneficial to itself. In the present case, since there were two notification operating simultaneously, the appellant had the right to choose the benefit which was more beneficial to the appellant and hence the appellant decided to avail cenvat credit and pay duty at concessional rate. There is no irregularity committed by the appellant and hence the demand under Rule 6(3) of the Cenvat Credit Rules, is unsustainable. He placed reliance on the following judgments:-

 

• ShareMedical Care Vs. Union of India – 2007(209)ELT 321
• M/sArvind Vs. CCE, Ahd-II – 2016(334) ELT 146.

 

5. On other hand Shri, Ghanshyam Soni, Additional Commissioner (AR) appearing on behalf of the Revenue reiterated the finding of impugned order.

 

6. We have carefully considered the submissions made by both sides and perused records.

 

• The first core issue required to be decided in the appeal is as to whether the Ld. Commissioner was right in confirming the demand of an amount of  58,87,106/- under Section 11D of the Act. We find that the appellant during the disputed period had cleared the pharmaceutical products on payment of duty @5% and deposited / debited the amount in statutory records. It is the

 

case of the revenue that the disputed goods cleared by the appellant are exempted from payment of duty vide Notification No. 4/2006 and hence the appellant was required to deposit the said amount alongwith interest in terms of Section 11D of the Act.

 

• We observed that in the present matter at the time of clearances of goods appellant paid duty @5%.It is seen that the Appellant did not retain the amount collected from the customers. The provisions of Section 11D of the Central Excise Act, 1944 will come into play only when an assessee collects an amount as an excise duty and does not credit it to the government treasury. The Tribunal in the case of SterliteIndustries (India) Ltd.  CCE, Vapi – 2008

(225) E.L.T. 397 (Tribunal-Ahmd.) held that duty paid from Cenvat Account also excise duty and recovery under Section11D of the Act is not sustainable. The Larger Bench of the Tribunal in the case of Unison Metals Ltd. v. Commissioner of Central Excise, Ahmedabad-I reported in 2006 (204) E.L.T. 323 (Tribunal-LB) = 2006 (4) S.T.R. 491 (Tribunal-LB) held as under :-

“9. The scheme of Central Excise duty payment is that a manufacturer removed goods from the factory of production after payment of duty. While selling the goods, the manufacturer recovered the duty so paid. In doing so, an assessee is recouping the tax already paid. The arrangement is not that the assessee first collected the tax from the buyer of the goods and then remits the amount to the Government. Section11D has to be read keeping this scheme in view. Therefore, the provisions for “every person who is liable to pay duty……..and has collected any amount from the buyer of any goods in any manner representing as duty of excise, shall forthwith pay the amount so collected to the credit to the Central Government” has application only when equivalent duty had not been deposited at the time of removal of the goods. The scheme of the law is that manufacturers shall not collect amounts falsely representing them as central excise duty and retain them, thus, unjustly, benefiting themselves. In the present cases (irrespective of whether the 8% payments were duty or not) since the 8% amount remain already paid to the revenue, and no amount is retained by the assessee, Section11D has not application.

 

10. The real identity of the amount „collected‟ (whether excise duty payable or not) is of no relevance for Section11D. What is relevant is only whether the collection was „represented‟ as duty of excise. The representation may as well as entirely false. The qualifying of the representation through the words „in any manner‟ makes this clear. Therefore, the contentions of both sides on the question, as to whether deposits under Rule 57CC are excise duty or not, are beside the point.”

 

• In the present case, the Appellant paid duty on the disputed goods and collected the amount from their customers as evident from the invoice. It is noted that the Appellant had not retained any amount and paid to the

 

Government and, therefore, Section11D of the Act cannot be invoked. So, the impugned order confirming demand under Section 11D is legally not correct.

 

• Now we come to the question that whether Appellant was required to pay an amount of Rs. 62, 89,867/- (5% on clearances of disputed exempted goods) in terms of Rule 6 (3) of Cenvat Credit Rules 2004. It is seen that, at the material point of time, there were two rates of duty applicable to Medicine

– one a „nil‟ rate prescribed under Notification No. 4/2006-C.E. as amended and the other „5% prescribed under Notification No. 2/2011-C.E., dated 01- 03-2011. Both these rates were unconditional rates. Therefore, it is not the case that the goods have been completely exempted. The “exempted goods” referred to in Rule6 have to be excisable goods which are fully exempt from duty or as chargeable to nil rate of duty. When two different Notifications prescribe two rates of duty, the assessee is at liberty to opt for whichever is beneficial to him. The judgment relied upon by the appellant in this context squarely applicable. In the present matter appellant already has paid the duty on finished goods. Further we find that the above said fact has not been disputed by the revenue here. Therefore, it is not a situation where the duty credit on inputs were availed in respect of exempted goods and dutiable goods simultaneously. It is clear that the goods supplied under Notification No. 02/2011-C.E. is not exempted. Accordingly the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004 is not applicable in the facts of the case.

 

7. In view of these observations, we are of the considered view that demand confirmed by the adjudicating authority has no legs and therefore the same cannot be sustained. Accordingly, the impugned order is set aside and Appeal is allowed with consequential relief, if any, in accordance with law.

 

(Pronounced in the open court on 12.06.2023)

 

RAMESH NAIR MEMBER (JUDICIAL)

C.L.MAHAR MEMBER (TECHNICAL)