CAG has a lot of respect for CESTAT (especially if the decision is favourable)
Here is another sample from the CAG's 2009 Report to Parliament:
3.6 Dual benefit by taking credit on inputs and collecting duty on exempted final products; Rule 6 of the Cenvat Credit Rules, 2004, envisages that where an assessee manufactures final products, part of which are chargeable to duty and part of which are exempt but avails of credit of duty on inputs meant for use in both the categories of final products and does not maintain separate accounts, he shall pay an amount equivalent to eight per cent (ten per cent from 10 September 2004) of the price charged for the exempted goods. The amount so payable is in lieu of cenvat credit availed of on inputs used in the manufacture of exempted goods and hence the liability is to be borne by the manufacturer itself.
The Ministry also clarified on 9 September 2002 that where a manufacturer debits an amount equal to eight per cent in terms of rule 6 of the Cenvat Credit Rules, 2002, and collects it from the buyers, then the amount so collected should be deposited to the credit of the Government.
Further, the CESTAT in the case of M/s Vimal Moulders (India) Ltd . {2004 (164) ELT 302} = 2003-TIOL-244-CESTAT-DEL had held that the amount of eight per cent paid by the manufacturer but collected from the customer was to be deposited with the Government as per the provisions of section 11 D of the Central Excise Act.
Here the CAG wants the amount of 8% (or 10%) collected from the buyer to be deposited with the Government, based on a CESTAT Order. If it suits them, Audit is prepared to accept a CESTAT order and if it doesn't, they will not accept even a Supreme Court Order.
Incidentally, the CESTAT order, relied on by CAG is no more valid. The Larger Bench of the Tribunal, in the case of Unison Metals Ltd - 2006-TIOL-1337-CESTAT-DEL-LB - had clearly held that the 8% collected was already paid to the Government and there was no requirement of a second payment. Government seems to have accepted this view and this should have been closed at least after the Larger Bench Decision.
Even the Board reacted though a little late with a Circular No. 870/08/2008- CX ., Dated: May 16, 2008, wherein it after referring to the Larger Bench decision in the Unison case clarified that,
as long as the amount of 8% or 10% is paid to the Government in terms of erstwhile rule 57CC of the Central Excise Rules, 1944 or rule 6 of the CENVAT Credit Rules, the provisions of section 11D shall not apply even if the amount is recovered from the buyers.
DDT had covered this issue extensively in on 30 05 2005 and DDT 869 21.05.2008
So there is a Larger Bench Decision in 2006 and there is a Board Circular in 2008 and CAG in 2009 says, “Eureka” blissfully ignorant about either of them!
And the CAG's Report is submitted to Parliament! And the CAG is a very honourable man – so are they all; all his auditors!
It is time we do an audit of THE AUDIT to find out the amount of time and money wasted due to frivolous and ignorant Audit objections!