Customs, Excise and Gold Tribunal - Mumbai
Cello Thermoware Ltd., Shri P. Rathod, ... vs Commissioner Of Central Excise on 7 January, 2005
Equivalent citations: 2005(191)ELT625(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. Appellants, M/s Cello Thermoware Ltd (herein after referred to as CTL for short), an assessee, under the Central Excise Act 1944, & its partner Shri Pradeep G. Rathod.
1.2 The assessee is engaged, in the manufacture of insulated plastic ware for Household. Table ware, like steel lined casseroles, insulted Tiffins & Tiffins, insulated water bottles etc. They avail Mod vat Credit on inputs & pay duty on the final products.
1.3 As regards insulated tiffins, they manufactured & cleared such items with stainless steel containers on values inclusive of container value, & whenever such tiffins were cleared without the stainless steel containers, duty was paid on values excluding the value of the stainless steel containers. Both types of clearance were declared & accounts maintained.
1.4. The present impugned proceedings are, as regards declared inputs viz Stainless Steel Coils/ Sheets received from dealers. They are using such steel products of various grades such as-
i) Salem AS (304) (containing 80% Nickel) from M/s Sail through stock/registered dealers on invoices as prescribed as per rules.
ii) Salem AS-202 or SSLN-4 (both having SC% Nickel or SSLN-2 having 2% nickel, again from M/s Sail as above.
iii) They also procure 4% or 2% Nickel Steel from M/s Jindal Strips Ltd with codes J-4 or J3 or J-1 as also from other Manufacturers. This material was called Rolling Grade SS coil. AS 304 grade being better in quality than Rolling grade quality & was used generally 121 products for export. Steel so procured was directly sent to job-workers or also after receipt from appellants factory, for conversion into lids & containers for Tiffin s/ Casseroles.
1.5 A show cause notice was issued by the officers after completion of the enquiries alleging-
i) CTL used only rolling grade steel in manufacture of containers for cassettes & lids thereof but availed credit on basis of dealers invoices of AS 304 grade steel of M/s SAIL-Salem.
ii) Coils of AS 304 grade steel were supplied to CTL, who had received 278585 kgs of AS 304 grade steel during 1995-96 to 1957-98 & availed credit therein while actual consumption of AS 304 Steel was only 27348.766 Kgs & credit on 299171.450 kgs of As 304 steel was therefore proposed to be denied.
iii) Steel dabbas, up to December 1997, manufactured by M/s Shri Ram Steel & supplied to CTL, on out right sale basis, without payment of Central Excise duty thereon & while clearing the Tiffin Carriers, M/s CTL were paying duty only on value of plastic containers. & Stainless Steel dabbas received from M/s Shri Ram Steel were cleared to dealers without payment of duty thereon & dealers were ultimately setting Lunch carriers to customeis. These dabbles cleared on 'NIL' duty were essential integral parts of Lunch Carries, therefore the value thereof could not be abated & clearance as stain less steel utensils at NIL rate by CTL was not correct & duty demands were worked out.
iv) Consequent penal liabilities were involved.
1.6 Commissioner confined the demands & imposed penalties. Hence the appeals.
2.1 The issues, which call for decision in this appeal, are (A) Whether there is an irregular availment of Modvat Credit in respect of A.S. 304 grade of SS Sheets/Coils, which is recoverable invoking Rule 57 I (ii) of Central Excise Rules?
(B) Whether there is any short payment of duty on the value of plastic Thermoware cleared from the factory without stainless steel tiffins?
(C) Question of time bar.
(D) Penalties liabilities if any that could be involved.
2.2 Regarding issue (A) From the Show Cause Notice, the impugned order, & the material on record the following facts stand out undisputed.
(a) The appellants purchase SS coils/sheets of "A.S. 304 grade" (superior grade) and Rolling grade (Inferior grade) from registered dealers as also from the manufacturers ( para 5 of the order refers)
(b) The purchases are fully covered by modvat invoices issued by the registered dealers or by the manufacturers as the case may be. Modvat credit is taken by the appellants either after the receipt of S.S. Steel in the factory, (where they are received direct) or after receipt of the items turned out by job workers, to whom S.S. Sheets were sent by the suppliers directly (para 4 of the order refers).
(c) Modvat invoices in question are all on record and are not disputed. They show all the particulars as required in the proforma prescribed for such invoices.
(d) Receipt and consumption of total quantity of S.S. Steel Coils/Sheets (both A.S.304 and Rolling Grade) is not disputed. There is neither an allegation in Show Cause Notice nor finding in the impugned order to the contrary.
(e) The appellants have been clearing their finished products i.e. "Insulated Casseroles" & "Insulated Tiffins.," on payment of appropriate duty and scrap generated has been disposed off in accordance with provisions of Modvat rules.
(f) The dealers have confirmed delivery of S.S. coils/sheets as per their invoices, which are not disputed.
(g) Registered dealer's invoices show the particulars of parent invoices issued by S.A.I.L. showing the grade particulars of S.S. Steel in question.
(h) None of the job workers have stated that they received S.S. Sheets/ Coils contrary to or in variance with the particulars given in the dealer's or manufacturer's invoices.
(i) Both A.S 304 grade as also Rolling grade are capable of and are being used in the manufacture of containers for the use of M/s CTL's.
(j) There is no evidence of substitution of A.S.304 grade material by Rolling grade material either at job workers end or at the appellants supplier raw materials end. Nor is there any evidence cited in the Show Cause Notice or relied in the order suggesting illicit disposal of A.S.304 grade in the market by the appellants anyone else.
(k) No samples have been drawn and tested from the stock of Casseroles containers/S.S. Sheets/ coils in process lying in the factory or at the job workers premises, for ascertaining the nickel content in containers for casseroles, though stock was available, when the officer searched the factory and job workers premises during the investigation, which allegedly was based on the intelligence received.
2.3 Revenue case on issue "A" is-
(a) The job workers have sated that they have used only rolling grade steel for manufacture of containers for casseroles for domestic market and they use A.S.304 grade only in the manufacture of tiffins and containers for casseroles for export.
(b) The purchase orders placed by the appellants do not deliberately show the grade of S.S. steel ordered.
(c) Shri Rathod, Director of the Company has corroborated the statement of job workers and was unable to render account of A.S.304 grade in the manufacture of final products.
(d) A.S.304 grade has been used only in tiffins and containers for Casseroles exported. The rest of the quantity has not been received/substituted, in respect of which quantity, Modvat credit have been wrongly availed.
2.4 On consideration, of the facts, the material & submissions, the following position emerges:
(a) The job workers cannot & do not know in advance, export or for domestic market, they therefore could not have positively asserted that they used only rolling grade in the manufacture of containers for casseroles for domestic market and A.S.304 grade was used only in the containers for export. No material exist to indicate marked difference in dimensions of the entity going into domestic or export markets. Hence their statements per se cannot he relied as evidence of substitution or non receipt of A.S. 304 grade without any corroboratory evidence in the form of illicit receipt of rolling grade or illicit disposal of A.S.304 grade received under Modvat invoices by the appellants. In fact it has been shown that the job workers have immediately after their statements were recorded, filed affidavits confirming having received S.S. Steel and Rolling grade materials to prepare bowls & they were made to state that only in export goods the aforesaid Salem Steel was used, while as a matter of fat the receipt of Salem as well as Rolling material as per availability cannot be denied. They have, also stated that they manufactured bowls from both Salem and Rolling grade and they did not know whether the company uses the same in exports or local market. This aspect, of the statements has been over looked without arriving at any reasons as to why, that is not the state of affairs as indicated in the affidavits. The Ld. Commissioner has also ignored the affidavits by observing that no evidence is produced in support of their contention that these affidavits were filed with the Department. Whereas it was shown that receipt of some of the affidavits has been acknowledge by the Department. (Exhibit E produced before us). This one sided approach & reliance on the statements by the Commissioner exhibits no application of mind or and bias application, to arrive at pre-determined conclusions. Such interpretation of the statements material therefore can not be upheld. Non consideration of the plea made by defence would be fatal, as in this case, to the order arrived.
(b) Corroboration sought to be brought in from Shri Rathod's statement also does not support the Departments case in the Show Cause Notice. Shri Rathod at the beginning of his statement averts clearly that A.S.304 grade is used in tiffins and casseroles for exports. No legal requirement under the rules for accounting of use of consumption of S.S. Steel inputs grade wise has been shown. The requirement under Modvat Rules is only of quantity of each input received under modvat invoices should be entered in the RG23A registers & issued as used in the manufacture of dutiable final products. The receipt of the alleged non used AS 304 grade is not questioned. The despatch to job workers & receipt by them of inputs under documents prescribed is not disputed. Diversion & or substitution is not found, established alleged, then non use, on calculation made & as relied of AS 304 not used cannot be upheld. When Modvat accounts are not diluted, Shri Rathod's inability, to account grade wise, of utilization of & for a particular finished product cannot be held against M/s CTL.
(c) The allegation of using rolling grade in the place of AS. 304 grade in the manufacture of casserole container for domestic market by the appellants has not been corroborated by drawing samples of casserols available in the godown/factory /job workers market. Failure to do so cannot be overcome merely by holding that in clandestine operations, no evidence is left behind as has been observed by the Ld. Commissioner. When there was an intelligence in this regard, the officers, during their visit to the factory, Godown and job workers in pursuance of that intelligence, should have drawn samples from containers for & in the casserols meant for domestic market' vis a vis export and got them tested. To independently corroborate the information to be reliable & valid. Reliance on so called job workers & other statements which are found to be relied & interpreted and biased meant, for domestic' vis a vis export cannot be corroborated without test. Reliance on so called job workers & other statements which are found to be relied & interpreted is a biased manner, will not justify to arrive at conclusion of ineligibility to credit.
(d) The registered dealers have confirmed supply of S.S. Steel as per the invoice's issued by them, which give reference to the parent invoices of the manufactures. The manufacturers invoices show the grade of S.S. Steel supplied to the dealers. Moreover there is a difference in price of both the grades, from which the actual supplied grade can be ascertained. When the purchase orders quote the price and the dealers invoices give reference orders, quote the price and the dealers invoices give reference to the parent invoices of the manufacturers, no deliberate design can be attributed, or concluded, merely because the dealer's invoice or purchase orders do not show (he grade, especially when there is no statutory requirement for showing the grade or quality in the format of invoice prescribed for issue by registered dealers. Even assuming that purchase orders should have shown grade, there is no compulsion under law shown, for the dealers to show the grade in their invoice. There is no averment from any of the registered dealers to the effect that the invoice was deliberately prepared, in a manner as they exist to enable the appellants to derive a undue benefit or in correct grades having been supplied.
(e) In view of the above findings, on the fact that the Show Cause Notice in Para 3.2 and para 29 takes the stand that AS 304 grades was not received where in para 2.8 alleges substitution of AS 304 Coils. This exhibits that the department itself is not sure and clear of the (sic) factum of receipt of AS 304. Such ambiguous & vague notices cannot be up held. Neither an allegation of non receipt of A.S.304 grade in clear terms nor the allegation of substitution of such A.S. 304 grade, by Rolling grade has been made or and conclusively established. The contentions by Revenue are in the realm of conjectures and surmises. Demands for recovery of modvat credit on such score is not sustainable.
(f) Apart from the above factors being in favour of the appellants on merits, there is no convincing explanation from the Department for failing to take into account the closing and opening balance of A.S. 304 grade each year and for not considering the position for 1998-99, as the period covered the position for 1998-99, though the period covered as per Annexure B is stated defence put forth by the appellants that not taking into account the opening balance and closing balance has inflated the quantity of A.S. 304grade alleged to have been not utilized, is tenable, is to be accepted, to conclude that the notice itself proceeded on basis of unsustained unascertained premises.
(g) Apart from the above considerations of the issue on merits, there is also a point of law arisen in this case, ie Show Cause Notice was issued on 3.5.2001, the entire set of Modvat rules (of which Rule 571 (iii) is a part) had been substituted by Cenvat Credit Rules effective from 1.4.2000. The question which would arise is whether Show Cause Notice issued under Rule 57 I (ii) and impugned order confirming the Show Cause Notice invoking the above Rule are legally sustainable. Section 38 A of the Central Excise Act validates the action taken under the erstwhile Rules only in cases where such rules are amended, repealed, superceded or rescinded and not where such Rules have been substituted by a new set of Rules. The issue stands settled by decision of this Hon'ble Tribunal in case of Sunrise Structural & Engineering Ltd. v. CCE, Nagpur vide Final Order No. A/711 to 722/WZB/04-CII dated 27.8.2004 in case of appeal No. E/3182 to 3193/02-Mum this part was however not pressed by Ld Sri Advocate since on merits (No incorrect availment of Modvat Credit was made out 2.5 Regarding Issue-"B", i.e. on the following facts, undisputed, as seen from the Show Cause Notice and the impugned order (d) The appellants in their classification declarations and price declarations have indicated clearly two distinct clearance:
(i) Insulated Thermoware without S.S. Tiffin container; and
(ii) Insulated Thermoware without S.S. Tiffin container; and as seen from Exhibit C-produced before us.
(a) Wherever insulated Thermoware with S.S. tiffins are cleared, they were paying Central Excise duty on the value of such ware including the value of S.S. Steel containers. Further, where insulated Thermoware were removed without S.S tiffins containers they are cleared on payment of duty without reckoning the S.S Containers values. The excise invoices visualise the same as without steel containers as shown from invoices at Exhibit C). This fact established the two types of clearance ie with steel containers & without.
(b) This fact is indicated in their classification declaration as also they are also engaged in trading from their godown in stainless steel containers, purchased from outside.
(c) Central Excise duty is demanded on the value of S.S. Steel container of tiffins, sold from the godown during the period 1.4.1995 to 30.9.1997 as seen from Annexure C to Show Cause Notice without establishing any correlation of these sales to invoices relating to clearance of Insulated Thermoware without S.S. containers effected from the factory.
(d) Stainless steel tiffins are purchased from the manufacturer of these tiffins. They are cleared by the manufacturer on "Nil" rate of duty, since S.S. containers are utensils made out of duty paid S.S sheets, they are not chargeable to duty & Such stainless steel tiffins have been sold from the godown separately. There is no evidence from any buyer to the effect that they are buying an integrated tiffins.
2.6 Revenue have raised the following grounds in this Connection-
(a) S.S. tiffins purchased are designed as parts -of the plastic thermoware tiffins cleared from the factory and hence their value is to be included in the value of plastic thermoware cleared without S.S. tiffins from the factory.
2.7 On the basis of undisputed facts and having regard to the case laws applicable, the following position emerees.
(a) The Department have been made aware of the fact that the appellants are clearing plastic thermo tiffins without. S.S. tiffins as also such plastic wares with S.S. tiffins and 'they are paying Central Excise duty on the values appropriate to each item in the form in which they are cleared. Their declarations confirm the above position. They have also declared their trading activity in regard to sales from their godown of brought out S.S. containers.
(b) Even assuming that these S.S. tiffins are parts of thermowares, their value cannot be notionally added in the, value of plastic thermo tiffins cleared as such from the factory, because of the settled law that goods are to be assessed on the value of the goods in the form, in which they are cleared from a factory & the reliance is well placed on the following cases by the assessee.
Castrol India Ltd. v. CCE-2000 (118) ELT 35 (Tri.) Which has been upheld by Supreme Court -2000 (121) ELT A (224) (SC) Savita Chemicals v. CCE-2000 (119) ELT 394 (Tri.)- Which has been upheld by Supreme Court at 2001 130) ELT A 262 (SC) Goetze (India Ltd. v. CCE-2004 (169) ELT 274, CCE v. A.Z. Electronic-2001 (134) ELT 689 (Tri.Mum.)
d) In view of the above, demand of duty, on value of S.S. containers, bought out by the appellants and sold from the godown which are otherwise chargeable to Nil rate of duty, is not justifiable to be included on merits, as no material of them being specific integral ports produced/relied.
2.8 The reasons of the adjudicator for invoking the larger period Under Section 11A by observing that S.S Containers are specifically obliged to fit in the insulated Plastic tiffins/lunch carriers & that no insulted tiffin could be sold without inclusion of value thereof & that the declarations of trading in such goods was deliberate to evade duty on the value of containers & basing his finding on the statements of Shri Ashok Modi the seller of such containers is overlooking the facts of removal of such Plastic ware from the factory and the settled law on this aspect. The period as per proviso to Section 11 A (1) cannot be invoked oh such assumptions which are not supported by facts.
2.9 When duty demands & Modvat violations are not being upheld, the order on penalty and interest cannot be sustained. The orders are required to be set aside and appeals allowed.
2.10 Ordered accordingly.
2.11 Appeals disposed as allowed.
2.12 In view of the aforesaid submissions, the appellants request the Hon'ble Bench to set aside the impugned order and to grant them all the consequential relief accepted.
(Pronounced in Court 07.01.2005)