Custom, Excise & Service Tax Tribunal
Cce, Chandigarh vs M/S.Jcbl Ltd on 5 June, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 DIVISION BENCH COURT NO.1 Appeal No. E/2516/2007-Ex(DB) [Arising out of the OIA no.219/CE/CHD/07 dt.29.6.2007 passed by the CCE (Appeals), Chandigarh) Date of Hearing: 27.09.2016 Date of Decision: 05.06.2017 For Approval & signature: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Devender Singh, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes CCE, Chandigarh Appellant Vs. M/s.JCBL Ltd. Respondent
Appearance Shri Styapal, AR for the appellant Shri Gagan Kohli, Advocate for the respondent CORAM:Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Devender Singh, Member (Technical) FINAL ORDER NO. 61026/2017 Interim Order No.01/2017 PER: ASHOK JINDAL The appellant is in appeal against the impugned order.
2. The brief facts of the case are the respondent is engaged in the manufacture of motor vehicles bodies on duty paid chassis supplied by independent owners of chassis who have purchased these from the manufacturer after payment of duty and are availing exemption on such motor vehicle bodies. The respondent manufactured motor vehicle bodies for chassis who cleared the same on payment of duty for getting the body fabricated from outside and cleared those motor vehicle bodies on payment of duty. The respondent availed exemption on motor vehicles fabricated for independent owners of chassis. In terms of S.No.229 of Notification No.3/2001-CE dated 1.3.2001 and S.No.212 of Notification No.6/2002-CE dated 1.3.2002, the exemption under the said notifications is available subject to the conditions that the vehicles should be manufactured out of the chassis under heading 87.06 on which duty of excise has been paid and no credit of duty paid on such chassis and other inputs in the manufacture of such vehicles has been taken under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2001/2002. The respondent did not take cenvat credit of duty paid on the chassis received from the customer but had taken cenvat credit on the other inputs used in the manufacture of such vehicles. As the appellant had availed modvat/cenvat credit in respect of duty paid on other inputs, the goods cleared by the appellant were found to be not eligible for exemption. The respondent had paid an amount equal to 8% on the value of the bodies only, fabricated/mounted on the chases received from the private customer on the clearance of the vehicles under Rule 6 (3) (b) of Cenvat Credit Rules, 2001. The provisions of this Rule did not appear to be applicable to the appellant as the goods under consideration were not exempted. Therefore, the show cause notices were issued to the respondent which was adjudicated by the adjudicating authority. The demands were confirmed alongwith interest and penalty was also imposed penalties. The said order was challenged by the respondent before the Commissioner (Appeals), who set aside the adjudication order. Aggrieved with the said order, the Revenue is before us.
3. Learned AR submits that the respondent is not entitled for the exemption under Notification No.3/2001-CE dated 1.3.2001 and Notification No.6/2002-CE dated 1.3.2002. The respondent has availed the credit on other inputs. It is his submission that if the respondent is claimed the exemption then the respondent is liable to pay 8% of the value of chassis plus bodies of the vehicles, therefore, the impugned order is to be set aside.
4. On the other hand, learned Counsel for the respondent submits that the respondent has not taken the credit on duty paid chassis. The respondent has availed credit of the duty on other inputs for fabrication of bodies of that chassis. Therefore, the respondent is required reversed 8% of the value of motor vehicle bodies. The respondent has complied with the condition of Rule 6 (3) (b) of the Cenvat Credit Rules,2001 the impugned order is to be upheld.
5. Heard both sides and considered the submissions.
6. On careful consideration of the submissions made by both sides, we find that the exemption is available to the respondent if the vehicles are manufactured out of chassiss falling under chapter heading 87.06 on which the duty of excise has been paid and no the credit of duty paid on other inputs for fabrication of bodies of that chassis has been taken. Admittedly in this case the respondent has taken the credit on other inputs, therefore, the respondent is not entitled for exemption. Moreover, the case of the Revenue is that the respondent has availed exemption, in that circumstance, the goods to be treated as exempted goods and the respondent is liable to pay 8% of the value of the exempted goods which means chassis plus body. Admittedly, in this case, the respondent has not paid the amount of 8% of the value of chassis at the time of clearance of motor vehicle, therefore, the respondent has not paid the correct amount under Rule 6 (3) (b) of Cenvat Credit Rules, 2001. In that circumstance, we set aside the impugned order, confirm the demand of duty and upheld the demand confirmed by the adjudicating authority against the respondent alongwith interest.
7. We further note this is an issue of interpretation of exemption notification as well as Rule 6 (3) (b) of Cenvat Credit Rules,2001, in that circumstance, the penalty on the appellant is not imposable. Accordingly, the penalty imposed on the respondent in the adjudication order is set aside.
8. In nutshell, the following order is passed:
(a) The demand of Rs.57,16,828/- is confirmed
(b) The penalty imposed on the respondent is set aside.
9. With these terms, the appeal is disposed of.
(pronounced in the open court on ________________) (Devender Singh) ( Ashok Jindal) Member (Technical) Member (Judicial) mk Per : Devender Singh, Member (T)
10.1 I had the benefit of going through the order recorded by learned brother Shri Ashok Jindal, Member (Judicial). While I agree with the confirmation of demand of Rs. 57,16,828/- as concluded by learned Member (Judicial), I am unable to agree on the issue of non-imposition of penalty. Hence, I record a separate order in respect of penalty.
10.2 It is undisputed that the assessee has manufactured 142 motor vehicles out of the duty paid chassis received from different parties and cleared the same without payment of duty in terms of Sr. No. 229 of Notification No. 3/2001-CE dated 01.03.2001. The exemption under aforesaid notification is subject to the following condition:-
If manufactured out of chassis falling under heading No. 87.06 on which duty of excise has been paid and no credit of duty paid on such chassis and other inputs used in manufacture of such vehicle has been taken under Rule 57AB or Rule 57AK of the C.E.R., 1944. 10.3 The above condition is clear and unambiguous. It has two parts. The first part states that no credit of duty paid on the chassis is taken. The second part states that no credit of duty paid on other inputs is taken.
The party did not take cenvat credit of duty paid on the chassis received from the customer but had taken cenvat credit on the other inputs used in the manufacture of such vehicles. As the party had availed modvat/cenvat credit in respect of duty paid on other inputs, the goods cleared by the party were found to be not eligible for exemption. The act of not availing credit on chassis and availing on other inputs shows that it has been done deliberately as the wording of the condition is clear and unambiguous and mentioned together, which leaves no room for any doubt or any interpretation. In a case like this, it is not a bonafide mistake but a clear case of deliberate misstatement of facts in their ER-1 declaration month after month in order to obtain illegal benefit.
10.4 Further, as rightly pointed out by the adjudicating authority in the extract of O-I-O below, the respondents also deliberately violated the Rule 6(3)(b) of Cenvat Credit Rules, 2002:
I find that Rule 6(3)(b) of Cenvat Credit Rules prescribes that in case a manufacturer uses common inputs for the manufacture of both dutiable and exempted goods and takes credit of duty paid on such common inputs, he will pay an amount equal to 8% of the total value of exempted goods before their clearance from the factory. This has been prescribed to nullify the effect of credit taken on inputs. Therefore, after reversal of 8% amount, these inputs do not remain cenvated ones and are at par with inputs on which no credit has been taken. Accordingly, it will not deter the noticees from availing the benefit of provisions of notification no. 3/2001 and 6/20012. I have also examined the CEGATs decisions cited by the noticees and find that these cover an analogous situation. The Honble CEGAThas held that after payment of the amount of 8%, the noticees cannot be said to have availed credit on inputs. Both these CEGAT order have since been affirmed by Honble Supreme Court reported as 1996 (81) ELT 3 (SC) and 2006 (133) ECR 0150 (SC).
In the instant case , the exempted goods are described as complete motor vehicles under Notification No. 3/2001 dt. 1.3.2001 and 6/2002 dt. 1.3.2002. The total price referred in Rule 6(3)(b) of CCR, 2001 shall refer to the assessable value of complete motor vehicle, as per Chapter Note 3 to Chapter 87 of Central Excise Tariff.
However, I find that the noticee had reversed / paid an amount to 8% of the value of the bodies of the motor vehicles whereas they were required to pay 8% of the total value of the exempted goods i.e. complete motor vehicle manufactured by them. Therefore, it is proved that they have neither fulfilled the condition of Rule 6(3)(b) of CCR, 2001/2002 nor that of Notification No. 3/2001 dt. 1.3.2001 etc. i.e. non availment of cenvat credit in respect of other inputs used in manufacture of motor vehicles. Thus, they were not eligible for availment of benefit of Notification No. 3/2001 ibid and 6/2002 ibid. By doing so they have contravened the provisions of these notifications and made themselves liable for penalty under Rule 25 of C.E. Rules, 2002. 10.5 Since the benefit of exemption is an exception for which the respondents have to actively bring themselves into the purview of that exemption to get benefit by complying with condition(s) therein, availing the benefit of notification despite non-fulfillment of the condition in the face of unambiguous law and by way of willful misstatement shows a clear intent to evade the duty. In the case of reversal of Cenvat Credit, there is no ambiguity that 8% of the total value of exemption goods was to be reversed. Still, they reversed / paid an amount to 8% of the value of bodies of the motor vehicles instead of complete motor vehicle. There is no question of interpretation involved as the law again is very clear. In these circumstances, the penalty under Rule 25 ibid is completely justified.
11. In view of the forgoing, the order of Commissioner (Appeals) in respect of non-imposition of penalty is also set aside and the order of adjudicating authority is restored in toto.
12. In the result, the Revenues appeal is allowed.
Devender Singh Member (Technical) Difference of opinion As there is a difference opinion on the issue of imposing penalty on the respondent, therefore the matter be placed before the Honble President to appoint third Member to resolve the following issue:-
Whether in the facts and circumstances of the case, the penalty on the respondent can be imposed or not ? (Order pronounced in the court on 19.01.2017) Devender Singh Member (Technical) Ashok Jindal Member (Judicial) RAS Per : Mr. Anil G. Shakkarwar Heard the parties and perused the record.
13. Ld. Brother Shri Devender Singh, Member (Technical) in Para 10.5 has held that in the case of reversal of Cenvat credit, there is no ambiguity that 8% of the total value of exemption goods was to be reversed. Still, they reversed/ paid an amount to 8% of the value of bodies of the motor vehicles instead of complete motor vehicle. There is no question of interpretation involved as the law again is very clear. In these circumstances, the penalty under Rule 25 is completely justified.
I find from the Clause (b) of sub Rule 3 of Rule 6 of Cenvat Credit Rules, 2001 which were applicable during the material period of show cause notice, provided that the manufacturer shall pay an amount equal to 8% of the total price excluding sales tax and other taxes, if any, paid on such goods of the exempted final products charged by the manufacturer. I sought to know from the ld. DR whether the respondent has paid 8% on the value less than the value charged by the manufacturer to which he has informed that the said show cause notice is silent on the same. It is undisputed that the respondent have paid 8% on the price they have charged from their customers. Therefore, I am of the opinion that the finding of Ld. Brother Shri Devender Singh, Member (Technical) that in these circumstances, the penalty under Rule 25 is completely justified cannot be agreed to by me. I therefore, agree with the findings of the ld. Brother, Shri Ashok Jindal, Member (Judicial).
14. The question framed is answered in the negative. To further clarify, I hold that in the facts and circumstances of this case, penalty on the respondent is not imposable. With these findings, I return the file to the Presiding Member Shri Ashok Jindal, Member (Judicial) for further proceedings.
(Order dictated in the open court) (Anil G. Shakkarwar) Member (Technical) FINAL ORDER NO. 61026/2017 In view of the majority decision, the demand of Rs. 57,16,828/- along with interest is confirmed and penalty imposed on the respondent is set-aside. With these terms, the appeal is disposed of.
(Order pronounced in the court on 05.06.2017) Devender Singh Member (Technical) Ashok Jindal Member (Judicial) KL 1 Appeal No.E/2516/2007 CCE, Chandigarh vs. JCBL