Customs, Excise and Gold Tribunal - Mumbai
Vickers Systems International Ltd. vs Commissioner Of C. Ex. on 17 December, 2007
Equivalent citations: 2008[10]S.T.R.378
ORDER A.K. Srivastava, Member (T)
1. This appeal has been filed by M/s. Vickers Systems International Ltd. against Order-in-Original No. 3/Central Excise/2007, dated 12-2-2007 passed by the Commissioner of Central Excise, Pune-I. The Commissioner, vide impugned order, has confirmed demand of Rs. 6,72,27,080/- under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. He also imposed penalty of Rs. 6,72,27,080/- under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. He also ordered for the recovery of interest on the duty of Rs. 6,72,27,080/- under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944. The interest of Rs. 23,448/-already paid by the appellants was ordered to be adjusted against the total interest demanded.
Heard both sides and perused the records.
2. The appellants are engaged in the manufacture of Hydraulic Cylinders, Hydraulic Pumps and parts thereof under Chapter Heading 84 of the Central Excise Tariff Act, 1985.
3. The activities of the appellants can be broadly described into following categories:
(i) The appellants procure the inputs either domestically or import the same. Such inputs are used in the manufacture of hydraulic pumps, valves, cylinders, etc. The appellants avail credit of duty or CVD paid on the inputs, as the case may be.
(ii) The appellants also import parts and spares of hydraulic pumps, valves, cylinders, etc. for sale as such in India. In such cases also, the appellants avail credit of CVD paid on such parts and spares of hydraulic pumps, valves, cylinders, etc.
4. The appellants did not have separate inventory control system for imported goods used in production and imported goods sold as such. In other words, the inventory control system and the Central Excise records were common.
5. The common pool of credit is used for payment of duty on manufactured goods as well as goods sold as such. The assessable value has been worked out on the basis of the sale price. In the case of the imported goods sold as such, the assessable value based on the sale price was always more than their landed cost.
6. After carrying out the investigations, the Central Excise Department issued show cause notice dated 28-4-2006 to the appellants proposing to:
(a) deny credit of Rs. 6,64,40,668/- (including Rs. 14,61,839/- for goods, lying in stock as on 17-8-2005) being the CVD availed during the period July, 2001 to July, 2005 on the goods imported on the ground that these goods were sold as such in India without using them in the manufacturing process.
(b) deny credit of Rs. 7,86,412/- on inputs sent to the job worker for conversion under Rule 4(5)(a) of Cenvat Credit Rules, 2002/2004 not received within 180 days.
(c) impose penalty and interest upon the aforesaid amounts.
7. As per show cause notice, the appellants are not entitled to the credit of the CVD on the imported spares and parts sold as such in India, since these were not used in the manufacturing operations. The show cause notice invoked the extended period for demanding duty from July, 2001 onwards.
8. The appellants applied for and obtained the dealers' registration for the same premises on 19-8-2005. Later on, the appellants shifted their entire activity of selling the imported goods in India to separate premises for which the appellants obtained a fresh registration as a dealer.
9. The appellants filed a reply to the show cause notice vide letter dated 20-10-2006. The appellants basically submitted that they have paid much more amount as duty which was not required to be paid and hence such payment be considered as reversal of the incorrect credit. They also relied upon the judgments in support of their claim.
10. We have examined the position. We are of the view that the Department cannot blow hot and cold at the same time. Having collected the duty on the imported goods sold as such at the time of their clearance to the customers in India, the Department cannot now deny the credit. The Department cannot take the contradictory stands to suit their convenience.
In the present case, the Department seeks to deny and recover the CVD amount availed as credit amounting to Rs. 6,49,78,829/- by the appellants or the imported inputs sold as such in India.
11. The appellants had cleared such imported goods on the payment of duty, wherein the assessable value was based on the sale price. The sale price used to have a general mark-up of 30% on the landed cost. Hence, the sale price was always higher than the (value plus customs duty) at the time of import. Reversal of credit now demanded by the impugned order has already been reversed by the appellants. Duty paid at the time of clearance should be treated as reversal of the alleged ineligible credit. Hence, the demand is not maintainable. The entire credit availed on imported inputs has to be considered as utilized towards the payment of duty on the sale of such imported goods only. Therefore, the Department cannot once again demand the reversal, which has already been done.
12. If no duty was payable on the sale of the imported goods, then the duty paid by the appellants on the imported goods should be treated as reversal of the Cenvat credit availed on such imported goods.
13. This view is fully supported by the decision of Tribunal in the case of Deioners Speciality Chemicals (P) Ltd. v. CCE . In that case, the assessee took, the Modvat credit on the inputs and utilized the same for payment of duty on the final product. The Department contended that the final product was wholly exempt from payment of duty in terms of Notification No. 1/93 and, therefore, no Modvat credit is available in terms of Rule 57C. The Department accordingly proceeded to deny and recover the Modvat credit taken on the inputs. The Tribunal after considering the issue held that the utilization of the Modvat credit for the payment of duty on the final product, which is treated by the Department as exempt from payment of duty, has to be treated as reversal of the Modvat credit. The relevant portion of this decision is as under:
4. I, however, find that the disputed Modvat credit amount has been utilized only for payment of duty on the very goods, which are held to be eligible for exemption. Disallowing of wrongly taken Modvat credit can be effectuated either by reversing the credit if available in the RG 23A Part II account or by recovery of the sum separately if the same is not available in the account, having already been utilized for payment of duty. In the present case, since the amount of credit was in fact utilized for payment of duty of goods, which are admitted by the Department to be eligible for exemption and hence not liable for duty, utilization of such credit for payment of duty thereon would serve the purpose of disallowance of credit as required under Rule 57C. There would be a case for confirming the demand by bringing into play Rule 57C if credit had been taken but kept intact due to the inputs being used for the manufacture of the exempted goods, which were cleared without payment of duty availing of such exemption and such credit was being utilized for other goods not relatable to the inputs in question. That would be the only way Rule 57C will, come into reckoning. Such a situation does not present itself in the present case as the credit was not left unutilized vis-a-vis the final product made from the inputs in question.
14. The assessee in the case of CCE v. Piramal Spinning & Weaving Mills Ltd. took the credit of the duty paid on the processed fabric. The processed fabric was then subjected to the processes such as cutting, folding and packing. The credit taken on the processed fabric was utilized for the payment of duty on the packed fabric cleared by the assessee. The Department denied the credit taken on the processed fabric on the ground that the processes undertaken by the assessee did not amount to manufacture. The Tribunal dismissed the Department's appeal on the ground that the duty paid by way of the debit in the Modvat account should be treated as the reversal of the inadmissible credit taken and, therefore, no demand would lie.
15. The following case laws lay down that when the process is held to be not manufacture, then the duty paid on the final product should be treated as reversal of the ineligible credit on the inputs and the assessee cannot be called upon to pay the credit:
(i) Singh Scrap Processors Ltd. v. CCE
(ii) PSL Holdings Ltd. v. CCE
(iii) Vinayak Industries v. CCE
(iv) Silvassa Wooden Drums v. CCE
(v) Stumpp Scheule & Somaopa v. CCE
(vi) Shivali Udyog v. CCE 2006 (204) E.L.T. 94 (T)
(vii) CCE v. M.P. Telelinks Ltd. 2004 (178) E.L.T. 167 (T)
(viii) Ajay Metachem v. CCE 2006-TIOL-667-CESTAT-MUM
(ix) Heat Shrink Technologies Ltd. v. CCE 2007 (220) E.L.T. 437 (Tri. -Mumbai) : 2007-TIOL-463-CESTAT-MUM
(x) Creative Enterprises v. CCE 2004 (60) RLT 342 (T)
(xi) Orion Ropes (P) Ltd. v. CCE 2006-TIOL-391-CESTAT-MUM
(xii) Systematic Steel Industries Ltd. v. CCE
(xiii) Orbit Bearing (I) Pvt. Ltd. v. CCE 2006-TIOL-1637-CESTAT-Mum.
16. In view of the settled legal position, there cannot be any further demand of duty from the appellants. Hence, the demand of Rs. 6,49,78,829/- is not maintainable. The same is set aside.
17. As regards the reversal of the credit of Rs. 14,61,839/- on the inputs lying in the stock as on 17-8-2005 is concerned, we are of the opinion that the same is not required to be reversed as the impugned inputs were lying in the stock and not sold. However, if the impugned inputs are cleared as such on sale, the appellants are required to reverse the credit of Rs. 14,61,839/-.
Further, the reversal of the credit of Rs. 7,86,412/- along with the interest of Rs. 23,448/- on the inputs sent for processing outside the factory but not received within the stipulated period of 180 days is in order. The order of the Commissioner is sustainable on this count.
In the facts and circumstances of the case, the imposition of the penalty of Rs. 6,72,27,080/- is uncalled for and unwarranted. The same is set aside.
18. Demand of interest on Rs. 6,64,40,668/- is not sustainable. The same is set aside.
The impugned order passed by the Commissioner is modified to the extent indicated above. The appeal filed by the appellants is disposed of in the above terms.
(Pronounced in court)