Custom, Excise & Service Tax Tribunal
Inox Air Products P Limited vs Commissioner Of Gst&Amp;Cce(Chennai ... on 3 October, 2018
1
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.: E/40359, 40360, 40361/2018
(Arising out of Order-in-Appeal No. 310/2017 (CTA-I) dated
10.11.2017 passed by The Commissioner of G.S.T. & Central Excise
(Appeal-I), Chennai)
M/s. Inox Air Products Pvt. Ltd. : Appellant
Vs.
Commissioner of G.S.T. & Central Excise, : Respondent
Chennai North Commissionerate Appearance:-
Shri. Joseph Prabakar, Advocate for the Appellant Shri. R. Subramaniyan, AC (AR) for the Respondent CORAM:
Hon'ble Shri P Dinesha, Member (Judicial) Date of Hearing/Decision:18.09.2018 Date of Pronouncement: 03.10.2018 Final Order Nos. 42576-42578 / 2018 The assessee/appellant is in the business of manufacture of various gases falling under Chapter No. 28 of Central Excise Tariff Act, 1985 and for the purpose of manufacture of its final excisable goods, the appellant procures inputs from its suppliers. The appellant avails CENVAT Credit on capital goods, inputs and input services as per CENVAT Credit Rules ('CCR' for short), 2004. The 2 Revenue issued a Show Cause Notice No. 05/2014 dated 07.03.2014 covering the period 01.02.2012 to 31.08.2013 wherein it was pointed out that during the course of the appellant's procurement of liquid oxygen and liquid nitrogen from its suppliers, liquid argon less than the invoiced quantity as per the annexure thereto, the appellant had availed full CENVAT Credit of duty indicated in the respective invoices. It was therefore pointed out that the quantity of input that was not received and consequently, not used in the manufacture of final products was not eligible for CENVAT Credit in terms of Rule 3 of the CCR, 2004. It was therefore Show Caused as to the availment of CENVAT Credit in excess to the extent of Rs. 1,27,481/-
of the inputs that were not received which amounted to violation of Rule 3 of the CCR which was liable to be recovered under Rule 14 of CCR along with interest under Section 11AA and penalty under Rule 15(2) of CCR, 2004 read with Section 11AC of the Central Excise Act, 1944.
1.2 Another Show Cause Notice No. 10/2014 dated 30.09.2014 was issued covering the period from 01.09.2013 to 31.07.2014 on the similar allegation as above and another Show Cause Notice No. 29/2015 dated 03.09.2015 was issued covering the period from August, 2014 to July, 2015. The appellant offered its explanations 3 dated 07.04.2014, 08.01.2015 and 26.10.2015 respectively to the above Show Cause Notice, but however, the adjudicating authority vide common Order-in-Original Nos. 5 to 7/2016 dated 21.12.2016 confirmed the proposals against which appeals were preferred before the Commissioner of G.S.T. & Central Excise (Appeals-I), Chennai, who vide common impugned Order-in-appeal No. 310/2017 dated 10.11.2017 has rejected the grievance of the appellant and therefore, the appellant is before this forum.
2. During the course of hearing Shri. Joseph Prabakar, Ld. Advocate, appeared for the appellant and Shri. R. Subramaniyan, Ld. Department Representative (DR), represented the Revenue. 3.1 It is the case of the appellant that the liquid gases which it procures are very unique in nature which requires handling of the same with utmost care because of its nature being highly volatile. It was explained that for transportation, the liquid gas is filled in a Vacuum Insulated Transport Tank (VITT) in cold conditions at temperatures around minus 180 degrees centigrade which is sustained throughout its transit till the same is decanted into Vacuum Insulated Storage Tanks (VIST) in the factory premises of the appellant for appellant's manufacturing processes. 4 3.2 In respect of the alleged short receipt, Ld. Advocate explained that at ambient temperatures, the liquid gas gets evaporated and in this way, the volume of the liquid gases differ due to changes in temperature as well as atmospheric conditions and further submitted that there is no whisper/allegation that there has been any diversion.
3.3 He inter alia submitted that the difference, as explained supra which results in loss due to evaporation, is normal in the natural course of the appellant's business; that the average percentage of loss works out to about 2.48%, 2.70% and 3.80% as against the percentage of loss worked out in the Annexure to the Show Cause Notices, which according to him was quite normal; that the appellant had voluntarily reversed the credit amounting to Rs. 24,222/- which was not normal according to the appellant; that there was no intent to evade any payment of duty or wrongly avail and utilize the CENVAT Credit; that the following decisions have, in an identical set of circumstances, given the benefit to the assessees therein :
C.C.E., Nagpur Vs. Ispat Industries Ltd. - 2012 (275) E.L.T. 0235 (Tri. - Bom.);
C.C.E., Chennai Vs. Bhuwalka Steel Industries Ltd. - 2010 (249) E.L.T. 218 (Tri. - LB);
Ganges Valley Foods (P) Ltd. Vs. C.C.E., Kolkata - 2007 (217) E.L.T. 147; 5 SRF Ltd. Vs. C.C.E, Gwalior - 2006 (196) E.L.T. 293, etc.
4.1 Per contra, Ld. DR Shri. R. Subramaniyan submitted that as pointed out in the Annexure to the Show Cause Notices, the percentage of loss/shortage is abnormal which has not been explained either before the lower authorities or even before this forum.
4.2 He further submitted that the alleged reversal of CENVAT Credit amounting to Rs. 24,222/- was on 02.03.2017 which was just a day before the filing of the first appeal before the lower appellate authority and much after the passing of Order-in-Original which is dated 21.12.2016. This, according to the Ld. DR, proved that the action of the appellant was not bona fide.
4.3 With regard to the various decisions relied on by the Ld. Advocate, Ld. DR pointed out that the reported losses in those cases were much lower compared to the reported losses for the periods under dispute in this case and therefore, none of the cases is applicable.
5. I have heard the rival contentions, perused the documents placed on record and have also gone through the decisions relied on 6 by the Ld. Advocate. On a careful consideration of the above, I find that the following facts emerge :
(i) There is no doubt that the goods in question are highly volatile in nature and by its nature, it is evaporable.
(ii) There is no whisper of allegation that the alleged loss/shortage is man-made or deliberate or that there was any diversion.
(iii) There is no finding as to the tampering of the vehicles used in transportation en route.
(iv) It is impracticable and unrealistic to ignore the ground realities, especially where the contents are susceptible to dryage due to atmospheric conditions.
(v) There is also a likelihood of some error in recording of measurements due to human and mechanical error.
(vi) The loss reported in some cases as per Annexures to the Show Cause Notice are huge.
(vii) Reversal of CENVAT Credit was made just a day before the filing of the first appeal before the lower appellate authority and even if the abnormal losses are ignored, still the reported losses are quite high.7
6. Admittedly, the extent of loss having not been addressed in the statute, the same has been allowed by various courts considering the nature of goods involved. Going by the same ratios, I am also of the view that such loss cannot be ruled out and the assessee- appellant herein should also get the benefit of the same. But, at the same time, the argument of the Ld. Advocate that the losses of the kind involved in the present case are normal and the counter- argument of the Revenue that such loss is high, has not been proved with any supporting scientific evidences. This assumes importance when there is no allegation of diversion or man-made loss. For this reason, the matter requires a fresh adjudication, requiring the supporting documents as indicated above to be placed on record. Further, the Original Authority has also held, without examining the plea of the appellant, that the assessee's claim of transit loss was unacceptable as the goods were transported and stored in a controlled temperature atmosphere which according to me is without any basis.
7. For the above reasons, I set aside the impugned Order and consequent demand and remand the matter back to the file of the adjudicating authority who shall call for the necessary documentary evidences from the appellant including such scientific evidences and 8 then arrive at a rational conclusion befitting such evidences furnished by the appellant. Needless to say that the adjudicating authority can also get scientific evidences, in the interest of justice, while reaching a finding, after affording reasonable opportunities to the appellant.
(Pronounced in open court on 03.10.2018) (P Dinesha) Member (Judicial) Sdd