Custom, Excise & Service Tax Tribunal
Indus League Clothing Ltd vs Commissioner Of Central Excise ... on 2 December, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No .27046 / 2013 Appeal(s) Involved: E/856/2010-SM [Arising out of Order in Appeal 95-2009 dated 26/02/2010 passed by , INDUS LEAGUE CLOTHING LTD PUTTAPPA INDUSTRAIL ESTATE, WHITEFILED ROAD, MAHADEVAOPURA POST, BANGALORE Appellant(s) Versus Commissioner of Central Excise ,Customs and Service Tax - BANGALORE-I POST BOX NO 5400...CR BUILDINGS, BANGALORE, KARNATAKA 560001 Respondent(s)
Appearance:
Shri M.S. Nagaraja, Advocate T. RAJESWARA SASTRY & ASSOCIATAES.
# 48, 11TH MAIN ,BANASHANKARI, 2ND STAGE, BANGALORE KARNATAKA 560070 For the Appellant Ms. Sabrina Cano, Superintendent(AR) For the Respondent CORAM: Honble Shri B.S.V. Murthy, Technical Member Date of Hearing: 02/12/2013 Date of Decision: 02/12/2013 Order Per : B.S.V. Murthy Appellant is a manufacturer of readymade garments (RMG). They were availing the facility of CENVAT credit and paying duty. They were also receiving duty paid RMG for remake, refine, repair and recondition and return. After issue of Notification No.30/2004-CE dt. 09/07/2004, which provided for exemption to RMG subject to the condition that CENVAT credit is not availed, the appellants opted to avail the exemption. Accordingly, they filed a declaration dt. 09/07/2004 giving the details of stock of finished goods lying in stock on which CENVAT credit availed, CENVAT credit of returned goods cleared from 01/07/2004 to 08/01/2004 and CENVAT credit on inputs in stock. After calculating amount payable by them, the appellants paid a portion of the amount in cash and balance by reversing the CENVAT credit. The appellants also incorporated this information while filing the ER1 return for the month of July 2004. During the audit of the appellants undertaken by the CERA, the audit found out that the appellants had received RMG from their customers and had maintained a Form V Register for this purpose. The Form V Register, besides showing the quantity of returned goods also reflected the quantity of goods cleared by them out of such returned goods after undertaking repairing, reconditioning etc. Audit found that from January 2003, the total quantity of returned goods which had not been repaired/reconditioned and cleared involved duty amount of Rs.5,86,299/-. After this audit objection was raised, proceedings were initiated by issuing a show-cause notice on 01/02/2008 requiring the appellants to pay back the CENVAT credit of Rs.5, 88,885/- in respect of RMG received back by them during the period 09/01/2003 to 17/02/2004. The proceedings culminated in confirmation of the demand with interest and penalty equal to the CENVAT credit.
2. The learned counsel for the appellants submitted that in the declaration given by them, the appellants had indicated the quantum of inputs in stock, work-in-progress and finished goods in stock and it is his submission that the inputs in stock included the returned goods also.
3. The learned AR would submit that inputs in stock did not include the returned goods. For this purpose, she relies on the audit report. She submits that in the audit report, it has been clearly mentioned that in the Form V register, the appellants were showing the quantity of RMG returned to them and quantity of RMG which were repaired/reconditioned and cleared also. She also submits that no evidence has been produced by the appellants to show that this quantity was included in the inputs in stock mentioned by them in the declaration given by them. Further she draws my attention to the observations of the Commissioner (Appeals) in his findings. In the findings under the head Non-accountal of removal of returned goods, the relevant extract reads as under: These three elements of stock of goods are accounted for in books of accounts viz. (i) Annexure 10 (stock of inputs), (ii) Form IV (receipted inputs and their issue for production which is indicative of stock in process goods) & (iii) Daily Stock Account (erstwhile RG-1 for finished goods). However, the receipted stock of returned goods is accounted for in Form V Register have not been. If they were cleared they are to be shown as disposal from the very same Form V Register and not from any one of the three mentioned above. This evidence is enough that the CENVAT credit availed on returned goods (under Rule 16 of CER, 2002) have not been accounted anywhere under the above mentioned three books of accounts. Unfortunately, we do not have any evidence to show the method of accounting followed by the appellants in this case. The Commissioner (Appeals) seems to presume that Form IV and Form V registers are exclusive to each other. He seems to have come to the conclusion that in the Form IV register the returned goods are not included. There is absolutely no basis for this conclusion. No evidence has been gathered. No statement has been recorded. No accounting procedure has been discussed. The only alternative left is to consider what would be the correct procedure to be followed in accordance with law. Rule 16 deals with returned goods. Whether the returned goods undergo a process of manufacture or not, Rule 16 requires that whatever duty had been paid on the returned goods has to be taken as CENVAT credit and thereafter if the goods have been cleared without undergoing process amounting to manufacture, the credit originally taken should be reversed and if the goods undergo a process of manufacture, duty should be paid on transaction value/MRP based assessments under Section 4A. That being the position irrespective of the process on the returned goods, they have to be necessarily to be added to the inputs account. Therefore, the normal and natural conclusion would be that the same would be added in the Form IV register or the register which is equivalent to erstwhile RG23A part I register. RG23 Part 1 register unlike Form IV register which relates only to the main raw materials, has to include the RMG returned also. In this case, it is doubtful whether Form IV register would have reflected the returned garments in view of the fact that if the appellant started process of manufacture of garments, fabrics would be the main materials and not the returned garments. In any case, unless it is shown that the appellant was following a practice of not entering the returned goods anywhere other than in Form V register, the conclusion that the same were not included in the stock of inputs cannot be reached. As rightly observed, there is no evidence forthcoming on this account. I also take note of the fact that the total amount of duty involved on the stock of inputs is Rs.10, 66,888/- which is more than the amount demanded from the appellant. If this was less than the amount that was demanded, naturally the conclusion would be that the appellant has not correctly indicated the position. In the absence of that also, the benefit, if any, regarding duty liability involved in the offence has to go to the assessee.
4. Further I also consider that this is a case where extended period could not have been invoked. When the declaration itself has been made, the Department had full opportunity to verify the submissions made by the appellants in the ER1 return within one year. Whether the declaration was made correctly as regards inputs in stock, WRP etc. could have been made. I am aware that suppression of facts/mis-declaration cannot be set aside or ignored merely because the Department had an opportunity to verify and did not verify. But when there is no evidence at all and there is no logical basis for the conclusions reached and no investigation is conducted to bring out the facts or verify important aspects, the only obvious solution would be to hold that extended period could not have been invoked.
5. In the circumstances, the impugned order is set aside and appeal is allowed with consequential relief, if any, to the appellant.
(Order dictated and pronounced in open court) B.S.V. MURTHY TECHNICAL MEMBER Raja.
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