Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 1549

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Somesh Arora, Judicial Member, Satendra Vikram Singh, Technical Member
Commissioner of CGST & Central Excise – Appellant
Versus
Filatex India Limited – Respondent
Excise Appeal No. 10960 of 2017|Excise Appeal No. 10961 of 2017|Excise Appeal No. 10962 of 2017

Advocates:
For the Appellants/Petitioners: Rajesh Nathan
For the Respondents: Prakash Shah, Mohit Raval

Prior to 2016, there was no statutory restriction under the Cenvat Credit Rules, 2004, preventing the utilization of Cenvat Credit of basic excise duty for the payment of National Calamity Contingent Duty (NCCD) on final products.

Headnote:(A) Central Excise Act, 1944 - Sections 11A, 11AB, 11AC - Finance Act, 2001 - Section 136 - Cenvat Credit Rules, 2004 - Rule 3(1), 3(4), 3(7) - Utilisation of Cenvat Credit of Basic Excise Duty (BED) for payment of National Calamity Contingent Duty (NCCD) - Prior to 2016, there was no restriction in utilizing Cenvat Credit of BED for payment of NCCD.

(B) Appellate Jurisdiction - Interpretation of Tax Legislation - Distinction between case laws relating to scope of exemption notifications (like Unicorn Industries) and rules governing the utilisation of Cenvat credit - Statutory provisions must be interpreted based on the specific language of the rules in effect during the relevant period. (Paras 5.4, 5.5)

Facts of the case:
The respondent, engaged in the manufacture of Polyester Oriented Yarn, utilized Cenvat Credit of basic excise duty to pay NCCD. The Revenue challenged this, citing that NCCD is a separate levy and not admissible for adjustment against credit of basic excise duty. The Commissioner dropped the proceedings, leading to these appeals.

Findings of Court:
The Tribunal examined the provisions of Rule 3 of the Cenvat Credit Rules, 2004. It held that the legislation did not contain restrictions on utilizing basic excise duty credit for NCCD until the 2008 and 2016 amendments. The decisions cited by the Revenue (e.g., Unicorn Industries) related to exemption notifications under Section 5A of the Central Excise Act and were distinct from the issue of credit utilisation under Rule 3. The Tribunal maintained that the respondent was entitled to utilise the credit as per the rules prevailing during the relevant period.

Issues: Whether the Cenvat Credit obtained on inputs as basic excise duty could be legally utilized to discharge the liability of National Calamity Contingent Duty (NCCD) during the period in question.

Ratio Decidendi: Prior to the 2016 amendment of the fifth proviso to Rule 3(4) of the Cenvat Credit Rules, 2004, there was no statutory bar preventing a manufacturer from utilizing Cenvat Credit of basic excise duty to pay NCCD on final products.

Result: Appeals dismissed.

Table of Content
1. summary of dispute over cenvat credit utilization for nccd payment. (Para 1)
2. parties argument on the permissibility of credit utilization prior to 2016. (Para 3 , 4)
3. court finds no restriction on bed credit for nccd before 2016. (Para 5)
4. final order dismissing appeals based on established jurisprudence. (Para 6)

SATENDRA VIKRAM SINGH

1. In the present matter, appeals have been filed by Revenue against impugned order dated 30.12.2016 passed by learned Commissioner, Silvassa Commissionerate.

1.1 The facts of the case are that M/s. Filatex India Ltd., Dadra (U.T.) are engaged in the manufacture of Polyester Oriented Yarn (POY) & Yarn Waste falling under CTH 54024200 and 55051000 respectively of the Central Excise Tariff Act, 1985. Their final product POY, in addition to basic excise duty, also attracts National Calamity Contingent Duty (NCCD) @ 1%. The respondent is availing Cenvat Credit of basic excise duty on various inputs viz. Polyester Chips falling under Chapter 39 which they have used for payment of NCCD on POY which according to revenue, was not admissible. Accordingly, three show cause notices dated 06.02.2007, 14.08.2007 and 18.02.2008 were issued to the respondent for disallowing utilisation of Cenvat Credit for payment of NCCD and it’s recovery from the account current under Section 11A of the Central Excise Act, 1944 alongwith interest under Section 11A B (now 11AA) of the said Act and penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11A C of the said Act. The total amount involved in three show cause notices is Rs.4,53,12,025/-. The above issue was decided by the learned Commissioner vide impugned order wherein, she dropped the proceedings initiated against the party.

2 Revenue has taken the following grounds in their appeal:-

• National Calamity Contingent Duty was imposed @ 1% vide Section 136 of the Finance Act, 2001. The Adjudicating Authority has dropped the department’s case by relying on the decision of CESTAT Kolkata in the case of Prag Bosimi Synthetics Limited Vs. CCE Dibrugarh reported in 2007 (216) ELT 254 wherein, it was held that NCCD is duty of excise and there can be no objection to the appellants utilising the credit of basic duty of excise for payment of NCCD. The said decision of Kolkata Tribunal was upheld by Hon’ble High Court of Gauhati as reported by 2013(295) ELT 682 (Gau).

• Hon’ble Sikkim High Court in the case of M/s. Unicorn Industries Vs. Union of India in Writ Petition (C ) No. 24 of 2007 and Writ Petition (C ) No. 7 of 2009, though relating to scope of exemption from payment of NCCD as duty of excise after having taken into consideration the provisions of law as contained in Section 3 of the Central Excise Act, 1944. Vide order dated 11.05.2012 reported at 2015 (324) ELT 498 (Sikkim) held that NCCD is not duty of excise and therefore, Notification which grants exemption to basic excise duty shall not be applicable for grant of exemption to NCCD. The decision of Hon’ble Sikkim High Court further been upheld by Hon’ble Supreme Court as reported at 2019 (370) ELT 3 (SC).

• On the above reasoning, revenue has pleaded that the decision in Prag Bosimi Synthetics Limited is not correct interpretation of law and therefore, charges made in the show cause notices against the respondent M/s. Filatex India Ltd. may be upheld by setting aside the order of Learned Commissioner.

3. During arguments, learned AR highlighted the grounds taken by the revenue for disallowing utilisation of Cenvat Credit of BED for payment of NCCD and recovery of NCCD amount from the respondent in cash. He highlighted that every legislation has profound object and purpose. The legislative intent and purpose may be clearly evident from the preamble of an Act and in absence of the same, from the various provisions contained in the Act. The object and purpose to levy NCCD is to create fund for any National calamity or disaster. Similarly, Education cess and Secondary and H

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2026 Supreme(Online)(CESTAT) 1549

Prior to 2016, there was no statutory restriction under the Cenvat Credit Rules, 2004, preventing the utilization of Cenvat Credit of basic excise duty for the payment of National Calamity Contingent Duty (NCCD) on final products.

Cases Referred (2)