M/S INDIAN OIL CORPORATION LTD V. THE COMMISSIONER OF CENTRAL EX

MA/753/2010

AI Insights

The case revolves around the interpretation of Rule 4(2)(b) of the CENVAT Credit Rules, 2002, concerning the timing of availing CENVAT credit on capital goods. M/s Indian Oil Corporation Ltd. (the Corporation) appealed against the order of the Commissioner of Central Excise, Patna, which was upheld by the Tribunal, denying the remaining 50% CENVAT credit on capital goods imported for its refinery in Barauni, Bihar. The Tribunal and the Commissioner had ruled that the credit could not be availed until the capital goods were installed and used in manufacturing, which was not done at the time the Corporation claimed the credit.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 735757 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 02-09-2013
• Assessment Year: misc
• Other Referred Cases: Ispat Industries Ltd. v. Commissioner of Central Excise, Raigad, Bharat Petroleum Corporation Ltd. v. Commissioner of Central Excise, Mumbai- II, Fiat India Pvt. Ltd. v. Commissioner of Central Excise, Mumbai- II, Goyal M.S. Gases Pvt. Ltd. v. Commissioner of Central Excise, Ghaziabad, Hindustan Zinc Ltd. v. Dy. Commissioner of Central Excise & Customs, Bhilwara, K.P. Varghese v. Income-tax Officer, Ernakulam and another, BPL Display Devices Ltd. v. Commissioner of Central Excise, Ghaziabad, Commissioner of Central Excise, Bhavnagar v. Saurashtra Chemicals Ltd.
• Laws Referred To: Central Excise Act, 1944, CENVAT Credit Rules, 2002, Central Excise Rules, 1944
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: NIVEDITA NIRVIKAR
• Assessee Lawyers: S D SANJAY
• Keywords: Capital Goods; Central Excise; CENVAT credit; Excise Duty; Tribunal
• Section: 12; 11AB; 35 G

Judgement Text

" IN THE HIGH COURT OF JUDICATURE AT PATNA Miscellaneous Appeal No.753 of 2010 With Interlocutory Application No.9209 of 2010 ====================================================== M/s Indian Oil Corporation Ltd., a Company incorporated under the Companies Act, 1956 having its Registered Office at G-9, Ali Yavar Jung Marg, Bandra (East), Mumbai-400 051 and also carrying on business at Barauni Oil Refinery at Begusarai in Bihar through its Authorised Representative, Vikash Chandra Jaiswal, S/o Shri Vinod Kumar Jaiswal, Resident of Barauni Refinery Township, P.S. Begusarai, District-Begusarai. .... .... Appellant-Appellant Versus The Commissioner of Central Excise, Central Revenue Building, Birchand Patel Path, Patna-800 001. .... .... Respondent-Respondent ====================================================== Appearance : For the Appellants : Mr. S.D. Sanjay, Advocate For the Respondent : Mrs. Nivedita Nirvikar, S.S.C.C. & Ex. ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE ASHWANI KUMAR SINGH C.A.V. JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) 10. 2-9-2013 This Appeal under Section 35-G of the Central Excise Act, 1944 is preferred by the manufacturer M/s Indian Oil Corporation Limited (hereinafter referred to as “the Corporation”) against the order dated 30th March 2010 made by the Customs, Excise & Service Tax Appellate Tribunal, Eastern Zonal Bench, Kolkata (hereinafter referred to as “the Tribunal”) Patna High Court MA No.753 of 2010 (10) dt. 02-09-2013 2 / 9 2 in Appeal No.EDM-819/04. The matter at issue is the CENVAT credit availed of by the Corporation on the capital goods imported by it in the financial year 2000-2001 for its refinery at Barauni in the State of Bihar. It is not in dispute that on receipt of the capital goods, the Corporation availed of the CENVAT credit in the same year to the extent of 50% of the Excise Duty paid by it. The remaining 50% of the CENVAT credit, the Corporation availed of on 1st April 2002. The said CENVAT credit was not allowed by the Commissioner of Central Excise, Patna under his order dated 24th September 2004. The said order has been upheld by the Tribunal under the impugned order dated 30th March 2010. The Corporation has preferred this Appeal on the following questions of law: (a) What is the true meaning & scope of the expression “in the possession and use of the manufacturer of final products “in such subsequent years” in Rule 4(2)(b) of the Cenvat Rules ? (b) When Rule 4(2)(b) allowed credit provided the capital goods in question were in possession and use of the manufacturer “in such subsequent year”, whether the Tribunal erred in law in imposing a new condition that in such subsequent year the credit could not be taken prior to the date of installation of the capital goods ? In connection with the above, it would be relevant to mention that as recorded in the Tribunal’s order itself the capital goods in question were in possession and use of the Appellant in the subsequent Patna High Court MA No.753 of 2010 (10) dt. 02-09-2013 3 / 9 3 years in which the credits were taken by it. In spite of this, interest was demanded from the Appellant on the ground that in such subsequent years it took the credit on a date prior to the date of installation. (c) When the Rule itself did not impose any condition requiring that the capital goods in question must be installed & used prior to the date of taking credit, whether the Learned Tribunal was correct in law in reading such a condition in the said Rule? (d) Whether the Learned Tribunal erred in law in ignoring the change in the phraseology, language & scheme of Rule 4(2)(b) of Cenvat Rules as compared to the erstwhile provisions of Rule 57Q of the Central Excise Rules, 1944 ? In connection with the above, it would be relevant to mention that the provisions of Rule 57Q (7) of the erstwhile Central Excise Rules, 1944 imposed a condition and restriction that the credit “shall not be taken on a date prior to the date on which such capital goods are installed or, as the case may be, used for manufacture of excisable goods”. However, the said scheme itself was modified in the Cenvat Credit Rules, 2001 and the Cenvat Credit Rules, 2002 and the Rule 4(2) (b) of both these provisions merely required possession and use of the capital goods by the manufacturer “in such subsequent year”. In the present case, admittedly, the capital goods in question were in possession and use of the Appellant in the subsequent years in which the credit was taken. Patna High Court MA No.753 of 2010 (10) dt. 02-09-2013 4 / 9 4 (e) Whether the Learned Tribunal’s interpretation of Rule 4(2)(b) of the Cenvat Rules is contrary to the plain and clear language of the said Rule itself ? Learned Additional Advocate General Mr. S.D. Sanjay has appeared for the Corporation. He has relied upon the CENVAT Credit Rules, 2002. He has submitted that the CENVAT Credit Rules, 2002, particularly Rule 4(2)(b) thereof allows a manufacturer to avail of 50% of the CENVAT credit in the year in which the capital goods are received. The remaining 50% of the CENVAT credit can be availed of in any subsequent year provided the manufacturer is still in possession of the capital goods. He has submitted that the Corporation had imported the capital goods in the year 2000-01 and had availed of the CENVAT credit to the extent of 50% of the duty paid. The remaining 50% of the CENVAT credit was availed of on 1st April 2002 for the subsequent financial year. He has submitted that the capital goods were installed and put to use in the line of manufacture in the months of September to December 2002 and the Corporation was wholly justified in availing of the remaining part of the CENVAT credit on 1st April 2002 in the financial year 2002-03. Mr. S.D. Sanjay has submitted that the Tribunal and the authority below have manifestly erred in holding that unless and until the capital goods in question are put to use, the remaining 50% of the CENVAT credit cannot be availed of. He has submitted that the decision of the Tribunal and the authority below are neither supported by the language of the relevant Rule nor by the judgments of the Tribunal or the High Courts. The relevant Rule 4(2) of the CENVAT Credit Rules, 2002 reads as under: Patna High Court MA No.753 of 2010 (10) dt. 02-09-2013 5 / 9 5 “2(a) The CENVAT credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year: Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial years if the said capital goods are cleared as such in the same financial year. (b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, if the capital goods, other than components, spares and accessories, refractories and refractory materials and goods falling under heading No.68.02 and sub-heading No.6801.10 of the First Schedule to the Tariff Act, are in the possession and use of the manufacturer of final products in such subsequent years”. Mr. S.D. Sanjay has also relied upon the order of the Tribunal. In support of his submission he has relied upon the order of the Mumbai Bench of the Tribunal in the matter of Ispat Industries Ltd. v. Commissioner of Central Excise, Raigad, {2006 (199) E.L.T. 509 (Tri.-Mumbai)}. Under order dated 4th April 2006, the said Tribunal held, “for taking credit of balance of 50% of amount of duty on capital goods in subsequent financial years, in case the capital goods are lying in the factory for installation and the process of erection was being carried out has to be considered as the capital goods were in Patna High Court MA No.753 of 2010 (10) dt. 02-09-2013 6 / 9 6 possession and use for manufacture”. The appeal to the Bombay High Court preferred by the Commissioner of Central Excise was rejected by the Bombay High Court citing that the appeal did not involve substantial question of law {2012(275) E.L.T. 79 (Bom.). The said proposition has been followed by the larger Bench of the Tribunal in the matter of Bharat Petroleum Corporation Ltd. v. Commissioner of Central Excise, Mumbai- II, {2012 (277) E.L.T. 353 (Tri.-LB). However, the very orders of the Tribunal, the interpretation placed by the Tribunal, Mumbai Bench has been doubted by the said Bench in the matter of Commissioner of Central Excise, Mumbai-II v. Fiat India Pvt. Ltd., {2009 (240) E.L.T. 620 (Tri.-Mumbai). The New Delhi Bench of the Tribunal has, in the matter of Goyal M.S. Gases Pvt. Ltd. v. Commissioner of Central Excise, Ghaziabad, {2004 (168) E.L.T. 369 (Tri.-Del.)}, taken a contrary view. The said Tribunal held that for availing the remaining 50% of the CENVAT credit not only the capital goods should be in possession of the manufacturer but it should be in the use also. Similar view has been expressed by the Rajasthan High Court in the matter of Hindustan Zinc Ltd. v. Dy. Commissioner of Central Excise & Customs, Bhilwara, {2007 (220) E.L.T. 50 (Raj.)}. In support of his submissions Mr. S.D. Sanjay has relied upon Rule 57Q (7) of the Central Excise Rules, 1944. He has also relied upon the judgments of the Hon’ble Supreme Court in the matters of K.P. Varghese v. Income-tax Officer, Ernakulam and another, (A.I.R. 1981 S.C. 1922); of BPL Patna High Court MA No.753 of 2010 (10) dt. 02-09-2013 7 / 9 7 Display Devices Ltd. v. Commissioner of Central Excise, Ghaziabad, {2004 (174) E.L.T. 5 (S.C.); and of Commissioner of Central Excise, Bhavnagar v. Saurashtra Chemicals Ltd., {(2007) 10 SCC 352}. In view of the undisputed facts, the matter boils down to a narrow compass i.e. the interpretation of the phrase, “are in the possession and use of the manufacturer of final products in such subsequent years” occurring in the aforesaid Rule 4(2)(b) of the CENVAT Credit Rules, 2002. In our opinion, the Mumbai Bench of the Tribunal is not right in reading the said phrase as, “are in the possession for use”. The law in respect of interpretation of taxing statutes is well defined and well settled. The Hon’ble Supreme Court has, in the matter of Commissioner of Sales Tax, U.P. v. Modi Sugar Mills Ltd., {(1961) 2 SCR 189) in interpreting the taxing statutes, held, “In interpreting a taxing statue, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency”. In our opinion, the phrase, “in possession and use of the manufacturer of final products’ is clear and unambiguous. The said phrase calls for one and only one interpretation and does not call for any external aid to cull the meaning of the said phrase. In our opinion, the said phrase provides for two conditions, (1) the manufacturer should be in Patna High Court MA No.753 of 2010 (10) dt. 02-09-2013 8 / 9 8 possession of the capital goods in the year in which it claims remaining 50% of the CENVAT credit; and (2) such capital goods shall be in use for manufacture of final products. Unless, the manufacturer satisfies both the aforesaid conditions, it cannot take CENVAT credit of remaining 50% of the duty paid by it. The Commissioner of Central Excise, Patna did not allow the CENVAT credit for the remaining 50% of the duty on the premise that on the date the remaining CENVAT credit was availed of, the capital goods were not in use as the project itself was not complete and the commercial production had not started. Consequently, the Corporation has been called upon to pay interest under Section 11AB of the Central Excise Act, 1944 read with Rule 12 of the CENVAT Credit Rules, 2001 and 2002. The contention of Mr. S.D. Sanjay that the Corporation had in fact put the capital goods in use in the same financial year in which it claimed the CENVAT credit of the remaining 50% of the duty paid by it with a view to justifying the CENVAT credit availed of by the Corporation requires to be rejected outright. Nothing in the aforesaid Rule 4(2)(b) of the CENVAT credit Rules, 2002 suggests that the CENVAT credit for the remaining 50% of the duty can be availed of in any subsequent financial year in anticipation of the capital goods being used on some future date in the same financial year. Mr. S.D. Sanjay has relied upon the departmental Circular and has submitted that it is binding to the authorities below. In support thereof, he has relied upon the judgment in the matter of K.P. Varghese (supra). The proposition of law is well settled and cannot be disputed. However, no Circular of the Department supports the interpretation canvassed by Mr. S.D. Patna High Court MA No.753 of 2010 (10) dt. 02-09-2013 9 / 9 9 Sanjay. The judgments in the matters of BPL Display Devices Ltd. (supra) and of Saurashtra Chemicals Ltd. (supra) have no relevance to the present case. The Appeal is devoid of any merit. The Appeal does not involve a question of law much less a substantial question of law. Appeal is dismissed in limine. Interlocutory Application stands disposed of. A.F.R. Pawan/- (R.M. Doshit, CJ) Ashwani Kumar Singh, J : I agree. (Ashwani Kumar Singh, J) "