Pradeep Jain - Chartered Accountant

PJ/Case Laws/2010-11/05

CASE LAWS

Prepared By: -

CA Pradeep Jain and

Sukhvinder Kaur LLB[FYIC]

Excise Section:

Case: Commissioner of C. Ex., Chandigarh v/s United Vanaspati Ltd

Citation: 2010 (251) ELT 373 (HP)

Issue: - Whether a manufacturer who has taken cenvat credit on inputs received in the factory is liable to reverse the credit when final product becomes exempt from payment of duty?

Brief Facts: - Respondent are engaged in the manufacture of vegetable products and were taking cenvat credit of duties paid on inputs used in the manufacture of final products. The final product became exempt from payment of duty vide Notification No. 16/96-CE, dated 23.07.96. Revenue issued notices to respondent asking them to reverse the credit taken on inputs lying in stock and in process. Respondent replied to the notice that once the credit had been taken, the same couldn’t be disallowed since on the books it has already been used and there was no legal provision which provided for recovery of such credit. Respondent also contended that Rule 57C placed a bar on taking credit of inputs used for the manufacture of final product exempted from duty. It was contended that this Rule came into operation only after the date when the credit which it had taken prior to the date of the issuance of the exemption notification. The Adjudicating Authority however, disallowed the credit. In appeal, the Commissioner (A) upheld the order of the Adjudicating Authority. The assessee then approached the Tribunal which allowed the appeal on the basis on law laid down in CCE, Rajkot v/s Ashok Iron and Steel Fabricators [2002 (140) ELT 277 (Tribunal-LB)]. Thus, the revenue has filed this appeal before the High Court.

Applicant’s Contention: - Revenue contended that in the case of Ashok Iron and Steel Fabricators, the Tribunal had held that there was no rule which permitted the department to seek reversal of the Modvat credit. Reliance is placed on Rule 9 (2) of the Cenvat Credit Rules, 2004.

Reasoning of the Judgment: - The High Court referred to the decision of the Apex Court in the case of Collector of Central Excise, Pune and others v/s Dai Ichai Karkaria Ltd and Others [1999 (112) ELT 353 (SC)] wherein similar question relating to the reversal of modvat credit under Central Excise Rules, 1944 was considered. In this judgment it was held that credit was indefeasible and a manufacturer is entitled to take credit on inputs. It was held therein that there was no correlation of the raw material and the final product. The said judgment was given in the context of Rule 57H(5) of the Central Excise Rules, 1944.

The High Court held that the language of Rule 57(H) and of Rule 9 (2) of the Cenvat Credit Rules is identical. The High Court held that in the case of Collector of Central Excise and Custom, Cochin v/s Premier Tyres Ltd [2001 (130) ELT 417] the High Court of Kerala had answered a similar question in favour of the assessee and against the Department.

The High Court also noted that the decision given in Ashok Iron and Steel Fabricator’s case was upheld by the High Court of Rajasthan in the case of Hindustan Zinc Ltd v/s Union of India [2008 (223) ELT 149].Therein it was held that the ultimate clearance of goods at nil rate due to contingency existing at the time of removal does not affect the entitlement that legally arises long before that date.

Thus, the High Court held that even though the final product may be exempt from payment of duty of excise, the assessee cannot be asked to reverse the Modvat credit already taken by it. Accordingly, question raised answered in favour of assessee and against the Revenue.

Decision: - Appeal dismissed.

Comments: - A very important decision. We have also received show cause notice on same issue when the textile industry was exempted. Even when we shift from normal procedure to special procedure of compounded levy, the department demands the reversal of Cenvat credit. This issue is decided number of times but the department does not agree and issue demand every time. We hope the High Court decision will end the litigation.

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Case: Sri Sarvaraya Sugars Ltd v/s Commissioner of Central Excise, Visak

Citation: 2010 (251) ELT 418 (Tri-Bang)

Issue: - Reversal of Cenvat credit means not taking of Cenvat credit. If reversal is done, no need for pay 10% on value of exempted goods as per Rule 6 of Cenvat credit Rules.

Brief Facts: - Appellants were engaged in the manufacture of dutiable aerated drinks- Limca and Sprite, and exempted drink Maaza. They had taken and utilised cenvat credit on common inputs and input services during the period from April 2003 to December 2007 without maintaining separate accounts for receipt, consumption and inventory of inputs and input services. Thus, they were required to pay duty @ 10% of the sale price of Maaza in terms of Rule 6 (3) (b) of the Cenvat Credit Rules, 2004. Appellant were reversing the cenvat credit relatable to inputs used in relation to Maaza manufactured and cleared during the material time, after such clearances and also paid interest. The Adjudicating Authority confirmed the demand of service tax equivalent to 10% of the sale price alongwith interest. The Commissioner (A) relied upon the judgment of the Apex Court in CCE, Nagpur v/s Ballarpur Industries [2007 (215) ELT 489 (SC)] and held that Rule 6 (3) (b) was applicable to appellant and demanded an amount equivalent to 8% upto 10.09.2004 and 10% w.e.f. 10.09.2004 of the price of exempted Maaza. Thus, appellant have filed this appeal before the Tribunal.

Appellant’s Contentions: - Appellant submitted that they debited the amount in their RG 23 A Part-II register on 21.04.2008 and paid the applicable interest under TR-6 Challan on 05.05.08. And the show cause notice was issued on 01.05.2008 after they had debited the cenvat credit relatable to Maaza cleared during material period. It was contended that the inputs involved were not direct inputs for manufacture of Maaza but were water treatment chemicals and therefore they were not required to pay any amount as envisaged in Rule 6. In terms of decision given in Chandrapur Magnet Wires (Pvt) Ltd [1996 (81) ELT 3 (SC)], they were not required to pay any further amount. It was contended that the demand was barred by limitation as the proceedings were entirely based on the disclosures made by them in the ER-1 returns. Longer period of limitation could not be invoked as they had not suppressed relevant facts. It was argued that there was no misrepresentation and therefore no penalty could be imposed on them in the light of judgment given in Hindustan Steel Ltd v/s State of Orissa [1978 (2) ELT J159 (SC)]. With regard to contention that in case of reversal of credit with interest, no further amount will be payable, reliance has been placed on the judgments given in the cases of CCE, Vishakhapatnam v/s Deccan Sugars [2006 (199) ELT 529 (Tri-Bang)], ETA Technology Ltd v/s CCE, Bangalore [2007 (212) ELT 371 (Tri-Bang)], Ruchi Soya Industries Ltd v/s CCE [2007 (82) RLT 624] and in GMR Technologies & Industries Ltd v/s CCE, Visak [2008 (223) ELT 246]. Reliance has also been placed on the order of the Tribunal which was approved by the High Court in CCE v/s Maize Products [2009 (234) ELT 431 (Guj)] wherein it was held that reversal of cenvat credit was adequate compliance of Rule 6.

For the contention that when the credit is taken on that portion of inputs used in the manufacture of exempted products is reversed, the effect would be as if no credit was availed on the inputs used in the manufacture of exempted products, the appellant relied upon the judgments in Chandrapur Magnet Wires (Pvt) Ltd [1996 (81) ELT 3 (SC)] and CCE, Mumbai v/s Philips India Ltd [2006 (200) ELT 106 (Tri-Mum)]. Reliance was placed on Pepsico India Holdings Ltd v/s CCE, Chennai [2008 (228) ELT 452 (Tribunal)], Nicholas Piramal (I) Ltd v/s CCE [2008 (232) ELT 37 (Tri-LB)] and Dr. Writer’s Food Products Pvt Ltd v/s CCE, Pune-II [2009 (247) ELT 391 (Tribunal)].

For non levy of penalty, appellants have relied upon the judgment given in Hindustan Steel Ltd v/s State of Orissa [1978 (2) ELT (J159). It was contended that as there was confusion regarding their liability, penalty could not have been imposed.

Reasoning of the Judgment: - The Tribunal held that the allowing credit on common inputs used in manufacture of dutiable and exempted goods, introduces an anomaly inconsistent with the object of cenvat scheme. When the assessee reverses the credit relatable to inputs used in the manufacture of exempted good, this anomaly is rectified. This remedy is legislated in Rule 6 of CCR and compliance with the same is achieved when credit is reversed as above. The judgment relied upon by the appellant were referred. The Tribunal held that the ratio laid down was that once the assessee reversed credit relatable to exempted final products, the requirement of Rule 6 (3) was met even if the reversal took place after removal of the goods. Thus, there was no legal justification for demanding the amount in lieu of Rule 6 (3) (b) from the appellants.

The Tribunal held that in the judgment given in Commissioner of Central Excise, Nagpur v/s Ballarpur Industries Ltd which was relied upon by the Commissioner (A) in upholding the demand, the issue raised in the present appeal was not raised therein. Therefore, the Commissioner placed wrong reliance on the said judgment.

Thus, the demand is vacated as being non sustainable. No penalty is imposable as the appellants were in doubt about their liability. There was no deliberate violation of the legal provisions. No justification to penalize the appellants in the absence of reliable finding of dishonest conduct on their part with intent to evade the statutory liabilities. Penalty vacated. Impugned order set aside.

Decision: - Appeal allowed.

Comments: - This is very good decision in favour of assessee. But it is to be seen whether this law still hold good in light of Mumbai High court decision in case of CCE v. NICHOLAS PRIMAL. After that decision, the Government has proposed to amend the Cenvat credit Rules to allow the manufacturer or service provider the benefit of proportionate reversal retrospectively w.e.f September 1, 1996 to all pending cases.

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Case: Ashokkumar H. Fulwadhya v/s Union of India

Citation: 2010 (251) ELT 336 (Bom)

Issue: - Whether penalty can be imposed on director under Rule 13 of CCR, 2002?

Brief Facts: - Penalty was imposed personally on the directors of the Company under Rule 13 of the Cenvat Credit Rules, 2002 for wrongly taking credit. The credit was taken by the company which is a manufacturer. In appeal before the Tribunal, the Tribunal directed that pre-deposit of 25% of the penalty imposed on the directors at the admission stage. Aggrieved by this direction, the petitioner -directors have filed this appeal before the High Court,

Appellant’s Contentions: - Petitioner-directors contended that imposition of personal penalty on the director was not permissible under Rule 13 (1) of the CCR as the rule contemplates penalty only on the person availing credit. In their case, cenvat credit was availed by the Company and not by the petitioner -directors.

Reasoning of the Judgment: - The High Court perused Rule 13 and reached the conclusion that person who has availed cenvat credit is the only person liable to be penalized. None of the petitioners had availed cenvat credit and as such they could not have been within the net of Rule 13 of the Rules. The High Court relied upon the judgment given in Union of India v/s M/s R. B. Shreeram Durga Prasad (P) Ltd and ors [1969 (2) SCR 727] wherein it was held that a penal provision is to be construes strictly. The High Court observed that where the penalty was to be imposed on any other person or agent, a specific language was used in that behalf.

It was held that Rule 13 only brings in its fold that person who takes cenvat credit and no other person. Impugned order quashed and set aside. No pre-deposit of personal penalty could be ordered against the petitioners. Directions are given to the Tribunal to hear the matter without there being pre-deposit from petitioners.

Decision: - Petitions allowed.

Comments: - Good decision. Penalty cannot be imposed on directors U/R 13 but it can be imposed on person who has availed the credit.

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Case: Balvida Textiles (P) Ltd v/s Commissioner of C. Ex, Jaipur-II

Citation: 2010 (253) ELT 90 (Tri-Del)

Issue: - Whether the goods can be received on Kacha challans in place of excise invoices? Whether the credit is admissible on such invoices?

Brief Facts: - Appellant-company is engaged in the manufacture of unprocessed man made fabrics. They were availing cenvat credit on inputs like PV and texturised yarn. Department noticed that in some instances the appellant were receiving the goods in advance for which the proper invoices were being received later on. In some cases, the invoices have been received from certain registered dealers and the goods have come either from the manufacturer or other registered dealers; that there was mis-match between the goods received and duty paying documents. Therefore, the demand was raised against the appellant-company and confirmed by the Adjudicating Authority alongwith interest and equal penalty under Section 11AC. Penalty was imposed on the director of the company also. The Commissioner (A) upheld the order of the lower authority. Hence, these appeals are filed by appellants.

Appellant’s Contention: - Appellant gave explanation that the discrepancies were technical in nature. In some cases, the goods were received under challans and slips issued by the dealers and the connected invoices were received on the very next day or within few days. In other cases, they have placed the orders for inputs with the dealers and the said dealers have arranged for supply of goods either from other dealers or from the manufacturers directly and therefore, there is discrepancy between the details contained in the invoices and those in challans.

It is also submitted that the Director was not personally involved in the day to day activities of the company and there was no finding of personal knowledge of misdeeds or intention on the part of the Director warranting imposition of penalty on him.

Respondent’s Contention: - Revenue re-iterated the findings of the Commissioner (A).

Reasoning of the Judgment: - The Tribunal perused the order of the Commissioner (A) wherein it was held that there was no evidence to substantiate the appellant’s claim that the goods and the subsequent invoices were linked to each other. The appellants have pleaded ignorance of the procedure which cannot absolve them from legal requirements.

The Tribunal held that the burden was on the appellants to show that they had received the duty paid goods and the corresponding duty paying documents. The goods on which credit was taken was received under kaccha challans. The need for issue of goods by the supplier under kaccha challans cannot be appreciated especially when credit was to be taken by the appellants. The appellants have failed in linking the duty paying documents to the goods received. Therefore the impugned order denying credit and imposing interest are justified. Imposition of penalty under Section 11AC is also justified. However, penalty on appellant-company under Rule 13 set aside.

The Tribunal further held that the penalty imposed separately on the directors was not warranted. No specific evidence has been led about the Director’s personal knowledge or his intention to evade duty has been brought out. Appeal of the director allowed.

Decision: - Appeals disposed of accordingly.

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Case: Skoda Auto India Pvt Ltd v/s Commissioner of C. Ex., Aurangabad

Citation: 2010 (253) ELT 135 (Tri-Mumbai)

Issue: - Procedural infraction should not come in the way to allow substantive rights.

Brief Facts: - The appellants are engaged in the manufacture of Motor Vehicles falling under chapter heading 8703.00. They filed refund claims of various amounts under Notification No. 6/2002 dated 01.03.02/Notification No. 6/2006, dated 01.03.06. The refund claims were rejected and recovery of irregular credit on the duty availed by the appellants together with interest and penalty was ordered. The refund claims were rejected on the ground that the condition prescribed in Notification No. 6/2002/Notification No. 6/2006 were not fulfilled. The appellant have not availed the credit of duty paid within 6 months. The Commissioner (A) upheld the order passed by the lower authority. It was held that refund claims were filed in time however for some invoices the claim was filed beyond the stipulated time and therefore were time barred. Thus, the appellant has filed these appeals.

Reasoning of the Judgment: - The Tribunal held that the appellants had fulfilled all the substantive conditions for availing exemption under the said Notifications. The only condition i.e. of providing intimation of availment of credit in account current within six months, which is procedural one was not satisfied. However, when they have re-submitted their claims, they have complied with this condition also. The Tribunal held that refund of duty under the said notification is a beneficiary provision. It is well settled law that any beneficiary provision should be interpreted liberally.

The Tribunal relied upon the judgment given in Mangalore Chemicals & Fertilizers Ltd v/s Deputy Commissioner [1991 (55) ELT 437 (SC)] wherein it was held that the distinction is to be made between a procedural condition of a technical nature and a substantive condition. The breach of procedural condition of a technical nature is condonable. The benefit of exemption notification should not be denied if the assessee has fulfilled the substantive conditions and failed to follow the procedural conditions and no importance should be given for procedural lapses.

The Tribunal held that appellant is entitled to refund claim except the claim which was time barred. Impugned order set aside.

Decision: - Appeals allowed with consequential relief, if any.

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Case: Alpump Pvt Lt d v/s Commissioner of Central Excise, Chennai

Citation: 2010 (253) ELT 133 (Tri-Chennai)

Issue: - The penalty under Rule 15(2) can be imposed on contraventions with fraud, collusion or wilful suppression.

Brief Facts: - The appellant purchased capital goods in 2000 and took credit on the same. In the year 2003-04, they sent the capital goods for jobwork. The goods were not received back in the factory within 180 days and the appellants did not reverse the credit taken on the capital goods. This was done when the said fact was pointed out by the Department in November 2005. The capital goods were received back in the factory in January 2008. The appellant have taken re-credit without any objection being raised by the Department. The Original Authority imposed equal amount of penalty on the ground that appellants have violated the CCR, 2004 as they neither reversed the credit while the removing the capital goods to the job worker nor received back the same within 180 days period. In appeal, penalty was reduced to 1 lakh. The Tribunal set aside the entire penalty.

Department filed miscellaneous appeal before the High Court. Matter was remitted back to the Tribunal to decide the matter in view of Apex Court’s judgment in the case of Union of India v/s Dharmendra Textile Processors [2008 (231) ELT 3 (SC)] and CCE, Pune v/s SKF [2009 (239) ELT 385 (SC)].

Appellant’s Contention: - Appellants contended that the order was passed by the High Court ex parte and appellants were not present. A finding was given by the Tribunal in its order that Section 11AC did not apply to demand of cenvat credit and the department had not challenged the said finding before the High Court. It is submitted that the appellants did not know that the goods will not be returned within 180 days by the jobworker. They were required to reverse the credit after expiry of 180 days which they inadvertently did not do. But as soon as it was pointed out to them, they have reversed the cenvat credit. Also, no objection was raised by the Department at the time of re-credit of same. This was not a case of suppression, misstatement.

It is submitted that Rule 14 and Rules 15 (2) applied to cases where cenvat credit was taken or utilised wrongly. Rule 15 (2) has an added condition hat it should be on account of fraud, suppression etc. It is contended that the appellant’s case was not of taking credit wrongly but there was unintentional violation of Rule 3 (5) and for which Rule 14 was not strictly applicable.

It was submitted that the demand was not disputed but the application of Rule 15(2) which allows invocation of Section 11AC is challenged as their case is not of wrong availing of credit much less of fraud, suppression etc.

Respondent’s Contention: - Revenue contended that demand was raised under proviso to Section 11A invoking larger period and the appellants have not challenged the duty demand, hence automatically the equal penalty provision under Section 11AC is attracted in this case.

Reasoning of the Judgment: - The Tribunal found force in the appellant’s contentions that Rule 14 and Rules 15 (2) only speak of cenvat credit taken or utilised wrongly. The Tribunal held that the appellant’s case could not be said to be a case of of mis-statement, fraud, suppression etc. It was held that Rule 15(2) clearly applies in respect of cases where credit has been taken or utilised wrongly whereas this was a case of contravention of Rule 3(5). Therefore, such contravention will not attract penal provisions under Rule 15(2) but under the second part of Rule 15 (1) which applies to contravention of any of the provisions of the Rules in respect of any capital goods or inputs. A contravention of Rule 15 (1) attracts both confiscation and penalty. It is agreed by both sides that there was no proposal for confiscation of goods in the show cause notice. But there was proposal to impose penalty. Accordingly, penalty of Rs. 10, 000/- as prescribed in the said Rule has been imposed on appellants. Penalty reduced from Rs. 1 lakh to Rs. 10, 000/-.

Decision: - Appeal partly allowed.

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Case: Akash Aromatics (P) Ltd v/s Commissioner of Central Excise, Chennai

Citation: 2010 (253) ELT 127 (Tri-Chennai)

Issue: - The option of reduced 25% can be given at appellate stage if not given earlier. If the duty paid on final product is less than the input then there is no procedure for demanding the differential duty.

Brief Facts: - The appellants are manufacturers of perfumes. There are two issues involved. One is relating to payment of duty, interest and penalty in respect of some perfumes cleared as samples on which duty was not paid under mistaken belief that the same were exempt. Thus, duty with interest and equal penalty under Section 11AC was imposed.

Second issue relates to demand for duty in respect of Diethyl Phthalte (DEP). The DEP was used in the manufacture of their main product i.e. perfume and cenvat credit was being taken on the same. DEP was used for cleaning the vessels after one kind of perfume was made and before a second kind of perfume was manufactured using the same vessel. The spent DEP was not thrown away as it was environmentally hazardous. It was mixed with other obsolete inputs and sold as cleaning solution on which excise duty is paid for a lower value which it fetched. Department demand differential duty equal to the difference between the amount of credit taken on DEP and the amount of duty paid on cleaning solution.

Appellant’s Contentions: - For the first issue, appellant contends that they are not challenging the levy but are pleading that no option was given to them to pay reduced penalty equal to 25% of the duty under Section 11AC within 30 days of Adjudication order. Reliance is placed on the cases of K. R. Pouches (P) Ltd v/s UOI [2008 (228) ELT 31 (Del)] and CCE, Rohtak v/s J. R. Fabrics (P) Ltd [2009 (238) 209 (P&H)].

For the second issue it is contended that the demand should be set aside as DEP was put to intended use and there was no provisions under the Cenvat Credit Rules for demanding such differential duty.

Respondent’s Contention: - Revenue contended that appellants had not asked for paying lesser penalty of 25% at the earlier stages of adjudication and first appeal.

Reasoning of the Judgment: - The Tribunal held that for the first demand, the in the judgments relied upon by the appellant, the option to pay 25% of penalty was allowed by the High Court of Delhi and the High of P & H. Since these judgments were not considered in the appellants case, the matter is remanded for limited purpose of re-determining the penalty amount in the light of the cited judgments of the High Courts.

For the second issue, it was held that the DEP was used for intended purpose and hence same can be taken to have been used in or in relation to the manufacture of the perfumes, there can be no demand of duty. Moreover, as a pollution control measure, the spent DEP is mixed with other inputs and sold as cleaning solution on which appropriate duty of excise duty is paid. Hence the duty demand with interest and penalty relating to such amount is set aside.

Decision: - Appeal allowed accordingly.

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Case: Sai Packaging Industries v/s Commissioner of C. Ex, Chennai-II

Citation: 2010 (253) ELT 107 (Tri-Chennai)

Issue: - The penalty under Section 11AC cannot be imposed on default in payment of duty under Rule 8 of Central Excise rules.

Brief Facts: - The appellants paid the duty with interest for the month of February 2007 on 20.04.07 and for the month of March 2007 on 17.05.07. As per Rules, the payment of duty for February was to be paid by 5^th March and for the month of March by 31^st March. In case the payments are not made within 30 days from the relevant dates, then the appellants would have to pay duty in cash on each clearance. The clearances have been made from 01.04.2007 to 19.04.2007 and from 01.05.2007 to 16.05.2007 without paying duty in cash. Accordingly, the Lower Authorities have imposed penalty equivalent to duty amount. The appellants are contesting the penalties imposed.

Reasoning of the Judgment: - The Tribunal held that since the clearances have been made from 01.04.2007 to 19.04.2007 and from 01.05.2007 to 16.05.2007 without paying duty in cash, there is contravention of Rule 8 (3A) of the Central Excise Rules, 2002. However, there is no evidence of any fraud etc in this case and hence the provisions of Rule 11AC are not attracted. The Tribunal further held that since the goods are cleared in contravention of Rule 8 (3A), the provisions of Rule 25 was squarely applicable. At the same time looking at the nature of contravention and the fact that the duty and/interest payment has been made within a short period, there is no ground made out for imposing maximum penalty equal to the duty involved. Penalties imposed are accordingly reduced.

Decision: - Appeals allowed accordingly. Stay applications also disposed of.

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Service Tax Section:

Case: - Commissioner of Central Excise, Pune-II v/s M/s Raymond Zambaiti Pvt Ltd

Citation: 2010-TIOL-604-CESTAT-MUM

Issue: - Whether assessee is entitled to avail input service credit of service tax paid on construction of compound wall?

Brief Facts: - The respondent-assessee are engaged in manufacturing cotton fabrics and were operating under Cenvat credit scheme. They constructed the compound wall to the factory and availed credit of service tax paid for the same. Revenue issued show cause notice on the ground that construction of compound wall did not fall under the definition of ‘input service’ as the respondent have not used the service for providing any output service as well as the said service is not used directly or indirectly in or in relation to the manufacture of final products and for the clearances of final products. The Adjudicating Authority held that compound wall had nothing to do with the factory and confirmed the demand alongwith interest and penalties. In appeal, the Commissioner (A) allowed the cenvat credit on the basis of judgment of the Apex Court in the case of South Eastern Coalfields Ltd v/s CCE, MP [2006 (200) ELT 357 (SC)] wherein it was held that the “precinct” has to be given broader meaning and not a narrower meaning. Reliance was also placed on the decision given in the case of CCE v/s Rajasthan State Chemicals Works [1991 (55) ELT 444 (SC)]. Aggrieved by this decision the Revenue has filed this appeal before the Tribunal.

Appellant’s Contentions: - Revenue contended that the compound wall is not a integral part of the factory and therefore not covered under input service. The wall is not necessary for the respondents to ru their factory. Reliance was placed on the decisions given in the cases of CCE, Ludhiana v/s Vardhman Industries Ltd [2007 (219) ELT 65 (P&H)], Asstt. Collector, C. Ex. v/s Nizam Sugar Factory Ltd [1978 (2) ELT J489 (AP)], Indian Iron & Steel Co. Ltd v/s CCE [1990 (46) ELT 409 (Tri)], Idex Gallagher Pvt Ltd v/s CCE, Bangalore-II [2008 (231) ELT 580 (Tri-Bang)], Indorama Synthetics Ltd v/s CCE, Nagpur [2006 (199) ELT 175 (Tri-Mum)] and Maruti Suzuki Ltd v/s CCE, Delhi-III [2009 (240) ELT 641 (SC)].

Respondent’s Contention: - Respondent contended that the compound wall is necessary if they have to run the factory as any goods lying outside the factory beyond the compound wall will be deemed as removed without paying central excise duty. It is submitted that the respondents have constructed a new factory and thereafter constructed the compound wall around their factory. They relied upon the judgments in Coca Cola India Pvt Ltd v/s CCE, Pune-III [2009 (242) ELT 168 (Bom)] and M/s ISMT Ltd v/s CCE, Aurangabad [2010-TIOL-27-CESTAT-MUM].

Reasoning of Judgment: - The Tribunal considered the findings of the Commissioner (A) and held found that the respondents had constructed the wall around the factory any goods lying within the area of the compound wall would be considered as lying in the factory as per site plan filed with registration form. It was held that the necessity of compound wall will depend upon the activity taken over by the manufacturer or as per the requirement for manufacturing activity. In respondent’s case from facts it appear s that compound wall was the integral part of the factory. And therefore, they are eligible to take credit of service tax on services utilised for construction of wall. There are no merits in appeal.

Decision: - Appeal rejected.

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Customs Section:

Case: Commissioner of Customs (AIR), Chennai v/s Srinar Electronics (P) Ltd

Citation: 2010 (253) ELT 96 (Tri-Chennai)

Issue: - Exemption denied under 158/95 on goods re-imported for repairing cannot be exported within time limit then the benefit of other notification 94/96 should be allowed.

Brief Facts: - Respondent-assessee had exported connectors under DEPB scheme. The said exported goods were re-imported into India for repairs under Notification No. 158/95- Cus, dated 14.11.1995. The respondent had executed bond at the time of import. The re-export of goods was delayed and was not done within a period of one year. Show cause notice was issued to the respondent for recovery of amount of bond executed by them. Before the Commissioner (A) respondent raised the plea that they were eligible to the benefit of Notification No. 94/96-Cus, dated 16.12.96. The lower appellate authority extended the benefit of the notification relying upon the decision of the Tribunal in Indian Rayon and Industries v/s CC, Calcutta [2002 (45) ELT 575 (Tri-Kolkata)]. Revenue has therefore come up in appeal against the said order.

Appellant’s Contentions: - Revenue contended that the decision given in Indian Rayon and Industries case was reversed by the Apex Court reported in 2008 (229) ELT 3 (SC)] and therefore prayed for setting aside the order of the Commissioner (A).

Respondent’s Contention: - Respondent contended that the judgment of the Apex Court is distinguishable as the issue therein was whether the benefit of Notification No. 94/96-Cus was available to the importer under the DEEC scheme, while the goods imported by respondents herein were under bond without payment of central excise duty, covered by sl. No. 1(d) of Notification No. 94/96-Cus.

Reasoning of the Judgment: - The Tribunal perused the judgment of the Apex Court and held that it was clearly held by the Apex Court that since the two consignments vide Bill of entry under DEPB scheme do not get the benefit of Notification No. 94/96-Cus, the order of the Tribunal was set aside and the order of the Commissioner of Customs was restored.

In the present case, the Tribunal noted that the goods in question were exported under DEPB scheme in terms of clause 1(d) of the Notification No. 94/96-Cus. Therefore, the benefit of Notification No. 94/96-Cus has rightly been extended to the respondent-importers. Impugned order was upheld.

Decision: - Appeal rejected.

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