Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise And ... vs Bhushan Steel Ltd. on 2 March, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Excise Appeal No. 1931 of 2012
(Arising out of Order-in-Original No. 15/AT(15)Commr/RGD/12-13 dated
31.08.2012 passed by Commissioner of Central Excise & Service Tax, Raigad)
Commissioner of CE & ST, Raigad Appellant
Utpad Shulk Bhavan, Plot No.01, Sector-17,
Khandeshwar, Navi Mumbai 410 206.
Vs.
M/s. Bhushan Steel Ltd. Respondent
Samba Phata, Khopoli-Pen Road,
Taluka Khalapur, Dt. Raigad
Appearance:
Shri Sunil Kumar Katiyar, Assistant Commissioner, Authorised
Representative for the Appellant
None for the Respondent
CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
Date of Hearing: 02.03.2023
Date of Decision: 02.03.2023
FINAL ORDER NO. 85824/2023
PER: SANJIV SRIVASTAVA
This appeal by revenue is directed against the order in
original No 15/AT(15)Commr/RGD/12-13 dated 31.08.2012
passed by Commissioner of Central Excise & Service Tax,
Raigad. By the impugned order following has been held:
"58. In view of the foregoing, it is concluded that prior to the
issue of circular dated 24.06.2010 the demand for reversal of
CENVAT credit on the inputs shall not sustain as discussed supra
and. As has discussed supra, it cannot be concluded that the
noticee has suppressed the fact of their activity of pickling and
oiling of H.R. coils and hence, the proposal for demand under
rule 15(2) of CENVAT Credit Rules, 2004 read with section 11AC
is also not sustainable. Similarly, when it is concluded that there
is no liability by reversal of CENVAT credit as proposed in the
notice, the payment of interest under section 11AB is also not
sustainable.
2 E/1931/2012
59. In view of the foregoing discussions and findings, the
demand for reversal of CENVAT credit taken and availed by the
noticee on the inputs used in the processing of pickling and oiling
of H.R. coils prior to 24.06.2010 shall not sustain on the
following grounds:
i. Hon'ble CESTAT and Hon'ble Bombay High Court have held
in Ajinkya Enterprises, Pune, that once the duty on final product
has been accepted by the department, the CENVAT credit availed
need not be reversed even if the activity does not amount to
manufacture. In view of these decisions of higher ties, reversal
of CENVAT credit is not sustainable in the instant case prior to
issue of clarification 24.06.2010 by the Board. The Department
has also continued letting the payment of duty on these goods in
monthly ER-1's and ARE-Is issued for export under bond or
under claim of rebate without objection and thus the proposal for
reversal of CENVAT credit shall not sustain during the material
period.
ii. The demand is also hit by bar of limitation as discussed supra.
60. Apart from the above, the noticee is not liable for penal
action and the amount paid by them as duty during the material
period on the impugned goods cannot be treated as deposit
under section 11D, as discussed earlier.
61. In view of the foregoing I hold thus:
ORDER
I drop the proceedings initiated vide show cause notice No. F.No V.Adj(SCN)/15-65/Rgd/11-12/ dated 07.06.2011 issued to M/s. Bhushan Steel Ltd."
2.0 Revenue has filed this appeal stating following grounds for review of the impugned order.
"Grounds for Review 4.1 The order passed by the Commissioner, Central Excise, Raigad in the instant case appears to be not legal and proper on the following grounds 4.2 The Commissioner has held that the process undertaken by 'BSL' does not amount to manufacture and observed that the assesssee gets the benefit for the period prior to 24.06.2010 in
3 E/1931/2012 view of the fact that the denial of the process to be manufacture by the Board was effective after the issue of circular on 24.06.2010 and that the departmental circular will have prospective effect and not retrospective effect in view of the Apex Court judgement in H.M.Bags Manufacture Vs. CCE [1997(94)ELT 3(SC)] 4.3 The Commissioner has failed to take note of the fact that Board vide its Circular No. 927/17/2010 C X dated 24.06.2010 had only clarified that mere undertaking the process of oiling and pickling as preparatory steps do not amount to manufacture. Since the Board Circular is clarificatory in nature, it has got retrospective effect. The Apex Court judgement cited by the adjudicating authority is misplaced in as much as in the Board Circular dated 24-09-1992 referred in the Apex Court judgement, the Board had used the word 'henceforth' and accordingly, it was held that the Board Circular has got retrospective effect whereas in the Circular dated 24.06.2010, the Board has used the word 'clarified' and not 'henceforth'.
4.4 The Commissioner has accepted the contention of 'BSL' that they have not suppressed the fact from the knowledge of the department as several CERA EA-2000 and Special CENVAT Check Audit teams had verified their records 4.5 The Commissioner has failed to take note of the observation of the Hon'ble Tribunal in the case of Collector of Central Excise, Aurangabad Vs. Tigrania Metal & Steel Industries [2001 (132) ELT 0103 (Tri.-Del)] that 'From the mere visit to the factory premises, by the Audit Party, it could not be legally inferred that the Revenue had the knowledge about the availment of the benefit of notification in question by the respondents wrongly and illegally'. Further, in the case of Chemfab Alkalies Ltd Vs. CCE, Pondicherry [ 2010 (251) ELT 264 (Tri.-Chennai), the Honb'le Tribunal has observed that "Besides, it is well known that the department has a regular programme of audit, under which different units are audited according to the frequency laid down, for example, a bigger unit having more transactions and paying more revenue is audited more frequently, say, once in 6 months. It cannot be a case of anybody that since all the excisable units are being audited by 4 E/1931/2012 the department from time to time, the extended period of limitation will not apply in respect of any unit. Such an interpretation would render the relevant legal provision regarding application of extended period of time totally redundant and hence cannot be accepted. Therefore, the Commissioner suppression of fact as CERA and internal audit have visited their factory and audited their records.
4.6 The Commissioner has held that the process undertaken by 'BSL' in the instant case does not amount to manufacture. Once the process is held as not amounts to 'manufacture', then 'BSL' is not entitled to CENVAT credit in terms of rule 3 read with rule 6 of CENVAT Credit Rules, 2004, according to which the credit of duty paid on inputs is allowed only if these inputs are used in the manufacture of the final product.
4.7 The Commissioner relied on the judgement of the Apex Court in Maruti Suzuki case [2009(240)ELT 641(SC)] wherein it was held that the crucial requirement for goods to qualify as inputs is that they should be used in or in relation to the manufacture of the final product and observed that oiling and pickling is not a process even parallel to manufacture and hence availing of CENVAT credit is highly doubtful. However, the Commissioner did not order recovery of CENVAT credit wrongly availed by 'BSL' for the period prior to 24.06.2010 by relying on the judgement of the Hon'ble Bombay High Court in Ajinkya Enterprises, Pune wherein it was held that the duty paid by the appellants has been accepted by the department, which is admittedly more than the CENVAT credit availed by the appellants and therefore, the appellants are not required to reverse the credit.
4.8 Rule 14 of the CENVAT credit rules, 2004 stipulates that 'Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same alongwith interest shall be recovered from the manufacturer or the provider of the output service and the provisions of section 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.
4.9 The Commissioner should have ordered recovery of interest under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 as 'BSL' had 5 E/1931/2012 wrongly availed CENVAT credit in terms of rule 3 read with rule 6 of CENVAT Credit Rules, 2004.
4.10 The Commissioner has failed to note that in the case of Printo India Graphics (P) Ltd Vs. CCE. Delhi-l [2012(273)FIT 592 (Tri -Del)] the Division Bench of the Tribunal has held that The issue regarding the liability to repay the credit with interest clearly stands answered by the above decision of the Apex Court and needs no further elaboration'. The said judgement of the Tribunal has been upheld by the Hon'ble Supreme Court [2012 (282) ELT A046 (SC)]. The Division Bench has relied on the decision of the Apex Court in the case of Union of India Vs. Swift Laboratories Ltd [2011(265) ELT E(SC)], wherein the Apex Court has held that Rule 14 of Cenvat Credit Rules, 2004 specifically providing for interest when Cenvat credit taken or utilized wrongly or erroneously refunded hence interest on irregular credit arises from date of taking such credit. Therefore, the Commissioner should have ordered recovery of interest under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944.
4.11 The show cause notice propose to treat the amount paid as duty of excise on 'H.R.Pickled and Oiled coils' as deposit under the provisions of Section 11D of the Central Excise Act, 1944. The Commissioner has held that the amount paid by "BSL' at the time of removal of goods cannot be termed as 'deposit' under Section 11D ibid.
4.12 The Commissioner has failed to note that the CBEC vide its Circular No. 940 / 1 / 2011 - CX., dated 14-01-2011 has clarified that 'in case the assessee pays any amount as Excise duty on such exempted goods, the same cannot be allowed as 'CENVAT Credit' to the downstream units, as the amount paid by the assessee cannot be termed as 'duty of excise' under Rule 3 of the CENVAT Credit Rules, 2004. The amount so paid by the assessee on exempted goods and collected from the buyers by representing it as 'duty of excise' will have to be deposited with the Central Government in terms of Section 11D of the Central Excise Act, 1944.....". In view of the said Circular, the Commissioner should have treated the amount paid by 'BSL' as 'deposit' under Section 11D ibid.
6 E/1931/2012 4.13 In view of the foregoing facts and circumstances, the Committee holds that the impugned order is not proper and legal"
3.1 None was present on the behalf of respondent at the time of hearing. Since the issue is in very narrow compass we heard Shri Sunil Kumar Katiyar, Assistant Commissioner, Authorized Representative for the revenue.
4.1 We have considered the impugned order along with the submissions made in appeal and during the course of hearing.
4.2 from the perusal of the impugned order it is evident that the order follows the decision of Hon'ble Bombay High Court in the case of Ajinkya Enterprises [2013 (294) E.L.T. 203 (Bom.)] holding as follows:
"9. It is relevant to note that the Board in its Circular dated 7th September, 2001 had only held that the activity of cutting/slitting of HR/CR coils into sheets or strips constitutes manufacture. Admittedly, the assessee had carried on additional activities such as pickling and oiling on the decoiled HR/CR coils, which is a complex technical process involving huge investment in plant and machinery. Since these additional activities were not considered by the Board in its Circular dated 7th September, 2001, the withdrawal of the said Circular cannot be a ground to hold that the activity carried on by the assessee did not constitute manufacturing activity. It is only on 24th June, 2010, the Board has issued a Circular to the effect that the process of pickling does not amount to manufacture. Therefore, during the relevant period, that is, during the period from 2nd March, 2005 to 31st December, 2005, it could not be said that the issue was settled and that the assessee paid duty on decoiled HR/CR coils knowing fully well that the same were not manufactured goods. If duty on decoiled HR/CR coils was paid bona fide, then availing credit of duty paid on HR/CR coils cannot be faulted.
10. Apart from the above, in the present case, the assessment on decoiled HR/CR coils cleared from the factory of the assessee on payment of duty has neither been reversed nor it is held that the assessee is entitled to refund of duty paid at the time of clearing the decoiled HR/CR coils. In these circumstances, the 7 E/1931/2012 CESTAT following its decision in the case of Ashok Enterprises - 2008 (221) E.L.T. 586 (T), Super Forgings - 2007 (217) E.L.T. 559 (T), S.A.I.L. - 2007 (220) E.L.T. 520 (T) = 2009 (15) S.T.R. 640 (Tribunal), M.P. Telelinks Limited - 2004 (178) E.L.T. 167 (T) and a decision of the Gujarat High Court in the case of CCE v. Creative Enterprises reported in 2009 (235) E.L.T. 785 (Guj.) has held that once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity docs not amount to manufacture. Admittedly, similar view taken by the Gujarat High Court in the case of Creative Enterprises has been upheld by the Apex Court [see 2009 (243) E.L.T. A121] by dismissing the SLP filed by the Revenue."
Appeal filed by the revenue is totally silent in this respect and is contrary to the said decision of Hon'ble Bombay High Court, which is the jurisdictional High Court.
4.3 We do not find any merits in the appeal.
5.1 Appeal field by revenue is dismissed.
(Order pronounced in the open court) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) tvu