Commissioner of Central Excise vs Siddheshwar Textile Mills Pvt. Ltd.

This Notice of Motion seeks to condone the delay of 972 days in applying for restoration of the Appeal. That Appeal was dismissed on 15 December 2009 by the Registry invoking Rule 986 of the Bombay High Court (O.S.) Rules.

Ordinarily, we would have insisted on a proper and complete explanation for such an enormous delay, but finding that the Appeal has been dismissed for want of compliance with the Bombay High Court (O.S) Procedural Rules, after it was placed for admission before the several Division Benches, that in the facts and circumstances and peculiar to this case, the delay is condoned. The delay is also condoned because both sides agreed that upon restoration they are ready to argue the Appeal for admission.

Accordingly, we have condoned the delay and we have taken up the Appeal for admission forthwith.

Mr. Kantharia, appearing on behalf of the Revenue, in support of this Appeal which challenges the order passed by the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench dated 20 April 2009, submits that there are substantial questions of law. The substantial questions of law have been formulated at pages 6 & 7 of the Appeal Paper-Book. He submits that the interest demanded under Section 11AA of the Central Excise Act 1944 could not have been said to be exempted by virtue of the Notification No. 67/95-CE dated 16 March 1995. This Notification only exempts levy of Additional Excise Duty in lieu of Sales Tax under the Goods of Special Importance Act, 1957. The exemption Notification does not cover this interest component and therefore, the Tribunal''s order raises substantial questions of law.

On the other hand, Mr. Shridharan, learned Sr.Counsel for the Assessee, submits that the Tribunal''s order as also that of the Commissioner (Appeals), Central Excise, proceed on the footing that there is a revenue neutrality. The point is that when the Respondent is manufacturing bleached cotton fabrics, at every stage they are not required to pay the duty and the additional excise duty. The exemption notification enables them to seek an exemption. Once at some stage the exemption can be sought, but eventually the duty or tax is paid at the final stage, then there is a revenue neutrality. Something which is not required to be paid at the earlier stage, even if that tax is paid, would have to be either set off or refunded, so as to enable the Assessee to make payment at the final stage. Therefore, this is a case of revenue neutrality and the point is answered in favour of the Assessee and against the Revenue by a authoritative pronouncement of the Hon''ble Supreme Court in the case of CCE v/s. Textile Corporation of Marathawada, 2008 (231) ELT 195 (SC), therefore the Appeal should be dismissed.

With the assistance of Mr. Kantharia and Mr. Sridharan, we have perused the order passed by the Tribunal and the relevant Notification so also the judgment of the Hon''ble Supreme Court. The Tribunal has found that the Additional Excise Duty paid on the bleached cotton fabrics was available as Cenvat credit in terms of Rule 57-AB (1)(iv) of the Central Excise Rules, 1944 and Rule 3(1) (iv) of the Cenvat Rules, 2001. The Assessee paid Rs.32,59,126.23 towards Additional Excise Duty on the printed fabrics manufactured and cleared by them and which sum is higher than the Additional Excise Duty of Rs.30,80,348 confirmed by the Adjudicating Authority. The duty confirmed is on bleached cotton fabrics manufactured and captively consumed in manufacturing of coated fabrics. Had the Respondent/Assessee paid this Additional Excise Duty, the same could have been available as Cenvat credit. The Assessee could have utilized this Cenvat credit and therefore would be required to pay balance amount of Rs.1,78,788 towards the Additional Excise Duty. The duty now confirmed stands paid in the form of AED paid on the coated fabrics.

There was no dispute about this fact. The Tribunal, rightly, relied upon the view taken in Textile Corporation of Marathawada (supra). Para 2 of the decision in that case was dealing with a identical situation.

The matter was carried by the Revenue against this Tribunal''s order in the Supreme Court and the Supreme Court confirmed the Tribunal''s view by holding that if the Assessee carries out bleaching, dyeing, printing and mercerizing of textile fabrics, which would invite levy of excise duty on each stage of manufacture, however, if the Assessee is also entitled to Modvat credit on duty paid at each stage, then something which is required to be paid or remitted at the final stage could be set off or there is a revenue neutrality. That approach is a permissible approach. The only thing that Mr. Kantharia points out from this judgment of the Hon''ble Supreme Court is that the Supreme Court was dealing with the controversy of excise duty/additional excise duty and not interest. Therefore, this judgment is not a binding precedent. We are unable to agree. If the component of interest is on the tax or duty demanded on the product and if that duty or tax is liable to be set off or adjusted against the credit available at the intermediate stage, then the demand itself was neutralised. Once it was so neutralised and in terms of the judgment of the Hon''ble Supreme Court, then, one cannot segregate or take out the interest component and call upon the Assessee to pay the sum demanded as interest. The approach of the Tribunal, therefore, in holding that there is a revenue neutrality cannot be termed as illegal or erroneous. The view taken is a possible and probable one. It is taken in the given facts and circumstances and peculiar to the Assessee. In such circumstances, the same cannot be termed as perverse or vitiated by any error of law apparent on the face of record enabling us to entertain this further Appeal. The Appeal is devoid of merits. It is dismissed. No costs.