Pradeep Jain - Chartered Accountant

PJ/Case Laws/2009-10/20

Case Laws

Central Excise Section:

Case: - Becton Dickinson India Pvt Ltd v/s Commissioner of C. Ex, Delhi-III

Citation: - 2009 (242) ELT 584 (Tri-Del)

Issue: - Whether the exemption under Notification no. 6/2002 is available to manufacturer of disposable cannula for blood vessels?

Brief Facts: - Appellant are manufactures of disposable cannula for blood vessels. They are availing the exemption under notification no. 6/2002-CE by placing the said items in item no. 34 of the list no. 37 in the same. The revenue has denied the benefit of the said notification to the appellant. Therefore, appellant has approached the tribunal

Appellant’s Contentions: - Appellant has placed reliance on judgement given in CCE, Coimbatore v/s Saberwal Surgicals (P) Ltd. [ 2000 (117) ELT 400 (Tri.)], Medisphere Marketing (P) Ltd. v/s CCE, New Delhi [2001(131) ELT 608 (Tri.-Del)] and unreported judgement of the Apex Court in Civil Appeal no. D72220 of 2000 [2000(121) ELT A74 (SC)]. Attention was also drawn to the description of entry in item no. 34 of the list no. 37 in the notification. It was submitted that the grant of exemption was refused ignoring the mandate of the Tribunal order in Saberwal Surgicals case. It was also ignored that in the earlier matter of appellant, the tribunal had granted stay to the orders of lower authorities refusing exemption to the appellant. The appellant further argued that since stay was granted in earlier stay application in appeal involving similar issues in relation to similar product, the appellant should be protected against demand of duty and refusal on the part of department to grant exemption.

The appellant further argue that the matter and issues have been referred to the larger bench and therefore, it would be justified ground to grant stay regarding requirement of pre-deposit.

Respondent’s Contentions: - revenue contended that the authorities below had rightly distinguished the decision in Saberwal Surgicals case and have based the decision on the opinion by DGHS which was neither successfully challenged nor countered by any expert opinion. They have pointed out the distinguishable features of instant case from Saberwal Surgicals case.

Reasoning of Judgment: - The Tribunal held that nearly because the issue has been referred to larger bench, unless the factual matrix of the case before the bench would justify the grant of stay, blanket stay can not be granted. Prima facie the authorities below in impugned order have clearly brought out the distinguishing feature in the matter with reference to the decision in Saberwal Surgicals case. The said decision was in relation to a product namely ‘scalp vein infusion sets’ whereas the appellant’s case relates to disposable cannula for blood vessels. The cited case did not deal with the analysis of entry no. 34 in list no. 37 of the notification no. 6/2002. Besides, the decision in Saberwal Surgicals case was based on number of expert’s certificates produced by the assessee in relation to their product. In the instant case the appellant’s have not produced any independent opinion but the revenue have furnished the certificate from DGHS. Prima facie no case is made out for any infirmity in impugned order. Pre-deposit of duty demanded does not warrant waiver.

With regard to dismissal of Appeal by Apex Court against Saberwal Surgicals, the tribunal held that the same would be applicable to the extent the matter is covered by the said decision and not beyond that. When an appeal is dismissed by the Apex Court against the judgement or order passed by the court or Tribunal which are subordinate to the Apex Court, the order passed by the subordinate court and tribunals stands uninterfered with by the Apex Court. At the same time it is settled law that a decision is to be understood with reference to what is decided in a matter and not what may follow form it.

The tribunal held that prima facie no case is made out for grant of stay in relation to duty demanded. No case of any financial hardship has been made out. However, with regard to interest and penalty, pre-deposit is stayed since the issue is regarding interpretation of an entry.

Decision: - Matter disposed of accordingly.

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Case: - Praveen Foundry Pvt Ltd v/s CCE, Coimbatore

Citation: - 2009 (94) RLT 717 (CESTAT-Che)

Issue: - Penalty under Rule 25 of CER, 2002 Vs. Penalty under Rule 27 of CER, 2002.

Brief Facts: - Appellants are manufacturers of iron and steel castings and other parts of automobiles. They defaulted in payment of duty for the month of July 2007 on 05.08.2007 but paid the same on 12.09.2007. For removal of goods made during the period 05.09.07 to 12.09.07, the appellants utilised Cenvat Credit for payment of duty on each consignment instead of debiting the PLA. The amount was paid from PLA on 18.12.07 with interest due. The Adjudicating Authority appropriated the amount of duty and interest paid by the appellants and imposed penalty of Rupees One lakh under Rule 25 of the CER, 2002.

Appellant’s Contentions: - Appellant contended that no penalty could be imposed under Rule 25 for violation found against the appellant. Reliance was placed on the judgments given in Saurashtra Cement Ltd v/s CCE, Rajkot [2008 (85) RLT 255 (CESTAT-Ahmd)] and Condor Power Products P Ltd v/s CCE [2007 (79) RLT 124 (CESTAT-Del)]. It was submitted that the proper rule was Rule 27 which provided for imposing maximum penalty of Rs. 5,000/-. It is submitted that the penalty may be reduced to Rs. 5000/-.

Reasoning of Judgment: - The Tribunal placed reliance upon the judgment given in Saurashtra Cement Ltd v/s CCE, Rajkot [2008 (85) RLT 255 (CESTAT-Ahmd)] wherein it was held on similar facts that inference of evasion of duty cannot be drawn from mere delay in making the payment of tax. It was held that penalty could not be imposed under Rule 25 of the CER unless there was contravention of the nature referred to in clauses (a), (b),(c) & (d) of Rule 25. In appellant’s case, the violation was on account of removal of excisable goods by debiting the Cenvat account in stead of PLA account during the period 05.09.07 to 12.09.07. In view of the relied upon case, it is held that appellant had not contravened any statutory provision when removing goods without payment of duty on such consignments.

In the said cited case, the Tribunal had held that violation involved a maximum penalty of Rs.5000/- could be imposed on the appellants under Rule 27. Accordingly, penalty is imposed under Rule 25 is not sustainable in law. A maximum penalty of Rs. 5000/- is justified under Rule 27. Penalty reduced accordingly.

Decision: - Appeal partly allowed.

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Case: - Polyfill Sacks v/s CCE &C, Vadodara-I

Citation: - 2009 (94) RLT 733 (CESTAT-Ahmd)

Issue: - Will mere admission statements of proprietor and laminator as regarding clandestine removal with no other evidence would amount to such removal ?

Brief Facts: - Appellants are manufacturing HDPE/PP Tapes, fabrics and woven sacks. At the material time, the appellant were manufacturing unlaminated and laminated HDPE fabrics, from out of which HDPE woven sacks was manufactured. The unlaminated fabric was exempted at that time from payment of duty but laminated fabric was leviable to duty. The appellants did not had the machinery to manufacture laminated in their factory. Therefore, they were sending the unlaminated fabric to laminators.

By virtue of Notification No. 63/87 dated 01.03.1987 the activity of laminating was exempted from payment of duty subject to condition that such activity was carried on as per the procedure prescribed under Chapter X of the Central Excise Rules, 1944. Accordingly, appellant were getting there fabric laminated by following the procedure given in Chapter X. The material was sent to the appellant after lamination under AR3. Appellant after getting the AR3 attested would record the quantity in prescribed RG-16 register.

The said procedure being followed was intimated to the Department from time to time. The appellant was then converting the laminated fabrics into HDPE woven sacks in their factory. During visit of Excise officers, excess stock of laminated fabrics was found. Thus, for clandestine removal, duty was demanded with interest and penalty was imposed.

Appellant’s Contentions: - Appellant reiterated the grounds of appeal. Therein it was contended that the whole case of revenue was based on a formula and no evidence was shown to prove clandestine removal of excess manufactured excisable goods. On the basis of theoretical ratio duty was sought not only on laminated fabric but also on notional quantity of tapes required alleged excess sacks.

The appellant had submitted Chartered Engineer’s certificate certifying that there are many factors technical as well as non-technical which may result in lowering /increasing production adopted by the Revenue. Reliance was also placed on standards prescribed by Bureau of Indian Standards (BIS) prescribing permissible variation in lamination process. Letter from Indian Petroleum Commission Limited (IPCL) was also furnished certifying that due to basic characteristic of primary plastic there is bound to be variation in lamination process.

In cross examination, the Excise officers admitted that every receipt of laminated fabrics under Chapter X procedures was verified by the officers. It is further submitted that the said submission were not considered by the Commissioner. The Commissioner had simply relied upon the ratio to confirm the demands on products at various stages on the basis of theoretical formula.

Reasoning of Judgment: - The Tribunal held that the impugned order was passed without considering the submissions of appellant relating to Chartered Engineer certificate, standards prescribed by BIS, letter issued by IPCL. Except for the formula and excess stock found, there was no other evidence available.

It was held that it is well established that for demanding duty on clandestine removal something more than mere admission is required and in appellant’s case other than admission statements of proprietor and laminator, no other evidence is forthcoming and proprietor had also admitted that formula was correct but he had not accepted any clandestine removal. Accordingly, demand in respect of other items, other than seized goods and HDPE tapes that could have been used for manufacture of seized goods has to be set aside. Impugned order confirmed as regards to items HDPE fabrics and HDPE tapes. Penalty reduced to Rs.2500/-.

Decision: - Appeal disposed of.

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Case: - Alembic Ltd v/s Commissioner of C. Ex., Vadodara

Citation: - 2009 (15) STR 108 (Tri-Ahmd)

Issue: - Revenue neutral exercise would attract penalty?

Brief Facts: - The appellant are manufacturers of medicaments which are generic in nature falling under chapter 3003.20 and they are also exporting part of the said goods. The appellant exported medicines bearing logo and name of foreign buyers and had classified the same under chapter 3003.10. The Commissioner held that the 11 products out of the exported goods were generic medicines and therefore were falling under chapter 3003.20 and not 3003.10. Accordingly, it was held that the appellant were not required to pay duty at the time of clearance and consequently not eligible for modvat credit on inputs which had gone into their manufacture and disallowed modvat credit. Penalty of equal amount was imposed and interest was also demanded. The appellant have filed this appeal against the said decision.

Appellant’s Contentions: - The appellant submit that their final product was being exported and hence they were eligible for cenvat credit. Reliance was placed on the judgments given in M/s Relish Pharmaceuticals Ltd [Final order no. A/2448/WZB/AHD/07 dt. 10.09.2007] and the subsequent decision given in M/s Cadilla Healthcare Ltd. [Order No. A/2537/WZB/AHD/07 dt. 27.09.2007].

Reasoning of Judgment: - The Tribunal has relied upon the case of M/s Relish Pharmaceuticals Ltd in which it was held on similar facts that the entire situation was revenue neutral and that even if final goods are exempted from payment of duty, the appellants are entitled to refund of credit in cash. The Tribunal found that the final products of the appellant were exported. In respect of products exported the duty on the final products as well as duty on the inputs are eligible to be reimbursed.

Rule 19 (2) of the Central Excise Rules permit procurement of raw materials for use in export goods without payment of duty. In appellant’s case, the duty paid raw materials have been used and credit taken has been used for payment of duty on the final product. This is a revenue neutral exercise. It has not been shown that the exporter has availed any doubt or multiple benefits. Impugned order set aside.

Decision: - Appeals allowed with consequential releif.

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Service Tax Section:

Case: - B.S.B.K. Pvt Ltd v/s Commissioner of C. Ex., Jaipur

Citation: - 2009 (15) STR 88 (Tri-Del)

Issue: - Does value of free supply of material would attract Service tax under commercial and industrial construction service ?

Brief Facts: - The applicants are providing the service of commercial and industrial construction and are availing abatement @ 67% from the gross amount as per Notification No. 15/04-ST. The Revenue is contending that the value of free supply of cement and steel used in the construction should be added to compute the gross value. The applicants are now before the Tribunal and have filed application for waiver of pre-deposit and stay.

Appellant’s Contentions: - The applicant has placed reliance upon the judgment in Larsen & Tourbo Ltd v/s UOI [2007 (7) STR 123] and Era Infra Engineering Ltd v/s Union of India [2008 (11) STR 3 (Del)]. It was contended that the Delhi High Court in Era Infra Engineering Ltd case had held that the material supplied free of charge is not includible in the gross amount charged.

Reasoning of Judgment: - The Tribunal held that in view of the relied upon decisions, pre-deposit of duty and penalty is waived.

Decision: - Stay application allowed.

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Customs Section:

Case: - Commissioner of Cus (ICD), TKD, New Delhi v/s Laxmi Float Glass Ltd

Citation: - 2009 (15) STR 48 (Tri-Del)

Issue: - Does enhancement of penalty survive or not when the duty and penalty are set aside?

Brief Facts: - Duty was demanded and penalty imposed on the Respondent by the Lower Authorities. Respondent filed appeal before the Tribunal against the said decision. Revenue preferred a cross appeal for enhancement of penalty. The duty and penalty were set aside in respondent’s appeal. However, the appeal of revenue is listed for hearing now.

Reasoning of Judgment: - The Tribunal held that as the case for enhancement of penalty does not survive due to setting aside of duty and penalty, revenue’s appeal is dismissed.

The cross appeal of appellant was required to be taken up alongwith the respondent’s appeal for decision.

Registry is directed to ensure that appeals filed by both sides against the same impugned order are listed together for hearing in future. The Revenue department is also directed to bring to the notice of the concerned bench all the appeals arising out of the same impugned order.

Decision: - Appeal dismissed.

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PJ/Case Laws/09-10/20

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