Customs, Excise and Gold Tribunal - Delhi
Hero Cycles Ltd. And Essar Steel Ltd. vs Commissioner Of Central Excise on 3 December, 2002
Equivalent citations: 2003(86)ECC341
JUDGMENT V.K. Agrawal, Member (T)
1. The issue involved in these two appeals, filed by M/s. Hero Cycles Ltd. and M/s. Essar Steel Ltd. arising out of a common Adjudication Order No. 14/2002 dated 3.4.2002, is whether the Appellant No. 1 has rightly taken the Modvat credit of the duty paid on the inputs supplied by the Appellant No. 2.
2. Shri B.L. Narsimhan, learned Advocate, submitted that M/s. Hero Cycles Ltd. Appellant No. 1 manufacture Cold Rolled Strips (C.R. Strips) for which raw material is H.R. Coils in respect of which they avail MODVAT Credit under Rule 57 A of the Central Excise Rules 1944; that they mainly purchase H.R. Coils from M/s. Essar Steel Ltd. Appellant No. 2, M/s. TISCO and M/s. SAIL; that during the disputed period, the practice in the Steel Industry was that the products were cleared from the factory on stock transfer basis to the various depots at a particular price; that the price at which the products were sold from the Depots Was also not a conclusive price; that after negotiation and based upon the market conditions, the ultimate price was arrived at and the change in price was effected in the form of debit notes/credit notes; that as per the said practice Hero Cycles purchased inputs from Essar Steel and based on the duty payment indicated in the invoice, Hero Cycles took MODVAT Credit in their Accounts; that after the negotiation whenever the price was reduced, the Appellant No. 1 raised debit notes on the seller; that, however, because of the reduction in the price, Essar Steel did not seek reassessment of the goods nor apply for and obtain refund of the excess duty paid.
3.1 The learned Advocate, further, mentioned that the Commissioner, under the impugned Order, has confirmed the demand and imposed penalty on both the Appellants holding that the invoices were deliberately over-invoiced resulting in availment of higher input credit. The learned Advocate submitted that they had claimed the MODVAT Credit as per the amount of duty mentioned in the invoices; that Appellant No. 1 has no Authority under law to make a reduction in the excise duty in respect of the inputs; that it is the settled position that once the excise duty has been paid on the goods, the duty amounts get attached with the goods no matter whatever be the price at which the goods have been sold subsequently; that only the excise authorities having jurisdiction over the manufacturer can charge extra or refund a portion of duty already paid; that the present proceedings to disallow the MODVAT Credit is effectively amounting to reassessing the goods manufactured and cleared by Essar Steel at the hands of the Appellant No. 1 which is clearly impermissible; that the Central Excise officer having jurisdiction over the factory of the manufacturer of the final products has no legal jurisdiction to reassess the goods manufactured and cleared from the factory of the input manufacturer. He relied upon the following decisions:
(i) CCE Raipur v. Universal Cables Ltd., 1997 (94) ELT 185 (T)
(ii) Eveready Industries India Ltd. v. CCE, Allahabad, 2000 (38) RLT 179 (Tri)
(iii) Cummins India Ltd. v. CCS, Pune-l, 2002 (51) RLT 626 (CEGAT)
(iv) Kerala Electronic Corporation v. CCS, 1996 (14) RLT 129 3.2 He also referred to the decision in the case of MRF Ltd. v. CCE, Madras, 1997 (92) ELT 309 (SC) wherein It has been held that fluctuation in prices subsequent to clearances of goods not to effect liability to the Excise duty. He, further mentioned that the reliance of the Commissioner on the decision in TELCO v. CCE, 1996 (87) ELT 157 (T) is wholly misplaced; that in the said matter, the Tribunal was examining the scope and purport of Rule 57 F and Rule 57 G in the context of a situation where the manufacturer of the inputs had sought reassessment of the goods and had applied for and obtained refund of the excess excise duty originally paid; that the Tribunal held that in such a situation, the manufacturer of the final product should suo-moto reverse the credit which has been obtained as refund by the input manufacturer; that in the present matter it is not the case of the Department that the Essar Steel had claimed refund of the excess excise duty in view of subsequent reduction in price.
4. Ms. Reena Khair, learned Advocate for M/s. Essar Steel Ltd. submitted that there is no evidence to come to a conclusion that the Appellant No. 2 had knowingly paid excess duty at the time of clearance of goods from their factory gate to Depot with an intention to facilitate availment of MODVAT Credit to the Appellant No. 1; that the HR Coils supplied to Hero Cycles were of regular size which were normally kept in stock at the Ludhiana Depot for sale to various dealers and/or actual users; that the Depot procured H.R. Coils from their factory based on its estimated sale requirements; that at the time of clearance of goods, duty was paid on the assessable value which corresponded to the Depot selling price of H.R. Coils prevailing on the date of clearance from factory to the Depot; that at the time of clearance of goods from the factory to Depot, the goods were not earmarked for safe to the Appellant No. 1; that the depot selling invoice alongwith the debit note/credit note reflect the correct selling price; She referred to the Board's Circular No. 251/85/96-CX dated 14.10.96 wherein it has been clarified in view of amendment of Section 4 of the Central Excise Act in 1996 that "Assessments need not be kept provisional till the actual sale price of the excisable goods cleared from places of removal other than factory gate is known. The Assessee may be asked to declare and pay duty at the price prevailing at such other place of removal on the date such goods meant for that place of removal are cleared from the factory gate." Finally the learned Advocate submitted that there was no commercial accommodation inasmuch as Hero Cycles purchased goods from their Depot at the prevailing market price and that it is not in dispute that ferrous metal market is volatile; that further there were many instances where the prices at which Hero Cycles purchased goods were higher than the prices at which duty has been paid at the time at clearance of the goods at the factory gate; that the duty was paid through PLA and as such there was no commercial accommodation,
5. Countering the arguments, Shri Rajeev Tondon, learned SDR, submitted that inspite of the contract, the goods were cleared by the Appellant No. 2 at inflated price which reflects commercial accommodation; that though subsequently the basic price was restored to the contracted price by way of issue of debit notes the corresponding corrections were not carried out in the amount of input credit; that the correct procedure should have been taking recourse to claim refund of the duty paid in excess by the Appellant No, 2. He relied upon the decision in Thermon Heat Tracers Ltd. v. CCE, Pune, 2001 (132) ELT 455 (T) and CCE Jaipur II v. Adarsh Guar Gram Udyog, 2000 (120) ELT 138 (T),
6. We have considered the submissions of both the sides. It has not been disputed by the Revenue that the Appellant No, 2 cleared H.R. Coils on payment of duty and the Appellant No. 1 had availed of MODVAT Credit of the duty actually paid by the supplier and mentioned in the duty paying documents, The Revenue has also not disputed the fact that the duty paid in excess on account of finaiization of price between both the Appellants has not been claimed as refund by the Appellant No. 2. Nothing has also been brought on record by Revenue to show that the assessments were reopened at the supplier's end that is Appellant No. 2. It has been held by the Tribunal in the case of Kerala State Electronic Corporation v. CCE, Kochi, 1996 (14) RLT 129 (CEGAT) that MODVAT Scheme "does not confer any power on the Authority having jurisdiction over a manufacturing unit to reassess duty on the inputs received for the purpose of MODVAT credit, Even in cases there is any short or excess collection of duty on the inputs, the assesses are entitled to credit as specified in the duty paying documents. If the duty paid on the inputs is found to be short or in excess what is payable under the law the resort can be had at the suppliers end.... The Legislature visualized this situation....and to take care of such a situation, they therefore provided a separate mechanism to ensure that MODVAT Credit is equal to the duty paid by providing for variation of credit under Rule 57 E." Similar views were expressed by the Tribunal in the case of Eveready Industries case. In the case of Universal Cables, the manufacturers of the final products issued debit notes to the suppliers of PVC compound as it was not in accordance with the specifications. The Department contended that the Respondent should not be allowed credit of duty on that part of the assessable value for which debit notes had been issued. The Tribunal did not agree with the Revenue and held that as there is no change in the duty paid by the manufacturer of input, "Credit of duty taken by the respondents herein cannot be varied." The ratio of those decisions is squarely applicable to the present matter before us. The ratio of the decision in TELCO case, relied upon by the Adjudicating Authority is not applicable as in that matter the inputs were reassessed at the suppliers end. The Appellant No. 1 is eligible to take the credit of the duty specified in the duty paying document under which the inputs were received. Accordingly we set aside the impugned orders and allow both the appeals. This also disposes of the stay application filed by M/s. Essar Steel Ltd.