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2019 Supreme(All) 1900
IN THE HIGH COURT OF ALLAHABAD
BISWANATH SOMADDER, AJAY BHANOT, JJ.
Commissioner, Central Goods and Service Tax Commissionerate - Appellant
Versus
M/s International Tobacco Co. Ltd. and Others - Respondents
Central Excise Appeal No. 89 of 2019 With Central Excise Appeal No. 88 of 2019
Decided On : 06-12-2019
For the Appellant : Dhananjay Awasthi.
For the Respondent: Shubham Agrawal.
Headnote:
CENVAT Credit - Central Excise - Rule 16 of the Central Excise Rules, 2002 - Summary of Acts and Sections: Rule 16(1) of the Central Excise Rules, 2002 - The judgment discusses the interpretation of Rule 16(1) of the Central Excise Rules, 2002, and the entitlement to CENVAT credit. The court analyzed the conditions for availing CENVAT credit under Rule 16(1) and the scope of the phrase 'or for any other reason'. The court concluded that the assessee was not entitled to avail the benefit of CENVAT credit and had illegally availed such credit.
Fact of the Case:
The respondent-assessee claimed CENVAT credit for returned cigarettes as inputs under Rule 16(1) of the Central Excise Rules, 2002. The Revenue alleged that the assessee unlawfully availed the benefits of CENVAT credit and imposed penalties on the assessee and Sri R.K. Gupta, the responsible person for excise matters.
Finding of the Court:
The court found that the assessee was not entitled to avail the benefit of CENVAT credit and had illegally availed such credit. The penalty imposed on Sri R.K. Gupta under Rule 26 of the Central Excise Rules, 2002, was upheld as the ingredients of the rule were fully satisfied.
Issues: The substantial questions of law were whether the interpretation of Rule 16(1) by the tribunal was correct and whether the penalty imposed on R.K. Gupta was justified.
Ratio Decidendi: The court held that the assessee was not entitled to avail the benefit of CENVAT credit under Rule 16(1) and that the penalty imposed on R.K. Gupta was justified as per the provisions of Rule 26 of the Central Excise Rules, 2002.
Final Decision: The judgment of the tribunal was set aside, and the judgment of the Commissioner of Customs, Central Excise & Service Tax, Ghaziabad, dated 21st October, 2010, was upheld. Both the appeals were allowed in favor of the Revenue.
JUDGMENT :
Ajay Bhanot, J.
1. Both the Central Excise Appeals instituted under section 35-G of the Central Excise Act, 1944 arise from the same judgment and order passed by the learned Customs, Excise & Service Tax Appellate Tribunal, Allahabad, dated 3rd April, 2018, which sets aside the Order-in-Original dated 21st October, 2010 passed by the Commissioner of Customs, Central Excise & Service Tax, Ghaziabad.
2. The appeals raise two separate substantial questions of law but the facts are the same. The substantial questions of law arising in both the appeals respectively can be decided conveniently by one judgment.
3. The learned Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad, in its order dated 03.04.2018 held that the assessee – respondent is entitled to CENVAT credit and has lawfully taken and utilized CENVAT credit under Rule 16 of the Central Excise Rules, 2002. The Commissioner of Customs, Central Excise & Service Tax, Ghaziabad, had in the Order-in-Original dated 21st October, 2010, found that the assessee had wrongly availed of the CENVAT credit under Rule 16(1) of the Central Excise Rules, 2002 and accordingly ordered recovery of evaded liability and imposed penalty.
4. The connected Central Excise Appeal No.88 of 2019 (Commissioner, Central Goods and Service Tax Commissionerate, Ghaziabad Versus R.K. Gupta) has also been filed against the said judgment and order of the learned Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad, dated 3rd April, 2018, in regard to reversal of the penalty imposed upon Sri R.K. Gupta under Rule 26 of the Central Excise Rules, 2002 by the Order-in-Original dated 21.10.2010.
5. The respondent – assessee is engaged in the manufacture of various brands of cigarettes on job work basis for M/s Godfrey Philips India Limited. During the period under assessment, certain cigarettes manufactured and removed by the appellant on payment of Central Excise duty were returned by Godfrey Philips India Limited for various reasons. The respondent – assessee claimed that the goods were brought back to the factory for refining.
6. The respondent – assessee took CENVAT credit by treating the said returned goods as inputs for the period November, 2006 to May, 2007 and for the period August, 2008 to April, 2009.
7. The respondent – assessee claimed entitlement to credit under Rule 16(1) of the Central Excise Rules, 2002 and availed of the CENVAT credit under Rule 16(2) of the Central Excise Rules, 2002, when the goods were removed from the factory after “refining”. Principally, the controversy in the instant appeal centres around Rule 16(1) of the Central Excise Rules, 2002.
8. When the offending transactions were noticed by the Revenue, show cause notices were issued to the respondent – assessee. The show cause notices recorded that “refining” of cigarettes is not covered under Rule 16 of the Central Excise Rules, 2002. The sum and substance of the case of the Revenue against the respondent – assessee was that the respondent – assessee engineered the return of the so-called non marketable/non saleable cigarettes, with the intent to unlawfully avail the benefits of CENVAT credit under Rule 16 (1) of the CENVAT Credit Rules, by misleading the Revenue.
9. The show cause notice specifically asserted that the respondent – assessee had wilfully, knowingly and with a mala fide intention, wrongly availed CENVAT credit which is recoverable from it under Rule 14 of the CENVAT Credit Rules, 2004, read with proviso to section 11A of the Central Excise Act, 1944, along with interest under section 11AB of the said Act. The respondent – assessee was also liable for penal action under Rule 15(2) of the CENVAT Credit Rules, 2004, read with section 11AC of the Central Excise Act, 1944.
10. Sri R.K. Gupta is the appellant in the connected appeal who was “the sole In-charge and responsible person for day-to-day working in respect of all excise matters in the factory” was also noticed for having conce
