M/S. JAYASWAL NECO LTD.versusCOMMISSIONER OF CENTRAL EXCISE, RAIPUR

                        [2015] 9 S.C.R. 360


A                  MIS. JAYASWALNECO LTD.
                                  v.
        COMMISSIONER OF CENTRAL EXCISE, RAIPUR
                   (CivilAppeal No.1468 of2004)
B                        AUGUST 06, 2015
               [A.K. SIKRI AND N.V. RAMANA, JJ.]

          Central Excise Rules, 1944 - r. 173G(1)(e) - Dues of
    excise duty- Late deposit- Demand of interest - On facts,
C   non-payment of excise duty on time by assessee- Order by
    the Revenue suspending the facility of clearing goods of
    paying the duty every fortnight and direction to the assessee
    to make the payment of duty on consignment basis for a
    period of two months - Thereafter, assessee while making
0
    payment of excise duty utilized the Cenvat Credit - On
    objection by the authorities that assessee could not have
    utilized the credit from the account, assessee paid the amount
    in cash -As a result imposition of 24% interest p.a. for the
E   belated payment - Challenge to - Utilization of Cenvat
    Credit during the said period of two months when facility for
    payment of duty fortnightly u/r. 173G was suspended, if
    permissible - Tribunal held that payment of duty by debiting
    the Cenvat Credit was not permissible during the said period
F   of two months, thus, amounted to non-payment of duty and
    interest was to be paid till the date duty was actually paid
    through cash - On appeal, held: Even when the facility is
    withdrawn for making payment in instalments, the excise duty
    can be paid through Cenvat Credit- Thus, the order passed
G   by the tribunal set aside.

        Allowing the appeals, the Court

        HELD: 1.1 The tribunal was not correct in observing
H                               360
   JAYASWALNECO LTD. v. COMMNR. OF CENTRAL              361
              EXCISE, RAIPUR

that merely because the appellant paid the said portion A
of duty subsequently in cash, it had accepted the legal
position that payment of duty through Cenvat Credit
Account was not permissible under the provisions of
Rule 173G(1)(e) of the Central Excise Rules, 1944. There
is no estoppel against law. Merely because the appellant B.
had yielded to the demand of the Revenue to pay that
portion of duty also in cash, would not mean that the
appellant was precluded from taking a stand that such
mode of payment through Cenvat Credit Account even
during the period when facility of payment of duty by C
instalments had been withdrawn for two months, was
permissible. It had taken a specific defence in this behalf
and, therefore, the tribunal was required to examine the
matter in.the light of the said Rule. [Para 13] [371-C-F]
                                                          D
     1.2 Rule 173G(1) enables the authorities to forfeit the
facility to pay the dues in instalments for a period of two
months in case the assessee commits default of the
nature specified therein. Thus, the main purport of this
Rule is to withdraw the facility of payment of dues in E
instalments and calling upon the assessee to pay the
duty during the said period on clearing each
consignment, i.e., on everyday basis. In sub-para (b) of
Rule 173G, a duty has been ~ast on the manufacturer to F
maintain an account current with the Commissioner for
the purpose of discharging his duty liability by debiting
such account current. This sub-rule also provides that
duty can be discharged by utilising Cenvat Credit in the
manner mentioned in the said sub-rule. Thus, insofar as G
mode of payment is concerned, it can be through
account current or by utilising Cenvat Credit. Both the
methods are permissible. The mode of payment of duty
through Cenvat Credit is as good as making payment
through account current. even during the period when H
362       SUPREME COURT REPORTS                [2015] 9 S.C.R.


A the facility of payment of excise duty in inst~lments on
  fortnightly basis is not available and remains suspended
  for a period of two years, the only obligation for the
  assessee is to pay the duty on each clearance and not
  on deferred basis. At the same time, insofar as manner
B of duty is concerned, it can be either through account
  currentorCenvatCredit. [Paras 14, 17, 18] [372-F-G; 373-
  H; 374-A-C; 375-C, D]

       1.3 In clause (e) of Rule 173G(1) the words "during
C this period the manufacturer shall be required to pay
  excise duty for each consignment by debit to the account
  current referred to in Clause (b) ... ".It is on the basis of
  this language used in Clause (e), the submission that
  the only mode or manner of payment of duty during this
D period was through account current, cannot be
  accepted, in the absence of specific prohibition
  contained in the said sub-rule (e) coupled with the fact
  that the payment of excise duty through Cenvat Credit
  is recognised as a valid mode of payment In fact, the
E Department itself understood the scope and purport of
  the said provision in this very manner, as it existed at
  that time. [Para 19] [375-E-H]

       1.4 The MODVAT Scheme is a self-contai~ed one,
F dealing with its applicability, eligibility of credit of duty
  on certain inputs, adjustment to be made on the credit
  of inputs used in final products, manner of utilisation of
  inputs, procedure to be followed by the manufacturer,
  procedure to be followed by the persons who have
G availed credit issued in invoice and finally provision for
  recovery of credits wrongly availed and a provision for
  imposing penalty for violation of the provisions and
  availing wrong credit. With the introduction of this new
H scheme, the assessee had the option to pay excise duty
  by availing credit of the duty paid on inputs provided he
     JAYASWAL NECO LTD. v. COMMNR. OF CENTRAL                363
                 EXCISE, RAIPUR

is a manufacturer of the finished products making use A
of such inputs. [Para 21] [377-B-D]

     1.5 The view taken by the High Courts that even
when the facility is withdrawn for making payment in
instalments, the excise duty can be paid through Cenvat        B
Credit is not only concurred with, it is imperative to point
out thateven the Department accepted the said opinion
of the High Courts. The judgments rendered by the High
Courts were not challenged and instead to remedy the
situation, Rule 8 of the Central Excise Rules, 2002 itself     C
is amended by inserting sub-rule 3A vide Notification
No.17/05-C.E. (N.T.) dated 31.03.2005 w.e.f. 01.04.2005.
This Rule now specifically provides that in case of default
in making payment of duty, the assessee would be
required to pay excise duty for each consignment by            D
debit to t~e account current and not by utilising Cenvat
Credit. This also lends credence to the view which is
taken in respect of unamended provision that was
applicable at the relevant time. Thus, the order passed
by the tribunal is set aside. [Para 23, 24] [379-E-H; 380-     E
A]
    Thanikkudam Bagawati Mills Limited, Thanikkudam v.
The Commissioner of Central Excise, Calicut decision dated
26.10.2005 in C.E. Appeal No.22 of 2005-approved.              F

    Commissioner of Central Excise, Pune v. Dai /chi
Karkaria Limited
         ;
                 1999 (112) ELT 353 (SC)- referred to.

                   Case Law Reference
                                                               G
     1999 (112) ELT 353 (SC)    referred to.    Para 17

   CIVILAPPELLATE JURISDICTION: CIVILAPPEAL NO.
1468 of 2004.

     From the Judgment and Order No. N549/2003-NB-C            H
364         SUPREME COURT REPORTS                    [2015] 9 S.C.R.


A     dated 30.09.2003 of the Customs, Excise and Service Tax
      Appellate Tribunal, New Delhi in Appeal No. E/2357/2002-
      NB(C).

                                   WITH
B
          C.A. No. 7386 of 2005

          V. Lakshmikumaran, M.P. Devanath, VivekSharma,Aditya
      Bhattacharya, Hemant Bajaj, Ambarish Pandey, Anandh K. for
      the Appellant.
c
          A. K. Panda, Rashmi Malhotra,Arijit Prasad, B. Krishna
      Prasad for the Respondent.

          The Judgment of the Court Was delivered by
D
          A.K. SIKRI, J. 1. The issue involved in these appeals lies
      in a narrow compass which pertains to the demanGI of interest
      calculated on the dues of excise duty which were allegedly
      deposited late. The period involved is 19.12.2000 and
E     18.02.2001, i.e., two months. The only question is as to whether
      the excise duty was in f~ct deposited late and therefore interest
      would be charged. This issue has arisen under the following
      circumstances in Civil Appeal No. 1468 of 2004.

F      2. The appellanUassessee is the manufacturer of pig iron
  and scrap of iron on which he pays excise duty. The Central
  Excise Rules, at the relevant time, permitted payment of duty
  every fortnight instead of consignment basis. In this manner
  on the goods cleared in the first fortnight the duty was payable.
G by 20 1h of the said month and forthe goods cleared during the
  second fortnight the duty was payable by 51h May of the next
  month. The Revenue Authorities found that in the months of
  August, October and November 2000, the appellants had not
  paid the central excise duty on time. This led to the passing of
H an order by the Revenue suspending the facility of clearing
   JAYASWAL NECO LTD. v. COMMNR. OF CENTRAL                       365
         EXCISE, RAIPUR [A.K. SIKRI, J.]

goods of paying the duty every fortnight and interest. Instead,    A
the appellant was directed to make the payment of duty on
consignment basis for a period of two months, i.e., from
19.12.2000to 18.02.2001.

      3. After the said orders were passed the appellant started s
paying duties on consignment basis. During this period the
appellant paid around Rs. 7 crores in cash through account
current, i.e., PLA. However, the appellant also had credit in
their CenvatAccount. A sum of Rs. 31 lakhs (approximately)
was utilized from the Cenvat Account for payment of excise C
duty in the aforesaid period. The authorities took the view that
the appellant could not have utilized the credit from the account.
The appellant was asked to pay the said sum in cash and the
appellant obliged. Since this payment was made later/
belatedly, the Commissioner (Excise) issued the show cause D
notice as to why the interest at the rate of 24% per annum
should not be charged for the belated period, i.e., from
19.12.2000 to 20. 05.2002. The appellant refuted the aforesaid
averment in the show cause notice with the submission that
the payment through Cenvat account was also a valid payment. E
This contention was not accepted by the Commissioner which
resulted in Order-in-Original dated 13.06.2002 charging
interest for delayed payment at the rate of 24% p.a. for the-
aforesaid period. The reason given by the Commissioner was F
that since the facility to pay the central excise duty in
installments given to the appellant was withdrawn under sub-
rule (e) of Rule 173G of the Central Excise Rules, 1944 for a
period of two months, it was not open to the appellant to make
use of Cenvat account during this period. As per the G
Commissioner, the implication of the aforesaid withdrawal of
facility was to pay the excise duty for each consignment by
debit to the account current, i.e., by cash only.

   4. The appellant assailed the aforesaid order by filing         H
appeal before the Customs Excise and Service Tax Appellate
366         SUPREME COURT REPORTS                 [2015) 9 S.C.R.


A     Tribunal (CESTAT). CESTAT has affirmed the order of the
      Commissioner holding that payment of duty by debiting the
      Cenvat Credit was not permissible during the said period of
      two months and therefore it would amount to non-payment of
      duty. As a consequence, interest was held to be payable till
B     the date duty was actually paid through cash.

       5. The moot question is as to whether it was not
  permissible forthe appellant to utilize the Cenvat Credit during
  the aforesaid period of two months when facility for payment
C of duty fortnightly under Rule 173G was suspended. To put it
  otherwise, when the duty during this period was to be paid on
  consignment basis, it was also incumbent to pay the same in
  cash only and utilisation of Cenvat Credit was also forfeited
  during this period.
D
       6. We have heard the learned counsel forthe parties on
  the aforesaid issues who have taken us through the relevant
  provisions contained in Central Excise Act as well as Rules.
  Section 11A of the Act permits the Central Excise Officer to
E recover duty not levied or not paid or short levied or short paid
  or erroneously refunded. It can be done within one year from
  the relevant date by serving show cause notice on the person
  chargeable with the duty. It is not necessary to state in detail
  the procedure prescribed therein. For our purposes it is
F sufficient to mention that Section 11 AA of the Act provides that
  where a person chargeable with duty determined under
  Section 11 A fails to pay such duty within three months from the
  date of such determination, he is liable to pay interest on the
  delayed period which is at the rate not below 18% and not
G exceeding 36% p.a. as for the time being fixed by the Central
  Government by Notification in the Official Gazette.

      7. Chapter Ill of the Rules deals with 'Levy and Refund of,
  and Exemption from Duty'. Rule 9 thereof stipulates time and
H manner of payment of duty and sub-rule 1 thereof reads as
    JAYASWAL NECO LTD. v. COMMNR. OF CENTRAL                    367
          EXCISE, RAIPUR [A.K. SIKRI, J.]

under:                                                           A

    "Rule 9: Time and manner of payment of Duty:-(1) No
    excisable goods shall be removed from any place where
    they are produced, cured, manufactured or any premises
    appurtenant thereto, which may be specified by B
    (Commissioner) in this behalf, whether for consumption,
    export or manufacture of any other commodity in or outside
    such place, until (excise duty leviable thereon is
    determined and indicated on each application in the
    proper form or each gate pass, as the case may be, C
    presented to the proper officer at such place and in such
    manner as is prescribed in these rules or as the
    Commissioner may require."

     8. The next Rule relevant for our purpose is Rule 173G o
which is textually very long dealing with various aspects. It
prescribes the procedure that has to be followed by the
assessee for the purpose of discharging his duty/liability in
respect of clearances of excisable goods from the place of
permission specified under Rule 9 or from a store room or E
other place, storage approved by the Commissioner under
R1.11e47.

    9. Eschewing the portion which is not relevant for us, we
reproduce that part of the Rule which is concerned with this     F
case, reads as under:

    "Rule 173G. Procedure to be followed by the
    assessee.-[(1)(a) Every manufacturer, other than a
    manufacturer who is availing of the exemption under a G
    notification based on value of clearances in a financial
    year, shall discharge his duty liability in respect of
    clearances of excisable goods from the place or premises
    specified under rule 9 or from a store room or other place
    of storage approved by the Commissioner under.rule 47 H
368     SUPREME COURT REPORTS                    [2015] 9 S.C.R.


A     made:

      (i) during the first fortnight of the month, by the twentieth
      day of that month;

      (ii) during the second fortnight of the month, other than the
 B
      month of March, by the fifth day of the succeeding month;
      and

      xx                            xx                         xx

C     (b) The manufacturer shall maintain an account current with
      the Commissioner and shall discharge his duty liability by
      debiting such account current or by utilising CENVAT
      credit, in the following manner:

o     (I) the manufacturer shall assess the duty due on the
      excisable goods intended to be removed, for each
      consignment and shall enter the particulars of such
      consignments [amount of duty payable had been
      substituted, the words and figures in Daily Stock Account
E     maintained under Rule 53];

      (ii) the manufacturer shall indicate on each invoice, issued
      under rule 52A, the amount of duty payable.

      (iii) at the end of each fortnight, the manufacturer shall
F
      determine the total amount of excise duty payable on the
      excisable goods removed during the fortnight, and he shall
      discharge the total duty liability so payable by making debit
      entry in the account current or by utilising CENVAT credit,
      as the case may be.
G
      (c) the duty of excise shall be deemed to have been paid
      for the purpose of these rules, on excisable goods
      removed in the manner prescribed in this sub-rule, and
      the credit of such duty, as maybe prescribed, under any
H
      rule, will be permissible.
    JAYASWAL NECO LTD. v. COMMNR. OF CENTRAL                         369
          EXCISE, RAIPUR [AK. SIKRI, J.]

    (d) If the manufacturer fails to pay the amount of duty A
    payable by the due date, he shall be liable to pay the
    outstanding amount along with interest at the rate of twenty
    four per cent per annum on the outstanding amount, for
    the period starting with the first day after due date till the
    date of actual payment of the outstanding amount.              B

    (e) If the manufacturer defaults on account of any of the
    following reasons, namely:~

    (i) full payment of any one instalment is discharged beyond       c
    a period of thirty days from the date on which the instalment
    was due in a financial year, or

    (ii) the due date on which full payment of instalments are
    to be made is violated for the third time in a financial year,
                                                                      0
    whether in succession or otherwise,

    then the manufacturer shall forfeit the facility to pay the
    dues in instalments under this sub-rule for a period of two
    months, starting from the date of communication of an
    order passed by the proper officer in this regard and             E
    during this period the manufacturer shall be required to
    pay excise duty for each consignment by debit to the
    account current referred to in clause (b) and in the event
    of any such failure it will be deemed as if such goods have       F
    been cleared without payment of duty and the
    consequences and penalties as provided in the Central
    Excise Rules shall follow."

      10. Clause (a) of sub-rule (1) permits the fortnight
payments of excise duty. Clause (b) mandates_ maintaining of G
a current account with the Commissioner and states that duty
can be discharged by debiting such current account or by
utilizing Cenvat Credit. As per clause (c) once the duty is paid
in the prescribed manner i.e. as per sub-rule (b) it would H
amount to discharging the liability of payment of excise duty.
370          SUPREME COURT REPORTS                     [2015] 9 S.C.R.


A     On failure to pay the duty by the due date interest at the rate of
      24% p.a. can be charged on the delayed payment. Sub-rule
      (e) deals with the situation where the manufacturer commits
      default on account of payment of duty for the reasons
      mentioned therein and in such a case the authorities can forfeit
B     the facility to pay the dues in installments under these sub-rule
      for a period of two months.

          11. In the present case, no doubt, this facility was withdrawn
      under Rule 173G( 1)( e ). The effect of withdrawal of this facility
C     would be that the appellant was not permitted to pay the duty
      every fortnight as per clause (a) of sub-rule (1 ). Instead the
      appellant was required to pay the duty for each consignment.

        12. It is not in dispute that the appellant paid the duty on
o  clearing each consignment. Substantial portion of the duty, i.e.,
   to the tune of Rs. 7 crores was paid in account current through
   PLA. However, for payment of small portion of a duty which
   was in the neighbourhood of Rs.31 lakhs, the appellant utilised
   Cenvat Credit Account. It is this payment from Cenvat Credit
E which has become the bone of contention. The respondent
   communicated to the appellant that duty through Cenvat during
   this period, when facility under Rule 173G was withdrawn, is
   not permissible. Without demur, the appellant complied with
   the demand of the respondent by paying this portion of duty
F also through account current. However, this happened in May,
   2002. The respondent now took the position that the custom
   duty of Rs:31 lakhs was paid belatedly. As it was paid only in
   May, 2002, on this delayed payment, appellant was liable to
   pay interest@ 24% p.a. from the period from 19.12.2000 to
G 20.05.2002. Order-in-Original dated 13.06.2002 passed by
   the Commissioner affirming the demand in show cause notice
   has been confirmed by the Tribunal. The reason given by the
 ' Tribunal is that it was admitted by the appellant that facility of
H payment of duty by installments had been withdrawn for two
   months. It was also admitted by the appellant that during this
     JAYASWAL NECO LTD. v. COMMNR. OF CENTRAL                         371
           EXCISE, RAIPUR [AK. SIKRI, J.]

period, the appellant discharged a portion of duty through A
Cenvat CreditAccount but afterwards paid this amount of duty
in cash and, therefore, admitted that payment of duty through
Cenvat Credit Account was not permissible under the
provisions of sub-rule (e) of Rule 173G(1) of the Rules.
According to the Tribunal, since these were the admitted facts, B
the interest@24 % p.a. which is prescribed for late payment,
was rightly claimed by the Department.

      13. At the outset, we are compelled to remark that the
 Tribunal was not correct in observing that merely because the         C
 appellant paid the aforesaid portion of duty subsequently in
 cash, it had accepted the legal position that payment of duty
 through Cenvat Credit Account was not permissible under the
 provisions of Rule 173G(1 )(e) of the Rules. Whether such a
 course of action was permissible or not had to be examined            D
 in the light of the legal provisions. There is no estoppel against
 law. Merely because the appellant had yielded to the demand
 of the Revenue to pay that portion of duty also in cash, would
 not mean that the appellant was precluded from taking a stand
 that such mode of payment through Cenvat Credit Account               E
 even during the period when facility of payment of duty by
 instalments had been withdrawn for two months, was
 permissible. It had taken a specific defence in this behalf and,
·therefore, the Tribunal was required to examine the matter in         F
 the light of the aforesaid Rule. We have already extracted
 relevant portion of Rule 173G. Since, we are specifically
 concerned with sub-rule (e) thereof, for clarity and better
 understanding of the matter, we reproduce the same once
 again:                                                                G
     "Section 173G(1)

     xx                        xx                      xx
     (e) If the manufacturer defaults on account of any of the         H
372       SUPREME COURT REPORTS                     [2015] 9 S.C.R.


A       following reasons, nar:nely:-

        (i) full payment of any one instalment is discharged beyond
        a period of thirty days from the date on which the instalment
        was due in a financial year, or
B
        (ii) the due date on which full payment of instalments are
        to be made is violated for the third time in a financial year,
        whether in succession or otherwise,

        then the manufacturer shall forfeit the facility to pay the
c       dues in instalments under this sub-rule for a period of two
        months, starting from the date of communication of an
        order passed by the proper officer in this regard and
        during this period the manufacturer shall be required to
        pay excise duty for each consignment by debit to the
D
        account current referred to in clause (b) and in the event
        of any such failure it will be deemed as if such goods have
        been cleared without payment of duty and the
        consequences and penalties as provided in the Central
E       Excise Rules shall follow.

                                              (emphasis supplied)"

       14. As already mentioned above, this clause enables the
  authorities to forfeit the facility to pay the dues in instalments
F for a period of two months in case the assessee commits
  default of the nature specified therein. Thus, the main purport
  of this Rule is to withdraw the facility of payment of dues in
  instalments and calling upon the assessee to pay the duty
  during the aforesaid period on clearing each consignment, i.e.,
G on everyday basis. In this context, the question that arises is
  as to whether such a duty has to be necessarily paid only by
  debit to the account current or it can be paid through Cenvat
  Credit as well.

H       15. For answering this question, first thing that is
            JAYASWAL NECO LTD. v. COMMNR. OF CENTRAL                     373
                  EXCISE, RAIPUR [A.K. SIKRI, J.]

        necessarily to be pointed out is the purport behind Rule 49 A
        and Rule 173G of the Rules. Rule 49 enables the assessee to
        pay excise duty on fortnightly basis on removal of goods from
        the factory premises or from an approved place of removal
        but for this Rule the assessee is required to pay duty on
        removal of each consignment, i.e. on consignment to B
        consignment basis. That is what is provided in Rule 9 of the
        Rules which mandates that no excisable goods shall be
        removed from the place where they are produced, cured or
        manufactured or any premises pertained thereto, which may
        be specified by the Commissioner in this behalf, whether for C
        consumption, export or manufacture of any other commodity
        in or outside such place, until excise duty leviable thereon is
        determined and indicated on each application in the proper
        form or each gate pass, as the case may be, presented to the
                                                                           0
        proper officer at such place and in such manner, as may be
        prescribed in these Rules or as the Commissioner may require.
        However, Rule 49 gives facility to the assessees to remove
        the goods without paying the duty immediately but allowing it
        to pay it on fortnightly basis as provided therein. At the same E
        time, this facility is given to the manufacturer/assessee on the
        premise that he faithfully pays the duty every fortnight, by
        specified dates which are stipulated in Rule 173G. In case
        defaults are committed by the assessee, its consequences
        are also provided in the said Rule. For certain specified nature F
        of defaults mentioned in Clause (e) of Rule 173G(1), this facility
        to pay the dues in instalments on fortnightly basis is to be
        forfeited for a period of two months.

             16. What follows from the aforesaid scheme discernible       G
        from the combined reading of Rules 9, 49 and 173G(1) is that
        focus of these Rules is on the manner in which duty is to be
        paid, namely, on daily basis or on fortnightly basis. The mode
        of payment of duty is altogether different aspect.
                                                                          H
            17. In sub-para (b) of Rule 173G, a duty has been cast on
'   "
374             SUPREME COURT REPORTS                      (2015] 9 S.C.R.


A     the manufacturer to maintain an account current with the
      Commissioner for the purpose of discharging his duty liability
      by debiting such aocount current. This sub-rule also provides
      that duty can be discharged by utilising Cenvat Credit in the
      manner mentioned in the said sub-rule. Thus, insofar as mode
B     of payment is concerned, it can be through account current or
      by utilising Cenvat Credit. Both the methods are permissible.
      The mode of payment of duty through Cenvat Credit is as good
      as making payment through account current. This Court in
      Commissioner of Central Excise_, Pune v. Dai /chi Karkaria
C     Limited described credit under the Modvat scheme to be "as
      good as tax paid". The reasons for the aforesaid view taken
      by the Court are contained in paras 17 and 18 of the judgment
      which may be recapitulated as under:

D            "17. It is clear from these Rules, as we read them, that a
             manufacturer obtai!"JS credit for the excise duty paid on
             raw material to be used by him in the production of an
             excisable product immediately it makes the requisite
             declaration and obtains an acknowledgment thereof. It is
E            entitled to use the credit at any time thereafter when making
             payment of excise duty on the excisable product. There is
             no provision in the Rules which provides for a reversal of
             the credit by the excise authorities except where it has
             been illegally or irregularly taken, in which event it stands
F
             cancelled or, if utilised, has to be paid for. We are here
             really concerned with credit that has been validly taken,
             and its benefit is available to the manufacturer without any
             limitation in time or otherwise unless the manufacturer itself
G            chooses not to use the raw material in its excisable
             product. The credit is, therefore, indefeasible. It should
             also be noted that there is no co-relation of the raw material
             and the final product; that is to say, it is not as if credit can

H     1
          1999 (112) ELT 353 (SC)
    JAYASWAL NECO LTD. v. COMMNR. OF CENTRAL                           375
          EXCISE, RAIPUR [A.K. SIKRI, J.]

     be taken only on a final product that is manufactured out          A
     of the particular raw material to which the credit is related.
     The credit may be taken against the excise duty on a final
     product manufactured on the very day that it becomes
     available.
                                                                        B
     18. It is, therefore, that in the case of Eicher Motors Ltd. v.
     Union of India [1999 (106) E.L.T. 3] this Court said that a
     credit under the Modvat scheme was "as good as tax paid."

     18. When we understand the character of Cenvat Credit              c
in the aforesaid manner, the answer to the question posed
easily becomes available, namely, even during the period when
the facility of payment of excise duty in instalments on fortnightly
basis is not available and remains suspended for a period of
two years, the only obligation for the assessee is to pay the           D
duty on each clearance and not on deferred basis. At the same
time, insofar as manner of duty is concerned, it can be either
through account current or Cenvat Credit.

      19. We are conscious of the words "during this period the E
manufacturer shall be required to pay excise duty for each
consignment by debit to the account current referred to in
Clause (b) ...... "occurring in clause (e). It is on the basis of
this language used in Clause (e) of Rule 173G(1), the argument
of the learned senior counsel for the Revenue is that the only F
mode or manner of payment of duty during this period was
through account current. However, it is not possible to agree
with this contention in the absence of specific prohibition
contained in the said sub-rule (e) in this behalf coupled with
the fact that the payment of excise duty through Cenvat Credit G
is recognised as a valid mode of payment. In fact, as would be
noticed below, the Department itself understood the scope and
purport of the aforesaid provision in this very manner, as it
existed at that time.
                                                                        H
376       SUPREME COURT REPORTS                   (2015] 9 S.C.R.



A       20. In this behalf, it also required to emphasize that the
  Central Government introduced a scheme namely MODVAT
  Scheme in the Central Excise Law as introduced by a separate
  Chapter containing Rule 57A to 57(U) from 1986. As per the .
  MODVAT credit scheme introduced by the aforesaid Rules,
B the manufacture of certain final products which are excisable
  goods specified in the notification issued by the Government,
  is allowed credit of any duty to excise paid by him on the input
  which is used in the manufacture of the final product. The credit
  of specified duty allowed is to be utilised towards payment of
C duty excise allowable on the final product whether under the
  Act or under any other Act as the case may be by the notification
  issued and subject to such conditions as may be specified.
  As per Rule 57F, the inputs on which credits have been taken
  may be used in or in relation to the manufacture of final products
0
  and the inputs may be removed for home consumption or for
  export under bond. As per this rule, all the removals of inputs
  for home consumption shall be made on payment of duty equal
  to the amount of credit availed in respect of such inputs and
E under the cover of invoice prescribed under Rule 52A. The
  inputs can also be removed as such or after they have been
  partially processed by the manufacturer of the final products
  to a place outside the factory under the cover of a challan
  specified in that behalf by the Central Board of Excise and
F Customs, for the purpose of test, repair etc. carrying out any
  operation necessary for manufacture of final products and return
  the same to his factory within the specified period. The inputs
  on which credit has been taken may be used for the
  manufacture of final products or can be removed after payment
G of duty for home consumption. Rule 57-1 provides for recovery
  of credit wrongly availed of or utilised in an irregular manner. It
  provides for recovery of the duty credit of which was wrongly
  availed and if the manufacturer has taken the credit by reason
  of fraud or willful misrepresentation, suppression offacts etc.
H with the intention to evade payment of duty then he shall, apart
    JAYASWAL NECO LTD. v. COMMNR. OF CENTRAL                          377
          EXCISE, RAIPUR [AK. SIKRI, J.]

from his liability to pay the amount equivalent to the credit, be      A
liable to pay penalty equal to the same amount plus interest
under Section 11AA.

     21. The Scheme is thus, a self-contained one, dealing with
its applicability, eligibility of credit of duty on certain inputs,    B
adjustment to be made on the credit of inputs used in final
products, manner of utilisation of inputs, procedure to be
followed by the manufacturer, procedure to be followed by the
persons who have availed credit issued in invoice and finally
provision for recovery· of credits wrongly availed and a provision     C
for imposing penalty for violation of the provisions and availing
wrong credit. With the introduction of this new scheme, the
assessee had the option to pay excise duty by availing credit
of the duty paid on inputs provided he is a manufacturer of the
finished products making use of such inputs.                           D

      22. This provision came up for interpretation before at least
four High Courts and all these Courts took the view that even
when the facility is withdrawn for making payment in
instalments, the excise duty can be paid through Cenvat Credit.        E
It is not necessary to refer to all these judgments. Suffice it is
to make a mention of the decision dated 26.10.2005 in
C.E.Appeal No. 22 of2005 rendered by Kerala High Court in
Thanikkudam Bagawati Mills Limited, Thanikkudam v.
The Commissioner of Central Excise, Calicut. In this                   F
judgment, the High Court after analysing the Rules as well as
the provisions of Modvat scheme summed up the position as
under:

    "23. It is true that as per rule 173G(1)(b) also the payment G
    utilising Cenvat credit is an approved manner of payment
    of duty by these rules. It is equally true that even in the
    absence of such a provision contained in Rule 173G(1)(b)
    accepting the mode of payment utilising Cenvat credit,
    an assessee, even by virtue of the provisions contained- H
378     SUPREME COURT REPORTS                     [2015] 9 S.C.R.


A     under Rule 49 read with Rule 57 A, will be entitled to utilise
      such input credit. In other words, there is force in the
      contention of the assessee that Rule 173G does not give
      any benefit ofany input credit and merely by referring to
      the entitlement of the assessee to use the Cenvat credit
 B    again under Rule 173G and further providing that the
      assessee has to pay the duty during the suspended period .
      for each consignment by debit from the account current
      only in no way will have the effect of taking away the already
      conferred benefit by separate .rule. So long as no
c     amendment is brought out to Rule 49 or Rule 57A, as the
      case may be, the consequences of making an assessee
      a defaulter and to deny him the benefit of utilising the input
      credit will become unworkable and ineffective. It has to
      be noticed as rightly pointed by the counsel appearing for
D
      the petitioner that the rule making authority took notice of
      this lacuna and by the Central Excise Rules, 2002 -
      second amendment 2005, which came into force from 1st
      April, 2005, the Central Excise Rules 2002 was amended
E     and Rule 3A was inserted which reads as follows:

      "If the assessee defaults in payment of duty by the date
      prescribed in sub-rule (2) and the same is discharged
      beyond a period of thirty days from the said date, then the
      assessee shall forfeit the facility to pay the duty in monthly
F
      instalments under sub-rule (1) for a period of two months,
      starting from the date of communication of the order
      passed by the Assistant Commissioner of Central Excise
      or the Deputy Commissioner of Central Excise, as the
G     case may be, ir. this regard or till such date on which all
      dues including interest thereof are paid, whichever is later,
      and during this period notwithstanding anything contained
      in sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004,
      the assessee shall be required to pay excise duty for each
H.    consignment by debit to the account current and in the
    JAYASWALNECO LTD. v. COMMNR. OF CENTRAL                      379
          EXCISE, RAIPUR [A.K. SIKRI, J.]

    event of any failure, it shall be deemed that such goods       A
    have been cleared without payment of duty and the
    consequences and penalties as provided in these rules
    shall follow."

    24. It is for the first time that a non obstantive clause was B
    added so as to take away the benefit under the Cenvat
    Credit rules and to utilise the input credit during the
    operation of the suspended period and requiring any duty
    by debit to the account current only. Until then, as is already
    referred to above, merely because rule 173G recognises C
    the payment of duty utilising the Cenvat credit also and
    providing for payment of duty through open and current
    account only during the suspended period will not have
    the effect of taking away the benefit conferred by a
    separate rule since even without Rule 173G by virtue of D
    Rule 49 read with Rule 57 A a right has already conferred
    on the assessee to utilise the input credit for payment of
    duty at the time of discharging his liability to pay duty on
    the final product as provided for in the rules."
                                                                    E
    23. Not only we are in agreement with the aforesaid view
taken by the High Courts, it is imperative to point out that even
the Department accepted the aforesaid opinion of the High
Courts. Forth is reason, judgments rendered by the High Courts
were not challenged and instead to remedy the situation, Rule F
8 of the Central Excise Rules, 2002 itself is amended by
inserting sub-rule 3A vide Notification No.17/05-C.E. (N.T.)
dated 31.03.2005w.e.f. 01.04.2005. This Rule now specifically
provides that in case of default in making payment of duty, the
assessee shall be required to pay excise duty for each G
consignment by debit to the account_current and not by utilising
Cenvat Credit. This also lends credence to our view which we
have taken in respect of unamended provision that was
applicable at the relevant time.
                                                                   H
380         SUPREME COURT REPORTS                   [2015] 9 S.C.R.


A         24. The result of the aforesaid discussion would be to allow
      these appeals and set aside.the decision of the CESTAT. We
      order accordingly.

      NidhiJain                                       Appeals allowed.
B