SANDLEY INDUSTRIES Vs. UNION OF INDIA AND ORS.

JUDGEMENT

(1.) This order shall dispose of a bunch of 14 petitions viz. CWP Nos. 10564, 14114, 14741, 23128, 25335, 25429 of 2014, 4804, 4841, 4865, 4873, 2001, 15514, 4779 and 1298 of 2015 as the issue involved in all these petitions is identical. However, the facts are being extracted from CWP No. 10564 of 2014.

(2.) CWP No. 10564 of 2014 has been filed by the petitioner for quashing Sub rule 3A of Rule 8 of Central Excise Rules, 2002 (in short, "the 2002 Rules") being beyond the delegated powers of the respondents and is arbitrary and confiscatory in nature. Further direction has been sought to the respondents not to adjudicate show cause notice issued to the petitioner during the pendency of the writ petition.

(3.) A few facts relevant for the decision of the controversy involved as narrated in CWP No. 10564 of 2014 may be noticed. The petitioner is engaged in the manufacture of zinc and zinc ash falling under Chapter heading 7901100 and 26201900 of the First Schedule to Central Excise Tariff Act, 1985. The raw material used by the petitioner is zinc dross, zinc scrap and zinc blowing. The raw material as well as finished goods are subject to Central Valued Added Tax (CENVAT). The petitioner is availing CENVAT Credit in terms of CENVAT Credit Rules, 2004 (in short, "the 2004 Rules"). The value addition involved is very low as major part of duty is paid from CENVAT. The petitioner is also importing goods. It gets more input credit than duty payable on finished goods apart from basic customs duty. As per Sec. 3 of the Central Excise Act, 1944 (in short, "the Act"), duty of excise called as CENVAT is leviable on goods produced and manufactured in India. As per Rule 4 of the 2002 Rules, every person who produces or manufactures any excisable goods shall pay duty leviable on such goods in the manner provided in Rule 8 of the 2002 Rules or under any other law for the time being in force. As per Rule 8 of the 2002 Rules, duty on the goods removed from the factory or warehouse during the month shall be paid by 6th day of the following month, if duty is paid electronically and by 5th day of the following month, in any other case. As per Rule 3 of the 2004 Rules, a manufacturer or producer of final product is entitled to credit of duty of excise leviable under the Act apart from other duties of excise specified in the Rule. As per Rule 3(4) of the 2004 Rules, the CENVAT Credit may be utilized for the payment of any duty on any final product. The object of CENVAT Credit is to avoid cascading effect of duties leviable at different stages. Therefore, the Government has extended benefit of credit on duty paid on input used for the manufacture of finished goods. As per Rule 8(3A) of the 2002 Rules, if an assessee defaults in payment of duty beyond 30 days from the due date, he shall pay excise duty for each consignment at the time of removal without utilizing CENVAT Credit till the date he pays outstanding amount including interest thereon at the rate specified by the Central Government. The petitioner is availing CENVAT Credit on zinc dross, zinc scrap and zinc blowing. The finished product is zinc metal. During the process of conversion of zinc scrap/dross into zinc metal, a waste arises which is called as zinc ash. The petitioner is clearing zinc ash as well as zinc metal on payment of duty. The value addition is very low, so duty is mainly paid from CENVAT Credit account and very small amount is paid in cash. During the month of October 2012, the petitioner cleared goods involving duty amounting to Rs. 19,26,044/ -. The petitioner paid a sum of Rs. 18,18,534/ - through CENVAT account and Rs. 17000/ - through personal ledger account i.e. cash. The accountant of the petitioner while calculating duty liability picked figure of one entry as Rs. 10057/ - whereas actual figure was Rs. 100567/ -. It resulted into short payment of duty amounting to Rs. 90,510/ -. The petitioner was having CENVAT Credit of Rs. 650410/ - apart from credit utilized for payment of duty so there was no question of delaying the payment of duty. Due to mistake correct liability was disclosed but a sum of Rs. 90,510/ - was paid short. This fact came to the knowledge of the petitioner when an official of the respondents pointed out about the same. The petitioner immediately deposited the said amount alongwith interest. The petitioner vide GAR 7 dated 31.10.2013 deposited a sum of Rs. 90510/ - towards duty and Rs. 16292/ - towards interest. Inspite of deposit of duty alongwith interest, the respondent relying upon Rule 8(3A) of the 2002 Rules formed an opinion that the petitioner had delayed payment of duty so it was barred from paying duty from CENVAT account. Show cause notice dated 4.11.2013, Annexure P. 4 was issued to the petitioner for recovery of Central excise duty, interest and penalty by treating Rs. 29,27,888/ - as not paid for the month of December 2012. Similarly, another show cause notice dated 20.12.2013, Annexure P. 5 was also issued to the petitioner on the ground that the petitioner had wrongly utilized CENVAT Credit amounting to Rs. 1,87,21,250/ - during January 2013 to October 2013. According to the petitioner, sub -rule 3A of Rule 8 of 2002 Rules is contrary to the whole scheme of the CENVAT credit. Hence the instant writ petitions.