IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN WEDNESDAY, THE 19TH OCTOBER 2011 / 27TH ASWINA 1933 RP.No. 533 of 2011(C) --------------------- AGAINST THE JUDGEMENT/ORDER IN WPC.25870/2009 Dated 19/11/2010 .................... REVIEW PETITIONERS/RESPONDENTS ------------------------------------------------------ 1. THE DEPUTY COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, THRISSUR DIVISION, S.T. NAGAR, THRISSUR-1. 2. THE SUPERINTENDENT OF CENTRAL EXCISE, PERMBRA RANGE, CHALAKUDY-680307. BY ADV. SRI.JOHN VARGHESE,SC,CEN.BOARD OF EXCIS RESPONDENT/PETITIONER --------------------------------------- M/S. APPOLLO TYRES LIMITED, PERAMBRA, CHALAKUDY-680689, REPRESENTED BY ITS HEAD-LEGAL & EXCISE MR. MAHESH SHARMA. ADV. SRI.JOSEPH KODIANTHARA, SENIOR ADVOCATE FOR R1 SRI.V.ABRAHAM MARKOS FOR R1 SRI.MATHEWS K.UTHUPPACHAN FOR R1 SRI.BINU MATHEW FOR R1 SRI.TERRY V.JAMES FOR R1 SRI.B.J.JOHN PRAKASH FOR R1 SRI.TOM THOMAS (KAKKUZHIYIL) FOR R1 THIS REVIEW PETITION HAVING BEEN FINALLY HEARD ON 19/10/2011, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: P.N.RAVINDRAN, J. --------------------------- R.P. No.533 of 2011 IN W.P.(C) No. 25870 OF 2009 -------------------------- Dated this the 19th day of October, 2011 O R D E R In this review petition, the respondents in W.P.(C) No. 25870 of 2009 seek a review of the judgment delivered on 19.11.2010 whereby this Court directed the first petitioner herein to adjudicate on the dispute raised by the writ petitioner in Ext.P8 letter. 2. The main contention raised in the review petition is that liability to pay interest in terms of section 75 of the Finance Act, 1994 is automatically attracted when any person liable to pay service tax in accordance with the provision contained in section 68 of the Finance Act, 1994 or rule 2(1)(d)(v) of the Service Tax Rules, 1994, fails to pay the tax and therefore no adjudication is required or called for. It is contended that as the writ petitioner had not admittedly paid the service tax in time during the period from 13.5.2005 to 31.3.2006, the liability to pay interest on the service tax payable by the writ petitioner automatically arises and no adjudication at all is required to be made. The review petitioners also contend that the availing of CENVAT credit in RP No.533/2011 2 terms of the CENVAT Credit Rules, 2004 also does not involve any scrutiny by the department except for the purpose of determining whether the assessee has correctly paid the excise duty/tax/interest payable as per law and can only take action to recover the balance amount if any payable by the assessee under those heads if the assessee has not correctly estimated and paid the duty/tax/interest payable by it. 3. I heard Sri. John Varrghese, learned Senior Standing Counsel for the Central Board of Excise and Customs and Sri.Joseph Kodianthara, learned Senior Advocate appearing for the respondent. 4. Section 75 of the Finance Act, 1994 reads as follows:- “Interest on delayed payment of service tax:- Every person, liable to pay the tax in accordance with the provisions of Section 68 or rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, for the period by which such crediting of the tax or any part thereof is delayed.” 5. Rule 3(1) of the CENVAT Credit Rules, 2004 reads as follows:- RP No.533/2011 3 “Rule 3. CENVAT credit (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of - (i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act; (ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act; (iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978); (iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957); (v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); (vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004); (via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007); (vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via); (viia) the additional duty leviable under sub- section (5) of section 3 of the Customs Tariff Act RP No.533/2011 4 Provided that a provider of taxable service shall not be eligible to take credit of such additional duty; (viii) the additional duty of excise, leviable under section 157 of the Finance Act, 2003 (32 of 2003); (ix) the service tax leviable under section 66 of the Finance Act; (x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004); and (xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and (xi) the additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005) paid on - (i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and (ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004, including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547(E), dated the RP No.533/2011 5 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004. Explanation – For the removal of doubts it is clarified that the manufacturer of the final products and the provider of output service shall be allowed CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act on goods falling under heading 9801 of the First Schedule to the Customs Tariff Act. 6. Rule 3(4) of the CENVAT Credit Rules, 2004 reads as follows: Rule 3(4) The CENVAT credit may be utilized for payment of:- (a) any duty of excise on any final product; or (b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or (c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or (d) an amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002; or (e) service tax on any output service; Provided that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be; Provided further that the CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used RP No.533/2011 6 in the manufacture of final products cleared after availing of the exemption under the following notifications of Government of India in the Ministry of Finance (Department of Revenue):- (i) No.32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated 8th July, 1999]; (ii) No.33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated 8th July, 1999]; (iii) No.39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565(E), dated the 31st July, 2001]; (iv) No.56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated the 14th November, 2002]; (v) No.57/2002-Central Excise, dated 14th November, 2002 [G.S.R. 765(E), dated the 14th November, 2002]; (vi) No.56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513(E), dated 25th June, 2003]; and (vii) No.71/2003-Central Excise, dated the 9th September, 2003 [G.S.R. 717(E), dated the 9th September, 2003] shall, respectively, be utilized only for payment of duty on final products, in respect of which exemption under the said respective notifications is availed of: [Provided also that no credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, shall be utilised for payment of service tax on any output service: [Provided also that the CENVAT credit of any duty specified in sub rule (1), except the National Calamity Contingent duty in item (v) thereof, shall not be utilized for payment of the said National Calamity Contingent duty on goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of the First Schedule of the Central Excise Tariff:] Provided also that the CENVAT credit of any duty mentioned in sub rule (1), other than credit of additional RP No.533/2011 7 duty of excise leviable under [section 85 of Finance Act, 2005 (18 of 2005], shall not be utilized for payment of said additional duty of excise on final products. 7. Rule 2(B)(p) of the CENVAT Credit Rules, 2004 defines the term “output service” as follows:- “Output service” means any taxable service, excluding the taxable service referred to in sub-clause (zzp) of clause (105) of section 65 of the Finance Act, provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions 'provider' and 'provided' shall be construed accordingly.” The service provided by a goods transport agency to any person in relation to transport of goods by road in a goods carriage falls within the definition of the term output service in view of sub-clause (zzp) of clause (105) of section 65 of the Finance Act, 1994. 8. The review petitioners do no dispute the fact that the writ petitioner is a CENVAT manufacturer and its entitlement to the benefits flowing from the CENVAT Credit Rules, 2004. The only contention raised by the review petitioners is that the applicability of the CENVAT Credit Rules, 2004 has nothing to do RP No.533/2011 8 with payment of service tax, which the writ petitioner ought to have paid on the 5th of every succeeding English calender month. It is also contended that after paying the service tax, the writ petitioner can claim CENVAT credit for excise duty payable by it under the Excise Tariff Act. In my opinion, the said contention is without any merit. Clause (ix) of sub rule (1) of rule 3 of the CENVAT Credit Rules, 2004 stipulates that a manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (referred to in the rule as CENVAT credit) of the service tax leviable under section 66 of the Finance Act. Clause (e) of sub-rule (4) of rule 3 of the CENVAT Credit Rules stipulates that the CENVAT credit may be utilised for payment of service tax on any output service. It is however stipulated that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be. 9. The contention raised by the writ petitioner and accepted RP No.533/2011 9 by me in the judgment sought to be reviewed is that the writ petitioner did not claim CENVAT credit for payment of service tax in terms of rule 2(1)(d)(v) of the Service Tax Rules, 1994 and remitted the excise duty payable by it in full without claiming such credit and as the money had already been credited to the account of the Central Government though under a different head, it cannot be said that there was failure to pay service tax so as to attract section 75 of the Finance Act, 1994. 10. Section 73 of the Finance Act, 1994 empowers the Central Excise Officer to determine whether any service tax has not been levied or paid or has been short-levied or short paid or erroneously refunded. All that this Court had by the judgment sought to be reviewed directed was that in view of the claim made by the writ petitioner under the CENVAT Credit Rules, 2004 the first respondent has to examine that claim and adjudicate whether there is merit and substance in the contention of the writ petitioner that it was entitled under the CENVAT Credit Rules, 2004 to take credit of the service tax payable by it during the relevant period, whether there was any short fall and if there was RP No.533/2011 10 no short fall whether any liability can be fastened on the writ petitioner by way of interest. The said direction does not in my opinion run counter to the provisions contained in section 75 of the Finance Act, 1994 or the CENVAT Credit Rules, 2004. I therefore find no grounds to review the judgment delivered on 19.11.2010. However, in view of the statement made in paragraph 3 the review petition that only the Additional Commissioner of Excise is vested with the power to adjudicate the dispute raised by the writ petitioner, I deem it appropriate to clarify that the directions issued by me in the judgment sought to be reviewed shall be implemented by the competent authority. The review petition fails and is accordingly dismissed with the above clarification. No costs. P.N.RAVINDRAN, (JUDGE) vps RP No.533/2011 11