Custom, Excise & Service Tax Tribunal
M/S Skf Bearings India Ltd vs Commissioner Of Central Excise & ... on 13 August, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. E/2704/96 (Arising out of Order-in-Appeal No. 78/CEX/96 dated 10.10.1996 passed by the Commissioner of Central Excise (Appeals), Mumbai -II). For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s SKF Bearings India Ltd. Appellant Vs. Commissioner of Central Excise & Customs, Pune Respondent Appearance: Mr. S. S. Gupta, Advocate for Appellant Mr. Rakesh Goyal, Addl. Commr. (AR) for Respondent CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 13.08.2014 Date of Decision: 13.08.2014 ORDER NO. Per: Shri Anil Choudhary
1. The present appeal is against Order-in-Appeal No. 78/CEX/96 dated 10.10.1996 passed by Commissioner of Central Excise & Customs, Pune.
2. The brief facts of the case are that the appellant, SKF India Ltd. had availed MODVAT credit on certain capital goods consumed in their factory in relation to the manufacturing process of various kinds of bearings. The only issue in this case is that the appellant had contravened the provisions of the newly introduced Rules 57T(1) and 57T(2) as the declaration held by appellants were not in terms of a purported Trade Notice issued by the respondent. The period of dispute is from October 1994 to January 1995. Further, some of the credit has been denied on the ground that the items are not capital goods at all.
3. As per the findings of the Commissioner of Central Excise; Appellant had not filed proper declaration under Rule 57T(1) nor proper intimation was sent as per Rule 57T(2), and some of the items declared were like material handling equipment, testing equipment, measuring equipment, which by themselves do not bring about any change in input, hence they do not even qualify as capital goods as per explanation to Rule 57Q.
Hence the Commissioner passed O-I-O under Rule 57U confirming the entire demand amounting to Rs.49,18,799.85 to be paid along with penalty of Rs.2 lacs as per Rule 173Q (1) (bb). Aggrieved by the impugned O-I-O, appellant is before this Tribunal.
4. The Appellant counsel states various grounds on behalf of the appellant on which the MODVAT credit should be allowed and the demand for penalty should be quashed.
4.1 It is a well settled law that any Trade Notice of whatsoever nature is not binding on the appellants and the same does not have any statutory authority. Therefore, any purported breach of the same cannot result in raising of demand of Excise duty or imposition of any penalty by the department.
4.2 It further contended that appellants intention was very clear so it had filed proper declarations well in time for availing MODVAT credit. As the concept was new, as the MODVAT credit on duty paid on capital goods was permitted from 1.3.1994 under Prov. of Rule 57Q to 57U of CER, 1944 both the assesses as well as the department took some time to appreciate the complete ramifications of the said new rules. So the department should have considered the declaration and not have alleged the procedural lapse, as a ground for denial of MODVAT credit.
4.3 Further, appellant contends that they were never confronted by the respondent Revenue during hearings or at any other time with technical reasons of disallowing MODVAT credit on said items as per SCN. Reasonable opportunity was also not granted to the appellant to repudiate the same.
4.4 Appellant counsel further contends that as the only ground on which credit has been disallowed is not that appellant has not filed any declaration, but it is due to not filing declaration in the format purportedly desired by the respondent under Trade Notice dated 08.07.1994. is a straight forward case where department has absolutely no justification in denying MODVAT credit as there is no question of evasion or wrongfully claiming of credit. Hence it ought not to be denied for procedure lapse of late filing of declaration and intimation. In fact Rule 57T(2) itself permits such condonation.
4.5 The learned counsel made following further submissions:
a) Notification No. 7/99-CE(NT) dated 09.02.1999 has amended the provisions of rule 57T and a new sub-rule (13) has been inserted which provides that credit may not be denied even if the declaration filed under rule 57T(1) does not contain all the details
b) Board Circular No. 441/7/99-CX dated 23.02.1999 has clarified the above amendment wherein it is stated that Assistant Commissioner must not issue show cause notice for procedural lapses.
c) Larger bench of CESTAT in the case of M/s Kamakhya Steels (P) Ltd. 2000 (121) ELT 247 has on the basis of above amendment and circular observed that it will apply to pending cases as well.
d) As regards items on which credit has been denied as capital goods, he submits that Honble Supreme Court in the case of M/s Jawahar Mills Ltd. 2001 (232) ELT 3 (SC) has observed that for availing Modvat on capital goods, the items need not be used in the manufacture of final product, only requirement is that it should be used in the factory of production.
5. The learned AR, appearing on behalf of the department reiterates the findings of the Commissioner in Order-in-Original.
6. Heard both the parties.
7. Having considered the rival contentions, I find that the necessary declaration was made by the appellant. I rely on the decision of the Larger Bench in the case of Kamakhya Steels (P) Ltd. Vs CCE, 2000 (121) ELT 247, wherein, this Tribunal held that the question raised before it, whether an assessee could avail MODVAT credit in respect of inputs without filing a declaration was not required to be answered. Tribunal accepted the suggestion made to it by an intervener that the amendment to Rule 57G by insertion of sub rule (2), under that rule resulted in a situation in which the credit could not be denied because a declaration was not filed. Sub clause (ii) of sub rule (2) of Rule 57G is para materia with sub clause (13) of Rule 57T. The ratio of the decision of the larger bench would therefore apply to the facts before us. The only ground on which credit has been denied is thus without any basis.
I further find that provisions of rule 57T was amended w.e.f. 09.02.2009 and the following has been inserted as sub-rule (13):
(13)?Credit under sub-rule (6) shall not be denied on the grounds that-
(i)??Any of the documents specified under sub-rule (3) of rule 57G does not contain all the particulars required to be contained therein under these rules, if such document contains details of payment of duty, description of the capital goods, assessable value, name and address of the factory or warehouse;
(ii)?The declaration filed under sub-rule (1) does not contain all the details required to be contained therein or the manufacturer fails to comply with any other requirements under sub-rule (1).
Provided that the Assistant Commissioner of Central Excise having jurisdiction over the factory of the manufacturer intending to take credit is satisfied that the duty due on the capital goods have been paid and such capital goods have actually been used or are to be used in the manufacture of final products, and such Assistant Commissioner shall record the reasons for not denying the credit so in each case. On the basis of this amendment, the Board vide Circular No. 441/7/99-CX dated 23.02.1999 has clarified as follows:
The Assistant Commissioner, before issuing Show Cause Notice for wrong availment of Modvat credit by the assessee on any procedural grounds, shall conduct enquiries with regard to duty paid nature of the goods as the suppliers send, ensure that necessary information as mentioned in the Notification are available on the invoice and satisfies himself whether the goods have been used or are intended to be used as contemplated in the Modvat Rules. In case the assessees invoice contains the details viz. description of the goods, assessable value, name and address of the factory or warehouse where the goods are to be received, and if the assessee has filed a declaration as contemplated in the Modvat rules, the Assistant Commissioner having jurisdiction over the factory would allow the credit of duty so paid after making enquiries as above. Further, in the case of M/s Kamakhya Steels (P) Ltd. 2000 (121) ELT 247, the larger bench has observed that even pending cases are to be disposed of in accordance with the amendment made in rule 57T. The observation made by the Tribunal is as follows:
?We are not convinced with the arguments advanced on behalf of the Revenue that amended provisions and Circulars referred to above are not applicable to the point in issue. On going through the amendment to Rule 57G particularly with reference to sub-clause II of 2(a) of 7/99-C.E. (N.T.), dated 9-2-1999 the Circulars and the case law, we find that matter is required to be re-examined as it was rightly pointed out by the intervener. In the view we have taken, the matter is remanded to the Jurisdictional Assistant Commissioner to examine the admissibility of Modvat credit for the period covered under Appeal No. E/1840/95 and to pass an order in accordance with law. As regards credit on items denied as capital goods, the learned counsel has rightly pointed out the observation made by Honble Supreme Court in the case of M/s Jawahar Mills Ltd. 2001 (232) ELT 3 (SC) which is as follows:
?The contention of learned Additional Solicitor General that the aforesaid decision and other decisions referred by the Tribunal in the impugned order were cases involving sales tax and income tax and, therefore, the Tribunal should not have relied on those decisions is without any substance because the real question is that of the principle laid down by a decision. In view of the liberal language of the provision; Mr. Rohtagi fairly and very rightly did not seriously dispute that if any of the items enumerated in explanation 1(a) is used for any purpose mentioned therein for the manufacture of final products, it would satisfy the test of Capital goods. The main contention of Mr. Rohtagi, however, is that the question whether an item falls within the definition of Capital goods would depend upon the user it is put to. The submission is that parts of the items in respect whereof availing of Modvat credit has been allowed by the Tribunal could not be treated as Capital goods as the manufacturer could not establish that the entire item was used in the manufacture of final product. To illustrate his point, Mr. Rohtagi submitted that part of a cable may go into the machine used by the manufacturer and, thus, may qualify the requirement of clause 1(a) and, at the same time, another part of the cable which is used only for lights and fans would not so qualify. We have no difficulty in accepting the contention of the learned Additional Solicitor General that, under these circumstances, user will determine whether an item qualifies or not the requirement of clause 1(a). However, in the present cases this aspect has no relevance. It was not the case of the revenue at any stage before the authorities that an item does not satisfy the requirement of Capital goods within the meaning of the Rule on the ground of its user as it now sought to be urged by the learned counsel. The case of the revenue has all through been that the items in question per se are not Capital goods within the meaning of the expression as defined in Explanation 1(a). In respect of the cables of which Mr. Rohtagi gave example, the stand of the revenue before the Tribunal was that the cables per se cannot be treated as Capital goods. The stand of the revenue was not as has been projected now by Mr. Rohtagi. In this view, the question of directing remand of these matters for fresh decision by the Tribunal does not arise. On the facts and circumstances of these cases, therefore, the stand that the items in question are not used for manufacture of final product cannot be accepted for the reasons aforestated.
8. Hence, I allow the appeal and set aside the impugned Order-in-Original and grant Consequential relief where due in accordance with law.
(Pronounced in Court)
(Anil Choudhary)
Saifi Member (Judicial)
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