Custom, Excise & Service Tax Tribunal
Shital Industries Private Limited vs Ahmedabad-Ii on 26 June, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
EXCISE Appeal No. 11858 of 2016 - DB
(Arising out of OIO-AHM-EXCUS-002-COMMR-1-2016-17 dated 05/08/2016 passed by
Commissioner of Central Excise-AHMEDABAD-II)
Shital Industries Private Limited ........Appellant
Behind Ongc,
Sabarmati,
Ahmedabad, Gujarat
VERSUS
COMMISSIONER OF C.E.-AHMEDABAD-II ......Respondent
Custom House... First Floor, Old High Court Road, Navrangpura, Ahmedabad, Gujarat- 380009 APPEARANCE:
Shri Mahendra K Kothari, Consultant for the Appellant Shri Rajesh Nathan, Assistant Commissioner (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Final Order No.11431/2024 DATE OF HEARING: 29.02.2024 DATE OF DECISION: 26.06.2024 RAMESH NAIR The brief facts of the case are that the appellant are engaged in the manufacture and clearance of PVC Tin Stabilizer, PVC Stabilizer, Calcium Zinc PVC Stabilizer, Oxidized Veg. Oil (Epoxy Plasricizer). As per the intelligence received by the department, it appeared to the department that the appellant did not carry out any manufacturing activity in respect of 'PVC Processing Aid' and PVC Impact Modifier' (herein after referred to as 'imported goods') falling under Chapter 39 (previously under Chapter 29) of First Schedule to Central Excise Tariff Act, 1985 and was taking Cenvat credit (CVD+SAD) on those imported goods, not doing any process thereon and was clearing the same in domestic market as well as for export under claim of Rebate or under Bonds and thereby they were taking Cenvat credit wrongly.
1.1 During investigation, it was found that as regard the product 'PVC Processing Aid', Shri Shital Jain in his statement Stated that they were importing the said material from M/s Shanding Ruifeng Chemical Co. Ltd,
2|Page E/11858/2016-DB China, in paper bags of 25 Kgs each and having the following face tag on one side of each paper bag as:-
"SHITAL INDUSTRIES PVT. LTD., PVC PROCESSING AID, PA-222, LOT NO:
NET WT: 25 KGS"
And after receiving the material, they were stamping the similar details as mentioned above on the other side of the bag.
"SHITAL INDUSTRIES PVT. LTD., PVC PROCESSING AID, PA-222, LOT NO:
NET WT: 25 KGS"
1.2 Shri Shital Jain also informed the investigating officer that appellant were not doing any manufacturing process on the said material and even not opening the bag but they were stamping the other details on the blank side of the bags and sometimes they were printing their monogram also on the bags.
1.3 Similarly, as regard 'PVC Impact Modifier', Shri Shital Jain Informed that they were importing the said material from M/s Shanding Ruifeng Chemical Co. Ltd, China, in paper bags of 25 Kgs. each and having the following fact tag on one side of the each paper bag as-
"SHITAL INDUSTRIES PVT. LTD., PVC IMPACT MODIFIER, IM- 333.
LOT NO:
NET WT: 25 KGS"
And after receiving the material, they were stamping the similar details as mentioned above on the other sides of the bag.
"SHITAL INDUSTRIES PVT. LTD., PVC IMPACT MODIFIER, IM- 333.
LOT NO:
NET WT: 25 KGS"
1.4 He stated that they were not doing any manufacturing process on the said material and even not opening the bag but they were printing their
3|Page E/11858/2016-DB monogram also on the bags. They were availing input Cenvat credit (CVD+SAD) on the said imported' PVC Impact Modifier'.
1.5 The case of the department is that by doing activity as described above, it does not amount to levy or re-levy. therefore, activity does not amount to manufacture as per the Chapter note of Chapter 39 (previously under Chapter 29) of First Schedule of Central Excise Tariff Act, 1985. In absence of any manufacturing activity appellant was not entitled for Cenvat credit. Accordingly, the demand of Cenvat credit availed on the imported goods was proposed for the period 2010-11 to 2014-15. The Adjudicating Authority while adjudicating the show cause notice confirmed the demand and passed the following order:-
(i) In terms of erstwhile Section 11A(2)/11A(10) of the Central Excise Act, 1944 read with Rule 14 of CENVAT Credit Rules, 2004, I confirm the demand of CENVAT Credit of 2,59,05,047/- (Rupees Two Crore Fifty Nine Lakh Five Thousand Forty Seven Only) from M/s. Shital Industries Pvt. Ltd.
under erstwhile proviso to Section 11A(1) / Section 11A(4) of the Central Excise Act, 1944. I order to appropriate the amount of Rs. 2,59,05,47/- paid by M/s. Shital Industries Pvt. Ltd. towards the aforesaid recovery of CENVAT credit.
(ii) I also order for recovery of interest at the appropriate rate on the irregularly availed CENVAT credit of 2,59,05,047/- (Rupees Two Crore Fifty Nine Lakh Five Thousand Forty Seven Only) from M/s. Shital Industries Pvt. Ltd. under erstwhile Section 11AB/ Section 11AA of the Central Excise Act, 1944 read with Rule 14 of CENVAT Credit Rules, 2004.
(iii) I impose penalty of Rs. 1,47,01,919/- (Rupees One Crore Forty Seven Lakh One Thousand Nine Hundred Nineteen Only) being equal to irregularly availed CENVAT credit amount of Rs. 34,98,791/- and 50% of irregularly availed CENVAT credit amount of 2,24,06,256/-, under erstwhile Section 11AC/ erstwhile Section 11AC (1) (b) read with Rule 15 of CENVAT Credit Rules, 2004 However, as per the first proviso to erstwhile Section 11AC of the Central Excise Act, 1944 and erstwhile clause (c) of sub-section (1) of Section 11AC of CEA, 1944 (applicable for the period from 08.04.2011 to 13.05.2015), if they pay the amount of CENVAT credit determined under sub- para (i) above along with interest payable thereon as ordered under Sub-para (ii) above within thirty days from the date of communication of this order, the amount of penalty shall be twenty-five percent of the demand of CENVAT credit. The benefit of reduced penalty shall be available if the amount of penalty so determined is also paid within the aforesaid period of thirty days."
4|Page E/11858/2016-DB Since, the appellant have been paying the duty at the time of clearance which is more or less equivalent to the Cenvat credit availed the Adjudicating Authority has appropriated the said payment against the availment of Cenvat credit. Hence there was no deferential amount recoverable. However, the penalties and interest were demanded. Being aggrieved by the Order-In-Original dated 05.08.2016 which is impugned herein, the appellant filed the present appeal.
2. Shri Mahendra K Kothari, Learned Consultant appearing on behalf of the appellant submits that the activity of labeling on the other side of the Bag clearly covered under the chapter note of chapter 39 of Central Excise Tariff Act, 1985, according to which the said activity is amount to manufacture. Therefore, the appellant is entitled for the Cenvat credit. Alternatively, he submits that since, the appellant have been paying the duty on removal of relabeled imported goods, it is as good as payment of Cenvat credit. Therefore, no show cause notice could have been issued to the appellant. Accordingly, no consequential penalty and interest is recoverable.
2.1 He further submits that once the excise duty has been paid on the goods cleared even though at a later stage it is decided that the activity does not amount to manufacture the Cenvat credit on the inputs cannot be denied. He also submits that the demand has raised invoking the extended period of five years whereas there is no suppression of facts on the part of the appellant, as the appellant have been clearing goods on payment of duty and the same was declared on their monthly return. Therefore, the entire fact was known to the department and in absence of suppression fact, the demand for extended period is not sustainable. In support of his submission, he placed reliance on the following judgments:-
PerfoChem (1) Pvt. Ltd. Vs. Commissioner of Central Excise, Belapur [2015 (315) E.L.T. 237 (Tri. Mumbai)] Asian Colour Coated Ispat Ltd. Vs. Commissioner of Central Excise, Delhi-III [2015 (317) E.L.T. 538 (Tri. - Del.)] Ajinkya Enterprises Vs. Commissioner of Central Excise, Pune-III [2013 (288) E.L.T. 247 Tri. - Mumbai)] Commissioner of Central Excise & Customs, Aurangabad vs. Sunrise Industries [2015 (315) E.L.T. 62 (Tri. - Mumbai)]
5|Page E/11858/2016-DB Ajmer Food Products Pvt. Ltd. Vs. Commissioner of Central Excise, Jaipur [2015 (317) E.L.T. 656 (Tri. - Del.)] R.B. Steel Services vs, Commissioner of Central Excise & Service Tax, Rohtak [2015 (318) E.L.T. 139 (Tri. - Del.)] Super Forgings And Steels Ltd. Commissioner of Central Excise, Chennai [2007 (217) E.L.T. 559 (Tri. Chennai)] Commissioner Of Central Excise, Indore Vs. M.P. Telelinks Ltd. [2004 (178) E.L.T. 167 (Tri. - Del.)] Commissioner of Central Excise, J & K, Jammu Vs. North Sun Enterprises Industrial Estate [2012 (284) E.L.T. 75 (Tri. - Del.)] Exide Industries Ltd. vs. Commissioner of Central Excise & Service Tax, Delhi-III [2016 (333) E.L.T. 101 (Tri. - Del.)] Hindustan Mineral Products Co. Ltd. Vs. CCE, Surat-II [2009 (235) E.L.T. 148 (Tri. Ahmd.)] Jindal Stainless Steelway Ltd. Vs. CCE, Raigad [2014 (310) E.L.T. 194 (Tri. Mumbai)] CCE, Belapur Vs. Merck Specialities Pvt. Ltd. [2015 (317) E.L.T. 375 (Tri. Mumbai)]
3. Shri Rajesh Nathan, Learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. He submits that since the imported bags were already labeled and the same details were reaffixed by the appellant on the other side of bag. Therefore, that activity does not amount to labeling of re-labeling and was also not required to render the goods marketable, as with the already given details on the bags the goods were marketable. Therefore, the activity of the appellant does not amount to manufacture. Consequently, appellant was not eligible for Cenvat credit. He placed reliance on the following judgments:-
Excide Industries Ltd Vs. Commissioner of C. Ex. & S.T., Delhi-III- 2016 (333) ELT 101 (Tri.- Del.) Commissioner of C. Ex., Pune-III Vs, Ajinkya Enterprise- 2013 (294) ELT 203 (Bom.)
4. We have carefully considered the submission made by both the sides and perused the records. We find that in the present case the appellant was
6|Page E/11858/2016-DB denied the Cenvat credit in respect of imported goods on the ground that the appellant's activity subsequent to the import almost does not amount to manufacture. We are of the view that even without deciding the issue whether the activity carried out by the appellant is amount to manufacture or otherwise. This case can be decided on other issue. We find that the appellant have made a submission that even though there is no manufacture but the assessee has paid the excise duty, hence, the Cenvat credit on the imported goods cannot be denied. This issue has been settled in various judgments as follows:-
(i) Ajinkya Enterprises v. CCE, Pune-III [2013 (288) ELT 247 (Tri.-
Mum)], affirmed by the Hon'ble Bombay High Court [2013 (294) ELT 203 (Bom.)]:-
"9. We have seen from the facts of this case where as per Circular dated 7-9-2001, the activity of slitting of HR/CR coils into strip was amounted to manufacture. It is admitted fact that the said Circular was withdrawn on 2- 3-2005. Thereafter, the appellants sought clarification through various letters to the department to clarify whether the composite activity of de- coiling of HR/CR coils, cutting and slitting into specific sizes and thereafter pickling and oiling amounting to manufacture or not. That was clarified only on 24-6-2010. In the case of Resistance Alloys (supra) and P.V. Sanghvi (supra), wherein it was held that process of pickling and oiling would not amount to manufacture, but in the case in hand before us, the appellants were undertaking composite activity of de-coiling of HR/CR coils thereafter cutting and slitting into specific sizes and after that pickling and oiling taken place, which was clarified by the department only on 24-6-2010 saying that the said activity does not amount to manufacture. Therefore, following instructions issued through Circular No. 911/1/2010-CX., dated 14-1-2010, the appellants approached to the Commissioner for issuance of appropriate rectification for regularization of the CENVAT credit availed as their activity does not amount to manufacture and they have paid duty on clearance of the goods more than the credit availed. The Commissioner has also considered the representation of the appellant and forwarded to the Board for issuance of the required notification. The Board has neither rejected the proposal of the Commissioner, nor issued the notification for regularization of credit availed. In that situation, we are of the view that the benefit of the Circular No. 911/1/2010-CX., dated 14-1-2010 is available to the appellants.
10. Further, it is the admitted fact that the appellants are the manufacturer of excisable goods also. Therefore, as per Rule 3(5) of the Cenvat Credit Rules, 2004, if the activity in question of the appellants does not amount to manufacture, the appellants are required to pay duty equal to credit taken on clearance of such inputs under cover of Central Excise invoices. As in this case, the activity of the appellants does not amount to manufacture, therefore, these inputs are cleared as such. In that event, as per Rule 3(5) of Cenvat Credit Rules, 2004 the appellants are required to
7|Page E/11858/2016-DB pay duty equal to the credit taken thereon and the appellants have paid duty more than the credit availed.
11. The learned Advocate also relied on several case laws, wherein it was held that when duty paid at the time of clearance equal to or higher than the credit availed, the same is to be treated as reversal of credit. Therefore, no further reversal of credit is required as held by this Tribunal in the case of Repro India Ltd. (supra), Punjab Stainless Steel Industries (supra), Drish Shoes Ltd. (supra), SAIL (supra). In this case, it is admitted fact that the department has accepted duty paid by the appellants on their clearances and as per judicial pronouncement in the case of Ashok Enterprises (supra), Super Forgings (supra), SAIL (supra), M.P. Telelinks Ltd. (supra), Creative Enterprises (supra) which was upheld by the Hon'ble Apex Court that once duty on final products has been accepted by the department in the case, CENVAT credit cannot be denied even if the activity does not amount to manufacture.
12. Therefore in view of the above discussion, we find 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. Therefore, following the various judicial pronouncements as discussed herein above, we hold that the appellants are not required to reverse the credit. Accordingly, the appeals are allowed with consequential relief."
(ii) Commissioner of Central Ex. & Cus., Surat-III v. Creative Enterprises [2009 (235) ELT 785 (Guj.)] as affirmed by the Hon'ble Apex Court in 2009 (243) ELT A120 (Supreme Court):-
6. When one goes through the order of the first appellate authority, it is apparent that the respondent has been held to be a manufacturer as defined in Section 2(f) of the Central Excise Act, 1944. The appellate authority has taken into consideration the activities carried on by the respondent-assessee. The Tribunal is justified in holding that if the activity of the respondent-assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture.
7. In the aforesaid set of facts and circumstances of the case in light of concurrent findings of fact recorded after appreciating the evidence on record by both Commissioner (Appeals) and the Tribunal, no question of law, much less a substantial question of law, arises out of impugned order of Tribunal. The appeal is accordingly dismissed."
(iii) J K Files and Tools Raymond Ltd. v. Commr of C. Ex. & Cus., Mumbai-
III [2011 (273) ELT 280 (Tri.- Mumbai)]:-
"8. We do agree with the submissions of the learned DR that appellant are not entitled to take such credit as held by the judicial pronouncements of this Tribunal as well as the Hon'ble High Courts and the Hon'ble Supreme
8|Page E/11858/2016-DB Court in the case of Narmada Chematur Pharmaceuticals Ltd. (supra). In this case the appellant have taken inadmissible credit, therefore, they were issued show-cause notices to reverse the same. From the facts of this case it is very much clear that the appellant have taken inadmissible credit but they have paid the same at the time of clearance with value addition. In that scenario, as held by the Hon'ble Apex Court in the case of Narmada Chematur Pharmaceuticals Ltd., cited supra, where the assessee has wrongly availed modvat credit and was liable to reverse such amount and it was stated that the duty paid and modvat credit availed were identical and therefore consequences of payment of excise duty after availing the credit was revenue neutral. In that case the appeal filed by the Revenue was dismissed by the Hon'ble Apex Court holding that in view of the fact that, admittedly there was no revenue implication and, therefore, the appeal was dismissed. In the case of Vickers Systems International Ltd. (supra) this Tribunal has held that the entire credit availed on inputs to be considered as utilised towards payment of duty on sale of such imported goods, credit reversal is not required. In that situation we hold that payment of duty on value addition on the inputs received by the appellant amounts to reversal of the CENVAT credit as demanded by the department in the show-cause notices."
4.1 From the above judgments, it can be seen that even though the activity does not amount to manufacture but if the assessee has chosen to pay the excise duty on the processed goods (whether it amount to manufacture or otherwise). The assessee cannot be denied the Cenvat credit. Notwithstanding anything observed above, we further find that the appellant have already paid the amount in the form of excise duty which is equivalent to Cenvat credit availed. For this reason also the payment of duty by the appellant is as good as payment of Cenvat credit availed on the imported goods. Therefore, no show cause notice was required to be issued hence, the appellant had already made good by paying the duty which is nothing but reversal of Cenvat credit taken on the imported goods. Accordingly, neither any show cause notice was required nor the consequential interest and penalties is required to be recovered.
4.2 Without prejudice to our above observation, we further find that the such activity involved in the present case is otherwise covered by provision of Rule 16 of Central Excise Rules, 2002, which reads as under:-
"Credit of duty on goods brought to the factory. -- RULE 16. (1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re- conditioned or for any other reason, the assessee shall state the particulars
9|Page E/11858/2016-DB of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules.
If the process to which the goods are subjected before (2) being removed 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 received 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.
[Explanation. - The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by the manufacturer who removes the goods.] If there is any difficulty in following the provisions of (3) sub-rule (1) and sub-rule (2), the assessee may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the [Principal Commissioner or Commissioner, as the case may be].
Removal of goods for job work, etc. RULE [16A. -- Any inputs received in a factory may be removed as such or after being partially processed to a job worker for further processing, testing, repair, re- conditioning or any other purpose subject to the fulfilment of conditions specified in this behalf by the [Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be] having jurisdiction.] Special procedure for removal of semi-finished RULE [16B. goods for certain purposes. -- The [Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be] may by special order and subject to conditions as may be specified by the [Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be], permit a manufacturer to remove excisable goods which are in the nature of semi-finished goods, for carrying out certain manufacturing processes, to some other premises and to bring back such goods to his factory, without payment of duty, or to some other registered premises and allow these goods to be removed on payment of duty or without payment of duty for export from such other registered premises.] RULE [16C. Special procedure for removal of excisable goods for carrying out certain processes. -- The [Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be] may, 10 | P a g e E/11858/2016-DB by special order and subject to such conditions as may be specified by him, permit a manufacturer to remove excisable goods manufactured in his factory, without payment of duty, for carrying out tests or any other process not amounting to manufacture, to any other premises, whether or not registered, and after carrying out such tests or any such other process may allow, -
a) bringing back such goods to the said factory without payment of duty, for subsequent clearance for home consumption or export, as the case may be, or
b) removal of such goods from the said other premises, for home consumption on payment of duty leviable thereon or without payment of duty for export, as the case may be :
Provided that this rule shall not apply to the goods known as ―prototypes‖ which are sent out for trial or development test.]"
The above Rule 16 unambiguously provide that if an assessee even does not carry out manufacturing activity but carried out any activity whether the same is amount to manufacture or not manufacture, the assessee can avail the Cenvat credit on the goods received in the factory. And after any process, if it is cleared from the factory, in case of activity amount to manufacture it is cleared on payment of duty on the transaction value and if the activity does not amount to manufacture then the same is cleared on payment of duty equivalent to the Cenvat credit.
4.4 Therefore, we are of the view, it is clear that the assessee can take the Cenvat credit even though their activity does not amount to manufacture and clear the same on payment of duty. Therefore, in our considered view, the entire transaction of the appellant is squarely covered by the provision of Rule 16 of Central Excise Rules, 2002 therefore, for this reasons the contention of the department that since no manufacturing activity is involved appellant is not entitled for the Cenvat credit, clearly fails on that basis. The entire proceeding of confirmation of demand, interest and penalty is not sustainable.
11 | P a g e E/11858/2016-DB
5. On the multiple counts, the impugned order is not sustainable. Accordingly, the impugned order is set aside. Appeal is allowed, with consequential relief, if any.
(Pronounced in the open court on 26.06.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) Raksha