Pearl Drinks Ltd. vs Pearl Drinks Ltd.
2010 Latest Caselaw 4231 Del

*          IN THE HIGH COURT OF DELHI AT NEW DELHI


+                         CEAC No. 16 of 2009



%                          Decision Delivered On: 13th September, 2010.


     PEARL DRINKS LTD.                                       . . . Appellant

                        through :         Mr. P.C. Jain, Advocate



                              VERSUS


     COMMISSIONER OF CENTRAL EXCISE                        . . .Respondent

                        through:          Mr. R.K. Tiwari with Mr. Ashwani
                                          Bharadwaj, Advocates



CORAM :-
    HON'BLE MR. JUSTICE A.K. SIKRI
    HON'BLE MS. JUSTICE REVA KHETRAPAL

     1.    Whether Reporters of Local newspapers may be allowed
           to see the Judgment?
     2.    To be referred to the Reporter or not?
     3.    Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J. (ORAL)

1. The facts leading to the filing of the present appeal may be

recapitulated in brief. These are as under:

The appellants are the manufacturer of aerated water of

different brands of PEPSI and beverage syrup. The appellant‟s

final product requires sugar as one of its important input. While

aerated water etc. was liable to Cenvat Duty (Basic Excise Duty,

i.e. BED) under Section 3 of the Central Excise Act, 1944, it was

not liable to duty under Additional Duty of Excise (Goods of

Special Importance) Act, 1959. On the other hand, sugar was

liable to separate duties under both the Acts mentioned above.

2. The appellants were purchasing sugar from two First Stage

Dealers, viz., (1) Rajputana Store Pvt. Ltd., Delhi and (2) Bajaji

Sugar Co. Delhi who were issuing invoices to the appellants

showing the element of BED paid on sugar sold to the appellants

and were not showing any element of AED (Additional Excise

Duty) as no AED was leviable on final products for the purpose of

taking Cenvat credit. No credit of AED could be taken and utilized

by the appellants prior to 01.03.2000 because credit of AED paid

on an input could be utilized towards payment of AED only

leviable on a final product. Therefore, prior to 01.03.2003,

invoices issued by first stage dealer did not show the element of

AED paid on sugar sold by them to the appellants. There was no

statutory liability on first stage dealers to show elements of

various duties paid on goods sold by them. It is appropriate to

mention here that the records of first stage dealers are subject to

check by Central Excise Officers and a periodical return is also

submitted by first stage dealers to Central Excise Range Office.

This is the factual scenario in which the invoices issued by first

stage dealers during the relevant period 01.04.2000 to

09.10.2000 to the appellant are to be understood. With effect

from 01.03.2003, an amendment was made in Cenvat Credit

Rules, 2002 that credit of AED paid on input can be utilized

towards payment of BED and special excise duty as well leviable

on a final product. Further, by a Circular dated 06.03.2003, it was

also clarified that any credit of AED accruing prior to 01.03.2003

to a manufacturer could also be utilized towards payment of BED

and SED as well on final product. Above Circular dated

06.03.2003 was given a statutory backing by Clause 78 of Finance

(No.2) Bill, 2004 (enacted as Section 88 under Finance (No.2) Act,

2004).

3. The appellants claimed Cenvat credit of AED (GSI) to the tune of

`9,20,944 paid on sugar accruing during the period 01.04.2000 to

09.10.2000. However on 05.07.2005, a show cause notice was

issued to the appellants proposing to withdraw the said credit.

The appellants filed reply to the said show cause notice and also

gave its written submission. Order-in-Original dated 20.10.2005

was passed by the Joint Commissioner confirming the demand of

duty of `9,20,944 and penalty of equal amount was also imposed.

The appellants preferred appeal thereagainst before the CIT(A),

which was dismissed. Further appeal was preferred before the

Customs, Excise and Service Tax Appellate Tribunal (hereinafter

referred to as „the Tribunal‟) and met the same fate. It is in these

circumstances, the instant appeal is filed, which is admitted on

the following question of law:

"Whether in the facts and circumstances of this case, Cenvat credit of AED(GSI) paid on sugar during the period 01.04.2000 to 09.10.2000 is admissible to the appellant in view of Section 88 of Finance Act (No.2), 2004 irrespective of the fact that payment of such duty was not shown in invoices issued by the dealers to the appellants, as required under Rule 9, Cenvat Credit Rules, 2004?"

4. We may point out, at the outset, that there is no dispute that the

additional excise duty on sugar has been paid. The only dispute is

that AED paid on sugar has not been passed on by the first stage

dealers to the appellants because the duty paying documents, i.e.,

the invoices issued by the first stage dealers, did not show the

element of AED. The Tribunal in its impugned order dated

09.06.2009 has remarked about the same, in the following

manner:

"5. I find that in terms of the Board‟s Circular dated 6.3.2003, the Additional Excise Duty (GSI) accrued prior to 1.3.2003 can be used for payment of Cenvat Credit. The appellants failed to produce proper duty paying documents in respect of payment of AED (GSI). The Representative contended that the dealer‟s invoices indicated the value of the goods higher than that in the primary invoices of the manufacturer. It is his contention that the manufacturer‟s invoice could establish the payment of AED (GSI). I am unable to accept the contention of the ld. Representative of the appellant. I find that credit would be eligible on the basis of duty paying documents as prescribed in the Rule 9 of the Rules. The documents in this case are the dealer‟s invoice. Admittedly, there is no mention of the payment of GSI in the dealer‟s invoice and, therefore, the Commissioner (Appeals) rightly disallowed the credit. However, I agree with the submission of the ld. Representative that in the instant case, there is no suppression of fact with intent to evade payment of duty and, therefore, imposition of penalty under Section 11AC is not warranted. In view of the above discussion, demand of duty and interest are upheld. Penalty is set aside. The appeal is disposed of in the above terms."

5. Submission of the learned counsel for the appellant is that Rule 9

of the Cenvat Credit Rules, 2004 on which the reliance was placed

by the Tribunal, is not applicable in the instant case inasmuch as

these Rules obviously came to be passed in the year 2004

whereas the period involved in the present case is 01.04.2000 to

09.10.2000. As there was no such requirement at the relevant

period, the invoices issued by the first stage dealers naturally

would not incorporate the element of AED (GSI). It is, thus,

argued that the case of the appellants should have been decided

by the Tribunal keeping in view the legal provisions, which were

applicable at that time.

6. Learned counsel for the appellant has drawn our attention to

Cenvat Credit Rules, 2002. The appellants have filed the copies of

the invoices which were produced before the AO and an attempt

is made by the learned counsel to show that additional excise

duty (GSI) was duly paid, which is reflected in the said invoices.

He has also made an attempt to demonstrate that this burden was

passed on to the assessee/appellants as well. Referring to one

such invoice dated 28.04.2000 issued by Daurala Sugar Works,

Daurala, the learned counsel has pointed out that the amount

reflected in the value of the invoice is `1,57,025.00. He has also

relied upon the judgment of the Tribunal in the case of Britannia

Industries Ltd. Vs. Commissioner of Central Excise, Delhi-I

[2010 (251) E.L.T. 385].

7. As pointed out above, it is not in dispute that AED (GSI) on sugar

has been paid. This was recorded by the Tribunal as well in the

impugned order. The only question was as to whether the first

dealer had passed on this burden to the appellant or not. As

noted above, the appellants had produced sufficient evidence to

demonstrate that such a burden had been passed on to the

appellants. However, none of the Authorities below went into this

aspect at all. The case of the appellants for Cenvat credit was

rejected only on the ground that the procedure contained in the

Rules was not complied with. When we find that there is no such

Rules in existence at the relevant time, the claim of the appellants

should not have been rejected on the basis of aforesaid Rules.

The orders of the Tribunal in the case of Britannia Industries

Ltd. (supra), in such circumstances, would clearly be applicable.

From the invoices produced by the appellants, the AO should have

determined as to whether the burden of AED was passed on the

appellants or not. That exercise has not been done by the AO.

Even as per Sub-Rule (2) of Rule 9, the Cenvat Credit is not to be

denied on the ground that any of the documents mentioned in

sub-rule (1) does not contain all the particulars required to be

contained therein under these rules, if such document contains

details of payment of duty or service tax, description of the goods

or taxable service, assessable value, name and address of the

factory or warehouse or provider of input service. The Joint

Commissioner of Central Excise or the Assistant Commissioner, as

the case may be, can satisfy itself that the duty of excise or

service tax due on the input or input service has been paid and

such input or input service has actually been used or is to be used

in the manufacturing of final products or in providing output

services.

8. Thus, the aforesaid question is answered in favour of the

appellants, as a result, the impugned order of the Tribunal is set

aside. The matter is remanded back to the Joint Commissioner,

who shall scrutinize the documents furnished by the appellants

and satisfy himself and record the satisfaction, if any, in term of

Sub-Rule(2) of Rule 9 of the Cenvat Credit Rules, 2004 and if the

requirements laid down therein are satisfied, the AED (GSI) shall

be allowed to the appellants.

9. The present appeal is dismissed accordingly.

(A.K. SIKRI) JUDGE

(REVA KHETRAPAL) JUDGE SEPTEMBER 13, 2010.

pmc