Madras High Court
Cprm Steels Ltd vs The Customs on 8 August, 2014
Bench: R.Sudhakar, G.M.Akbar Ali
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 8.8.2014
CORAM
THE HON'BLE MR.JUSTICE R.SUDHAKAR
AND
THE HON'BLE MR.JUSTICE G.M.AKBAR ALI
C.M.A.Nos.1202 and 1203 of 2006
CPRM Steels Ltd.
Narasimhanaiaken Palayam
Coimbatore 641 031. .. Appellant
Vs.
1. The Customs, Excise and Service Tax
Appellate Tribunal, South Zonal Bench
Shastri Bhawan Annexe, First Floor
No.26, Haddows Road
Chennai 600 006.
2. The Commissioner of Central Excise
6/7 ATD Street, Race Course Road
Coimbatore 641 018. .. Respondents
Prayer: Appeals under Section 130 of the Customs Act, 1962 against the Final Order Nos.32 and 33 of 2006, dated 6.1.2006 passed by the Customs, Excise and Service Tax Appellate Tribunal.
For Appellant : Mr.T.Ramesh
For Respondents : Mr.A.P.Srinivas
Senior Standing Counsel
for 2nd respondent
J U D G M E N T
(Delivered by R.SUDHAKAR,J.) These appeals are filed challenging the Final Order Nos.32 and 33 of 2006, dated 6.1.2006, passed by the Customs, Excise and Service Tax Appellate Tribunal (for brevity, the Tribunal) and the same were admitted on the following substantial questions of law:
1. In the facts and circumstances of the case, whether the first respondent was correct in denying the Modvat Credit to the extent of Rs.4,63,570/- relating to the inputs received from Visakhapatnam Steel Plant, a Government of India undertaking, merely on the ground that the inputs covered under single invoice were transported by various vehicles by splitting up the consignment, as a matter of convenience for the supplier in transporting such inputs, which is merely procedural in nature?
2. In the facts and circumstances of the case, whether the first respondent is correct in denying the Modvat Credit to the extent of Rs.4,63,570/- when there is no dispute with regard to the compliance with the substantial conditions for availing the Modvat Credit viz., inputs have suffered Central Excise duty, such duty paid goods were received into the factory under the cover of the duty paying document and the said inputs were used in the manufacture of the final product and there is only a technicality involved in denying the Modvat Credit?
3. In the facts and circumstances of the case, whether the first respondent was correct in denying the Modvat Credit for procedural lapses?
4. In the facts and circumstances of the case, whether the first respondent was correct in denying the Modvat Credit to the extent of Rs.78,086/- on the ground that Modvat Credit was taken on the basis of Original copy of the invoice, when the relevant Rule 57G itself permitted the availment of credit on the basis of Original copy of invoices, if the duplicate for the transporter is lost, but the inputs were received into the factory of manufacture and used in the manufacture of the final product?
2.1. The brief facts of the case are as under: The appellant is engaged in the manufacture of products of Steel falling under Chapter 73 of Central Excise Tariff Act, 1985. During the period July, 1995 to October, 1995, the appellant received various inputs, including billets, from Visakhapatnam Steel Plant, a Government of India Undertaking. It is the case of the appellant that the entire inputs received from Visakhapatnam Steel Plant had suffered duty. Since the goods in question, covered under single invoice, could not be transported as a single consignment, the same were split up into smaller consignments and transported as per the convenience of the supplier. The various split up consignments were transported under the cover of the photocopy of the original invoice.
2.2. It is the case of the appellant that the Modvat credit for the entire goods was taken on the basis of the original copy of the invoice, which accompanied one of the consignments, and that was not accepted by the Department resulting in issuance of two show cause notices dated 9.1.1996 and 27.3.1996, alleging procedural lapses in availing Modvat Credit. The main allegation in the show cause notices was that the appellant was not entitled to Modvat Credit of Rs.4,63,570/- relating to the inputs received from Visakhapatnam Steel Plant, covered by single invoice, but supplied under different consignments.
2.3. The appellant filed a detailed reply to the show cause notices. However, the adjudicating authority passed an order holding that the condition required for availment of Modvat Credit was not complied with and, therefore, the demand of Rs.5,83,546/- and Rs.1,46,086.69 was confirmed. The adjudicating authority also imposed penalty of Rs.1,00,000/- and Rs.25,000/- vide Orders-in-Original dated 29.8.1997.
2.4. Assailing the said orders, the appellant filed appeals before the Commissioner of Central Excise (Appeals), Trichy, who, by order dated 28.5.2004, upheld the order passed by the adjudicating authority.
2.5. Challenging the said common order passed by the 1st Appellate Authority, the appellant appealed to the Tribunal by filing two appeals. The Tribunal, by common order dated 6.1.2006, confirmed the demand of duty of Rs.5,83,546/- and reduced the penalty to Rs.50,000/- as against Rs.1,00,000/- in the the first appeal. In the second appeal, Tribunal held that out of the disputed amount of Rs.1,13,728/-, the appellant is entitled to credit of Rs.26,218/- and upheld the demand for the balance amount of duty and reduced the penalty to Rs.15,000/- as against Rs.25,000/- imposed.
2.6. Aggrieved by the said common order passed by the Tribunal, the present appeals are filed on the substantial questions of law, referred supra.
3. We have heard the learned counsel on either side and perused the order passed by the Tribunal and the authorities below.
Substantial Questions of law (1) to (3):
4.1. Before considering substantial questions of law (1) to (3), it will be relevant to refer to Rules 52A and 57G of the Central Excise Rules, 1944 (for brevity, the Rules), which read as under:
Rule.52A. Goods to be delivered on an invoice. (1) No excisable goods shall be delivered from a factory or a warehouse except under an invoice signed by the owner of the factory, or his authorised agent:
Provided that when the excisable goods, other than those to which the provisions of Chapter VII-A apply, are removed on payment of duty such invoice shall be required to be countersigned by the proper officer.
Explanation.In this rule, and in any other rule, where the term invoice or gate-pass, as the case may be, is used it shall mean
(i) assessees own document such as invoice, challans, advice or other document of similar nature generally used for sale or removal of excisable goods and which shall contain all the particulars as required under the said Act or in these rules; or
(ii) such other form as the Central Board of Excise and Customs may notify.
(2) The invoice shall be made out in quadruplicate. The original copy shall be for the buyer, the duplicate for the transporter, and the triplicate shall be retained by the manufacturer. The manufacturer may make extra copies of the invoice for his own use and each such extra copy shall be clearly marked with its sequential number. The duplicate copy shall be produced by the transporter on demand by any officer while the goods are en route to such destination from the factory:
Provided that in respect of removal of excisable goods consumed within the factory for manufacture of other goods in a continuous process, the manufacturer may make out a single invoice, at the end of the day:
Provided further that for any excisable goods, other than those to which the provisions of Chapter VII-A apply, the invoice shall be presented to the proper officer for counter-signature at least one hour before the actual removal of goods from the factory. After counter-signature the proper officer shall return all the copies of the invoice to the manufacturer except the triplicate required for his record.
(3) The copies of the invoices shall be marked at the top in bold capital letters in the following manner, namely :
(i) the original copy shall be marked as ORIGINAL FOR BUYER;
(ii) the duplicate copy shall be marked as DUPLICATE FOR TRANSPORTER(to be used for taking credit under Rule 57G and Rule 57T);
(iii) the triplicate copy shall be marked as TRIPLICATE FOR ASSESSEE.
(4) If all the packages comprising a consignment are despatched in one lot at any one time, only one invoice shall be made out in respect of the consignment. If, however, a consignment is split up into two or more lots each of which is despatched separately either on the same day or on different days, a separate invoice shall be made out in respect of each such lot. In case a consignment is loaded on more than one vehicle, vessel, pack animal or other means of conveyance which do not travel together but separately or at intervals, a separate invoice shall be made out in respect of each vehicle, vessel, pack animal or other conveyance.
(5) Invoice shall be maintained in two sets
(i) one for clearance for home consumption; and
(ii) the other for clearances for export.
(6) Each invoice shall bear a printed serial number running for the whole financial year beginning on the 1st April of each year. Only one invoice book of each type shall be used by a factory for removal of excisable goods at any one time unless otherwise specially permitted by the Commissioner in writing.
(7) Each foil of the invoice book shall be authenticated by the owner or working partner or Managing Director/Company Secretary, as the case may be, before being brought into use by the manufacturer. The serial number of the invoice, before being brought into use, shall be intimated to the Assistant Commissioner of Central excise and dated acknowledgment of receipt of such intimation shall be retained by the manufacturer.
Provided that the Commissioner may, by a general or special order, exempt an assessee or class of assessees from pre-authentication of each foil of invoice book and from intimating the serial number of the invoice.
(8) If any person
(a) caries or transports excisable goods from a factory or warehouse without a valid invoice, or
(b) while carrying or removing such goods from a factory or warehouse does not on request by an officer, forthwith produce a valid invoice, or
(c) enters any particulars in the invoice which are, or which he has reason to believe to be false, he shall be liable to a penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to in clauses (a), (b) or (c) has been committed and such excisable goods shall be liable to confiscation. Rule 57G. Procedure to be observed by the manufacturer. (1) Every manufacturer intending to take credit of the duty paid on inputs under Rule 57A or Rule 57B shall file a declaration with the Assistant Commissioner of Central Excise having jurisdiction over his factory, indicating the description of the final products manufactured in his factory and the inputs intended to be used in the said final products and such other information as the said Assistant Commissioner may require, and obtain a dated acknowledgment of the said declaration.
(2) A manufacturer who has filed a declaration under sub-rule (1) may, after obtaining the acknowledgment aforesaid, take credit of the duty on the inputs received by him.
(3) No credit under sub-rule (2), shall be taken by the manufacturer unless the inputs are received in the factory under the cover of any of the following documents, namely :
(a) an invoice issued by a manufacturer of inputs under Rule 52A or 100E of the said rules;
(b) an invoice issued by the manufacturer of inputs from his depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer provided the depot or the premises, as the case may be, is registered under Rule 174;
(c) triplicate copy of a bill of entry;
(d) a certificate issued by an Appraiser of Customs posted in foreign post office;
(e) an invoice issued by a first stage dealer of excisable goods, registered under Rule 174;
(f) an invoice issued by a second stage dealer of excisable goods, registered under Rule 174 and duly authenticated by the proper officer;
(g) an invoice issued by a dealer on or before the 31st day of August, 1996;
(h) an invoice issued by an importer registered under Rule 174 and duly authenticated by the proper officer;
(i) an invoice issued by an importer from his depot or from the premises of the consignment agent of the said importer provided the said depot or the premises, as the case may be, is registered under Rule 174 and duly authenticated by the proper officer;
(j) an invoice issued by a first stage or second stage dealer of imported goods registered under Rule 174 and duty authenticated by the proper officer;
(k) duplicate copy of a bill of entry generated on Electronic data Interchange System installed in any Customs or central Excise Commissionerate;
(l) a certificate issued by the Superintendent of Central Excise or by the proper officer in the Customs area under Rule 57E; and
(m) an invoice issued by a manufacturer of final product under sub-rule (3) of Rule 57F or sub-rule (1) of Rule 57S Explanation.For the purposes of this section,
(i) first stage dealer means a dealer who purchases the goods directly from
(a) the manufacturer under the cover of an invoice issued under Rule 52A or Rule 100E or from the depot of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer, under cover of an invoice issued under Rule 57G; or
(b) an importer or from the depot of an importer or from the premises of the consignment agent of the importer, under cover of an invoice issued under Rule 57G.
(ii) second stage dealer means a dealer who purchases the goods from a first stage dealer.
(4) No credit shall be taken by the manufacturer in respect of invoices referred to in clause (g) of sub-rule (3) after the 30th September, 1996.
(5) Credit shall also not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3) and where the intermediate products manufactured by the user of inputs specified under Rule 57J are received by the manufacturer, after nine months.
(6) Notwithstanding anything contained in sub-rule (3) or Rule 52A
(i) a manufacturer may take credit on inputs received in his factory; or
(ii) a person registered under Rule 174 for issue of invoice under Rule 57G, or as the case may be, under Rule 57T may make receipt entries in register maintained under Rule 57GG.
On the basis of
(a) original invoice, if duplicate copy of the invoice has been lost in transit; or
(b) a certificate issued by the proper officer of Customs at the port/airport of the importation of such goods, if triplicate copy of bill of entry or duplicate copy of bill of entry generated on Electronic Data Interchange System installed in any Customs or Central Excise Commissionerate, as the case may be, has been lost in transit, subject to the satisfaction of the Assistant Commissioner of Central Excise that the inputs have been received in the factory of the said manufacturer or, as the case may be, the said person registered under Rule 174, and the duty was paid on such inputs:
Provided that no credit or receipt entry, shall be allowed under this sub-rule after six months of the date of issue of the said invoice or bill of entry, as the case may be, and where the intermediate products manufactured by the user of inputs specified under Rule 57J are received by the manufacturer, after nine months.
(7) A manufacturer of the final products shall maintain,
(a) an account in Form R.G.23A, Parts I and II;
(b) in respect of duty payable on final products, an account-current with adequate balance to cover the duty of excise payable on the final products cleared at any time.
(8) A manufacturer of final products shall submit within five days after the close of each month to the Superintendent of Central Excise, a monthly return indicating the particulars of the inputs received during the month and the amount of credit taken. The manufacturer shall also submit original duty paying documents and extracts of Part I and Part II of For R.G. 23A maintained along with the monthly return to the Superintendent of Central Excise, who shall after verifying their genuineness, deface such documents and return the same to the manufacturer:
Provided that the Commissioner may, having regard to the nature, variety and extent of production or manufacture or frequency of removals
(i) fix in relation to any assessee or class of assesses a period shorter than one month for filing the aforesaid return;
(ii) permit that the aforesaid return may be filed by the assessee within a period not exceeding twenty-one days after the close of each month:
Provided further that in respect of a manufacturer availing of any exemption based on the value or quantity of clearances in a financial year, the provisions of this sub-rule shall have effect in that financial year as if for the expression month, the expression quarter were substituted.
(9) Where a manufacturer was, for sufficient reasons, not in a position to make a declaration under sub-rule (1) and makes the declaration subsequently, the Assistant Commissioner may, subject to the provisions of sub-rule (10) and for reasons to be recorded in writing, condone the delay in filing of such declarations and allow the manufacturer to take credit of the duty already paid on the inputs.
(10) The Assistant Commissioner shall not condone the delay unless he is satisfied that:
(i) the inputs were received in the factory not before a period of six months from the date of filing of such declaration;
(ii) the amount of duty for which credit is sought has actually been paid on such inputs; and
(iii) the inputs have actually been used or are to be used in the manufacturer of final products 4.2. The learned counsel for the appellant relied upon a decision of the Allahabad High Court in Commissioner of Central Excise v. Hindalco Industries Limited, 2013 (293) ELT 208 (All.) to plead that procedural lapses need not be cited as a ground for denying the Modvat Credit.
4.3. In the case of Hindalco Industries Ltd., referred supra, the assessee availed Modvat Credit without furnishing the duplicate copy of the invoice required under Rule 57G(2) of the Rules and reliance was placed on notification dated 9.2.1999, which amended Rule 57G and inserted sub-rule (11), which reads as under:
2. In the Central Excise Rules, 1944,-
(a) in rule 57G, after sub-rule (10), the following sub-rule shall be inserted, namely :
'(11) Credit under sub-rule (2) shall not be denied on the grounds that
(i) any of the documents, mentioned in sub-rule (3) does not contain all the particulars required to be contained therein under these rules, if such document contains details of payment of duty, description of the goods, assessable value, name and address of the factory or warehouse;
(ii) the declaration filed under sub-rule (1) does not contain all the details required to be contained therein or the manufacturer fails to comply with any other requirements under sub-rule (1);
Provided that the Assistant Commissioner of Central Excise having jurisdiction over the factory of manufacturer intending to take credit is satisfied that duty due on the inputs has been paid and such inputs have actually been used or are to be used in the manufacture of final products, and such Assistant Commissioner shall record the reasons for not denying the credit so in each case.' and under such backdrop, the Division Bench of Allahabad High Court held that procedural lapses need not be cited as a ground for denying the Modvat Credit.
4.4. In the case on hand, it is not in dispute that there is one invoice already produced which shows payment of duty on the goods removed from Visakhapatnam Steel Plant. But insofar as goods which have been split up into several smaller consignments, Rule 52A(4) of the Rules clearly mandates that if all the packages comprising a consignment are despatched in one lot at any one time, only one invoice shall be made out in respect of the consignment. It also provides that if, however, a consignment is split up into two or more lots each of which is despatched separately either on the same day or on different days, a separate invoice shall be made out in respect of each such lot. It further provides that in case a consignment is loaded on more than one vehicle, vessel, pack animal or other means of conveyance which do not travel together but separately or at intervals, a separate invoice shall be made out in respect of each vehicle, vessel, pack animal or other conveyance. The appellant in this case had not complied with the procedure contemplated under Rule 52A(4) of the Rules.
4.5. If each consignment was accompanied by an invoice as prescribed under Rule 52A(4) of the Rules and there was an error in the copy of the invoice, as set out in Rule 52A(3) of the Rules, then the provisions of Rule 57G(11) of the Rules can be made applicable. That could be called as a procedural lapse. In this case, a photocopy of the invoice cannot be recognised either as an original or duplicate or triplicate or quadruplicate. It is no document at all in terms of the Rules. Therefore, the requirement of Rule 52A(4) of the Rules having not been complied with, the appellant has been rightly denied the benefit of credit as applicable under Rule 57G of the Rules.
4.6. We find that in Hindalco Industries Ltd. case, referred supra, the duplicate copy of invoice was not available and that was sought to be cured by the amendment brought in by notification dated 9.2.1999, which amended Rule 57G and inserted sub-rule (11). However Rule 57G(11) of the Rules does not cure the non compliance of Rule 52A(4) of the Rules. It is not a case of procedural lapse and, therefore, the question of extending the benefit of Rule 57G(11) or the decision of Hindalco Industries Ltd. case, referred supra, to the appellant herein does not arise.
4.7. We, therefore, hold that the Tribunal was correct in denying the Modvat Credit in respect of clearance made in violation of Rule 52A(4) based on photocopies of documents, which we hold is no document at all as per the Rules.
4.8. In such view of the matter, the substantial questions of law (1) to (3) are answered against the assessee and in favour of the Revenue.
Substantial Question of Law (4):
5.1. We find from the records that there was an original copy of the invoice available along with the duty paid inputs, even though the duplicate copy was not available. Therefore, the issue raised under this substantial question of law gets covered by Rule 57G(11) of the Rules and the decision of the Allahabad High Court in Hindalco Industries Ltd. case, referred supra, is squarely applicable to this issue, which we respectfully follow.
5.2. Accordingly, we answer substantial question of law (4) in favour of the appellant.
6.1. The learned counsel for the appellant made a plea on levy of penalty stating that it is a bona fide clearance with no intention to evade duty. He pleads that the since there is no dispute with regard to the nature of goods and the duty paid, the penalty imposed should be set aside. Accordingly, the following question of law is formulated:
Whether in the facts and circumstances of the case penalty is leviable? 6.2. We have heard the learned counsel for the appellant and the learned Senior Standing Counsel for the second respondent on this question of law as well.
6.3. We find that in the present case the goods have been supplied by Visakhapatnam Steel Plant, a Government of India Undertaking, and the department has accepted the plea that the entire inputs have suffered duty. However, the only reason attributable for levy of penalty is that the goods were not accompanied with proper invoices, as required under Rule 52A(4) of the Rules. From a reading of the orders of the Tribunal and the authorities below, it is clear that the appellant had no intention either to evade payment of duty or to avail duty wrongfully. In such view of the matter, we set aside the penalty imposed on the appellant in both the cases and answer the question in favour of the assessee.
In the result, these appeals are disposed of in the above terms. No costs. Consequently, C.M.P.Nos.4982 and 4983 of 2006 are closed.
(R.S.J.) (G.M.A.J.)
8.8.2014
Index : Yes
Internet : Yes
sasi
To:
1. The Assistant Registrar,
Customs, Excise and Service Tax
Appellate Tribunal, South Zonal Bench
First Floor, No.27, Haddows Road
Chennai 600 006.
2. The Commissioner of Central Excise
6/7 ATD Street, Race Course Road
Coimbatore 641 018.
R.SUDHAKAR,J.
and
G.M.AKBAR ALI,J.
(sasi)
C.M.A.Nos.1202 and 1203 of 2006
8.8.2014