Custom, Excise & Service Tax Tribunal
Mitsubishi Electric Automotive India ... vs Cce, New Delhi on 5 September, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing/Order : 5.9.2014
Appeal No. E/2144/2006-EX(DB)
[Arising out of Order-in-Original No. 02/CE/2006 dated 31.3.2006 passed by the Commissioner of Central Excise, Delhi-III]
For Approval & Signature :
Honble Mr. Justice G. Raghuram, President
Honble Mr. R.K. Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
Mitsubishi Electric Automotive India Pvt. Ltd. Appellant
Vs.
CCE, New Delhi Respondent
Appearance:
Shri Amit Jain, Advocate - For the Appellant Shri M.S. Negi, D.R. - for the Respondent Coram : Honble Mr. Justice G. Raghuram, President Honble Mr. R.K. Singh, Member (Technical) Final Order No. 53567/2014 Per R.K. Singh :
The appellants have filed this appeal against Order-in-Original No.02/CE/2006 dated 31.3.206 in terms of which Cenvat credit of Rs.1,78,93,790/- has been disallowed and ordered to be recovered along with interest and mandatory equal penalty has also been imposed.
2. The facts, briefly stated, are as under :
The appellants are engaged in the production of electronic control unit, alternator assembly etc. They had taken Cenvat credit of the CVD paid on the goods imported by them viz. stator assembly, spacer, rectifier assembly etc. (hereinafter referred to as inputs). The imported inputs were supplied by them to their job workers M/s Lucas TVS Ltd. under challans after taking Cenvat credit of CVD paid thereon. After completion of the job work M/s Lucas TVS Ltd. sent the goods back under cover of invoice/delivery challan and after paying duty leviable thereon as they did not avail of the benefit of Notification No. 214/86-CE dated 23.3.1986. The appellants took Cenvat credit of the duty paid by M/s Lucas TVS Ltd. It is seen that during the period 23.9.2003 to 29.3.2005 the appellants took Cenvat credit of Rs.2,04,31,581/- on the basis of invoice cum delivery challans issued by the job workers and Rs.1,78,93,790/- (CVD) on the basis of Bills of Entry for the inputs which they had imported and supplied to the job worker. The adjudicating authority held that the appellants had taken credit twice on the same inputs and therefore disallowed the Cenvat credit of CVD amounting to Rs.1,78,93,790/- imposing equal penalty for wilful mis-statement or suppression of facts.
3. The appellants have contended that :
(i) The inputs were duly imported by them and CVD was paid thereon. The said inputs were sent to the job worker under cover of challans and therefore they are entitled to Cenvat credit of CVD paid on such inputs.
(ii) It is not in dispute that the job worker was liable to pay duty if they did not avail of the benefit of Notification No. 214/86 as the intermediate product manufactured by them was dutiable and availment of Notification No. 214/86 is not mandatory. Thus, they (i.e. the appellants) had correctly taken credit of the duty paid by the job worker.
(iii) Overall it is a revenue neutral exercise.
(iv) They cited several judgements in support of their contention.
4. We have considered the facts and submissions. We find that the issue is covered in the appellants favour by the judgement of the Honble High Court of Gujarat in the case of CCE, Ahmedabad-I Vs. Rohan Dyes & Intermediated Ltd. 2012 (284) ELT 484 (Guj.). In paras 11, 12, 13 and 14 of the said judgement, the Honble High Court held as under :-
11.?In such case, it was contended on behalf of the appellant that the entire transaction between the TELCO and the appellant was covered by Rule 57F(2)(b) of the Central Excise Rules, 1944. According to the said appellant under those Rules, the assessee is the manufacturer of final product and in that case, excavators. The manufacturer of the final product, according to the appellant, was permitted to remove the inputs to a place outside the factory for the purpose of manufacture of intermediate products so that they return to the factory for further use in the manufacture of final product. The appellant therein contended that in such a case, the credit can be taken by the manufacturer of the final product on the inputs purchased by it which are made available to the intermediate product produces. According to the appellant therein, Modvat credit is taken by the manufacturer of the final product on the inputs supplied by it to the manufacturer of the intermediate products which credit is reversed ultimately when the final product is removed from such manufacturers factory. The appellant therein further contended that as far as the appellant (the intermediate purchaser) was concerned, it was not liable to pay duty on the inputs supplied by TELCO since it had not taken credit for modvat in respect of those inputs nor could value of the inputs be added to the excisable value of the assemblies.
12.?In such case, the Supreme Court made the following observations :
We are of the view that the submission of the appellant is correct. The Tribunal appears to have been confused between the manufacture of the final product, namely, excavators and the manufacture of the intermediate product, namely, the floor plate assemblies. The scheme of Modvat permits the person who clears the ultimate final product to take the benefit of the Modvat scheme at the time of clearance of such final product. The manufacturer of the final product, in this case TELCO, would therefore, be entitled not only to adjust the credit on the inputs supplied by it to the intermediate purchaser such as the appellant but also to the credit for the duty paid by the intermediate purchaser on its products. The reliance on the decision in Burn Standard Company Ltd. (supra) by the Tribunal was misplaced. That case has no doubt held that the value of the free inputs were to be included in the final product. In that case, the final product was wagons and the question was whether the items which were supplied free by the Railway Board to the assessee could be included in the value of the wagons. This Court came to the conclusion that it could. The first distinguishable feature is that this Court in that case was neither concerned with the Modvat scheme, nor with the provisions of Rule 57F(2)(b). Furthermore, the Court was not considering a situation where the question was of the liability of an intermediate product being subjected to excise duty. What was in consideration was the final product, namely, wagons.
13.?If we apply the aforesaid principle to the facts of the present case, there is no dispute that according to the modvat scheme, it is the modvat of such final product which would have to include the cost of the inputs and in respect of which Modvat credit could be taken at the time of clearance of the final product and thus, in the facts of the present case, the Tribunal rightly rejected the contention of the Revenue that the respondents should have reversed the Cenvat credit taken before sending the goods to the job worker since the job worker had not followed the procedure of job work. It may not be out of place to mention here that that what was earlier provision contained in Rule 57F(2)(b) is exactly the present provision of Rule 4(5A) of the Cenvat Credit Rules, 2004.
14.?We do not find any substance in the contention of Mr. Ravani that the job workers cannot prefer to pay excise duty in spite of having exemption notification bearing No. 214/86 exempting the job workers from paying duty in view of the mandatory provision of Section 5A(1A) of the Act. Similarly, we are also not impressed by the submission of Mr. Ravani that it was a case of sale and not the case of job work so as to attract the aforesaid principle laid down by the Supreme Court in the above case. On consideration of the entire materials on record, we thus hold that the Tribunal below rightly applied the decision of the Supreme Court in the case of International Auto Ltd. (supra) to the facts of the present case and allowed the appeal of the respondents. Similar view was held by Honble CESTAT in respect of Hindustan Wire Products Ltd. Vs. Collector of Central Excise, Chandigarh 1995 (76) ELT 377 (Tribunal) as is evident from the following para 7 thereof:
7. There is no dispute that the job workers herein returned the copper wire bars sent to them by the appellants after converting them into copper rods, upon payment of duty @ Rs. 2900/- PMT under Notification No. 149/86-C.E. which was the rate admissible only if modvat credit was not availed of in respect of additional duty of customs. Therefore, the observation of the lower appellate authority that the benefit of Rs. 3300/- paid as additional duty of customs was already taken by the appellants while discharging duty liability on wrought copper rods at concessional rate of duty of Rs. 2900/- PMT and hence was not admissible to the appellants, is based upon a wrong premise. There is also no dispute that the imported copper bars purchased by the appellants from MMTC, Ludhiana had suffered additional duty to the extent of Rs. 3300/- PMT which amount is admissible as modvat credit under Rule 57A. The benefit of credit of Rs. 3300/- PMT cannot be denied on the sole ground that the job workers had opted to pay duty on the rods rolled from the copper bars without availing modvat credit of Rs. 3300/-. There is further no dispute that in case duty had not been paid at the job workers premises, the appellants would have been eligible to the modvat credit of Rs. 6200/- PMT once the job worker pays the duty and takes the consequence of payment of duty, and the normal procedure applicable for availing of modvat credit in respect of duty paid goods can be followed by the manufacturer of the final product. In the present case, the job worker has chosen to pay the duty and after clearance of the same, the appellants had taken modvat credit in respect of the duty paid by the job worker who has not taken credit in respect of the inputs received by him. Though in this case the appellants have not complied with the procedural requirement of Rule 57F(2), the substantive benefit cannot be denied to them, if otherwise due. Further, the Revenue cannot be said to have suffered any prejudice in as much as the appellants took only the credit of duty paid at the intermediate stage when they received the duty paid intermediate goods and therefore, the transaction between the job worker and the appellants was revenue neutral and the inputs had been used in the manufacture of intermediate products which in turn have gone into the manufacture of final products covered under the modvat scheme. Accordingly, the appellants are eligible to the benefit of credit of additional customs duty paid by them @ Rs. 3300/- PMT (in addition to credit @ Rs. 2900/- on copper rods which benefit has already been extended to them). It is pertinent to mention that the provisions relating to Modvat credit were in para materia provisions relating to Cenvat credit in relation to the present subject matter.
5. Further in a recent judgement in the case of Bharat Heavy Electricals Ltd. Vs. CCE & ST, Meerut-I - 2014 (300) ELT 442 (Tri.-Del.) it has been held by CESTAT that Cenvat credit is admissible to principal manufacturer of duty paid by job workers even if credit was availed earlier on receiving the inputs. It is worthwhile to mention that the fact that the job worker had not taken any credit in respect of inputs imported by the appellants is not in dispute at all.
7. In the light of the foregoing and following the binding judicial precedents narrated above, we allow the appeal and set aside the impugned order-in-original.
(Justice G. Raghuram) President (R.K. Singh) Member (Technical) RM 2