lhek “kqYd ,oa dsUnzh; mRikn “kqYd vk;qDrky;] dsUnzh; mRikn “kqYd Hkou]
jsl dkslZ] fjax jksM jktdksV-360001
OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE
RACE COURSE RING ROAD, RAJKOT-360001
Phone No: (0281) 2442030/2456233
FAX:(0281)2452967
F.No.: V-84/15-125/Adj/2011
BY R.P.A.D. / HAND
DELIVERY
13.01.2012
vkns”k dh frfFk
Date of Order:Ekwy vkns”k Lka.
Order in Original NO.
07/ADC/2012
13.01.2012
tkjh djus dh frfFk
Date of Issue:(MkW-Ckychj flag)
vkns”kdrkZ dk uke :
vij vk;qDr
Passed by:
ds0 m-0 “kqYd vk;qDrky;]
jktdksV
ds lanHkZ esa :
M/s. Jyoti CNC Automation Pvt. Ltd., Unit-II, Plot
In the matter of
No.2839, Kalawad Road, Lodhika GIDC, Rajkot
dkj.k crkvksa uksfVl la- &frfFk
Show Cause Notice No. & Date.
SCN. No.: V/AR-VI/RJT-I/ADC/151/2011
Dated 05.08.2011
1.
;g izfrfyfi ml O;fDr dks futh mi;ksx ds fy, fu%”kqYd nh xbZ gS] ftls ;g tkjh
fd;k x;k gSA
2.
bl vkns”k ds fo:) vk;qDr (vihy) ds- m- “kq- vk;qDrky;] jktdksV esa vihy dh tk
ldrh gSA
3.
vihy QkeZ bZ-,-&1 esa dh tkuh pkfg, ,o adsUnzh; mRikn vihy fu;e 2001 dh
/kkjk&3 dh mi/kkjk (2) dh “krsZ mfYyf[kr O;fDr }kjk gLrk{kfjr gksuh pkfg,A
4.
dsUnzh; mRikn “kqYd vf/kfu;e 1944 dh /kkjk 35 dh mi/kkjk 1 ds vuqlkj
vkns”k dks izkIr fd, tkus dh rkjh[k ls 60 fnuksa ds vUnj vihy Qkby dh tkuh
pkfg,A
5.
bl vihy ds lkFk fuEufyf[kr dkxtkr gksus pkfg,%
(a)
LVkEi vf/kfu;e 1870 ds /kkjk 1 dh mi/kkjk 6 ds vuqlkj bl vkns”k dh
izfrfyfi ;k nwljs dh izfrfyfi&ftl ij uhps n”kkZ, v/khu fu/kkZfjr dksVZ dh
LVkEi Qhl gksuh pkfg,%
(i) ;fn lcTSkDV eSVj dh jde ewY; 50 :Ik;s ;k mlls de gks rks 25 iSls gksA
(ii) ;fn ;fn lcTSkDV eSVj dh jde ewY; 50 :Ik;s ls vf/kd gks rks 50 iSls
gksA
(b)
vihy dh izfrfyfi ftlij :Ik;s 2-50 dh dksVZ Qh LVkEi gksuh pkfg,A
6- vihy QkZe ds lkFk M~;wVh@isUkYVh vkfn ds Hkqxrku dk ewyHkwr izek.ki=
layfXur gksuh pkfg,
Page 1 of 21
Notes: - [These notes are for broad general guidance only. The original text of the Central Excise Act,
1944 and the Rules framed there under may be referred to before taking any action in terms of these
Notes.]
Page 2 of 21
BRIEF FACTS:
M/s. Jyoti CNC Automation Pvt. Ltd., Unit-II, Plot No.2839, Kalawad Road,
Lodhika GIDC, Rajkot (hereinafter referred to as ‘the noticee’) are engaged in
the manufacture of excisable goods i.e. CNC turning centre, Vertical machining
centre, SPM Machine and Horizontal machining centre falling under Chapter
No.84 of the Central Excise Tariff Act, 1985 and are holding the Central Excise
Registration No. AABCJ1947RXM002. The noticee is availing the benefit of Cenvat
credit facility under the Cenvat Credit Rules, 2004.
2.
The Noticee is working under self assessment procedure as per the Central
Excise Rules, 2002 as amended and accordingly assessing the assessable value
and determining the Central Excise Duty. The Noticee is availing the facility of
payment of Central Excise duty on monthly basis as per Rule 8 of the Central
Excise Rules, 2002 as amended.
3.
During the course of scrutiny of records by the audit party for the period
from April-2009 to September-2010, it was noticed that the noticee has utilized
the basic central excise duty for payment of Education Cess and Secondary and
Higher Education Cess as detailed below.
Sr.
No.
Month
1
01
02
03
04
05
06
07
08
09
10
11
12
13
14
2
April-2009
June-2009
July-2009
August-2009
September-2009
January-2010
February-2010
March-2010
April-2010
May-2010
June-2010
July-2010
August-2010
September-2010
Total
Amt. of Cenvat Credit of BED of col.3 utilized
credit of B.E.D. for payment of
(Rs.)
Education Cess
S & HE Cess
(Rs.)
(Rs.)
3
4
5
7000
4000
3000
1294
294
1000
35500
23500
12000
11600
7800
3800
120000
79000
41000
44000
28000
16000
142000
95000
47000
242000
160000
82000
116000
78000
38000
160000
108000
52000
44000
26000
18000
100000
66000
34000
61000
61000
0
244000
172000
72000
13,28,394
9,08,594
4,19,800
4.
It appeared that the Education Cess is levied on excisable goods under
section 91 read with section 93 of Finance (No.02) Act, 2004 (23 of 2004) and
Secondary and Higher Education Cess is levied on excisable goods under section
136 read with section 138 of Finance Act, 2007(22 of 2007). Both are not
considered as Excise duty.
5.
As per sub-rule (4) of rule 3 of the Cenvat Credit Rules, 2004, the
Cenvat credit may be utilized for payment of “(a) any duty of excise on any final product; or
(b) an amount equal to CENVAT credit taken on inputs if such inputs are
removed as such or after being partially processed; or
(c) an amount equal to the CENVAT credit taken on capital goods if such
capital goods are removed as such; or
(d) an amount under sub rule (2) of rule 16 of Central Excise Rules, 2002;
or
(e) service tax on any output service:
Provided that while paying duty of excise or service tax, as the case may
be, the CENVAT credit shall be utilized only to the extent such credit is
available on the last day of the month or quarter, as the case may be, for
Page 3 of 21
payment of duty or tax relating to that month or the quarter, as the case
may be:
Provided further that the CENVAT credit of the duty, or service tax, paid
on the inputs, or input services, used in the manufacture of final products
cleared after availing of the exemption under the following notifications of
Government of India in the Ministry of Finance (Department of Revenue),(i) No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E),
dated 8th July, 1999];
(ii) No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E),
dated 8th July, 1999];
(iii) No. 39/2001-Central Excise, dated the 31st July, 2001 [G.S.R. 565
(E), dated the 31st July, 2001];
(iv) No. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R.
764(E), dated the 14th November, 2002];
(v) No. 57/2002-Central Excise, dated 14th November, 2002 [G.S.R..
765(E), dated the 14th November, 2002];
(vi) No. 56/2003-Central Excise, dated the 25th June, 2003 [G.S.R. 513
(E), dated the 25th June, 2003]; and
(vii) No. 71/2003-Central Excise, dated the 9th September, 2003 [G.S.R.
717 (E), dated the 9th September, 2003],
shall, respectively, be utilized only for payment of duty on final products,
in respect of which exemption under the said respective notifications is
availed of.
Provided also that the CENVAT credit of any duty specified in sub-rule (1),
except the National Calamity Contingent duty in item (v) thereof, shall not
be utilized for payment of the said National Calamity Contingent duty on
goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of
the First Schedule of the Central Excise Tariff;
Provided also that the CENVAT credit of any duty mentioned in sub-rule
(1), other than credit of additional duty of excise leviable under section 85
of Finance Act, 2005 (18 of 2005 ), shall not be utilized for payment of
said additional duty of excise on final products.”
From the above extract it appeared that Cenvat Credit earned otherwise cannot
be utilized for payment of Education Cess and Secondary & Higher Education
cess.
5.1
Further sub-rule (7) of rule 3 of Cenvat Credit Rules, 2004 stipulates as
under
(7)
Notwithstanding anything contained in sub-rule (1) and sub-rule (4)-
(a) . . . . .
(b) CENVAT credit in respect of (i) the additional duty of excise leviable under section 3 of the Additional
Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);
(ii) the National Calamity Contingent duty leviable under section 136 of
the Finance Act, 2001 (14 of 2001);
(iii) the education cess on excisable goods leviable under section 91 read
with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);
(iv) the additional duty leviable under section 3 of the Customs Tariff Act,
equivalent to the duty of excise specified under items (i), (ii) and (iii)
above;
(v) the additional duty of excise leviable under section 157 of the Finance
Act, 2003 (32 of 2003);
Page 4 of 21
(vi) the education cess on taxable services leviable under section 91 read
with section 95 of the Finance (No.2) Act, 2004 (23 of 2004);
(via) the Secondary and Higher Education Cess on taxable services
leviable under section 136 read with section 140 of the Finance Act, 2007
(22 of 2007); and
(vii) the additional duty of excise leviable under clause 85 of the Finance
Bill, 2005 (18 of 2005)
shall be utilized only towards payment of duty of excise or as the case
may be, of service tax leviable under the said Additional Duties of Excise
(Textiles and Textile Articles) Act, 1978 or the National Calamity
Contingent duty leviable under section 136 of the Finance Act, 2001 (14
of2001), or the education cess on excisable goods leviable under section
91 read with section 93 of the Finance (No.2) Act, 2004, additional duty of
excise leviable under section 157 of the Finance Act, 2003 (32 of 2003), or
the education cess on taxable services leviable under section 91 read with
section95 of the said Finance (No.2) Act, 2004 (23 of 2004), or the
Secondary and Higher Education Cess on taxable services leviable under
section 136 read with section 140 of the Finance Act, 2007 (22 of 2007),
or the additional duty of excise leviable under clause 85 of the Finance Act,
2005 (18 of 2005) respectively, on any final products manufactured by the
manufacturer or for payment of such duty on inputs themselves, if such
inputs are removed as such or after being partially processed or on any
output service:
Provided that the credit of the education cess on excisable goods
and education cess on taxable services can be utilised, either for
payment of the education cess on excisable goods or for the
payment of the education cess on taxable services;
Provided further that the credit of the Secondary and Higher
Education Cess on excisable goods and the Secondary and Higher
Education Cess on taxable services can be utilized, either for
payment of Secondary and Higher Education Cess on excisable
goods and the Secondary and Higher Education Cess on taxable
services
(emphasis added)
6.
From the above extract it is clear that credit of the Education Cess on
excisable goods can be utilised only for payment of the Education Cess on
excisable goods while credit of Secondary and Higher Education Cess on
excisable goods can be utilized only for payment of Secondary and Higher
Education Cess on excisable goods. Moreover, there is no provision in the Cenvat
Credit Rules, 2004 which permits an noticee to utilize basic Central Excise Duty
for payment of Education Cess and Secondary and Higher Education Cess levied
on final goods.
7.
From the para-supra as above, it appeared that the noticee has wrongly
utilized Cenvat credit of Basic Excise duty to the tune of Rs.13,28,394/- (Rs.
Thirteen lakh twenty eight thousand three hundred ninety four only) for
payment of Education Cess and secondary and higher Education Cess which is
required to be recovered under rule 14 of the Cenvat Credit Rules, 2004 read
with section 11A of the Central Excise Act, 1944, along with interest under
section 11AB of the Central Excise Act, 1944 and penalty is imposable under rule
15 of the Cenvat Credit Rules, 2004.
8.
Further on perusal of D S A for the month of April-2010 indicated clearance
of one VMC machines as “Captive Consumption” (CC) which was installed in a
premises other than the registered premises of the said noticee. Though the said
premises is stated to belong to the noticee, it is not included in the registered
premises of the noticee and also located at far from it. Further inquiry in the
matter, revealed that there were five machines cleared for captive consumption
without payment of duty during the period from 2006-07 to 2010-11 (upto
Page 5 of 21
November-2010) and the same were found to be installed in the premises other
than the registered premises of the noticee. Such premises wherein the said
machines were found to be installed were pertaining to the noticee and the same
were registered with Central Excise department separately till 05.02.2008.
9.
The said goods were cleared under cover of invoices endorsing with ‘invoice
under Notification No. 67/95-CE and value of the machine was shown thereon.
But no Central Excise duty was shown to be levied therein. Further, such invoices
clearly reflect the address of consignee as ‘Jyoti CNC Automation Pvt. Ltd., G506, Lodhika GIDC, Village-Metoda’ i.e. different from the noticee, i.e., ‘Jyoti CNC
Automation Pvt. Ltd., 2839, Lodhika GIDC, Village-Metoda’. Hence, the said
machines were apparently cleared out of the factory of manufacture. In view of
above, all the five machines were said to be cleared to their own unit, but to a
place outside the registered premises and hence, benefit of duty exemption
envisaged for captive consumption is not admissible to them. Therefore, the said
five machines so cleared would amount to removal of dutiable goods without
payment of duty.
10.
The value of the said five machines so cleared under the guise of availing
exemption of Notification No. 67/95-CE dated 16.3.95 as amended, meant for
captive consumption calculated to `1,03,10,000/- as per the values shown on the
respective invoices. Accordingly, duty leviable and payable at the prevailing rate
during the material time is ascertained to ` 14,14,702/- is as follows:
Sr.
No.
01
02
03
04
05
Machine
Name
Model
VMC 1050
VMC 850
SX 04
VMC 1260
VMC 850
TOTAL
Value
& (Rs.)
Date
of Rate
removal
duty
2300000
1950000
1610000
2500000
1950000
1,03,10,000
11.09.2006
11.09.2006
11.09.2006
30.04.2010
02.11.2010
of Duty
payable
(Rs.)
16.32%
375360
16.32%
318240
16.32%
262752
10.3%
257500
10.3%
200850
14,14,702
11.
From the para-supra it appeared that the noticee has cleared five
machines under the guise of availing exemption Notification No. 67/95-CE ibid
and benefit of duty exemption for captive consumption is not admissible to them
therefore noticee is liable to pay the Excise duty to the tune of Rs. 14,14,702/(Rs. Fourteen lakh fourteen thousand seven hundred and two only) which
is required to be recovered from the noticee. Noticee has suppressed short
payment of duty from the department therefore such short payment of duty is
required to be recovered under the provisions of proviso to Section 11A of the
Central Excise Act, 1944 along with interest in terms of Section 11AB of the
Central Excise Act, 1944. The omission committed by the noticee rendered
themselves liable for penalty in terms of Section 11AC of the Central Excise Act,
1944.
12.
Therefore, the said noticee was served the show cause notice
No.V/AR.VI/RJT-1/ADC/151/2010 dated 05.08.2011 requiring to show cause as
to why:1)
2)
3)
Cenvat credit of Basic Excise duty amounting to Rs. 13,28,394/-(Rs.
Thirteen lakh twenty eight thousand three hundred ninety four
only) wrongly utilized for payment of Education Cess and secondary
and higher Education Cess should not be recovered under rule 14 of
the Cenvat Credit Rules,2004 read with section 11A of the Central
Excise Act,1944.
Central excise duty short paid amounting to Rs.14,14,702/- (Rs.
Fourteen lakh fourteen thousand seven hundred two only)
should not be recovered in terms of provision of Section 11 A of the
Central Excise Act, 1944;
Interest under section 11AA (erstwhile rule 11AB) of the Central Excise
Act, 1944 should not be recovered.
Page 6 of 21
4)
Penalty should not be imposed upon them under rule 15 of the Cenvat
Credit Rules, 2004 and under Section 11AC of the Central Excise Act,
1944.
SUBMISSION AND DEFENCE:
1. The noticee has submitted that the sub-rule (4) of Rule 3 of the Cenvat
Credit Rules, 2004 provides that Cenvat Credit can be utilized for payment
of any duty of excise on any final product. As per Section 93 of the
Finance Act, 2004 Education Cess levied under Section 91 in the case of
goods specified in the First Schedule to the Central Excise Tariff Act, 1985
being goods manufactured or produced shall be a duty of Excise. In this
Section, Education Cess has been very clearly referred to as a duty of
excise.
2. They further submittd that Hon'ble Tribunal in case of Mahindra &
Mahindra Ltd. V. CCE, Mumbai - 2007 (211) E.L.T. 481 (Tri-Mum.)
has decided that Education Cess imposed on manufacturer and production
of goods under Sections 91 & 93 of Finance Act, 2004 is in a nature of
excise duty. Once it is decided that Education Cess is a duty of excise,
then in terms of sub-rule 3(4) of the Cenvat Credit Rules, 2004, Cenvat
credit can be utilized for payment of any duty of excise including Education
Cess on any final product.
3. The noticee has further submitted that there is restriction under Rule 3(7)
of the Cenvat Credit Rules, 2004, which applies to the credit of various
duties, such as additional duties on textiles and textile articles, NCCD,
Education Cess etc. In terms of this restriction, which overrides the
provisions of Rule 3(4), the credit of the named of duties including
Education Cess can only be utilized for payment of the said duties alone.
As a result, credit of Education Cess can be utilized for only paying of
Education Cess and not other kind of duties.
4. The noticee has further submitted that in the present case, there is no
such allegation that they have used credit of Education Cess for payment
of any other duties, other than Education Cess. Evidently, this restriction
cannot be extended to credit of duties not specifically listed under Rule
3(7). The credit of Basic Excise duty is one such duty credit, which is not
subject to restriction under the said Rule 3(7). Therefore, in absence of
any such restriction and as
provided under rule 3(4) of the Cenvat Credit Rules, 2004, the credit of
Basic Excise duty can be utilized for payment of any duty of excise.
5. To further emphasize their stand, that education cess and SHE cess can be
paid out of the cenvat credit balance of basic excise duty, we wish to place
reliance on the following judgements in their support, wherein the Hon'bie
CESTAT, Ahmedabad has clearly held that Education Cess can be paid by
utilizing the Cenvat credit of Basic Excise Duty (BED) – Rule 3(4) of
Cenvat Credit Rules, 2004.
1. CCE, Vapi vs Balaji Industries cited in 2008 (232) E.L.T. 693 (Tri. Ahmd.)
2. CCE, Vapi vs Donear Inds Ltd cited in 2009 (233) E.L.T. 221 (Tri. Ahmd.)
3. CCE Shilong V/s Godrej Consumer Products Ltd-2007[219]
ELT-585[TRI-Kolkata]
4. Sun Pharmaceuticals Ind. V/s CCE 2007[207]ELT-673[TRI]
5. Euro Cotspin Ltd V/s CCE, Chandigarh 2008[223] ELT 918
[TRI- Delhi]
6. Pan Parag India Ltd 2009[247] ELT 927 [Comm[A]]
6. As regards demand of Central Excise Duty on the VMC machines
manufactured by them were captively consumed by them. On this the
department has demanded Central Excise duty of `1414702/- for the
three machines said to have been cleared in September-2006 and 2
machines cleared in April-2010 and November-2010 respectively.
Page 7 of 21
In this regard, they urged that these 5 machines were manufactured by
them as the same was their final product and in the ordinary course of
business, they clear the same on payment of appropriate Central Excise
duty. However, as these 5 VMC machines have been captively consumed
within their factory under the name and style of M/s Jyoti CNC Automation
Pvt. Ltd., but situated at the different place i.e. 500 mts away due to the
paucity of space, it cannot be alleged by the department that it is removed
outside their unit and appropriate duty is leviable on the same denying
them the benefit of notification N0. 67/95-CE dated 16-03-1995.
7. Due to the space constraint, our different parts of CNC machine were
manufactured by them at the premises under the name and style of Jyoti
CNC Automation Pvt. Ltd., G-506, Lodhika GIDC, Metoda which is nothing
but the extension of their main registered unit under the same name of
Jyoti CNC Automation Pvt. Ltd., Plot No. 2839, Lodhika GIDC, Metoda.
From this, it is evident that it is their unit which has been extended due to
the space limitation and the various parts of CNC machines are
manufactured by them thereby following the procedure as laid down under
notification No.214/86-CE dated 25-03-1986. If they have removed
these goods under notification No. 214/86-CE i.e. to the job workers
premises, perhaps the department may not have raised this objection and
even the Cenvat credit (if availed) could not have been denied to them by
applying Rule 4(5)(A) of the Cenvat Credit Rules, 2004. Instead of the
benefit of notification No.214/86, they have preferred to avail the benefit
of notification No.67/95-CE, dated 16-03-1995. Hence, it is not the case
for the department to demand the Central Excise duty on these 5 VMC
machines captively consumed within their own factory of production being
situated 500 mts. away due to the space restriction. M/s Jyoti CNC
Automation Pvt. Ltd. is one company registered under the Companies Act,
1956 and its balance sheet consists of the accounts of both these premises
and even the assessment under the Income Tax Act and VAT is done
under the name of Jyoti CNC Automation Pvt. Ltd. Hence, treating their
own premises as a different unit is quite not understandable and without
any authority.
8. It has been further alleged that they have cleared these 5 machines
without payment of duty is clearly undesirable as it is the extension of
their unit only which do not merit/require the payment of Central Excise
duty as the benefit of notification No.67/95-CE is clearly admissible to
them as these machines were captively consumed within their factory of
production and are to be treated as only one unit for the purpose of
Central Excise duty assessment and other allied matters. M/s Jyoti CNC
Automation Pvt. Ltd. is the single entity in the eyes of law having the
single PAN, TIN, Company registration certificate, EPF registration etc. and
it is not for the department to treat their own unit as different entity and
demand the duty by captively consuming such machines within their
production.
In this matter they relied on the following case laws;
1.
2002(147)ELT 368(Tri-Delhi)
ISGEC Covema Ltd. V/s CCE, Trichy
2.
2006(206)ELT 276(Tri-Delhi)
Hindustan Copper Ltd V/s CCE, Raipur
9. They further contended without prejudice to the above, that the
department cannot demand the Central Excise duty on these 5 machines
invoking extended period of 5 years as they have not suppressed its usage
from the department and the same machines used captively under noti.
No.67/95-CE dated 16.03.1995 were shown to have been cleared under
proper invoice as clearly mentioned in the impugned SCN and the same
was also reflected in their monthly ER- 1 returns filed with the department
during the month of September-2006, April-2010 and November-2010.
Hence, barring one machine of 02-11-2010 of Rs.19,50,000/-, the demand
of Central Excise duty on the remaining 4 machines cleared during
September-2006 and April-2010 is clearly time barred as the period
Page 8 of 21
invoked is beyond the limitation period of one year and it is not the case of
the department when the entire things is well within the knowledge of the
department, invoking the provision of section 11A of the Central Excise
Act, 1944 is clearly unlawful and untenable.
In this matter they relied on the following case laws:
1. 2008(228) E.L.T. 276 (Tri. Delhi)
Usha Martin Construction Steel Ltd. v/s Commr. Of C.Ex., Kanpur.
“On the issue of time-bar, I find that the demand is for the
period August 2001 to January 2002 and show-cause notice was
issued on 12-7-04 alleging suppression with intent to evade payment
of duty. The appellants were regularly filed ER-I monthly returns
showing clearance of goods on payment of duty and clearance of the
same goods under notification without payment of duty. The
assessable value of the goods was also reflected in the monthly
returns. The appellants were also filing the copies of the relevant
statutory record showing that they were taking credit in respect of
the goods used in their final product. In these circumstances, I find
that the allegation of suppression on the part of appellant to evade
payment of duty is not sustainable hence demand is set aside as
time-bar. Consequential penalty is also set aside. The appeal is
allowed as indicated above.”
2. 2011(270) E.L.T. 98 (Tri. Kolkata)
Diamond Beverages Pvt. Ltd. v/s Commr. Of C.Ex., Kolkata-IV
“we find that Appellants are filing necessary returns regarding
payment of duty on the basis of M.R.P, and when the M.R.P. was
reduced the same was reflected in the monthly returns hence the
allegation of suppression with intent to evade payment of duty is also
not sustainable. In view of the above discussion the impugned order
is set aside and Appeal is allowed.”
10. Without prejudice to the above, even the demand is revenue neutral as
the Central Excise duty paid by them on these machines was subject to
availment of cenvat credit as their other premises was also registered at
the material time, which is also mentioned the SCN. Hence, it is not going
to benefit the Government exchequer, as for them, it is just paying from
one side and pocketing on the other hand.
11.They further submitted their written submission on 10.01.2012 submitting
that the period covered in show cause notice is from April-2009 to
September-2010, so the period prior to July-2010 is time barred on the
following grounds:
a. The utilization of credit of basic excise duty in payment of education
cess or secondary and higher secondary education cess is reflected by
the noticee in their monthly ER-1 returns.
b. The monthly abstract of cenvat availment and utilization is filed with
the range office in form of revenue shhet at the end of every month.
c. The annual financial statement i.e. ER-4 has been filed regularly
which also clearly mentions the utilization of cenvat credit. Hence, the
demand of wrong utilization of cenvat credit is clearly time barred
from April-2009 to June-2010.
d. The duty demand for the extended period cannot be made from the
noticee as no proviso to Section 11A has been invoked in the entire
show cause notice, hence the question of demand beyond extended
period is without any base and such the period beyond one year can
not be covered or demanded in show cause notice.
12. They further submitted that when no suppression, misstatement,
fraud, collusion etc. is found, the demand beyond extended
period
of one year cannot be made and once these ingredients
are
absent
no
penalty can be imposed under Section 11AC of the
Central Excise Act,1944,
similarly no penalty can be imposed
Page 9 of 21
under rule 15 of the Cenvat Credit Rules, 2004.
In this regard they relied on following judgments:
1. 2009 (238) E.L.T. 3 (S.C.)
UNION OF INDIA v/s RAJASTHAN SPINNING & WEAVING MILLS
“The penalty provision of Section 11AC would come into play only
after an order is passed under Section 11A(2) with the finding that
the escaped duty was the result of deception by the assessee by
adopting a means as indicated in Section 11AC.”
2. 2010 (260) E.L.T. 167 (S.C.)
COMMISSIONER OF C. EX., VAPI v/s KISAN MOULDINGS LTD.
“the penalty under Section 11AC, as the word suggests, is
punishment for an act of deliberate deception by the assessee with
the intent to evade duty for adopting any of the means mentioned in
the Section. Since the present is a case of bona fide mistake and
because there was a categorical finding then there was no intention
to evade tax by the respondent, therefore in terms of the ratio laid
down by this Court in the aforesaid decision, no interference is called
for.”
13.
They further contended that no penalty can be imposed on the
noticee when the question of interpretation of rule, law or
statute is involved. As per the noticee’s view the credit of basic
duty can be utilized for payment of education Cess, however
the department thinks otherwise. Hence it is purely of
technical nature involving interpretation of rule/statutes, hence
no
penalty can be imposed. In this regard they relied on
following judgements.
1. MICROSYNTH FABRICS (INDIA) LTD. V/s CCE, VAPI 2011
(267) ELT 532 (Tri. Ahmd.)
“Basically, the issue involved in this case is of interpretation of
notification and therefore, in the absence of any evidence of
deliberate intention to evade duty, no penalty can be imposed. In
view of the above, we consider that the penalty imposed on the
appellants cannot be sustained and accordingly, set-aside the same.”
2. AUROBINDO PHARMA LTD. V/s CCE., VISAKHAPATNAM2011(265)ELR 358(Tri-BangaLORE)
“we hold that the same is not sustainable in view of the fact that the
dispute involves provisions now being interpreted. The impugned
order is set aside.”
3. RIMTEX INDUSTRIES V/s CCE, BHAVNAGAR 2010 (254) ELT
116 (Tri. Ahmd.)
“As regards penalty on the appellants, we take note of the fact that
clearances were made with the knowledge and approval of the
department and this is because of their wrong interpretation of
provisions of law by both the sides. Therefore, imposition of penalty
on the appellants is totally unfair and not called for.”
14.
The duty demand for the extended period cannot be made from the
noticee as no proviso to Section 11A has been invoked in the entire show
cause notice, hence the question of demand beyond extended period is
without any base and such the period beyond one year can not be covered
or demanded in show cause notice.
15.
When no suppression, misstatement, fraud, collusion etc. is found,
the demand beyond extended period of one year cannot be made and once
these ingredients are absent no penalty can be imposed under Section 11AC
of the Central Excise Act,1944.
16.
They further submitted that the department cannot demand the
Central Excise duty on these 4 machines cleared in September-2006 and
April-2010
invoking extended period of 5 years as they have not
suppressed its usage from the department and the same machines used
captively consumed under the benefit of noti. No.67/95-CE dated
16.03.1995 were shown to have been cleared under proper invoice as
Page 10 of 21
clearly mentioned in the impugned SCN and the same was also reflected in
their monthly ER- 1 returns filed with the department during the month of
September-2006 and April-2010.
In this regard they relied on following judgments:
1. 2011 (273) E.L.T. 85 (Tri. - Del.)
AJAY POLY PVT. LTD.
Versus
COMMISSIONER OF CENTRAL EXCISE, DELHI-I
2. 2011 (272) E.L.T. 572 (Tri. - Bang.)
SARITA STEEL & INDUSTRIES LTD.
Versus
3. COMMR. OF C. EX., VISAKHAPATNAM2011 (272) E.L.T. 572 (Tri. Bang.)
4. 2011 (270) E.L.T. 98 (Tri. - Kolkata)
DIAMOND BEVERAGES PVT. LTD.
Versus
COMMISSIONER OF C. EX., KOLKATA-VI
5. 2011 (267) E.L.T. 562 (Tri. - Bang.)
SARITHA SUGARS LTD.
Versus
COMMISSIONER OF C. EX., GUNTUR
6. 2009 (239) E.L.T. 461 (Tri. - Chennai)
THANGAVELU SPINNING MILLS LTD.
Versus
COMMISSIONER OF C. EX., SALEM
17. They further demanded the legitimate benefit of cum-duty
price
is required to granted while calculating duty liability on remaining one
machine captively consumed/cleared during the month of November-2010
relying on the following submission.
Attention is invited towards the provisions of Section 4 of the Central
Excise Act, 1944:
Explanation to Section 4 reads as under:
“For the removal of doubts, it is hereby declared that the pricecum-duty of the excisable goods sold by the assessee shall be the
price actually paid to him for the goods sold and the money value
of the additional consideration, if any, flowing directly or indirectly
from the buyer to the assessee in connection with the sale of such
goods, and such price-cum-duty, excluding sales tax and other
taxes, if any, actually paid, shall be deemed to include the duty
payable on such goods.”
The value in relation to any excisable goods does not include the
amount of duty of excise payable on such goods. Thus, whatever
assessable value taken by the department while computing the duty
amount of Rs.2,00,850/- is the value inclusive of duty of excise payable
and amount of duty is to be deducted from that value.
Hon”ble
Supreme Court as well as Tribunal in number of cases held the same
and they relied upon some of them and gist of the same is reproduced
below:
Recently Hon’ble Supreme Court in the case of CCE, Madurai v. T.V.S.
Srichakra Ltd. [2002 (142) E.L.T. A279 (S.C.)] and the judgment dated
27-2-2002 in the case of CCE, Delhi v. Maruti Udyog Ltd. [2002 (141)
E.L.T. 3 (S.C.)] dismissed the appeals filed by the Department,
upholding that the sale price realised by the assessee is to be regarded
as inclusive of excise duty and therefore, in arriving at the excisable
value of the goods, the element of duty which is payable is to be
excluded.
A reference may be made to CBEC Circular No.
749/65/2003-CX., dated 26-9-2003.
Against these judgments the department had filed review petitions,
which were also dismissed by the Apex Court as reported vide CBEC
Circular No. Circular No. 803/36/2004-CX., dated 27-12-2004.
Page 11 of 21
In these circumstances, this issue has got finality.
Attention is also invited towards Hon’ble Supreme Court’s and
Tribunal’s decisions on the similar subject under erstwhile provisions of
Section 4(4)(d)(ii) of the Central Excise Act, 1962 and ratio of the
same is squarely applicable under the present provisions of Section 4
ibid.
Hon’ble Supreme Court in the case of Government of India Vs.
Madras Rubber Factory Ltd. reported in 1995(77) ELT 433(SC) held
that
“Valuation (Central Excise) - Cum-duty-Price - How to
compute assessable value and quantum of excise duty in a cumduty price at a factory gate sale - Permissible deductions to be
first reduced from cum-duty price - Section 4(4)(d) of the
Central Excises and Salt Act, 1944 and Central Excise
(Valuation) Rules, 1975.
The assessment of excise duty both in relation to Section 4 and
in relation to the Valuation Rules is now subject to the
definition contained in Section 4(4)(d) of the Excise Act. The
`value’ as defined thereunder is to be arrived at after the cost
of packaging of a durable nature or a returnable nature as also
amounts of duty of excise, sales tax and other taxes and trade
discount allowed in accordance with the normal practice of
wholesale trade is determined. It is thus implicit that no excise
duty is payable on an element of excise duty in the price. The
value as contemplated under Section 4 cannot include a
component of excise duty. In the circumstances where the
computation of an assessable value has to be made from the
factory gate sale, price which is cum-duty price, the first
question which will have to be addressed is what are the
exclusions and permissible deductions from such a sale price.
The Petitioners’ contention that the assessable value is to be
arrived at by taking into consideration the same amount of
excise duty which was hypothetically pre-determined and
added to the factory price and that this element is an attempt
to compute the assessable value should naturally be deducted
first is not correct. It is putting the cart before the horse. The
excise duty is only known as a ratio of the assessable value
and an ad valorem duty is included in the cum-duty paid
selling price. The quantum of excise duty cannot be prededucted or pre-determined till the assessable value is known.
It is only the permissible deductions in concrete monetary
terms and amount which are known. The cum-duty paid sale
price being available for computation and a known value of
deductions permitted being also known, the assessable value
and the excise duty as a ratio of the assessable value can only
be determined by just deducting the permissible deductions
from the cum-duty paid selling price and thereafter computing
the value in accordance with the equation mentioned herein.
This has both a legal and mathematical basis. If the predetermined amount of excise duty is first deducted, the
equation will not tally. Therefore the excise duty in a cum-duty
price cannot be computed unless the permissible deductions
are first made. Excise duty is a ratio of the assessable value.
Ad valorem excise duty is computed only on assessable value
after arriving at such assessable value by making proper
permissible deductions. [1987 (27) E.L.T. 553 (S.C.)
concurred]. [para 67]”
SRICHAKRA TYRES LTD. Versus COLLECTOR OF CENTRAL EXCISE,
MADRAS reported 1999 (108) E.L.T. 361 (Tribunal) [LARGER BENCH]
Page 12 of 21
Valuation (Central Excise) - Duty demanded and paid subsequent to
sale of goods to be abated from cum-duty price actually received Section 4(4)(d)(ii) of Central Excise Act, 1944.
Wholesale price will include the element of duty payable on
any goods because such duty forms part of the consideration
for sale of the goods according to terms of sale of the goods. If
any further demand of duty is created against an assessee and
such further demand of duty cannot be passed on to a
customer in view of terms of sale of any goods between the
assessee and a customer, the original consideration (including
duty, if any) received by an assessee for sale of the goods in
wholesale trade, has to be taken as cum-duty price for the
purpose of demand of higher duty subsequently. Any
hypothetical consideration that the sale price would have gone
up had correct duty been paid in the first instance cannot be
made the basis for non-abatement of differential duty from the
realised sale price. Total duty proposed to be demanded shall
have to be abated from the cum-duty price actually received
and liable to be received as a consideration for sale of goods.
This is the mandate of sub-section 4(d)(ii). [1998 (101) E.L.T.
495 (Tribunal); 1997 (96) E.L.T. 497 (S.C.) relied on]. [para
9.1]
Hence, they requested to extend the benefit of cum duty
price as per section 4 of the Central Excise Act, 1944 and also
requested to drop the proceedings initiated vide aforementioned
Show Cause Notice.
PERSONAL HEARING :
Personal Hearing in the matter was held on 07.01.2012, wherein Shri
Jagdish Busa, Consultant of the noticee appeared and reiterated the submissions
dated 23.12.2011 and 10.1.2012 made in this regard and requested to drop the
proceedings.
DISCUSSION AND FINDINGS:
I have carefully gone through the facts of the case and the show cause
notice under adjudication. I have also considered the written and oral
submissions advanced by the noticee in reply to the show cause notice as well as
the time of personal hearing.
The two issues under consideration in the present show cause notice are;
i)
whether the noticee can utilize the Cenvat credit of the basic Central
Excise Duty for payment of Education Cess and Secondary Cess ?
ii)
Whether the demand of Central Excise Duty on the CNC machines
manufactured by them and used in their another unit can be
considered as captive consumption and the benefit of notification
67/95-CE dated 16.03.1995 can be extended to this clearance?
First, I take up the issue of as to whether utilization of Cenvat credit of
the basic excise duty for payment of Education Cess and Secondary Education
Cess is proper or not.
Page 13 of 21
For the sake of brevity, I am not reiterating the relevant provisions of Rule
3 of the Cenvat Credit Rules, 2004 which has already been reproduced in the
show cause notice.
The noticee has mainly relied upon the following decisions of the Hon’ble
Tribunals to support their point of view, that the credit of basic Central Excise
Duty can be utilized for payment of Education Cess and Secondary and Higher
Education Cess :
(i)
CCE, Vapi V/s Balaji Industries 2008(232) ELT-693(Tri-Ahmd)
(ii) CCE, Vapi V/s Donear IndsLtd 2009(233) ELT-(221) (TriAhmd)
(iii) CCE, Shilong V/s Godrej Consumer Products Ltd-2007(219)
ELT 585(Tri-Kolkata).
(iv) Sun Pharmaceuticals V/s CCE, 2007(207) ELT-673(TRI)
(v)
Euro Cotspin Ltd. V/s CCE, Chandigarh 2008(223) ELT-618
(Tri-Delhi).
(vi)
Pan Parag India Ltd 2009(247) ELT-927(Comm A)
In all the above decisions, delivered by the single member bench of
Hon’ble Tribunal, it has been inter alia, observed that Education Cess and SHE
Cess can be paid by way of utilization of Cenvat Credit of basic excise duty.
Accordingly, the noticee prima facie has made out the strong case in their
favour.
However, I find that above decisions cannot accepted to have settled the
issue in favour of the noticee, for good, inasmuch as, Hon’ble Tribunal
comprising of President and Member(T) has delivered the judgment in the case
of CCE V/s Bharat Box Factory Ltd. (Unit No. 1) reported in 2011 (265)
ELT 366 (Tri-Del) wherein it has been inter alia held as under while disposing
off almost one and a half dozen appeals filed by the Department on the similar
issue on hand :
“Credit availed on payment of basic excise duty whether
utilisable for payment of cess while availing Notification No.
56/2002-C.E. - Payment of cess by utilising Cenvat credit of
basic excise duty not permissible - Modus operandi adopted by
respondent, not correct - Tribunal decision in 2007 (207) E.L.T.
673 (Tribunal) contrary to law and per incuriam - Subsequent
orders following said decision not laying down correct law Impugned order allowing refund, set aside - Rule 3 of Cenvat
Credit Rules, 2004. [paras 6, 7, 8]
5.The respondents are engaged in the manufacture of printed
corrugated cartons and printed duplex cartons falling under Tariff Item
Nos. 4819.12 and 4819.19 of the First Schedule of the Central Excise
Tariff Act, 1985. The respondents filed refund claims by way of self
credit for various amounts as indicated in the above chart on account of
central excise duty paid through PLA for the months specified in the
chart claiming the same in terms of the Notification No. 56/2002-C.E.,
dated 14-11-2002. The adjudicating authority held that Cenvat credit of
basic excise duty available to the party cannot be utilised for payment of
education cess as per the provision of sub-rule 7(b) of Rule 3 of the
Cenvat Credit Rules, 2004 which provides that the credit of education
cess on excisable goods and education cess on taxable service can be
Page 14 of 21
utilised either for payment on education cess on excisable goods or for
payment of education cess on taxable services. It was further held by
the adjudicating authority that the respondents had circumvented the
payment of the amount of cess from PLA to the Cenvat credit amount of
basic excise duty to claim the refund of the amounts. In the appeal
before the Commissioner (Appeals), the said orders have been set aside
while following the decision of the Tribunal in Sun Pharmaceutical
Industries v. C.C.E., Jammu reported in 2007 (207) E.L.T. 673 = 2008
(11) S.T.R. 93 (T). The orders of the adjudicating authority have been
set aside and refund has been allowed.
6.The short point for consideration which arises in all these
matters is whether the credit availed out of payment of central
excise duty could have been utilised for payment of cess while
availing the benefit under the said Notification No. 56/2002-C.E., dated
14-11-2002, therefore, refund could have been claimed.
7.The issue, in fact, has been elaborately discussed in the matter of
C.C.E., Jammu v. Jindal Drugs Ltd. reported in 2010 (97) RLT ON LINE
13. Even otherwise, the provision of law either as it stood in the
year 2005 or even today does not permit the payment of cess by
utilising cenvat credit availed on payment of excise duty as the
provision of law comprised under sub-rule 7(b) of Rule 3
specifically makes the provision regarding the utilisation of the
cenvat credit. It specifically provides that the credit of the education
cess on excisable goods and education cess on taxable services can be
utilised, either for payment of the education cess on excisable goods or
for payment of education cess on taxable services. In fact, the provision
thereunder expressly used the expression respectively while referring to
the utilisation of cess on a particular item to be utilised on a specified
item. This clearly shows that the modus operandi adopted by the
respondents was not correct in relation to the utilisation of the
cenvat credit while availing the benefit of Notification No. 56/2002,
dated 14-11-2002.
8.It is true that in Sun Pharmaceutical Industries case, it was held that
sub-rule 7(b) of Rule 3 makes it clear that limitation placed in view of
utilisation of cenvat credit obtained through education cess paid on
inputs and that the said sub-rule has no application at all in regard to
utilisation of basic excise duty, the observation, however, runs counter
to the provision of law and therefore, the decision will have to be
held as per in curiam. All the subsequent orders based on Sun
Pharmaceutical Industries case, therefore, do not lay down the
correct proposition of law. In fact, this aspect has already been dealt
with in detail in Jindal Drugs Ltd. case. Considering the above, therefore,
the impugned order cannot be sustained and is liable to be set aside and
the orders passed by the adjudicating authority are to be restored.
Hence, the appeals succeed and are allowed. The impugned order is set
aside and the orders passed by the adjudicating authority are restored
with consequential effect”
In the aforesaid landmark judgment, the Hon’ble President of Tribunal has
held that Cenvat credit cannot be utilized for payment of education cesses. He
further went on to add that all orders passed based on M/s. Sun Pharmaceuticals
Industries case, wherein it was held that cess is also a kind of excise duty, do
not lay down correct position of the law and also decisions passed on the basis of
the decision in the case of M/s. Sun Pharmaceuticals Industries has to held to
have been passed per in curiam, The noticee in the instant case also predicated
their defense on the decision of M/s. Sun Pharmaceuticals and therefore the
Page 15 of 21
same cannot be attached any significance in light of the judgment of the Tribunal
in the case of M/s. Bharat Box Factory Ltd. supra.
In view of the above discussion, as also
the clear cut law position
enshrined in sub-rules (4) and (7) of Rule 3 of the Cenvat Credit Rules, 2004,
I
find that the noticee could not have utilized the Cenvat credit of the basic excise
duty for the payment of Education Cesses.
As regards, proposal for charging of interest under section 11AB of the
Central Excise Act, 1944 and imposition of penalty under Rule 15 of the CCR,
2004 and Section 11AC of the CEA, 1994, the noticee has contended since the
‘original demand’ is not sustainable and they have shown the credit utilized in
their ER-1 returns, interest is not recoverable and penalty is not imposable and
there is no wrong utilization of Cenvat credit as it is only the credit of the Basic
Excise duty used for payment of Education Cess and Secondary and Higher
Education Cess. In this regard, I find that disallowance of Cenvat credit for the
payment of Education Cess and Higher Education Cess has already been
confirmed by virtue of this order. As the noticee has wrongly utilized the credit of
basic excise duty for the payment of Cesses, I also confirm the interest on
irregular utilization of the amount of basic excise duty in payment of Cesses.
However, I am disinclined to impose penalty under section 11AC of the Central
Excise Act as the issue is revenue neutral and the noticee is not getting any
benefit by utilizing the credit of Basic Excise duty in payment of Education Cess
and SHE Cess. By utilizing the Basic Excise duty they are found with the surplus
of Education Cess balance. There is no intention of evasion of any duty or any
suppression of any fact from the department. The ingredients as mentioned in
section 11AC are as under;
SECTION 11AC. Penalty for short-levy or non-levy of duty in
certain cases. —
(1) The amount of penalty for non-levy or short-levy or non-payment
or short payment or erroneous refund shall be as follows :—
(a) where any duty of excise has not been levied or paid or shortlevied or short paid or erroneously refunded, by reason of fraud or
collusion or any wilful mis-statement or suppression of facts, or
contravention of any of the provisions of this Act or of the rules made
there under with intent to evade payment of duty, the person who is
liable to pay duty as determined under sub-section (10) of section
11A shall also be liable to pay a penalty equal to the duty so
determined;
The ingredients mentioned above i.e. fraud, collusion, willful misstatement and suppression of fact with intent to evade the duty are
not found in the instant case and hence, I do not find any merit in
imposing penalty under section 11AC of the Central Excise Act, 1944.
In this matter, I rely on the following judgments:
(1) UOI V/s Rajasthan Spinning & Weaving Mills-2009(238) ELT-3(S.C.)
“Penalty - Mandatory penalty under Section 11AC of Central Excise
Act, 1944 not applicable to every case of non-payment or short-payment of
Page 16 of 21
duty - Conditions mentioned in Section 11AC ibid should exist for penalty
thereunder”
(2) CCE, Vapi V/s Kisan Mouldings Ltd.-2010(260) ELT167(S.C.)
“Penalty - Bona fide mistake - Cenvat/Modvat – Excess availment Tribunal’s finding that case of bona fide mistake which subsequently
rectified - Findings upheld by High Court - Apex Court in Rajasthan Spinning
& Weaving Mills [2009 (238) E.L.T. 3 (S.C.)] observed that penalty under
Section 11AC of Central Excise Act, 1944 is punishment for act of deliberate
deception with intent to evade duty for adopting any means mentioned in
said section - Present case of bona fide mistake and finding that intention to
evade absent - No interference called for - Rules 15 of Cenvat Credit Rules,
2004. [para 4]”
The noticee has further argued that no penalty can be imposed when the
question of interpretation of rule, law or statue is involved. This issue of
utilization of credit of Basic Excise Duty in payment of education cess is in fact
the matter of strict interpretation of the rules and the law. Various cases are in
favour of the noticee and there are others in favour of revenue. This issue has
not yet attained finality due to conflicting decisions of Tribunals. On this ground
also, I am disinclined to impose penalty under section 11AC of the Central Excise
Act, 1944.
However, I impose penalty on the noticee under Rule 15(1) of the Cenvat
Credit Rules, 2004, wherein it is mentioned that “(1) If any person, takes or
utilises CENVAT credit in respect of input or capital goods or input services,
wrongly or in contravention of any of the provisions of these rules, then, all such
goods shall be liable to confiscation and such person, shall be liable to a penalty
not exceeding the duty or service tax on such goods or services, as the case may
be, or two thousand rupees, whichever is greater.”
As the noticee has wrongly utilized the credit of basic excise duty in payment of
Education Cesses hence I impose penalty under rule 15(1) of the Cenvat Credit
Rules, 2004.
With reference to the second issue as to the demand of central excise duty
on the CNC machines manufactured by them and used in their another unit can
be considered as captive consumption and the benefit of notification 67/95 dated
16.03.1995 can be extended to this clearance or otherwise, I find that these five
machines have been installed and used in the another nearby factory /unit of the
noticee, who is also doing the job work of the noticee. The noticee claims that
due to paucity of space, they had got manufactured different parts of CNC
machines manufactured at the premises situated at G-506 Lodhika GIDC, Metoda
( 1/2 Kms from the main unit) which is nothing but the natural extension of
their main registered unit under the name of M/s Jyoti CNC Automation P. Ltd.
However, I do not agree with this contention of the noticee, as their registered
premises covers only plot No.2839, Lodhika GIDC, Metoda and their other
factory/unit situated at G-506, Lodhika GIDC Metoda is a different and distinct
factory/unit and hence, it cannot be considered as the extension of their
Page 17 of 21
registered factory premises. The noticee has further argued that the benefit of
notification no. 67/95-CE dated 16.03.1995 is admissible to them, in as much as,
it is their captive consumption. However, I find that the notification no. 67/95-CE
dated 16.03.1995 gives exemption to all capital goods and specified inputs if
captively consumed within the factory of production. Here, these CNC machines
manufactured by the noticee are used by their another unit who is their job
worker and the premises of job worker are located half a kilometer away from
their registered premises, hence the condition stipulated in the notification no.
67/95-CE dated 16.03.1995 i.e. “consumed within the factory of production” is
not satisfied.
In view of the above, I find that the benefit of notification no. 67/95-CE
dated 16.03.1995 cannot be extended to the machines cleared to their another
unit even in the name of M/s Jyoti CNC Automation P. Ltd. which is a different
and distinct factory/unit other than the noticee’s registered unit.
The noticee has further argued that the department cannot demand the
Central Excise Duty on these 5 machines by invoking extended period of 5 years,
as they have not suppressed its usage from the department and the same
machines used captively under notification No.67/95-CE dated 16.03.1995 were
shown to have been cleared under proper invoice, as clearly mentioned in the
SCN and the same were also reflected in their monthly ER- 1 returns filed with
the
department
during
the
month
of
September-2006,
April-2010
and
November-2010. They argued that barring one machine of 02-11-2010 of
Rs.19,50,000/- the demand of Central Excise Duty on the remaining 4 machines
cleared during September-2006 and April-2010 is clearly time barred, as the
period invoked is beyond the limitation period of one year and it was well within
the knowledge of the department. They had further argued that the demand is
revenue neutral, as the Central Excise Duty paid by them will be subject to
availment of cenvat credit in their another unit, which was registered unit at the
material time. In this regard, I find that there is ample force and merit in the
argument put forth by the noticee on the aspect of time bar. I find that the
noticee in their monthly ER-1 returns have clearly mentioned these machines
being cleared under the exemption notification no. 67/95-CE dated 16.03.1995
and also have cleared these machines on proper invoice as categorically
mentioned/narrated in the show cause notice. Once it is found that the fact was
clearly within the knowledge of the department, invoking the extended period
beyond one year will not be justified. In this matter, I rely on the following case
laws:
(1) Ajay Poly Pvt. Ltd. V/s CCE, Delhi-I 2011(273) ELT-85 (Tri-Del)
“Demand - Limitation - Extended period - Suppression - Cenvat/Modvat Capital goods - Denial of credit on ground that capital goods were exclusively
used for manufacture of goods on job work basis, which were cleared without
payment of duty under Notification No. 214/86-C.E. - Appellants regularly filed
ER-1 returns and fact of clearance of goods without payment of duty under
Notification ibid was known to Department - Department’s contention that
relevant information with regard to availment of capital goods credit was
Page 18 of 21
deliberately suppressed by appellants, not acceptable - Show cause notice barred
by limitation - Demand not sustainable - Rule 14 of Cenvat Credit Rules, 2004 Proviso to Section 11A(1) of Central Excise Act, 1944. [para 4]”
(2) Sarita Steel & Industries Ltd. V/s CCE., Visakhapatnam 2011(272)
ELT-572 (Tri-Bang)
“Demand and penalty - Limitation - Extended period - Suppression Valuation (Central Excise) - Related person - Appellants were filing returns with
Revenue Authorities - Revenue Authorities were aware of transactions entered
into by appellants, but never raised any objections, nor sought for any
clarification from appellants - No suppression - Extended period not invocable Demand barred by limitation - Penalty not imposable - Proviso to Section 11A(1)
and Section 11AC of Central Excise Act, 1944. [paras 11, 12]”
(3) Diamond Beverages Pvt. Ltd. V/s CCE, Kolkata-VI 2011(270)ELT98(Tri-Kolkata)
“Demand - Limitation - Reduction of MRP reflected in monthly returns - In
such case, allegation of suppression was not sustainable and extended period
was not invocable - Section 11A of Central Excise Act, 1944. [para 10]”
(4) Saritha Sugars Ltd. V/s CCE, GUNTUR 2011(267) ELT-562 (Tri-Bang)
“Demand - Limitation - Appellants cleared the capital goods ‘as such’
debiting the amount of credit availed and informed the Department about their
activities in monthly returns - Extended period of limitation not available Section 11A of Central Excise Act, 1944. [para 9]”
(5) Thangavelu Spinning Mills Ltd. V/s CCE, SALEM 2009(239) ELT461(Tri-Chennai)
“Demand - Limitation - Cenvat/Modvat - Credit availed on invoice issued in
the name of another party, irregular and the same recoverable with interest Details of disputed transaction recorded in prescribed register by appellant and
copy thereof furnished with monthly return - Action not taken by Department to
recover irregular credit in time - Inputs received and used in manufacture of final
products and cleared on payment of duty - Larger period not invocable - Demand
not sustainable as also interest and penalty - Rule 12 of Cenvat Credit Rules,
2002 - Rule 14 of Cenvat Credit Rules, 2004 - Section 11A of Central Excise Act,
1944.”
In this backdrop, I am inclined to confirm the Central Excise Duty demand
on merit on these five machines cleared under notification no. 67/95-CE dated
16.03.1995, however since there is no suppression of fact, fraud, mis statement
or any intention on their part and particularly when the things were within the
knowledge of the department, I find the demand of Central Excise Duty on the
four machines cleared during September, 2006 and April, 2010 is time-barred,
hence I am disinclined to confirm demand of the Central Excise Duty on these
four machines as the same are not within the normal period of demand under
section 11A of the Central Excise Act, 1944. So, the demand the duty on one
CNC machine (VMC 850) valued at Rs.19,50,000/- cleared vide invoice dated
02.11.2010 is confirmed.
The noticee has further argued that the benefit of cum-duty price should
be granted on such clearance of machines relying on the explanation to section 4
of the Central Excise Act, 1944. They have also relied on the various judgments
in this regard as follows;
(1) CCE, Madurai V/s TVS Srichakra Ltd. 2002(142) ELT-A279(S.C.)
(2) CCE, Delhi V/s Maruti Udyog Ltd. 2002(141) ELT-3 (S.C.)
Page 19 of 21
(3) Govt of India V/s Madras Rubber Factory Ltd 1995(77) ELT-433
(S.C.)
I find that the noticee has cleared the machines under proper invoice and
also have reflected its clearances in their monthly ER-1 returns but have wrongly
taken the benefit of exemption notification. Here, I would like to mention the
provisions of explanation to section 4 as under:
“Explanation. - For the removal of doubts, it is hereby declared that
the price-cum-duty of the excisable goods sold by the assessee shall
be the price actually paid to him for the goods sold and the money
value of the additional consideration, if any, flowing directly or
indirectly from the buyer to the assessee in connection with the sale of
such goods, and such price-cum-duty, excluding sales tax and other
taxes, if any, actually paid, shall be deemed to include the duty
payable on such goods.”
Hence, as laid down in the explanation to section 4 and also based on the
Hon’ble Supreme Court’s judgment as mentioned above and Board’s circular
no.803/36/2004-CX dated 27.12.2004, I extend the benefit of cum duty price on
the one machine cleared on 02.11.2010 and demand the Central Excise Duty on
the said machine accordingly.
Further, I confirm the demand of the interest on such clearance of
machine under section 11AB of the Central Excise Act, 1944. I also impose
penalty equivalent to the duty confirmed under section 11AC of the Central
Excise Act, 1944. In light of the above discussion, the argument put forth by the
noticee for not imposition of penalty are of no avail to them and penalty on them
is required to be imposed.
In light of the above discussion and findings, I pass the order as follows;
: ORDER :
(i)
I disallow the utilization of Cenvat Credit of the basic excise duty to the
tune of Rs.13,28,394/-(Thirteen Lakhs Twenty Eight Thousand Three
Hundred Ninety Four Only) for payment of Education Cess and
Secondary and Higher Education Cess and order to recover the same
through account current / PLA under rule 14 of the Cenvat Credit Rules,
2004 read with section 11A of the Central Excise Act, 1944.
(ii)
I confirm the charging of interest at appropriate rate payable on the
aforesaid Cenvat credit against the noticee under section 11AB of the
Central Excise Act, 1944.
Page 20 of 21
(iii)
I impose a penalty of Rs.4,50,000/-(Rs. Four Lakhs Fifty Thousand
Only) under Rule 15(1) of the Cenvat Credit Rules, 2004.
(iv)
I confirm the Central Excise Duty of Rs.1,82,094/-(Rs. One Lakh Eighty
Two Thousand Ninety Four Only) on one machine cleared in November,
2010 after allowing cum duty benefit under section 11A of the Central
Excise Act, 1944 alongwith the interest at the appropriate rate under
section 11AB of the Central Excise Act, 1944.
(v)
I impose a penalty of Rs.1,82,094/-/-(Rs. One Lakh Eighty Two
Thousand Ninety Four Only) under section 11AC of the Central Excise
Act, 1944.
(Dr. Balbir Singh)
Additional Commissioner
F.No.: V-84/15-125/Adj/2011
To,
M/s. Jyoti CNC Automation Pvt. Ltd.,
Unit-II, Plot No.2839,
Kalawad Road, Lodhika GIDC,
Rajkot
Copy
1)
2)
3)
4)
to:
The Assistant Commissioner, Division – I, Rajkot
The Superintendent, AR-VI.
The Superintendent (RRA), CCE, Rajkot.
Guard file.
Page 21 of 21
Date: 13.01.2012