Custom, Excise & Service Tax Tribunal
M/S. Dhanuka Pesticides vs Cce on 21 February, 2013
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Court No.II
E/Appeal No.868/2005
(Arising out of order in appeal No.465/AKG/GGN/2004 dated 8.12.2004 passed by the Commissioner of Customs & Central Excise(Appeals), Gurgaon )
Date of Hearing: 8.1.2013
Date of Pronouncement:
For Approval and signature:
Honble Mrs. Archana Wadhwa, Member Judicial
Honble Mr.Sahab Singh, Technical Member
_________________________________________________
1. Whether Press Reporters may be allowed to see
The order for publication as per Rule 27 of the
CESTAT(Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of
the CESTAT (Procedure) rules, 1982 for
publication in any authoritative report or not?
3. Whether their lordships wish to see the fair
copy of the order?
4. Whether order is to be circulated to the
Department Authorities?
M/s. Dhanuka Pesticides Appellants
Vs
CCE, Respondent
Appeared for the Appellant: Shri Amit Jain, Advocate Appeared for the Respondent: Shri S. Jain, DR Coram: Honble Mrs. Archana Wadhwa, Member Judicial Honble Mr. Sahab Singh, Member Technical Interim ORDER 126/2013 FO 58256/2013 Per Sahab Singh:
This is an appeal filed by M/s Dhanuka Pesticides Ltd (hereinafter referred to as appellant) against the order in appeal No.465/AKG /GGN/2004 dated 8.12.2004. The brief facts of the case are that the appellants are manufacturers of Pesticides/Insecticides and are availing the cenvat credit on inputs used in the manufacture of pesticides/insecticides. On the visit to their factory on 26.11.2001, it was found by the officers that appellants had availed cenvat credit in respect of rejected goods received back in part consignments from their own sales depot under the cover of challans/bills/invoices issued by the depot. The Assistant Manager of the appellant in his statement has stated that none of Depots were registered with the Central Excise Department and challans/bills/invoices did not indicate duty paying particulars. Therefore, the department felt that the appellants were not entitled to cenvat credit on challans/bills/invoices as these documents did not belong to category of documents specified under Rule 7 of Cenvat Credit Rules. Accordingly, three show cause notices for different periods were issued to the appellants demanding the credit along with interest and also proposing imposition of penalty on them. Three show cause notices were adjudicated by the Additional Commissioner on 19.3.2004 who confirmed the demand of duty amounting to Rs. 46,51,067/- along with interest and also imposed penalty of Rs. 15 lakhs on them under Rule 13 of Cenvat Credit Rules. The appellants challenged the order of Original Authority before the Commissioner (Appeals) who vide the impugned order has rejected their appeal. The appellants are in appeal before this Tribunal against the order passed by the Commissioner.
2. The learned Advocate appearing for the appellants submits that they had correctly availed the cenvat credit on damaged finished goods as provided under Rule 16 of the Central Excise Rules. He submits that under Rule 16, the appellant received back the duty paid goods in the factory and they are entitled to take the cenvat credit of duty paid on goods received back. Since the goods received are duty paid, there is no reason to deny the cenvat credit to the appellants. He further submits that under Rule 7 of the Cenvat Credit Rules, documents have been prescribed on the basis of which the cenvat credit can be taken. Since the invoices issued by the manufacturers are acceptable as documents and since the appellants received back the goods under cover of invoice/challans and bills raised by their sale depot, these invoices are eligible as documents under Rule 7 of Cenvat Credit Rules. He also submits that the original excise invoices issued by the factory were also being sent by the sales depot along with challans/bills/transfer invoices to make it convenient for verification. Since there is no ground for denial of cenvat credit, there is no case for demanding of interest as well as imposition of penalty. He also points out that there is a computation error in respect of show cause notice dated 25.4.2003 in which the credit of Rs. 85,687/- has also been denied though that amount is in respect of certain cancelled invoices and not in respect of returned goods. He also relied on the decision of the Tribunal in the case of Hitesh Pesticides Ltd 2009 (243) ELT 419 and the decision of the Honble High Court of Uttrakhand in the case of CCE Meerut Vs Polyplex Corporation Ltd 2008 (243) ELT 46.
3. The DR appearing for the Revenue reiterates the findings of the lower authorities and submits that the goods which were received back in the factory were not in the same packing in which they had been originally cleared from the factory and goods coming back did not have any batch number mentioned on the goods. He submits that the original authority has examined the issue for verification of the receipt of the damaged goods and came to the conclusion that identification of the returned goods with original invoices is a remote possibility. He therefore, submits that in absence of any verification with the duty paying documents, the credit has rightly been denied to them.
4. After hearing both sides, we find that the dispute in the appeal is regarding the availability of cenvat credit of duty paid on its returned goods. We find that Rule 16 of the Central Excise Rules reads as under:
RULE 16 Credit of duty on goods returned to the factory. (1) Where any goods on which duty has been paid at the time of removal thereof are subsequently returned to the factory for being re-made, refined, re-conditioned or for any other reason, the assesse shall state the particulars of such return in his records and shall been tiled to have CENVAGT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2001 and utilize this credit according to the said rules.
[(2) If the process to which the goods are subjected before returning does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods returned under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.] (3) If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (20, the assessee may receive the goods for being remade, refined re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the Commissioner.
5. After going through the Rule, we find that for availing the cenvat credit under Rule 16, the goods returned back to the factory should be duty paid. The documents submitted by the appellants to the department failed to establish the duty paid character as the goods are not verifiable with the documents submitted by the appellants. The appellants are clearing the goods from the factory in the packing of five numbers or multiple of five whereas it is observed by the lower authorities that in number of cases, the goods were not received in the packing of five or multiple of five but received in such quantities which are neither in five numbers nor multiple of five. It is also observed by the lower authorities that the goods have not been received in the same packing in which they were originally cleared from the factory and their identification with the duty paying documents is a remote possibility This is also admitted fact that the batch number of goods are mentioned on the outer packing of the goods which means no such batch number was mentioned on the goods themselves. In such a situation, identity of goods received back cannot be verified with goods originally cleared.
6. We therefore, are of the view that the duty paid character of the goods received in peace meal is not verifiable. The lower authorities are justified in denying the credit to the appellants. In view of the above, we hold that the appeal filed by the appellants does not have any merit and we accordingly reject the same.
(Order pronounced in the open Court on..) (ARCHANA WADHWA) Member Judicial (SAHAB SINGH) Member Technical MPS* Per Archana Wadhwa:
7. Having gone through the order proposed by my learned brother, I proceed to record a separate order, as I do not find myself in agreement with the order proposed by learned Member (Technical).
8. As per facts on record, the appellants are engaged in the manufacture of insecticides and pesticides and were clearing the same from their factory in lots of 5 pieces / units or multiples thereof. The said clearances are being made to their sale depots located through out the country under the cover of Central Excise invoices and from there the said insecticides are further sold to farmers situated in villages in various parts of the country. During transit, finished goods get damaged or the same may get damaged at their depots or outer packing of the finished goods become unsuitable for marketing, the same are sent back by their sales depots to their factory for the purpose of remade etc under the cover of stock transfer invoices/ challans/ bills. The documents issued by the sale depots contain the following particulars:
(a) Description of the goods.
(b) Original Invoice Number and Date under cover of which the said goods were cleared from the factory.
(c) Quantity of damaged goods returned i.e. the number of packs returned and the quantity in each pack.
(d) The rate per pack of damaged goods and the total amount.
9. On receipt back of the goods, the appellants availed the Cenvat credit of duty originally paid by them at the time of clearance of goods. The necessary entries are made in the register as regards the returned goods and the same are then reproduced and cleared again on payment of duty.
10. In the above background appellants were issued 3 show cause notices proposing denial of Cenvat credit on the ground that said credit stand availed on the basis of delivery challans issued by the sales depots which cannot be considered to be eligible modvatable documents for the purpose of availment of credit as the same are not specified documents under Rule 7 of Cenvat credit Rules. The said show cause notice stands confirmed by the lower authorities and upheld by the Commissioner (Appeals). Hence, the present appeal.
11. First of all I find that the allegations in the show cause notice was that documents issued by the sales depots on the basis of which the appellant have availed the credit are not prescribed documents in terms of Rule 7 of the Cenvat Credit Rules, 2002. I may make a specific reference to Show cause notice dated 25.4.2003 alleging and proposing as under:
As per Rule 16 of the Central Excise Rules, 2002, the assessee can avail CENVAT credit on returned goods as if such goods are received as inputs under CENVAT Credit Rules, 2002. Further, Rule 7 of CENVAT Credit Rules 2002 provides/prescribes the documents on which CENVAT credit can be taken by the manufacturer. The Rule 7 of the CENVAT Credit Rules 2002 provides/prescribes the following documents on which a manufacturer shall take the CENVAT credit:-
(a) an invoice issued by-
(i) a manufacturer for clearance of-
(I) inputs or capital goods from his factory or 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; (II) inputs or capital goods as such;
(ii) an importers;
(iii) an importer from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may be, is registered in terms of the provisions of the Central Excise Rules, 2002;
(iv) a first stage dealer or a second stage dealer.
As such, in the instant case, the party had taken CENVAT credit on the basis of challans/bills/invoices issued by their sales depots, but the Rule 7 ibid forbids these documents for taking CENVAT credit. These challans/bills did not indicate the duty particulars. Moreover none of the sales depots was registered with the Cenvat Excise Authorities. For the period 1.4.2002 to 31.3.2003, the party had availed CENVAT credit amounting to Rs. 34,94,757/- on the returned goods by their sales depots as per details given in the Annexure-I to this show cause notice.
From the above, it appears that M/s. Dhanuka Pesticides Ltd. have contravened the provisions of Rule 7 of CENVAT Credit Rules 2002 in as much as that they have availed CENVAT credit on the basis of documents not prescribed under the rules. Thus, it appears that the CENVAT credit amounting to Rs. 34,94,757/- is recoverable from the party and that acts of commission and omission narrated above have rendered the party liable to penalty in terms of provisions of Rule 13 of the CENVAT Credit Rules.
12. As is seen from the above notice, the Revenue proposed to deny the credit on the sole ground that the delivery challans issued by the sales depots are not prescribed documents under Rule 7 and as such, the credit availed by the appellant was not proper. However, while adjudicating, lower authorities have drifted from the said allegation and has extended the scope of proceeding by introducing another allegation that the goods received back from the sales depots cannot be correlated with the goods originally cleared.
13. I find that it is well settled law that the orders beyond the scope of allegations made in the show cause notice are not sustainable. There was no allegation in the notice doubting the fact of returned goods being different than the one originally cleared. The revenue cannot make out a new case at the adjudicating or appellate stage. The Honble Supreme Court in the case of Godrej Industries vs. CCE, Mumbai [2008 (229) ELT 484 (SC)] has observed that the finding of the Tribunal on the disputed issue was based on the ground not taken in the show cause notice. Accordingly the order was set aside and matter was remanded. Similarly, in the case of Nilos India Pvt. Ltd. vs. CC Chennai [2009 (241) ELT 270 (Tri-Chen)], it was observed that new case different from the one which stand decided by the original adjudicating authority cannot be made. In fact I would observe that there is plethora of precedent judicial decisions laying so and there is no end for reference to all of them. As it is well settled that the Revenue has to adjudicate the matter on the basis of allegations made in the show cause notice and no new case can be made out without putting the assessee on notice, and as such, on this short ground itself the impugned orders are required to be set aside.
14. In any case and in view of the matter I find that the provisions of Rule 16 allows the assessee to receive back the damaged originally cleared goods and to avail the credit of duty paid at the time of original clearance if the said returned goods were inputs. The Revenues objection that credit cannot be availed on the basis of documents of the sender of the goods has no merits inasmuch as in that case the manufacturer assessee would never be able to take the credit thus defeating the very purpose of existence of Rule 16. In fact, I need not go to the detailed reasoning on the said count inasmuch as the issue stands decided by following decisions of the Tribunal:-
(i). CCE, Meerut-II v Polyplex Corporation Ltd.
[2008 (224) ELT 46 (Uttarakhand)];
(ii) Hitesh Plastic Pvt. Ltd. v CCE & C Vapi [2009 (243) ELT 419 (Tri-Ahmd)];
(iii) Jindal Photo Ltd v CCE, Vapi [ 2009 (247) ELT 730 (Tri-Ahmd)]; and
(iv) CCE(A) Vapi v Vapi Paper Mills [2009 (234) ELT 538 (Tri-Ahmd)]
15. As regards the identity of returned goods, I have carefully examined the provisions of Rule 16 as also various trade notices issued by the Commissionerate. On going through the provisions of Rule 16, I find that the same allows Cenvat credit of duty originally paid, as and when such cleared goods are subsequently returned. There is no requirement in terms of said Rule to establish the identity of the returned goods and to co-relate the same with the originally cleared goods with reference to any identification marks etc. The said Rule has been subject matter of various circulars/ trade notices etc. issued by the Revenue from time to time. Mysore Commissionerate Trade Notice No. 21/2004 dated 11.5.04 lays down the procedure under Rule 16, which is required to be followed by the manufacturer. It stands observed in the said trade notice that the assessee receiving the duty paid goods may avail Cenvat credit based on the documents under which the goods were returned or on ones own office copy of document under which the goods were originally cleared. It is only on receipt of goods without accompanying the duty paying documents that the assessee is required to identify the goods from marks, numbers etc. based on photocopy of the duty paid documents available and he accordingly would avail Cenvat credit. In terms of said trade notice, ;even a part of the goods can be sent back. In terms of the said trade notice an assessee receiving the goods for remaking / reconditioning/ refining etc. should maintain sufficient private records to show the following:-
(i) the details of receipt of duty paid goods
(ii) the person from whom the goods are received.
(iii) the reasons for receipt, that is, whether it is for repair or remanufacture etc.
(iv) approximate time required to do the repair/remanufacture etc.,
(v) value of the goods received
(vi) Duty involved
(vii) Nature and value of repairs / re-processing proposed to be undertaken
(viii) Details of the value, description & duty paid on the (inputs/components /spares /accessories etc. used for such purposes)
(ix) Date of issue and date of usage of such items
(x) Date and mode of dispatch and
(xi) Any other relevant information.
The invoice raised at the time of redespatch of goods after repair, remanufacture etc., should have the endorsement re-despatch of goods under Central Excises Rule 16. The amount of the applicable duty paid should also be mentioned in the said invoice raised. Further, a reference to the intimation filed / permission granted at the time of entry of duty paid goods should also be mentioned in the referred invoice.
It is not the Revenues case that the appellants have not maintained the proper records etc. showing the receipt of returned goods and there subsequent refining, reconditioning and clearance on payment of duty. In such a scenario, the refusal to grant the Cenvat credit would be unjust and unfair.
Reference can also be made to Boards circular No. 267/44/2009-CX-8 dated 25.11.09 laying down that the credit should be allowed to be availed by the manufacturer on its own invoice.
16. When viewed in the light of the above material, I find that the provisions of Rule 16 is a beneficial piece of legislation allowing the manufacturer to avail the credit of duty in case of return of goods which were originally cleared by him on payment of duty. The safeguard for such availment of credit stands prescribed by way of trade notice and clarifications. As long as goods are received back under the cover of duty paying documents, which are easily co-relatable to the received back goods, no further insistence on identification marks is required. The goods in the present case are insecticides and pesticides, which do not carry any such manufacturing number or any other identification marks. The same are packed in units of 5 or multiples thereof. It is not necessary that the entire packing cleared by the appellant would get damage and it may happen in certain cases that part of the certain goods gets damage. In such a scenario, only a part of the goods are returned back to the appellant. Insistence on the fact that entire goods in the original packing should go back, would defeat the very purpose of Rule 16. In my views the said Rule 16 would become otiose in respect of number of goods manufacturer inasmuch as most of the goods do not carry any identification marks on them. Inasmuch as in the present case it is the chemicals which do not carry any marks etc. the same can be identifiable with the original clearance only on the basis of original duty paying documents and the Revenues insistence on the identification particulars cannot be appreciated.
17. In any case, I find that the appellants have produced on record the detailed chart showing co-relation of each of the returned consignment with the original clearance. I really fail to understand if such a co-relation with the original duty paying document is not sufficient, the assessee manufacturer of such type of goods will never be able to avail the benefit of Rule 16.
18. In view of the foregoing discussion, I find no merit in the impugned order and accordingly I set aside the same and allow the appeal with consequential relief to the appellant.
(Pronounced in the open court on )
( Archana Wadhwa ) Member(Judicial)
( Sahab Singh ) Member(Technical)
ss
Difference of Opinion
Whether the confirmation of duty and penalty is required to be upheld and appeal rejected as held by learned Member (Technical) or the same is required to be set aside and appeal to be allowed with consequential relief to the appellant as held by learned Member (Judicial) ?
( Archana Wadhwa ) Member(Judicial)
( Sahab Singh ) Member(Technical)
19. In view of the difference of opinion, the Registry is directed to take necessary steps to resolve the above difference in views.
(Pronounced in the open court on )
( Archana Wadhwa ) Member(Judicial)
( Sahab Singh ) Member(Technical)
ss
PER: D.N.PANDA
20. Primarily reading of show cause notice and page 7 of the paper book reveals that while Revenue intended to make a case under Rule 16 Central Excise Rules 2001, it proceeded to make allegation under Rule 7 of Cenvat Credit Rules 2001. No doubt Rule 7 lends support to Rule 16. But substantial allegation when appears to be under Rule 16 adjudication proceeded to examine technicality of that Rule without testing the principal allegation. Such observation is suffice to answer the difference Ld. Judicial Member examining rule 7 in para 12 of the order reached to conclusion which appears to be proper. Accordingly, the difference is to be answered in favour of the assessee and ordered accordingly.
2. Registry is directed to place the record before the appropriate Bench for passing the majority order.
[Dictated & Pronounced in the open Court.
(D.N.PANDA) JUDICIAL MEMBER Anita Final Order In view of the majority order, the impugned order is set aside and appeal is allowed with consequential relief to the appellant.
(Archana Wadhwa) Member (Judicial) (Sahab Singh) Member (Technical) Jyoti* ??
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