PJ/Case Laws/2010-11/02
Case Laws
Case: Vinod Kumar Gupta vs. Commissioner of C. EX.,
Citation: 2010 (252) E.L.T. 157 (Tri. –
Issue: - Whether separate penalty imposable if the appellant helped another assessee to avail Cenvat Credit by issuing cenvatable invoices without supplying the goods?
Brief Facts: - Appellant was the proprietor of M/s. Asim Enterprises and partner of M/s Makhan lai Vinod Kumar. They were registered dealers. During investigation by Central Excise Officers it was found that M/s Asian Alloys Ltd., Mandi Gobindgarh , Punjab fraudulently availed Cenvat Credit on the basis of cevatable invoices issued by various registered dealers and washer manufacturing units during the period from 1-4-2000 to 31-7-2001. It was found that both the firms had also issued cenvatable invoices without supplying goods to M/s Asian Alloys Ltd. In addition to it the appellant also collected cenvatable invoices from other registered dealers and washer manufacturing units and maintaining the records at premium. The commissioner confirmed the demand of duty of Rs. 3,79,64,978/- and imposed penalty of equal amount on M/s Asian Alloys Limited along with interest. He also imposed penalty on washer manufacturing units and registered dealers including both the firms. He further imposed penalty of Rs. 50,00,000/- on the appellant under Rule 209 A of the erstwhile Rules and Rule 26 of the Rules,2001.
Appellant’s Contention: - The appellant said that the main beneficiary in these transactions was M/s Asian Alloys Limited and duty was demanded from him and penalty was also imposed on him. The penalties imposed on the appellant cannot be sustained as there were separate penalties imposed on appellant’s partnership and proprietorship firm. The benefit to the assessee was of small amount and the penalty imposed was of huge amount. The relied case was a decision of the larger bench in Steel Tubes of India Ltd. v/s Comm. of Central Excise, Indore-2007 (217) E.L.T 506 (Tribunal-LB). It said that where there is no movement of goods penalty under Rule 209 A of the erstwhile Rules and Rule 26 of the Rules, 2001 cannot be imposed and here also the appellant has not handled the goods.
Respondent’s Contention: - The appellant agreed in his statement and in his reply to the show cause notice that he issued cenvatable invoices to help M/s Asian Alloys Ltd. to avail Cenvat Credit without supplying the goods. The penalties were imposed to the partnership and proprietorship firm on issue of cenvatable invoices to assist M/s Asian Alloys Limited. There was no issue relating to supplying of goods.
Reasoning of the Issue: - The appellant played a separate role apart from issuing cenvatable invoices through his firms. The goods supplied to the other registered dealers and washer manufacturing units were diverted and were liable to confiscation. Hence imposition of penalty under Rule 26 is justified. However the penalty amount is excessive.
Decision: - Appeal disposed off.
**********
Case: South Easter Coalfields Ltd. Vs. Commissioner of C. EX., Kolkata-VI
Citation: 2010 (252) E.L.T. 140 (Tri.- Kolkata)
Issue: - Whether refund claim after the prescribed time limit can be filed, if the duty paid by the manufacturer is under protest and no proof related to it is submitted to the revenue?
Brief Facts: - The appellants purchased conveyor belts from M/s Dunlop
Appellant’s Contention: - They had filed a similar case where the conveyor belt was purchased from M/s. Fenner (
Respondent’s Contention: - The department went with the finding of the commissioner.
Reasoning Of The Issue: - The communication with the Assistant Commissioner does not says that the duty paid by M/s Dunlop
Decision: - Appeal rejected.
***********
Case: Guljag Industries Ltd. Vs. Commissioner of Central Excise, Jaipur
Citation: 2010 (252) E.L.T. 102 (Tri-Del.)
Issue: - Whether duty paid on welding electrodes used for the purpose of repair of pipelines is available for cenvat credit? Whether extended period can be invoked and penalty can be imposed if periodically returns are filed?
Brief Facts: - The appellants are manufacturer of chemicals falling under Chapter 28 and they have pipelines in the factory and their maintenance is essential condition for manufacturing for which welding electrodes in welding machine were required. They want the electrodes to be classified as capital goods as the welding machine.
Appellant’s Contention: - The appellants relied on the cases of Bajaj Auto Ltd. v. CCE, Pune reported in 1998 (99) E.L.T. 479 and the other was Wheels India Ltd. v. CCE, Chennai reported in 2000 (122) E.L.T. 875 and said that welding parts were essential parts of the machinery. He said the dispute arises from 7-7-2009 when the amendment in the definition of inputs in Rule 2(k) by addition of exclusion clause which it had been added that “but shall not include cement, angles, channels, centrally twisted deform bar or thermo mechanically treated bar and other items used for construction of factory shed, building or laying of foundation or making of structures of support for capital goods” As regards to the aluminium sheets they said that they are used in the lining of accessories as they are used in relation to trays.
They said that they were submitting the periodical returns and they were audited by the officers periodically. They were issued SCN dated 25-2-2002 in pursuance of visit of audit parties. In these circumstances the allegation of suppression of relevant material and invocation of extended period of limitation and imposition of penalty are not warranted. They relied on the decision in the case of Jaypee Rewa Plant V. CCE, Raipur reported in 2003 (159) E.L.T 553(Tri- LB) where penalty was set aside holding that electrodes were not eligible for Cenvat Credit, so penalty was to be imposed in the present case.
Respondent’s Contention: - The commissioner (Appeal) has rightly classified that electrodes were consumables and cannot be classified as capital goods. The decisions cited by the appellant were where the electrodes used for spot welding was involving a completely different process. Here in Spot welding, electrodes are part of the machine. The returns pointed out by the appellant only mention the name of the items on which credit has been taken. The electrodes and aluminium sheets have not been disclosed and therefore there suppression of relevant information and so extended period can be invoked and penalty should be restored as imposed by the original authority. Aluminium sheets are accessories and cannot be considered as capital goods.
Reasoning Of The Issue: - They relied on the decision in the case of Vikram Cement in E/A No. 1466/09 [2009 (242) E.L.T. 545 (Tribunal)] and held that welding electrodes cannot be classified as inputs within the meaning of expression held under Cenvat Credit Rules, 2002/2004. So, the appellant was not eligible for Cenvat Credit on Welding electrodes. The aluminium sheets and the trays are used in the factory of manufacturer and that too in relation to manufacture of final product they should be eligible for Cenvat Credit.
The extended period cannot be invoked because once the welding electrodes are mentioned in the returns, it is understood that they are used for the purpose of welding. The imposition of penalty cannot be sustained because there have been disputes and differing decisions on the availability of the credit on the welding electrodes.
Decision: - Appeal disposed off.
************
Case: Jhunjhunwala Vanaspati Ltd. vs. Commr. of C. EX.
Citation: 2010 (252) E.L.T.90 (Tri. -
Issue: - Whether penalty can be imposed on the assessee if Cenvat credit on capital goods availed 100% instead of 50% and on being pointed out reversed the same along with interest?
Brief Facts: - The appellant was issued a SCN and penalty was imposed on him u/r 13 of the Cenvat Credit Rules, 2004 read with Sec 11AC of the Central Excise Act, 1944 for the contravention of the provisions of Rule 3,4& 7 of the Cenvat Credit Rules,2002/ Rule 3,4& 9 of the Cenvat Credit Rules,2004, during the period from Dec 02 to Feb 04, the appellant has wrongly taken Cenvat Credit of Rs. 92,605. During audit wrong credit was pointed out and was paid with interest. From Rs. 92,605 an amount of Rs. 86,331 had been wrongly availed on the ground that 100% credit has been availed on the capital goods which should be limited to 50%. 100% penalty was imposed u/r 13 of Cenvat Credit Rules,2002/ Rule 15 of Cenvat Credit Rules,2004 read with Sec 11 AC of Central Excise Act, while neither the SCN makes the duty demand nor the demand has been confirmed in OIO.
Appellant’s Contentions: - The appellant’s contention was that there was no need of invoking penalty u/s 11AC as the credit on capital goods which has been wrongly availed ie. 100% instead of availing just 50% would in any case available to the assessee if not in the current year in the next year. But as soon the assessee knew this fact he paid the amount with the interest and so this case was covered under the provisions of Sec. 11A(2B) of Central Excise Act, 1944 as since in this case, duty was paid on being pointed out by the department.
Respondent’s Contentions: - They said that as Cenvat Credit has been wrongly availed, hence penalty u/r 15 read with Sec 11AC has been rightly imposed. The reversal of credit along with interest cannot be said to be voluntary and that just because the duty had been paid back prior to the issue of SCN, this cannot be any ground for not imposing penalty.
Reasoning of the Judgment: - The imposition of penalty was not justified because the appellant when pointed out reversed the entire disputed amount along with interest, even when the SCN was gone through there was no element of Sec 11 AC like fraud, wilful mis-statement, suppression of fact, contravention of the provisions of Central Excise Act, 1944 or the rules made there under.
Decision: - Appeal allowed.
**********
Case: DSM Sugar vs. Commissioner of C. EX., Meerut-II
Citation: 2010(252) E.L.T. 86 (
Issue: - Whether credit on forged products allowed if they are used as capital goods after undertaking certain processes?
Brief Facts: - The appellants filed the appeal against the denial of capital goods, namely forged products i.e. forged steel shafts. The original authority allowed the credit of Rs. 28,860. The revenue filed appeal against it in Comm.(A) which was allowed. So the appellant further went in this appeal.
Appellant’s Contentions: - The forged products are in the nature of components and parts of various machineries available for Cenvat Credit. The items in machine or machinery were not disputed by the revenue before the Comm.(A) and the only reason was that the capital goods were used after undertaking certain processes, namely grooving and shelling. The decisions relied upon were-
(a) CCE,
(b) Steel Authority of India Ltd. v. CCE, Raipur-2008 (227) E.L.T. 265 (
(c) UOI v. Hindustan Zinc Ltd., 2007 (214) E.L.T 510 (Raj.)
Respondent’s Contention: -They went with Comm.(A) findings. Their contention was that the forged products were not used in machine or machineries. Processes on them were conducted and they were intermediate product for plant and machinery thereof cannot be considered as components/ parts and accessories of capital goods and Credit on them should be denied.
Reasoning of the Judgment: - The process undertaken by the appellants are in the nature of incidental for use in the final product, which cannot be treated as intermediate product as said by the revenue. So there was no reason to deny credit on forged products. Reliance was placed on case of U.P State Sugar Corporation Ltd.
Decision: - Appeals allowed.
**********
Case: Gurang Alloys & Iron Ltd. vs. Commissioner of C. EX. & S.T.,
Citation: 2010 (252) E.L.T.67 (Tri. - Kolkata)
Issue: - Whether duty is confirmed and penalty is imposed if revenue says that the goods are short but no physical weighment done?
Brief Facts: - There was visit by the Revenue Officers on 22.07.2006 in the factory premises of the appellants. On verification it was found that there was shortage of 49.290 MT of the finished goods when compared with the statutory report. Shortage was also found in packing materials i.e. jute bags. The finished goods were Silico manganese which was cleared in jute bags containing 50 kgs of Silico manganese. The verification was conducted in front of the Authorised signatory of the appellants and the production manager admitted the shortage. The Adjudicating Authority confirmed the demand and imposed penalties. The Comm. (A) dismissed the appeal filed by the appellants.
Appellant’s Contentions: - The appellant contended that the revenue made a eye estimation and no physical weighment was done and the conclusion was drawn out. Approx. 16MT finished goods were in loose condition and no weighment of these goods done. They further said that penalty on the grounds of Sec 11Ac of the Central Excise Act cannot be imposed by reason of fraud, any wilful mis-statement of suppression of facts or contravention of any provision of the Act as there was no evidence that the goods found short were clandestinely removed from the factory. The cases relied were-
(a) Commr. Of Central Excise,
(b) Commr. Of Central Excise,
(c) Commr. Of
Respondent’s Contention: - The contention of the revenue was that the verification was conducted in front of the Authorised signatory of the appellants and the production manager admitted the shortage. The duty is rightly demanded and penalty u/s 11AC is rightly imposed on the assessee. The revenue also said that some goods were loaded in the truck found in the factory and no duty paying documents were with it.
Reasoning of the Judgment: - As the Authorised signatory of the appellants and the production manager admitted the shortage the demand is confirmed. But the penalty u/s 11AC cannot be imposed as there was no evidence that the goods were removed clandestinely. Certain goods were found short and the appellant tried to explain this by saying that there was no logic as no weighment, just eye estimation. The decisions relied by assessee said that in such cases penalty cannot be imposed but duty is confirmed.
Decision: - Appeal disposed off.
**********
Case: Exotic Associates vs. Commissioner of Central Excise
Citation: 2010 (252) E.L.T. 49 (Guj.)
Issue: - (A) Whether penalty was liable to be imposed on the assessee in case where part amount of duty had been deposited by the assessee before issue of Show Cause Notice?
(B) Whether it was mandatory to impose penalty equal to amount of duty alleged to have been evaded, or discretion to impose less penalty was vested in the authorities under sec 11AC of the Act?
(C)Whether or not in view of Sec 11AB inserted with effect from 28-9-1996 vide Sec 76 of Finance (No.2) Act, 1996 (33 of 1996) interest is leviable on the amount of Central Excise Duty evaded for a period subsequent to 28-9-1996 till 11-5-2001?
Brief Facts: - The assessee is engaged in manufacture of clearance of chemicals like Sodium Cynate, Cuprous Chloride, B.D.S.A., etc. and had registration under Central Excise Act, 1944. On investigation in the unit of the assessee it was found that a SCN was issued saying why Rs. 5,99,500 on finished goods valued at Rs. 43,04,935 should not be recovered under the proviso of Sec 11A(1) of the Act and why the duty amounting Rs. 97,063 involved should not be recovered on inputs and interest u/s 11AA of the Act. The Additional Commissioner passed the OIO and on further appeal the Commissioner (Appeal) confirmed the order. The tribunal said that merely because somebody has paid duty by resorting to the clandestine removal, prior to the issue of the SCN, waiver of penalty should not be justified as the same will make the evasion risk free and will treat the evader more kindly than the genuine tax payer which is neither warranted nor envisaged.
Reasoning of the Judgment: - The
If the assessee pays duty and penalty imposed u/s 11AC of the Act within 30 days it is reduced to 25%.Here the case referred was of K.P Pouches (P) Ltd. v. Union of India, 2008 (228) E.L.T. 31 (Delhi) where the court said that once the chances are known to the assessee and if he does not take its advantage its assessee’s own peril. The Central Excise department has issued circular that wherein it is clarified that penalty u/s 11AC should be mandatorily mentioned in the OIO by the Adjudicating Authority.
Another decision that came forward was of
Considering the above judgements the order was remanded to the adjudicating authority with a direction to frame an order after giving the assessee an option to pay the duty amount within 30 days making it clear that if the assessee wants to avail this option.
The tribunal has deleted the interest only considering the ground that the demand relates to the period 1997 to 2000 and no interest is leviable in respect to demand prior to 11-5-2001. The tribunal has only considered the provisions of sub sec (2) of Sec 11AB w.e.f 11-5-2001 The amended Sec 11AB would not apply to the cases where Sec 11AB was inserted by Sec 76 of Finance (No. 2) Act,1996, effective from 28-9-2006 and demand related to period subsequent thereto, i.e. between the period from 28-9-1996 and 11-5-2001. Sub sec (2) of Sec 11AB specifically states that the provision of Sub sec (1) of Sec 11AB shall not apply to cases where the duty has become payable on the date on which Finance Act, 2001 received the assent of the president. Therefore, it is open and permissible to levy interest under Sec 11AB for the period subsequent to 28-9-1996 under the unamended provision of sec 11AB of the Act. So the impugned order of the tribunal is set aside on this point and matter remanded back to the Adjudicating Authority to decide the issue keeping in mind unamended provision of sec 11AB of the Act
Decision: - Appeal disposed off and the matter was remanded back.
**********
Case: Vinay Wires & Poly Products P. Ltd. vs. Member (C. Ex.), C.B.E. & C.,
Citation: 2010(252) E.L.T 10(Del.)
Issue: Whether without giving the evidence on which the department relied and without providing an opportunity to be heard can an order be passed?
Brief Facts: - The order was passed against the assessee putting the restrictions that
(i) Facility of monthly payment provided to the assessee u/r 8(1) of the Central Excise Rules, 2002 is ordered to be withdrawn and they are required to pay excise duty for each consignment at the time of removal of goods w.e.f 21-12-2009 to 30-6-2010.
(ii) The utilisation of Cenvat credit was ordered to be stopped w.e.f 21-12-2009 to 30-6-2010 but the assessee was permitted to utilise credit for payment of duty on goods cleared from the respective factories after the aforesaid period is over.
(iii) Separate records should be maintained by the assessee of receipt, disposal, consumption and inventory of the principal inputs w.e.f 21-12-2009 to 31-5-2010 in both the factories separately.
(iv) They have to intimate the jurisdictional central excise officer within 24 hours of the receipt of principal inputs in each of the factories on which Cenvat credit has or has not been taken and the same should be available for verification for next 24 hours w.e.f 21-12-2009 to 31-5-2010.
Appellant’s Contentions: - They were not given proper opportunity of hearing and the documents which were relied upon. Case referred were Kothari Filaments v. Commissioner of Customs [2009 (233) E.L.T. 289 (S.C)] that the principles of natural justice should be applied.
Respondent’s Contentions: - The notice issued by the revenue had various documents, invoices, records of the company Also the comparison was made by the daily stock account figures maintained by the petitioner and it was made on the basis of documents available. Opportunity of hearing here means that an effective opportunity of hearing and in this case it means that the petitioner ought to have been supplied with the documents so that he could have made effective representation against the contemplated action so, the non supply of such documents would not be fatal in as much as these are not adjudication proceedings.
Reasoning of the Judgment: - The impugned order was passed according to the Notification No. 32/2006 C.E.(N.T.)issued under Rule 12CC of the Central Excise Rules,2002 read with Rule 12AA of Cenvat Credit Rules,2004.
The Rule 12CC says that the Central Government is empowered to issue notifications relating to the nature of restrictions, including the suspension of registration in case of a dealer, types of facilities to be withdrawn and procedure for issue of such order. It is reproduced below
Power to impose restrictions in certain types of cases. — Notwithstanding anything contained in these rules, where the Central Government, having regard to the extent of evasion of duty, nature and type of offences or such other factors as may be relevant, is of the opinion that in order to prevent evasion of, and default in payment of, excise duty, it is necessary in the public interest to provide for certain measures including restrictions on a manufacturer, first stage and second stage dealer or an exporter, may by a notification in the Official Gazette, specify nature of restrictions including suspension of registration in case of a dealer, types of facilities to be withdrawn and procedure for issue of such order by an officer authorized by the Board.
Rule 12AA of the Cenvat Credit Rules, 2004 is in identical terms with regard to Cenvat credits. In pursuance of the power given under Rule 12CC of the Central Excise Rules ,2002 and Rule 12AA of the Cenvat Credit Rules ,2004 Cent Govt. issued a notification dated 30-12-2006, Notification No. 32/2006- Central Excise (N.T.) which says-
G.S.R.(E).- In pursuance of rule 12CC of the Central Excise Rules, 2002, and rule 12AA of the CENVAT Credit Rules, 2004, the Central Government, hereby declares that where a manufacturer, first stage or second stage dealer, or an exporter including a merchant exporter is prima facie found to be knowingly involved in any of the following,-
(a) removal of goods without the cover of an invoice and without payment of duty;
(b) removal of goods without declaring the correct value for payment of duty, where a portion of sale price, in excess of invoice price, is received by him or on his behalf but not accounted for in the books of account;
(c) taking of CENVAT Credit without the receipt of goods specified in the document based on which the said credit has been taken;
(d) taking of CENVAT Credit on invoices or other documents which a person has reasons to believe as not genuine;
(e) issue of excise duty invoice without delivery of goods specified in the said invoice;
(f) claiming of refund or rebate based on the excise duty paid invoice or other documents which a person has reason to believe as not genuine,
(g) removal of inputs as such on which CENVAT credit has been taken, without paying an amount equal to credit availed on such inputs in terms of sub-rule (5) of rule 3 of the CENVAT Credit Rules, 2004.;
an officer authorized by the Board may order for withdrawal of facilities or impose certain restrictions as specified in para 2 of this Notification.
2. Facilities to be withdrawn and imposition of restrictions:
(1) Where a manufacturer is prima facie found to be knowingly involved in committing the offences as specified in para 1, the following restrictions may be imposed on the facilities, namely:-
(i) the facility of monthly payment of duties may be withdrawn and the assessee shall be required to pay excise duty for each consignment at the time of removal of goods;
(ii) payment of duty by utilisation of CENVAT credit may be restricted and the assessee shall be required to pay excise duty without utilising the CENVAT credit:
(iii) the assessee may be required to maintain records of receipt, disposal, consumption and inventory of the principal inputs on which CENVAT credit has not been taken;
(iv) the assessee may be required to intimate the Superintendent of Central Excise regarding the receipt of principal inputs in the factory on which CENVAT credit has or has not been taken, within a period specified in the order and the said inputs shall be made available for verification upto the period specified in the order.
Provided that where a person is found to be knowingly involved in committing any one or more type of offences as specified in para 1 for the second time or subsequently, every removal of goods from his factory may be ordered to be under an invoice which shall be countersigned by the Inspector of Central Excise or the Superintendent of Central Excise before the said goods are removed from the factory or warehouse.
Explanation I.- It is clarified that a person against whom the order under sub-para (3) of para 4 has been passed may continue to take CENVAT credit; however, he would not be able to utilize the credit for payment of duty during the period specified in the said order.
Explanation II.- For second time or subsequent offence, the restriction specified in clauses (i) and (ii) may also be imposed.
Explanation III.- For the purposes of this paragraph, “principal inputs”, means any input which is used in the manufacture of final products where the cost of such input constitutes not less than 10% of the total cost of raw materials for the manufacture of unit quantity of a given final products:
(In paragraph 1 - clause(g), in paragraph 2, sub-paragraph (1) - clause (iii) & (iv) & Explanation III has been inserted vide NTF. NO. 15/2009-CE(N.T.), DT. 10/06/2009)
(2) Where a first stage or second stage dealer is found to be knowingly involved in committing the type of offence specified at clauses (d) or (e) of para 1, the registration granted under rule 9 of the Central Excise Rules 2002 may be suspended for a specified period.
Explanation.- During the period of suspension, the said dealer shall not issue any Central Excise Invoice. However, he may continue his business and issue sales invoices without showing excise duty in the invoice and no CENVAT credit shall be admissible to the recipient of goods under such invoice.
(3) Where a merchant exporter is found to be knowingly involved in committing the type of offence specified at clause (f) of para 1, the self sealing facility for export consignment may be withdrawn whereby each export consignment shall be examined and sealed by the jurisdictional Central Excise Officer:
Provided that any other facility available to a manufacturer, first stage or second stage dealer or an exporter provided by a circular or an order issued by the Board may also be ordered to be withdrawn for a specified period.
3. Monetary Limit.- The provisions of this notification shall be applicable only in a case where the duty or CENVAT Credit alleged to be involved in the offences specified in para 1 is more than Rs.10 lakhs.
4. Procedure.- (1)The Commissioner of Central Excise or Additional Director General of Central Excise Intelligence, as the case may be, after examination of records and other evidence, and after satisfying himself that the person has knowingly committed the offence as specified in para 1, may forward a proposal to the Chief Commissioner or Director General of Central Excise Intelligence, as the case may be, specifying the facilities to be withdrawn and restriction to be imposed and the period of such withdrawal or restrictions, within 30 days of the detection of the case, as far as possible.
(2) The Chief Commissioner of Central Excise or Director General of Central Excise Intelligence, as the case may be, shall examine the said proposal and after satisfying himself that the records and evidence relied upon in the said proposal are sufficient to form a reasonable belief that a person has knowingly committed the offences specified in para 1, may forward the proposal along with his recommendations to the Board. However, the Chief Commissioner of Central Excise or Director General of Central Excise Intelligence, before forwarding his recommendations, shall give an opportunity of being heard to the person against whom the proceedings have been initiated and shall take into account any representation made by such person before he forwards his recommendations to the Board.
(3) An officer authorized by the Board shall examine the recommendations received from the Chief Commissioner of Central Excise or Director General of Central Excise Intelligence and issue an order specifying the type of facilities to be withdrawn or type of restrictions imposed, along with the period for which said facilities will not be available or the period for which the restrictions shall be operative.
From the above Notification it is clear that an opportunity to be heard should be given.
The impugned order should be said aside and the documents should be within 4 weeks supplied to the appellant which are relied by the revenue.
Decision: - Writ petition disposed off.
**********
Case: Lokhandwala Construction Industries Ltd. v/s CCE, Mumbai
Citation: 1997 (92) E.L.T 703 (Tribunal)
Issue: - Whether SSI exemption could be denied if declaration not filed and other notification requirements are fulfilled under Sec 5A of the Central Excise Act, 1944?
Brief Facts: - The appellant was a manufacturer of flush doors which were utilised in its min activity of construction of buildings. For the year 1991 to 1994 it did not fulfilled central excise formalities like registration, licensing, etc. Even duty was also not paid by them. Notice was issued to the assessee asking for the duty. The Comm. has passed order impugned in the appeal
Appellant’s Contentions: - The appellant contended that he was entitled to the SSI exemption and it was available even if the assessee has not declared that he was intended to use such notification or has not followed the Central Excise procedure. The commissioner order of denying the SSI exemption was not sustainable.
Respondent’s Contention: - The revenue went with decision in the appeal.
Reasoning of the Judgment: - The case relied upon was of Vikram Laminators Pvt. Ltd. Vs. CCE
Decision: - Appeal allowed.
**********
Case: Apex Steels (P) Ltd. v/s Collector of Central Excise,
Citation: 1995 (80) E.L.T. 368 (Tri.)
Issue: -
i. Whether the CTD Bar is a separate marketable commodity, in as much as, as to whether the process of twisting activity results in different separate marketable goods?
ii. Whether the Notification No. 202/88, dated 20-5-1988 covered the goods in question?
iii. Whether the Notification No. 170/89 is a clarificatory in nature having retrospective effect? Whether the parties are entitled for Modvat benefit when demand for past period is made?
iv. Whether the demands are barred by time when facts are known to parties.
v. Whether the penalty is imposable in the present case?
Brief Facts: - The appellants were engaged in the production of the product but have taken a stand that the process of conversion of hot rolled Bars which are allowed to cool and thereafter, it is twisted on the twisting machine, and thus such an activity does not amount to the process of manufacture and that no new commodity or separate goods arises, the fact that the product is known as CTD Bar or by the trade name TOR STEEL, it does not matter. Now the department demanded the duty. The appellants were not denying the production of the CTD Bars but were in the contentions that the product was exempt from duty as the activity performed was amounting to no further manufacturing. The conclusion to be drawn that CTD Bars are “not further worked”, is on the basis of the legislative intent, which has been shown to us, and also because the items having been exempted earlier and subsequent to this Notification. The assessee has submitted the various units and figures of production required to the Re- rollers association and after that several Trade notices and circulars were issued exempting the bars from duty so the assessee has not hidden any facts from the department as these figures went to the department, there was no intention of the assessee to evade duty otherwise he would have not submitted the figures. The department circulars said that the CTD bars are exempt from duty and at one stage the department was saying that it was advisable for such units to cancel their Excise licenses. Then the department said that process of twisting plain bars amount to manufacture. The assessee was ready to pay duty on it but also was demanding Cenvat Credit on the inputs. The department denied the Cenvat Credit on the basis that proper procedure is not followed and documents required are not submitted. Even the extended period was invoked saying that the assessee has suppressed the facts.
Appellant’s Contentions: - The appellants contention was that the process of twisting does not amount to manufacture, as no new commodity comes into existence, although, the impugned goods may arise out of cold rolling process, after hot rolling. Yet, the goods are required to be considered as `rods and bars’. The twisting to the bars and rods are done merely to help the goods to acquire better grip in construction activity and that the items continuous to remain as `bar and rod’. There is only a physical change and it is only for identification purpose the item is called `CTD Bars’, while in fact, in trade and commercial parlance, both the items are one and the same, in view of the fact that both the items are used for the same purpose of construction activity. In this regard the Learned Advocate relied on the ruling of the Hon’ble Supreme Court rendered in a sales tax matter, which according to him has full applicability, as the judgment had been rendered in the context of the understanding that arises on reading a tariff heading in respect of plain bars. It is his contention that on such an understanding, it has been held that such process of twisting does not amount to a process of manufacture, as in the case of Telangana Steel Industries v. State of Andhra Pradesh as reported in 1994 (73) E.L.T. 513.
He further drew support from the ruling rendered in the case of Bombay Iron Foundry v. Collector of Central Excise as reported in 1987 (32) E.L.T. 360. He further contended that where a entry mentions the term “including” it referred to all items and hence, bars would also include Twisted Bars. On this proposition on the term `including’ to be read to mean all items of similar nature are to be read as to fall in the same category. They relied on the ruling rendered in the case of Galada Continuous Castings Ltd. v. Collector of Central Excise, as reported in 1985 (22) E.L.T. 884. Further cases cited were
(a) Bharat Forge & Press Industries (P) Ltd. v. Collector of Central Excise - 1990 (45) E.L.T. 525;
(b) Dunlop India Limited v. Union of
(c) Collector of Central Excise v. Saraswathi Stores - 1995 (75) E.L.T. 538;
(d) Collector of Central Excise v. Popular Cotton Covering Works - 1994 (73) E.L.T. 264 (S.C.).
It was further submitted that in all the appeals, the department had collected the details from the Association regarding the product figures of all the parties during 1988 itself and hence, there was inaction on the part of the department and due to such inaction of the department in issuing show cause notices, the parties cannot be blamed. The Collector, Chandigarh in the case of Aeron Rolling Mills had held in parties favour both on merits and on time bar. The Learned Counsel submitted that in the show cause notice, there was also no allegation or pleading regarding suppression or mis-statement. It is argued that the department has to state what constituted deliberate and conscious suppression and there were no such facts in these appeals, as both the department and the Trade held a belief of the item being exempted from duty. In this regard the ruling of Hon’ble Supreme Court rendered in the case of Cosmic Dye Chemical v. Collector of Central Excise as reported in 1995 (75) E.L.T. 721 and that of Nagpur Engineering Co. Ltd. v. Collector of Central Excise, as reported in 1993 (63) E.L.T. 699 was relied.
The Tribunal had already decided the issue arising in this case in [party’s] favour and the ratio is also required to be followed as in the case of:
(i) Chamundi Steels Rerolling Mills v. Collector of CentralExcise - [1994 (3) RLT 855];
(ii) Vivek Rerolling Mills v. Collector of Central Excise - [1994 (73) E.L.T. 660].
It was further submitted that subsequent issue of clarificatory Notification cannot be a ground for invoking larger period and the ratio of the case as in Birla Jute Industries Ltd. v. Union of India, as reported in 1992 (61) E.L.T. 437
It was lastly pleaded that the input bars were all duty paid and that the Cenvat was available to the item in question. The finding given that declaration had not been filed is not a correct reading of the provision of the law. The filing of declaration would arise only at the time when demands would be quantified. The department while quantifying the demands under Section 11A is bound to give deductions to all those items, which are exempted from duty, as well as the Cenvat, as Cenvat, was introduced to avoid the cascading effect. He submitted that non-filing of declaration is only a procedural failure and it should not come in the substantive right of Cenvat deductions, when duty has been quantified under Section 11A. The Learned Counsel read this Section to explain that duty demandable, would mean only that duty which is liable to be paid after granting all available concessions including proforma credit and Modvat deductions. In this regard the ruling of Bombay High Court rendered in the case of Kirloskar Brothers Ltd. v. Union of India & Others, as reported in 1988 (34) E.L.T. 30 was relied, which had laid the rule that proforma credit should be granted irrespective of filing declaration, and the plea as raised here by department was rejected by the High Court.
The Collector had noted about this aspect in para 11 of his order but yet he had proceeded to confirm the demands for larger period, which was against his own findings of facts. He submitted that even independently; where party had held the bona fide belief in the light of Board’s own instructions vide Letter No. 267/92-CX. 8, dated 30-1-1992 as reported in 1992 (59) E.L.T. T7, the demands cannot be confirmed nor penalty imposed.
He relied on the rulings rendered in the following cases:
(i) Re-rolling Mills, Hirakud& Others v.Collector of Central Excise & Others - 1986 (25) E.L.T. 52;
(ii) Saphire Steel (P) Ltd. v. Collector of Central Excise - 1994 (71) E.L.T. 1049;
In this case the Tribunal dealing on a similar issue has held that the Modvat benefit should be given even if the declaration had not been filed.
(iii) H.M. Baga v. Collector of Central Excise - 1995 (75) E.L.T. 171 (Tri.) = 1994 (5) RLT 160;
(iv) Vivek Re-rolling Mills & Others v. Collector of Central Excise - 1994 (73) E.L.T. 660 (Tri.) = 1994 (4) RLT 265].
He submitted that the penalty is not leviable in these cases and the same is unjustified. In this regard he relied on the ruling rendered in the cases:
Hindustan Steel Ltd. v. State of
Khemka (b) & Co. (Agencies) Pvt. Ltd. v. State of Maharashtra and State of Mysore v. Guldas Narasappa Thimmaiah Oil Mills - 1975 (35) STC 571
That the Government had already collected duty in respect of this product at the input stage itself by enhacing the duty on the inputs. This was very clear, as can be seen from the tariff rates which had been increased on the inputs, from time to time and also in the light of Finance Minister’s Budget speech of 1977. He submitted that the hot rolled bars cannot be weighed in that condition and production records cannot be maintained at this stage. They had allowed to cool the hot rods and only thereafter, the process of twisting is carried out. The production figures had not submitted to the department. Therefore, the removal of hot rolled bars under Rules 9 and 49 has to be taken only after the twisting process and hence, twisting is a part of the process of hot rolled bar and that both hot rolled bar and cold finished twisted bars are one and the same. He submitted that there is no exclusion clause to exclude the twisted bars. He also made a grievance that the Collector had allowed the appeal in respect of the few manufacturers while denying to their party. It is his further contention that there is no mention of CTD bars in the tariff and only when bar is mentioned in the tariff, it should be understood to mean all varieties including the twisted one.
The arguments of other counsels were adopted and he further pointed out that as far as their case is concerned, there was voluminous correspondence with the department, and that they had also filed declarations during 1990 and, therefore, the show cause notice issued in November, 1992 is time barred. Despite these facts, the Collector had ignored it and had held that they had suppressed the facts. The Association had also given the clearance figures to the Range Superintendent during 1989 itself. Therefore, when there was a doubt in the department’s mind also regarding now dutiability of the twisted bars, then in such a circumstance, the benefit of doubt should go to the Assessee and in this regard, he relied on the judgment rendered by the Tribunal in the case of Punjab National Fertilizers & Chemicals Ltd. v. Collector of Central Excise as reported in 1991 (54) E.L.T. 115 (Tri.) = 1991 (34) ECR 166.
Respondent’s Contentions: - The process of manufacturing twisted bar is by hot rolling process and not by cold rolling. Merely because the hot bars are allowed to cool, before they are twisted, that does not mean that the twisting has been done by cold rolling process. As cold rolling process in technical terms has a totally different understanding. It is his contention that the twisting, has to be done, when the hot iron is in soft stage. Therefore, he submitted that the words “but including those twisted after rolling” has occurred in the amending Notification No. 170/89 after the words “hot rolled, hot-drawn or hot-extruded” and before the words “hot extruded or cold rolled or cold formed/cold finished.” Therefore, it reflects from these incorporating words, that the process of manufacturing is by hot rolled process only, as these words had not been there in Notification No. 202/88. It indicated that the legislature had intentionally decided not to grant the benefit to the twisted bars. He submitted that the Notification No. 170/89, in any event of the matter, is not clarificatory in nature and it cannot be given a retrospective effect. The Learned SDR has drawn his support from the reading of the HSN notes appearing at page 1001 in respect of Chapter Heading 72.14
They submitted that the fact that the Government had rejected the plea of the manufacturers for issuing of a Notification under Section 11C is a clear intention of the legislative intent not to grant exemption from duty in respect of the goods in question for the relevant period. As regards the plea that the item in question is a separate manufactured marketable commodity, the Learned SDR has relied on the ratio of the following judgments :-
i. South Bihar Sugar Mills Ltd. & Another etc. v. Union of India and Tata Chemicals v. R.M Desai, Inspector of C. Excise - 1978 (2) E.L.T. (J 336)
ii Union Carbide Co. Ltd. v. Collector of C. Excise - 1978 (2). E.L.T. (J 180)
iii Indian Vegetable Products Ltd. v. Union of
iv Chirukandan . & Others v. Superintendent of Central Excise - 1984 (15) E.L.T. 7
v.Empire Industries Ltd. v. Union of
vi.Wishwanath Pandey v. Collector of Customs - 1984 (16) E.L.T. 404
vii.Metal Forgings (P) Ltd. v. Union of
Arguing on the point of invocation of larger period, submitted that the manufacturer had not taken licence nor maintained records and had cleared the goods without payment of duty. Therefore, all in those cases where party had not filed declaration, the department was entitled to invoke larger period. However, in cases where the party has filed declaration, the limitation point could be considered in their favour including the grant of Modvat. He submitted that units were under SRP and when notification granting exemption was withdrawn then it became mandatory on the part of manufacturer to file declaration and pay the duty. With regard to the plea that there was wilful suppression of facts, the Learned SDR relied on the following citations:
I Vishwa Industrial Works v. Collector of C. Excise - 1987 (31) E.L.T. 976
ii. Jajmau Dyeing & Proofing Co. v. Collector of Central Excise - 1986 (25) E.L.T. 595
iii. Essco Sanitations v. Collector of Central Excise - 1989 (44) E.L.T. 752
iv. Unik Springs (
v. Vee Kay Industries v. Collector of Central Excise - 1990 (50) E.L.T. 520
If there is suppression of facts, in these cases and hence, there is justification for imposing penalty. In this regard, he relied on the following rulings:
i. Mahendra Radio and TV (P) Ltd. v. Collector of Central Excise i. - 1988 (35) E.L.T. 668.
ii. Creative Cosmetics v. Collector of Central Excise - 1993 (63) E.L.T. 348
The Learned SDR submitted that the Modvat cannot be given retrospectively. Therefore, the ruling rendered by the Tribunal in the case of Chamundi Steels Rerolling Mills v. Collector of Central Excise, as reported in 1994 (3) RLT 855, relied by the appellants is required to be reviewed and this point is required to be referred to the Larger Bench. He submitted that the Tribunal has already held in number of cases that the Modvat cannot be granted in cases where there has been non-filing of declaration under Rule 57G which ruling the Learned Collector had followed and, therefore, the Learned Collectors cannot be faulted on this aspect of the matter. He submitted that the compliance of CE Rules is mandatory as the rules are subordinate legislation. The non-compliance of such an substantive law especially filing of declaratijon is sufficient to deny the benefit and it cannot be said that it is only a procedural irregularity. In this context, the Learned SDR relied on the following rulings:
i. Tata Oil Mills Co. v. Collector of Central Excise - 1990 (48) E.L.T. 279
ii. British Physical Laboratories v. Collector of Central Excise - 1994 (74) E.L.T. 593
iii. Collector of Central Excise v. Bharat Containers (P) Ltd. - 1990 (48) E.L.T. 520
iv. Usha Martin Industries Ltd. v. Collector of Central Excise - 1990 (46) E.L.T. 392
v. Chetna Industries v. Collector of Central Excise - 1993 (63) E.L.T. 344
Reasoning of the Judgment: - The judgments cited by them pertains to denial of Modvat arising under proviso to Section 11A and hence, they are not applicable to the facts of the present cases. He submitted that Section 11A is an exception. He submitted that there is no provision in law, which compels a party to file a declaration in respect of exempted goods, in view of a clear bar, as laid down by Rule 57C. He submitted that no credit can be allowed if the final product is exempted, and hence in a situation like this, the question of filing a declaration did not arise at all. Now, the Revenue has taken a different stand than the one they had understood earlier. The Government had also clarified about that the goods being exempted in terms of trade notices and circulars. In a situation like this the parties cannot be denied the benefit of Modvat on the ground that they had not filed declarations. He submitted that if the Revenue had made the position clear on the issue of notification in question, then in that event the manufacturers would have straightway filed the declaration and obtained Modvat benefit and in that event, there would not have been any demands at all. He pointed out to the provision of Section 11A and submitted that the section made it clear that the duty leviable is to be that much as is imposable, after granting all other benefits, which the party is entitled in law. In this regard, he has relied on the following rulings:
i. Kirloskar Brothers Ltd. v. Union of India & Others - 1988 (34) E.L.T. 30, (
ii. H.C.L. Ltd. v. Collector of C. Excise - 1994 (71) E.L.T. 608, paras 8 & 9
He submitted that the declaration can be filed even today and the benefit claimed as there is no provision created under Rule 57G to deny the benefit or belated declaration. In this regard, he relied on a passage appearing in a Maxwell’s Interpretation of Statutes at page 326. The understanding of the Learned author is that law does not lay down an impossible condition for fulfilment. Therefore, in a case like this, when the duty has been exempted before and after the issue of Notification in question and such an understanding prevailed in the minds of the departmental officials as well. Therefore, the expectation of the department that the parties should have filed the declaration, is certainly asking for an impossible condition to be fulfilled today. The Learned Counsel submitted that in a large majority of reported cases, the duty had been quantified after adjusting the benefit of Modvat available to the assessee. He submitted that even in the cases, where there has been no following of procedure and where no licences had been taken, even then the benefit of Modvat has been extended. The citations relied are noted herein below:
i Kirloskar Brothers Ltd. v. Union of
ii
iii Jagraon Machine Tools v. Collector of Central Excise - 1993 (65) E.L.T. 300
iv. Byco International & Others v. Collector of Central Excise - 1993 (49) ECR 126
v. Saphire Steels (P) Ltd. v. Collector of Central Excise - 1994 (71) E.L.T. 1049
vi. Vivek Rerolling Mills v. Collector of Central Excise - 1994 (73) E.L.T. 660
Also relied on Board’s letter vide F. No. 267/6/92-CX. 8, dated 30-1-1992 which is reported in 1992 (59) E.L.T. (T7). He also relied on the ruling rendered in the case of International Tractor Co. of India Ltd. v. Union of India and Others as reported in 1977 (1) E.L.T. (J 133).
He submitted that as there was an ambiguity in the field the amending Notification issued should be construed as a clarificatory one. He submitted that there is case made out by Revenue for reference to the Larger Bench on the Modvat issue as there was no contradictory judgments as cases relied by the DRs were clearly distinguishable. He also submitted that in the reported case in E. Spton & Co. (P). Ltd. v. Superintendent of Central Excise and Another as reported in 1985 (19) E.L.T. 57, the Allahabad High Court had held that holding of licence is a procedural requirement and notwithstanding the holding of the licence, the Modvat benefit should be extended. Therefore, the department cannot be argued that the Modvat is to be denied to them as they had not held a licence or filed a declaration
That the show cause notices had been issued only after the four orders details of clearances of each factory had been submitted by the Manufacturers’ Association in October, 1989 itself and, therefore, the demands were time barred. There was negligence on the part of the department and, there was no failure on the part of the parties at all. He has also pointed out that the decision relied by the DRs were all decisions rendered in cases other than those arising under Section 11A and, that there was no conflicting decision requiring reference to the Larger Bench.
The trade notices issued by Chandigarh Collectorate clarifying that twisting did not result in a process of manufacture. He also submitted that his party had obtained licence and the department had asked them to surrender the same after issue of Notification No. 202/88 and, therefore, their present plea of denial of Modvat is unjustified. He also placed on record, the Board’s letter dated 23-8-1973 on this point for consideration.
We notice that most of the Collectors have not given a finding on this issue except one Collector. However, that finding is not based on any commercial understanding or by applying trade parlance test except, what the party themselves say about the product. The appellants are relying on a judgment rendered by the Hon’ble Supreme Court in the case of Telangana Steel Industries v. State of Andhra Pradesh, as reported in 1994 (73) E.L.T. 513. As pointed out by the learned DR, this judgment has been rendered under Sales Tax Act and in the context of the grouping of the items in one heading and also in the light of circular issued by the government. Therefore, this question can be best answered only when there is sufficient evidence of trade understanding and as to how the goods are traded and known in the market. The plea that hot rolled rods cannot be weighed and, they are required to be cooled and thereafter twisting is done, which is a completion of the process of manufacture of bars, itself, is a question that is required to be gone into in great detail only with the assistance of technical literature and expert evidence. The parties have not placed any technical literature nor the department has examined, the commercial understanding of the product in the market.
The conclusion to be drawn that CTD Bars are “not further worked”, is on the basis of the legislative intent, which has been shown to us, and also because the items having been exempted earlier and subsequent to this Notification. It is also because of the understanding held by the department and the trade notice and circular issued in this regard.
The plea that reduction of duty from the assessable value has to be granted in view of the decision in the case of Collector of Central Excise v. Vazir Sultan Tobacco Industries reported in 1991 (52) E.L.T. 59, where it was held as under :
“A harmonious construction of Section 4 of the Act and Rule 5 can lead only to one conclusion - that the extra accrual should be added to the wholesale price and the assessable value worked back after allowing admissible deductions. Addition of such extra accruals to the assessable value would distort the meaning of Section because there is no way in which abatement of excise duty which is permitted by Section 4 can be given if the extra accrual is directly added to the assessable value
the pleas raised by the appellants with regard to the time bar is very reasonable and acceptable. Such a view held by the department has also been brought out by the Collector,
As the issue has already been answered by the Tribunal on this point, there is no reason for us to differ from that view on this point and we respectfully follow the same. The ld. DRs submitted that the case is required to be referred to a Larger Bench. We do not see any reason to refer this case to a Larger Bench, as the Tribunal has followed the well laid down judgments on this point. Further, we also take into consideration the submissions made by the counsels in this regard that claim for Modvat could not be filed in this particular case, as the department itself had returned the licences on a peculiar understanding held by them. Therefore, there is justification for granting Modvat in the fact and circumstances of the present case. It is also noted that the inputs have suffered duty and that the RT 12 returns had been filed. The parties have maintained the details of payment of duty and MODVAT that is available to them. In all the cases, the Range Superintendent has checked and issued certificates also. The certificates states that the claim can be adjusted towards Modvat, except perhaps in few cases, where marginal amount is shown as recoverable. However, we are of the view that even this amount is also not payable, as, we have held that the goods are exempted in the Notification in question. The ld. Advocates had pointed out that the judgments cited by the DRs did not pertain to demands raised under Proviso to Section 11A. We have gone through the same and we find this submission is correct, but we do not wish to give any finding on this aspect of the matter. In the light of our findings and following the ratio of the Tribunal’s rulings in the case of Technological Systems, Chamundi Steels, Vivek Rerollings Mills and Saphire Steel, we hold that the appellants are entitled to the Modvat Credit, as claimed by them.
We also find that there is no justification for imposing penalty in these appeals, as there has been no suppression or any intention to evade duty.
Decision: - The impugned orders are set aside and the appeals are allowed.
***********
SOY P ITTY on 21 Apr, 2016 wrote:
hitesh on 03 Apr, 2016 wrote:
hitesh on 20 Mar, 2016 wrote:
visuiyer on 09 Mar, 2016 wrote:
hitesh on 06 Mar, 2016 wrote:
hitesh on 29 Feb, 2016 wrote:
Abhimanyu Singh on 08 Feb, 2016 wrote:
CA R P Vijay on 04 Jan, 2016 wrote:
Rahul Singhvi on 04 Jan, 2016 wrote:
O V Srinivasan on 04 Jan, 2016 wrote: