Custom, Excise & Service Tax Tribunal
M/S. Indian Oil Corporation Ltd vs Cce, Chennai Iv on 27 October, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/1376/2004
(Arising out of Order-in-Original No.10/2004 dated 30.8.2004 passed by the Commissioner of Central Excise, Chennai I)
M/s. Indian Oil Corporation Ltd. Appellant
Vs.
CCE, Chennai IV Respondent
Appearance Mrs. Radhika Chandrasekar, Advocate for the Appellant Shri K.P. Muralidharan, AC (AR) for the Respondent CORAM Honble Shri D.N. Panda, Judicial Member Honble Shri Madhu Mohan Damodhar, Technical Member Date of Hearing / Decision: 27.10.2016 Final Order No. 42063 / 2016 Per D.N. Panda It is submission of learned counsel that the issues framed in the adjudication order in para 14 thereof are without evidence. The authority framed the issue for two products sold by the appellant to Indian Navy availing exemption under a Notification. Both goods were manufactured for Defence Department making exclusive use of an input. Revenue disentitled the appellant to the MODVAT credit. However appellant has paid 8% of the value of the exempted goods to resolve the dispute on an allowance of MODVAT Credit. Therefore, there should not be any direction for reversal of the MODVAT credit.
2. Appellant further submitted that there is no finding by the adjudicating authority that there was exclusive use of the input without any other input to produce the exempted goods. When the appellant has paid 8% on the value of the exempted goods cleared, Revenue has not been prejudiced.
3. To the aforesaid contentions of the appellant, Revenue disagrees on the ground that in paragraphs 18 and 20 of adjudication order, the adjudicating authority has examined that the input in question was exclusively used for exempted goods manufactured for Indian Navy. When there was no use of the common input for manufacture of dutiable and exempted goods, payment of 8% value of the goods does not arise. What that is necessity of law is that there should not be admissibility of MODVAT credit due to exclusive use of the input for manufacture of exempted goods.
4. Learned AR also says that the appellant was before Settlement Commission and withdrew its application. To this proposition, appellant replies that Settlement Commission did not look into the merits of the case at all. However, settlement petition was rejected when the quantum of deposit for settlement was disagreed between the parties.
6. Heard both sides and perused the records.
7. Revenues submission that the appellant was before Settlement Commission is correct as is revealed from the order dated 6.4.2004 of the Settlement Commission. The issue as that is in the present appeal was before Commission. Appellant has deposited 8% of the value of the goods cleared to Indian Navy. But that was not acceptable to Revenue for which the litigation perpetuated. Both sides did not agree with the Commission on the quantum of deposit required by Commission. Therefore, application for settlement was rejected without the Commission looking into the merits of the case. This is specifically recorded in para 9 of the Commissions order. Therefore, merit in the case is open for the Tribunal to look into that afresh.
8. When the merit is looked into, nothing is apparent from the adjudication order to appreciate that the authority made any trial run to find out that the input in question was the only input used to manufacture goods meant for Indian Navy. Appellant says this input was commonly used along with other inputs for manufacture of exempted goods and other finished goods. Had there been any trial run to ascertain that the finished goods supplied to Indian Navy was out of exclusive use of the input in question, the situation would have been different. But that is not the case. The authority from para 18 onwards of his order only dealt with legal propositions without testing the facts with evidence. In such circumstances, an arbitrary order has been passed. Such order does not provide any scope to appreciate that the appellant carried out manufacture of the exempted goods during the material period only using the input in question. In absence of any evidence to show that the appellant has not used the input commonly with others for manufacture of exempted goods as well as dutiable goods, proposition of the appellant that 8% demand on the value of the goods cleared to the Indian Navy is justified.
9. To put an end to the issue, which is running for the last 15 years, the appellant can only be directed to deposit 8% of the amount of the value of the goods cleared with interest if any, for the default amount to bring an end to the issue.
10. In view of the dispute between the parties as above on the point of law, there shall be no penalty.
11. In the result, appeal is allowed to the above extent.
(Dictated and pronounced in open court)
(MADHU MOHAN DAMODHAR) (D.N. PANDA)
Technical Member Judicial Member
Rex
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