Custom, Excise & Service Tax Tribunal
Decorpac vs Delhi 2 on 29 September, 2020
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH
Excise Appeal No. 646 of 2008
(Arising out of Order-in-Original No. 05/2007 dated 28-31.12.2007 passed by
Commissioner (CE), New Delhi)
M/s. Decorpac ......Appellant
WH-44, Mayapuri Industrial Area,
Phase-I, New Delhi.
Versus
Commissioner of Central Excise .......Respondent
Central Revenue Building, Indraprastha Estate, New Delhi - 110 002.
APPEARANCE:
Shri B.L. Narasimhan, Advocate for the Appellant Shri O.P. Bisht, Authorised Representative for the Department CORAM : HON'BLE MR.JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) Date of Hearing and Decision : September 29, 2020 FINAL ORDER No.: 51580/2020 JUSTICE DILIP GUPTA The appellant has assailed the order dated December 28, 2007 passed by the Commissioner of Central Excise, Delhi-(II)1 by which the central excise duty on the PVC bags cleared during the financial years 2002-03 to 2005-06 has been confirmed and ordered to be recovered from the appellant under the proviso to sub-section (1) of section 11A of the Central Excise Act, 19942.
1. the Commissioner
2. the Excise Act 2 E/646/2008 The order also appropriates an amount of Rs. 30,00,000/- already deposited by the appellant towards partial discharge of the central excise duty and this amount has been directed to be adjusted against the central excise duty recoverable from the appellant.
The Commissioner has also imposed penalty and interest.
2. The appellant is engaged in the manufacture of PVC bags and other articles of printing like paper inserts, tags, labels, stickers and stiffeners. These articles of printing manufactured by the appellant have been classified under sub-heading 4901.90 of the Tariff Item and are chargeable to NIL rate of duty. However, the PVC bags manufactured by the appellant are classifiable under Tariff Item 3923 29 10 and attract central excise duty. These PVC bags were cleared for home consumption as well as for export. The appellant also supplied these goods to various merchant exporters against Form 'H' and Form „ST-49‟ for use in the goods manufactured and exported by such merchant exporters. According to the appellant, the PVC bags are used mainly for packing of home furnishing products, which are ultimately exported. Such supplies made to the merchant exporters against Form 'H' and Form „ST-49‟ were not included in the aggregate value of clearances, for availing the benefit of Small Scale Industry3 exemption under the Notifications.
3. The Department, however, believed that the appellant was not entitled to avail SSI exemption under Notification no. 81/2002-CE dated March 1, 20024 and Notification no. 8/2003-CE 3 SSI 4 Notification dated March 1, 2002 3 E/646/2008 dated March 1, 20035 as the clearances made to the merchant exporters against the aforesaid two Forms namely Form 'H' and Form „ST-49‟ were liable to be included for calculating the aggregate value of clearances made by the appellant and if the value was included, it would exceed the limit provided for in the aforesaid two Notifications. The Department, therefore, formed an opinion that the appellant was not eligible for the benefit of SSI exemption.
4. Accordingly, a show cause notice dated November 29, 2006 was issued to the appellant proposing to deny the benefit of SSI exemption and a demand for payment of central excise duty amounting to Rs. 1,63,46 331/- for the period from 2002-03 upto March 28, 2006 with interest was issued to the appellant. The show cause notice also proposed to impose penalty upon the appellant. The demand was raised by invoking the extended period of limitation under the proviso to section 11A (1) of the Excise Act.
5. A reply dated May 18, 2007 was filed by the appellant to the show cause notice. Additional submissions were also filed at the time of personal hearing on October 3, 2007.
6. The Commissioner, however, by order dated December 28, 2007 confirmed demand for the reason that the appellant had not cleared the goods for export directly from the unit itself, and, therefore, the procedure prescribed under the Circular dated July 25, 2002 was not followed by the appellant for availing the benefit 5 Notification dated March 1, 2013 4 E/646/2008 of export clearances in respect of the supplies made under Form 'H' and Form „ST-49‟. It was also held that the appellant had not followed the requirements mentioned in the Notification no. 36 / 2001 dated March 1, 2002 for exemption from registration under rule 9 of the Central Excise Rules, 20026.
7. This appeal has been filed to assail the aforesaid order passed by the Commissioner.
8. Shri B.L. Narasimhan learned Counsel appearing for the appellant made the following submissions:
(i) Goods supplied to merchant exporters against Form „H‟ & Form „ST-49‟ qualify as export and not as clearances for home consumption. Thus, the value of such goods cannot be included in the aggregate value of clearance for the purpose of claiming SSI exemption under the Notifications;
(i) On a plain reading of the Notification, it is evident that only the clearances for home consumption are to be taken into consideration for determining admissibility of the benefit of exemption under these Notifications. Therefore, clearances for the purpose of export are outside the ambit of these Notifications and, hence, not liable to be included in the aggregate value of clearances;
(i) Clearances made against Forms H/ST-49 are considered as exports under the provisions of Section 5 of the Central Sales Tax Act, 1956, read with rule 12(10)(a) of the Central Sales 6 Excise Rules 5 E/646/2008 Tax (R&T) Rules, 1957. Similar provisions exist under section 8 of the Delhi Sales Tax Act, 1975, read with rule 10A of the Rules;
(iv) Certificates in Forms H/ST-49 have been accepted as proof of exports by the Board as clarified under Circular dated July 25, 2002;
(v) The benefit of the Circular is available even in cases of supplies to merchant exporters where the goods are not directly supplied from the unit. In such cases also, Forms H/ST-49 are considered as sufficient evidence of export. Reliance has been placed on the following decisions:
(a) Vadapalani Press Vs.
Commissioner of C. Ex., Chennai7
(b) Commissioner of Central Excise
Vs. Amar Packaging Industries8
(c) Universal Packaging Vs.
Commissioner of C.Ex., Mumbai -
V9
(d) Jai Jawala Processors Vs.
Commissioner of Central Excise,
Rohtak10
(e) Viba Fluid Control Vs.
Commissioner of Central Excise,
Belapur 11
(f) Hare Krishna Boxes Pvt. Ltd. Vs.
Commissioner of Central Excise,
Belapur12
(vi) A substantative benefit cannot be denied due to procedural infractions, if any;
7 2007(217)ELT 248 (Tri.-Chennai) 8 2016 (344) ELT 187 (Guj) 9 2011 (264) ELT 147 (Tri.-Mumbai) 10 2018 (360) ELT 94 (Tri.-Del) 11 2018 (364) ELT 230 (Tri.-Mumbai) 12 2011 (267) ELT 525 (Tri.-Mumbai) 6 E/646/2008
(vi) The value of traded goods cannot be included in the aggregate value of clearances for the purpose of SSI exemption;
(vi) Value of branded goods (printed material) cannot be included in the aggregate value of clearances for the purpose of SSI exemption;
(ix) Even otherwise, if SSI exemption is held inadmissible, the appellant would be entitled to CENVAT credit on inputs/input services etc.; and
(x) The extended period of limitation could not have been invoked and penalty was not imposable nor interest was recoverable.
9. Shri O.P Bisht learned Authorized Representative of the Department has, however, supported the impugned order and has submitted that it does not suffer from any infirmity so as to call so as to call for an interference in this appeal.
10. The submissions advanced by learned Counsel of the appellant and learned Authorized Representative of the Department have been considered.
11. The issue that arises for consideration in this appeal is about denial of SSI exemption under Notifications dated March 1, 2002 and March 1, 2003 by treating the supplies made to merchant exporters against Form 'H' and Form „ST-49‟ as clearances for home consumption.
12. The relevant findings of the Commissioner on this issue are reproduced below:
"10.2 Secondly, the finished goods cleared to exporters against Form H or Form ST-49 were not excludible from the total sale of the party, since they had not followed the proper procedure for availing the benefit of export 7 E/646/2008 clearances against the sales made on Form H or Form ST-49.
10.3 Learned counsel for the party, Shri Shukla‟s submission that w.e.f. 01/04/2003, the value of exempted goods is includible for the purpose of determining eligibility to SSI exemption after excluding the value of export goods since export clearances are not clearances for home consumption, is acceptable but we have to see whether the so called export clearance have taken place as per the law or not. The Central Board of Excise and Customs has clarified is issue vide Circular No. 648/39/2002-CX dt. 25.07.02 wherein it has been held that "the Central Excise Manual provides that in the case of export by exempted units through merchant exporter, the documents prescribed by Sales Tax Deptt., viz. H- Form or ST-XXII Form or any other equivalent Sales Tax form, will be accepted as proof of export. It is clarified that this facility is available only in respect of the exempted units which undertake exports themselves or through merchant exporters directly from the unit itself. The facility is not available for the supplies made to any other domestic manufacturer who may or may not export its finished products". Clearly in this case the party has not followed the prescribed procedure as stipulated in the above said CBEC circular."
13. To appreciate the contentions advanced on behalf of the parties, it would be appropriate to reproduce the relevant paragraphs of the exemption Notification dated March 1, 2002 that was effective from April 1, 2002. It is as follows:
"In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1994) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2000-Central Excise, dated the 1st March, 2001, published in the Gazette of India vide number G.S.R 133(E), dated the 1st March, 2001, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts clearances, specified in column (2) of the Table below (hereinafter referred to as the said Table) for home consumption of excisable goods of the description specified in the Annexure appended to this notification (hereinafter referred to as the specified goods), from so much of the aggregate of,-8
E/646/2008
(i) the duty of excise specified thereon in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); and
(ii) the special duty of excise specified thereon in the Second Schedule to the said Central Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (3) of the said Table:
Provided that nothing contained in this notification shall apply to a manufacturer who has availed the exemption under notification No. 39/2001-Central Excise , dated the 31st July, 2001, published in the Gazette of India vide number G.S.R.565(E), dated the 31st July, 2001, in the same financial year.
Sl. No. Value of Clearances Rate of duty (1) (2) (3)
1. First clearances upto an aggregate Nil value not exceeding one hundred lakh rupees made on or after the 1st day of April in any financial year.
2. All clearances of the specified goods Nil which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods.
2. The exemption contained in this notification shall apply subject to the following conditions, namely:-
(i) to (vi) ****** ****** ******
(vii) The aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed rupees three hundred lakhs in the preceding financial year.
14. It needs to be noted that w.e.f April 1, 2005, the amount of Rs. 3,00,00,000/- mentioned in clause 2 (vii) of the above Notification was substituted for Rs. 4,00,00,000/-.
15. A plain reading of the Notification makes it evident that only the clearances home consumption are to be taken into 9 E/646/2008 consideration for determining the admissibility of the benefit of the exemption under the two Notifications dated March 1, 2002 and March, 2003.
16. This is also evident from the Circular dated August 6, 2003 issued by the Central Board of Excise and Customs, New Delhi. The relevant portion of the Circular is reproduced below:
"3. Accordingly, it is reiterated that for availing Small Scale Industry Exemption Scheme Exemption under notifications No. 03-Central Excise and No.9/2003-Central Excise, both dated 1.3.2003, for the financial year 2003- 04 the value of clearances for calculating the limit of Rs.3 crores for the preceding financial year 2002-03 includes the value of exempted goods (excluding exports) also."
17. The finding of the Commissioner that the Notifications do not provide for exclusion of export sales while computing the aggregate value of clearances is, therefore, erroneous.
18. The Commissioner has also not accepted the clearances against Form 'H' and Form „ST-49‟ as proof of exports on the ground that the procedure prescribed in the Circular issued by the Board has not been followed. It has been observed by the Commissioner that the benefit of simplified export procedure and acceptance of Form 'H' and Form „ST-49‟ as proof of export is available only in respect of exempted units which undertake exports themselves or through merchant exporters directly from the unit itself.
19. It is not possible to accept this reasoning of the Commissioner. Certificates in Form 'H' and Form „ST-49‟ have been accepted as proof of exports by the Circular dated July 25, 10 E/646/2008 2002 issued by the Board. The relevant portion of the said Circular is reproduced below:
"2. The matter has been examined by the Board. The Central Excise Manual provides that in the case of export by exempted units through merchant exporter, the documents prescribed by Sales Tax Department, viz H- Form or ST-XXII Form or any other equivalent Sales Tax form, will be accepted as proof of export. It is clarified that this facility is available only in respect of the exempted units which undertake exports themselves or through merchant exporters directly from the unit itself. The facility is not available for the supplies made to any other domestic manufacturer who may or may not export its finished products."
20. The Department has placed reliance upon the condition mentioned in the aforesaid Circular that the benefit of the Circular would be available only if the goods are supplied directly from the unit. The submissions of learned Counsel of the appellant is that the benefit of the such Circular would be available even in case of supplies to merchant exporters where the goods are not directly supplied from the unit and in such cases Form 'H' and Form „ST- 49‟ are considered as sufficient evidence of export.
21. The submission of learned Counsel for the appellant deserves to be accepted. A Division Bench of the Tribunal in Vadapalani Press held that the certificate in Form „H‟ issued by the merchant exporter has to be accepted as proof of export. The relevant portion of the decision is reproduced below:
"5. **** SDR has laid emphasis on the same and has argued that a Form-H certificate would not be accepted as proof of export unless the SSI unit did not undertake exports either directly or through merchant-exporter directly from the SSI unit itself. In this case, it was pointed out by SDR, the exports were made by the appellants' buyers from the latter's premises and not from the former's and, therefore, the appellants would not be entitled to employ the Form-H certificates as proof of export of the cartons supplied to their buyers. We are not inclined to accept this contention inasmuch as the Board's clarification as to the manner of exportation has to be understood 11 E/646/2008 conjointly with the relevant provisions of the Central Sales Tax (Registration and Turnover) Rules, 1957. Rule 10(a) of the CST (R&T) Rules, 1957 reads as under:
"A dealer may, in support of his claim that he is not liable to pay tax under this Act in respect of any sale of goods on the ground that the sale of such goods is a sale in the course of export of these goods out of the Territory of India within the meaning of Sub-section (3) of Section 5, furnish to the prescribed authority a certificate in Form 'H' duly filled, and signed by the Exporter alongwith the evidence of export of such goods."
It is not in dispute that the appellants obtained certificates in "Form H" from M/s. A.V. Thomas Co. and other similar customers and used the same before the Sales Tax authorities for exemption from payment of sales tax on the cartons sold to such customers. The Revenue has no case that the appellants did not obtain such exemption from payment of sales tax. This would mean that the Revenue has accepted the fact that the sale of 'printed cartons' by the appellants to the said customers was a sale in the course of export of the goods out of India. The above rule contemplated export of the goods by the purchaser. By no stretch of imagination can it be said that the above rule contemplated retention of possession of the goods by the dealer (appellants in the present case) for its direct exportation from their own premises by the buyer (M/s. A.V. Thomas Co. or other similar customer in this case). If the very physical export of the goods sold by the appellants to their customers is required to be made from the appellants' premises, why should the appellants be required to gather proof of export (in the form of Form-H certificate) from their customer ? We have perused a specimen "Form-H" certificate issued by M/s. A.V. Thomas Co. to the appellants. This document (No. 107 dt. 3.1.2005) certified as under:
"Certified that the goods the Particulars whereof have been specified in items (1) and (2) of the Schedule below supplied in pursuance of my/our Purchase Order No. ( ANNEXURE ENCLOSED) Purchased from you as per bill/cash memo/Challan NO. ( ANNEXURE ENCLOSED) dated ( ANNEXURE ENCLOSED) for Rs. 88,64,004/15 have been utilized by me/us in the packing of the goods exported by me/us outside the territory of India, as per the details given in item (3) to (6) of the said schedule."
The Schedule to the above certificate described the goods as "boxes/packing materials" and also provided export details including the particulars of the relevant Air Waybills in proof of export of goods across the Indian customs frontiers. It was submitted by learned Counsel that all the "Form-H" certificates produced by the appellants had indicated that the goods covered therein were used by the buyers in the packing of goods exported by them. The details regarding exports which were required to be mentioned in the Schedule to each 12 E/646/2008 certificate were furnished in a tabular statement annexed to the document. Such a document was liable to be accepted as proof of export by the appellants' customer, of the cartons supplied by the appellants. It would not cease to be proof of export by mere reason of the fact that the exportation was done by the customer from his own premises and not directly from the appellants' factory. Therefore, we are of the view that the interpretation given by learned SDR to the Board's Circular No. 648/39/2002 would not be consistent with the provisions of law governing issuance of "Form-H" certificate. It is not the case of the Revenue that the cartons supplied by the appellants to A.V. Thomas Co. and other similar customers were not exported. It is, however, pointed out that the cartons were not exported as such, but were only used as packing material for goods exported by the customers. We find that, in the case of M/s. Radhey Paper Udyog (supra), there was an identical factual situation. In that case, corrugated boxes supplied by the said party (SSI unit) were used by their buyer for packing shoes, which were exported. The Tribunal held that such clearances of corrugated boxes by the SSI unit were not to be included in the aggregate value of clearances by the unit for the purpose of claiming the benefit of SSI exemption. The Revenue has no case that the Tribunal's decision in Radhey Paper Udyog dt. 27.1.2005 was not accepted. Earlier decision to the same effect of the learned Single Member in the case of International Corrugators (supra) was also, apparently, accepted by the Revenue."
(emphasis supplied)
22. The Gujarat High Court in Amar Packaging Industries held that the certificate in Form „H‟ certificate issued by the merchant exporter has to be accepted as proof of export and the requirement of the Circular dated July 25, 2002 stands substantially complied with. The relevant portion of the judgement is reproduced below:
"5.2 The case of the department is based on the above circular and it is contended that conditions prescribed therein were not met with. It is clear that „H‟ form is not dispensed with as a document of proof of export. The acceptance of „H‟ form to prove and establish that the export has taken place is only clarified in the above circular. This facility will be available for the purpose of exemption in respect of exempted unit which undertake exports themselves or through merchant exporters directly.
5.3 It is an admitted position that the merchant exporters having issued „H‟ forms to the assessee, the proof of export is established in terms of requirement of 13 E/646/2008 above circular. It cannot be said that the condition of export has not been satisfied. The cartons were sent to exporters for export and which were the necessary part of the goods which were imported by the merchant exporters. By first concluding that there was no export as the conditions of the circular were not satisfied, the lower Authorities of the Central Excise could not have held that the exemption was exceeded."
23. The Mumbai Tribunal in Universal Packaging also, after placing reliance upon the decision of the Tribunal in Vadapalani Press, observed that Form „H‟ has to be accepted as proof of export. The appeal filed by the Department before the Bombay High Court against the aforesaid decision of the Tribunal in Universal Packaging was dismissed and the decision is reported in 2013(292)ELT 191(Bom.).
24. The decision of the Tribunal in Vadapalani Press has been followed in :
(i) Jai Jawala Processors
(ii) Amar Packaging Industries
(iii) Universal Packaging
(iv) Viba Fluid Control
(v) Hare Krishna Boxes Pvt. Ltd.
25. The Commissioner has also held that the value of traded goods cannot be included in the aggregate value of clearances for the purpose of SSI exemption. According to the appellant, it had also traded some goods which were not manufactured by the appellant and, therefore, this value was liable to be excluded from the aggregate value of clearances for the purpose of claiming SSI benefits. The Commissioner has denied the benefit for the reason that the proper procedure had not been followed. The appellant claims that there has been no violation of the procedure and in any case procedural infraction, if any, cannot be made a ground 14 E/646/2008 to deny the substantive benefits of SSI exemption to the appellant if the goods have been exported.
26. This contention of the learned Counsel for the appellant deserves to be accepted in view of the decision of the Tribunal in Pioneer Magnesia Works Ltd. Vs. Commissioner of Central Excise, Ahmedabad-II13 and Commissioner of Central Excise, Delhi-I Vs. Sigma Pneumatics Pvt. Ltd.14.
27. The value of branded goods (printed material) cannot also be included in the aggregate value of clearances for the purpose of SSI exemption. The appellant manufactures and clears the printed material for home consumption which do not bear any branded name. The appellant also manufactures printed material which bears the brand name of the buyers. In terms of paragraph 2(vii) of Notifications dated March 1, 2002 and March 1, 2003, one of the conditions for availing SSI exemption is that the aggregate value of clearances of all excisable goods for home consumption does not exceed Rs. 3 Crore (4 Crore w.e.f 01.04.2005) in the preceding financial year. In paragraph 3A, certain categories of clearances have been excluded for determining the aggregate value of clearances under paragraph 2(vii). One such category under clause (b) of paragraph 3A is clearances bearing the brand name or trade name of another person that are ineligible for exemption in terms of paragraph 4. Thus, in terms of paragraph 3A(b) of the Notification, clearances bearing the brand name or trade name of another person are not 13 2010 (251) ELT 316 (Tri.-Ahmd.) 14 2017 (353) ELT 245 (Tri.-Delhi) 15 E/646/2008 includible in the aggregate value of clearances for paragraph 2(vii). This is what was also held by the Tribunal in Commissioner of Central of Central Excise, Chennai Vs. Nebulae Health Care Ltd.15 and British Health Products India Ltd. Vs. Commissioner of Central Excise, Jaipur-I16.
28. The Commissioner has not accepted this contention as the appellant had not followed the proper procedure.
29. There was no violation of the procedure by the appellant and in any case, procedural infraction, if any, cannot to be a ground to deny of substantive benefit of SSI exemption to the appellant.
30. Thus, as the benefit of SSI exemption could not have been denied to the appellant, it is not necessary to examine the contention advanced on behalf of the appellant that the extended period of limitation could not have been invoked.
31. In this view of the matter and for all the reasons stated above, it is not possible to sustain the impugned order dated December 28, 2017 passed by the Commissioner. It is, accordingly, set aside and the appeal is allowed.
(Order pronounced in the open Court) (JUSTICE DILIP GUPTA) PRESIDENT (C.L. MAHAR) MEMBER (TECHNICAL) Babita 15 2015(325) ELT 431 (S.C) 16 2016 (335) ELT 489 (Tri.-Delhi)