Custom, Excise & Service Tax Tribunal
M/S. The Supreme Industries Ltd vs Cce, Puducherry on 16 June, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/853 & 854/2005
(Arising out of Order-in-Appeal No.51/2005 (P) and Order-in-Appeal No.52/2005 (P) both dated 30.6.2005 passed by the Commissioner of Central Excise (Appeals), Chennai)
M/s. The Supreme Industries Ltd. Appellant
Vs.
CCE, Puducherry Respondent
Appearance Shri T. Chandran Nair, Advocate for the Appellant Shri K.P. Muralidharan, AC (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri V. Padmanabhan, Member (Technical) Date of Hearing / Decision: 16.06.2017 Final Order Nos. 40996-40997 / 2017 Per Bench The issue involved in both the appeals being the same, they were heard together and are disposed by this common order.
2. The appellants cleared the capital goods Moulds to their sister units on returnable basis, during the disputed period and demand has been raised alleging that they are liable to reverse the credit availed /duty paid for removal of the capital goods.
3. The brief facts of the case are that the appellants are engaged in the manufacture of plastic moulded furniture, crates etc. in their factories located in different parts of the country. The steel mould required for manufacture of aforesaid furniture and crates are either imported or locally procured by one unit were being sent to other units also for use in the manufacture of furniture and crates. The moulds are identified by its name like Mould Maxi, Mould Lily, Mould Crown, Mould Sumo, Mould Oskar, Mould Coral etc. That no two moulds were either with the same name or same nature. Thus, each moulds can be identified by its name itself. The appellants unit at Pondicherry availed CENVAT credit on moulds and cleared them to their sister unit for using them in manufacture in their sister unit. The moulds being used capital goods were cleared without payment of duty / reversal of CENVAT credit. As the appellants were under the belief that Rule 3(5) of CENVAT Credit Rules, 2001 does not apply to used capital goods and would apply only if capital goods are cleared as such. Show cause notices dated 7.6.2002 and 15.7.2002 were issued proposing to recover duty on these moulds on the ground that duty was payable on 115% on the cost of production or manufacture of such moulds. After due process of law, the original authority confirmed the duty along with interest and imposed penalty. However, he held that in view of Boards Circular the demand of duty computed on the basis of 115% of cost of production as proposed in the show cause notice cannot be sustained and that the duty has to be arrived on the basis of the invoice value applying depreciation. Thus, the duty amount was arrived by the original authority based on CBEC circular adopting depreciation in the written down value method. In appeal, Commissioner (Appeals) held that the proposal in the show cause notices demanding duty by adopting 115% of the cost of production is ab initio unsustainable and that by applying the written down method, the original authority has travelled beyond the scope of the show cause notice and for this reason, the impugned order does not sustain. Be that as it may, the appellate authority directed to issue show cause notice to the appellant as to which method of depreciation is to be adopted and then decide the issue. The appellant was thus issued a show cause notice dated 11.5.2004 in both these appeals proposing to invoke written down value method for arriving at the depreciated value of the goods. In this show cause notice also, there was no allegation of suppression of facts. Pursuant to the subsequent show cause notice, the original authority confirmed the duty demand by arriving at the depreciated value adopting written down value method. The appellants carried the issue in appeal before the Commissioner (Appeals) and vide order impugned, the Commissioner (Appeals) held that written down value method cannot be adopted, the duty has to be arrived at applying straight line method and thus the duty demand was reduced. The penalty imposed in Appeal No. E/854/2005 was set aside. Thus, the appellant is now before this Tribunal. For easy reference, the details of demand of duty, period and show cause notice etc. are reproduced as under:-
Appeal No. E/854/2003 E/853/2003 Demand (Duty) Rs.4,92,690/- Rs.12,23,089/- Period May 2001 Nov. 2001 July 2001 Sept. 2001 SCN Dated 7.6.2002 & 11.5.2004 15.7.2002 & 11.5.4004 OIO dated 24.9.2004 24.9.2004 OIA dated 30.6.2005 30.6.2005
4. On behalf of the appellant, learned counsel T. Chandran Nair argued that the appellant was under bonafide belief that the duty was not payable or that credit was not reversible when used moulds are cleared to their own sister units on returnable basis. He stressed upon the fact that two show cause notices were issued to the appellant and in both these show cause notices, there has been no allegation of suppression of facts. Even though the first show cause notices dated 7.6.2002 and 15.7.2002 were issued invoking the extended period of limitation, there is no allegation of suppression of facts. He argued that vide Order-in-Appeal dated 29.1.2004, the Commissioner (Appeals) had categorically held that the adjudicating authority had travelled beyond the scope of the show cause notice and that the impugned order does not sustain. However, he directed the adjudicating authority to issue further show cause notice to rectify the defect. That the subsequent show cause notice enlarges the limitation and also to plug the lacunae in the show cause notices issued earlier. Therefore, the confirmation of duty is not sustainable. He also argued that the issue whether credit has to be reversed when used capital goods are removed was highly contentious during the relevant period and the issue travelled upto the Larger Bench of the Tribunal and therefore extended period is not invocable. He relied upon the judgment in the case of Commissioner of Central Excise Vs. HMM Ltd. as reported in 1995 (76) ELT 497 (SC) to contend that the show cause notice should allege suppression of facts for invoking the extended period. The case of Steel Authority of India Ltd. Vs. Commissioner of Central Excise 2007 (210) ELT 150 was relied upon by the counsel to contend that the demand cannot be revised by issuing belated corrigendum to show cause notice and that such corrigendum cannot be used to enlarge the scope of the earlier show cause notice. The learned counsel argued that, in any case, the situation was a revenue neutral one since the appellant was clearing the used capital goods only to their sister units for manufacture of products and relied upon the decision of the Larger Bench of the Tribunal in the case of Jay Yuhshin Ltd. Vs. Commissioner of Central Excise, New Delhi 2000 (119) ELT 718 (Tri. LB).
5. Against this, the learned AR Shri K.P. Muralidharan reiterated the findings in the impugned order. He submitted that vide Order-in-Appeal dated 29.1.2004, the Commissioner (Appeals) had directed to issue a further show cause notice to the appellant. The appellant has not challenged the said decision before the Tribunal and accepted the subsequent show cause notice as well as the adjudication pursuant to the subsequent show cause notice. Therefore, he cannot contend that the subsequent show cause notice proposes to enlarge the scope of the earlier show cause notice or that it is used to plug the lacunae in the earlier show cause notice. On merit, the learned AR submitted that Rule 3(4) of CCR, 2001 provides for when capital goods are removed from the factory, the appellant is liable to reverse the credit. Therefore, the duty raised is legal and proper and that the Commissioner (Appeals) in the impugned order has given benefit of reduced duty demand by applying straight line method in determining the depreciation that has to be applied.
6. We have heard both sides and considered their submissions.
7. At the outset, we have to say that vide Order-in-Appeal dated 29.1.2004, the Commissioner (Appeals) has held that the demand raised in the earlier show cause notice proposing to demand duty adopting 115% value of the cost of production is ab initio unsustainable. But, however, he proceeded to direct the adjudicating authority to issue a further show cause notice which, in our view, transgresses the powers vested on the first appellate authority who can either nullify, modify or confirm the order passed by the adjudicating authority. It is categorically held by the Commissioner (Appeals) that the adjudicating authority in confirming the duty demand by applying written down value method of depreciation, instead of confirming the duty demand as proposed in the show cause notice has travelled beyond the show cause notice. In such an event, the demand at this stage itself ought to have been dropped. However, by the subsequent show cause notice, further adjudication was done wherein the duty demand was confirmed as per such subsequent show cause notice. On perusal of both the show cause notices, we find that there is no allegation with regard to suppression of facts. It is also clear that the appellants are removing the capital goods only to their sister units and the department is fully aware of such practice adopted by the appellant. On the basis of records as well as facts, we find that the appellants cannot be saddled with suppression of facts with intent to evade payment of duty. On this ground itself, we hold that the demand is unsustainable. Moreover, the capital goods being removed to the sister units, would give rise to a situation of revenue neutrality. If there is no allegation that the capital goods have been misused or diverted, in such scenario, the ratio laid down in the case of Jay Yushin Ltd. (supra) squarely applies.
8. From the foregoing discussions, we hold that the demands are unsustainable, the impugned orders are set aside and the appeals are allowed with consequential relief, if any.
(Operative portion of the order was
pronounced in open court)
(V. PADMANABHAN) (SULEKHA BEEVI C.S.)
Member (Technical) Member (Judicial)
Rex
4
8
E/853 & 854/2005