Custom, Excise & Service Tax Tribunal
Mahindra Steel Service Centre Ltd vs Bhopal on 14 August, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
BENCH-DB
COURT -III
Excise Appeal No. E/50382/2016-Ex [DB]
[Arising out of Order-in-Appeal No. BHO-EXCUS-001-APP-
362-17-18 dated 24.10.2017 passed by the Commissioner
(Appeals) Bhopal Commissionerate, Bhopal.]
M/s. Mahindra Steel Service Centre Ltd.
...Appellant
Vs.
C.G.S.T., C.E & C.C-, Bhopal ... Respondent
Present for the Appellant : Mr. J.M. Sharma (Adv.) Present for the Respondent : Mr. S.K. Bansal, (AR). Coram: HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) HON'BLE MS. RACHNA GUPTA, MEMBER (JUDICIAL) Date of Hearing.19.07.2018 Pronounced on.14.08.2018 FINAL ORDER NO. __52774/2018___ PER: RACHNA GUPTA The appellants herein are engaged in the manufacture of Transformer Core Stack as well as cutting of silicon steel coil (CRGO Coils) from wider size to smaller size falling under Sub Heading No. 7225110 of the first scheduled to Central Excise Tariff Act, 1985. The appellants have been availing cenvat credit on inputs under Cenvat Credit Rules, 2004 (CCR). The department on an enquiry noticed that for the period w.e.f February 2014 to June 2015 the appellants have cleared CRGO Coils by classifying the product under 72251100 and 72261100 as final product, CRGO Coils
2|Page E/50382/2016 -[DB] 7225110 are being received as inputs by the appellant. The department observed while comparing the inputs & the final products with the input invoices, that the appellant has paid duty less than the cenvat credit availed on the inputs. Resultantly the show cause notice dated 27.10.2015 was served upon the appellants for effecting recovery of short duty paid under Rule 14 of Cenvat Credit Rules read with Section 11 A of Central Excise Act, 1944(CEA) alongwith the interest and the proportionate penalty. The additional Commissioner vide order dated 15.04.2016 has confirmed the entire demand alongwith the interest and penalty. The said order has been confirmed vide the order of Commissioner Appeals dated 24.10.2017. Hence the present appeal.
2. We have heard Sh. J.M. Sharma ld. Advocate for the appellant and Sh. S.K. Bansal ld. DR for the department.
3. It is submitted by the appellant that in fact 4 show cause notices were served upon the appellant as below:-
SN Date of Period O-I-O Recovery O-I-A Amount Decision SCN date Ordered Date upheld in (Rs.) O-I-A 1 27.02.14 Feb 2013 03.02.15 5,44,959 19.12.17 2,64,463 The appeal to Jan (Pg. was partly (Page 67) 2014 (Pg. 74) 87) allowed after taking into consideration the actual credit taken on goods and duty paid on such goods cleared on payment of duty. The differential amount Rs.
2,46,463/-
alongwith
interest and
penalty was
3|Page
E/50382/2016 -[DB]
paid to avoid
further
litigation.
2 25.07.16 Sep 2015 06.06.17 3,07,273 23.10.1 Appeal
(Page 92) to Feb (pg. 97 7 allowed.
2016 (Pg Cenvat credit
101) availed was
Rs. 15,87,556.
The amount
paid at the
time of
clearance as
duty Rs.
18,58,634. No
amount
payable.
3 24.08.15 Oct 2011 05.04.16 48,99,673 24.10.1 48,99,673 O-I-O
(Page 45) to Jan (pg. 30) 7 confirming the
2013 (Pg. demand
23) upheld as
records could
not be
produced.
4 27.10.15 Oct 2014, 05.04.16 1,37,954 24.10.1 1,37,954 Order upheld
(Page 53) Dec 2014 7 without taking
and June into
2015 consideration
the facts
available in
Exhibit F (page
no. 155) and
para (ii) at
page 135
wherein it is
noted that
against the
amount Rs.
1,37,954/-
CENVAT credit
availed. The
duty
amounting to
Rs. 1,55,704/-
was paid.
Under similar
facts, ld.
Commissioner
(Appeals) in
the respective
orders
mentioned at
S. No. 1 & 2
above has held
that the duty
liability is
required be to
determine
with reference
to the amount
of CENVAT
Credit actually
taken and the
amount of duty
paid at the
time of
clearance.
That in respect
of demand
vide SCN dated
27.10.2015, no
duty is
required to be
paid.
4|Page
E/50382/2016 -[DB]
The show cause notice at sr. no. 3 & 4 (as above) have been adjudicated vide the impugned order under challenge.
4. It is further submitted that the decision first two show cause notices has not been challenged w.r.t by the department nor by the appellant and accordingly stands final. With respect to the third show cause notice it is submitted that since there was no evidence by the appellant the original authority has rightly confirmed the demand therein. As on date also appellant has no documentary evidence to support his case hence there is no argument on merits qua the confirmation of demand arising out of show cause notice dated 24.08.2015. However, the same is challenged as being barred by time. In addition it is submitted also w.r.t show cause notice at Sr. No. 4 above that there is no dispute about CRGO Coil under 72251100 to have been cleared as final product with the payment of precise excise duty CRGO Coil under 72261100 which is mentioned to have been cleared as cut coil under the belief that the cutting coils to a particular size amounts to manufacture. The Circular No. 584/21/2001-CX dated 07.09.2001 is being impressed upon as the basis of relief specifically the para 3 thereof as follows:
It is also clear from the ER-1 returns and submissions made by the party that they are engaged in the manufacture of Transformer Core Stack (a transformer part) falling under Chapter 85 of the CETA 1985 and the CRGO Coils/ Sheets is the main input for the manufacture of transformer Core Stack. Thus it
5|Page E/50382/2016 -[DB] is clear that the CRGO Sheets not used in the manufacture of Transformers Core Stack and cleared by the party are nothing but removal of inputs „as such‟
5. The case law Lal Woolen And Silk Mills (P) Ltd.
Vs. Collector of C. Ex., Chandigarh 1999(108) ELT 7 (SC) is being relied upon. It is also submitted that even if it is not manufacture the appellant was under bonfide impression for it to be so. Also in circular no. 911/1/2010- CX dated 14.01.2010 in cases where the process under taken by assessee in-disputably does not amount to manufacture, the mandate was fixed on the department, to inform the said assessee about the correct legal position and advising not to pay duty and not to avail credit on input. It is submitted that the department has never given any such information to the appellant due to which appellant continued under bonafide belief of CRGO Coils of 72261100 it being cleared in cut coils of specified size, as manufacture. The liability is alleged to have wrongly been raised and confirmed. Finally impressing upon the letter dated 30.01.2013 as was submitted by the appellant to the Superintendence Central Excise range III, it is submitted that the appellant has paid much more duty then the credit as has been availed by him. Seen from all these angles, the findings of the order under challenge are prayed to be set aside and appeal is prayed to be allowed.
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6. While contradicting these arguments ld. DR has submitted that the appellant cannot be allowed to challenge the decision of the original adjudicating authority qua the show cause notice dated 24.08.2015 as the ground of non availability of any evidence was never taken by the appellant before the said authority. A fresh ground cannot be taken before the Tribunal for seeking any relief as is prayed with respect to the said show cause notice. With respect to the circular dated 7.09.2001, it is submitted that the said circular was withdrawn vide the letter dated 24.03.2005 after it was quashed by under the High Court of Delhi vide its order dated 21.11.2003. It is submitted that the adjudicating authorities below have given a reasoned detailed decision while confirming the demand against the appellant. Justifying the said order ld. DR has prayed for the appeal to be dismissed.
7. After hearing both the parties and perusing the record we are of the opinion as follows:
Two things need to be adjudicated for the purpose No. 1 As to whether activity of cutting CRGO Coils to a specified size amounts to manufacture in accordance of Section 2F of Central Excise Act, 1944 (CEA).
No. 2 Whether the duty paid by the appellant is more than a cenvat credit availed by them. For the purpose, definition of manufacture is relevant. It reads as follows:
2(F) "manufacture" includes any process,-
7|Page
E/50382/2016 -[DB]
(i) Incidental or ancillary to the completion of a
manufactured product;
(ii) Which is specified in relation to any goods
in the Section or Chapter Notes of the first schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or
(iii) Which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container of labeling or re-labeling of container including he declaration of alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, And the word "manufacture" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his account.'
8. In the present case the admitted activity is cutting and silting of CRGO Coils irrespective the Tariff head had been changed but to still to be called as manufacture, the activity has either to be identical or ancillary to the completion of final product or should itself amount to manufacture or should be a process which in relation to the goods specified in third schedule involves packing or re- packing of such goods in a unit container. The main product of appellant, admittedly, is the manufacture of transformer core stack falling under Chapter 85 of CETA 1985 for which the CRGO Coils is the main input. It becomes clear that the unused input if cut into any other form but since is not used
8|Page E/50382/2016 -[DB] in the manufacture of final product of the appellant the same can be nothing more than the clearing of the unused input/ raw material. From no stretch of imagination same can be called as manufacture. In the given circumstance irrespective the Tariff Heading of the cut CRGO Coils change from that of the input it still will not be the manufacture. The Hon'ble High Court Delhi in the Case of Faridabad Iron & Steel Traders Association Vs. Union of India 2004 (178) ELT 1099 has held that the process of cutting or slitting of steel sheets in coil form to specific sizes do not amount to manufacture as under Section 2 (f) of CEA for no new article of distinct character being emerged from mere cutting or slitting. In this case itself the Hon'ble High Court Delhi had quashed the circular dated 07.09.2001 where upon the appellant here in is relying to hold cutting of CRGO Coils as his activity of manufacture. The department has also withdrawn the said circular as is impressed upon by ld. AR vide a circular dated 24.03.2004.
9. From this discussion we hold that the adjudicating authorities have rightly concluded that the appellant has removed the inputs as such and has failed to reverse the equal cenvat credit which has been taken on the said inputs and thus has contravened the provision of Rule 3 (5) of Cenvat Credit Rules, 2004 (CCR) Rule 2004. The appellant rather, while removing the inputs as such was required to pay cenvat credit taken by them. The plea of the appellant
9|Page E/50382/2016 -[DB] about more duty to have been paid then the credit availed is also observed as been not sustainable, in view of the admitted fact of the appellant that they are using various grade of CRGO Sheets, price where of vary several times. In these circumstances we opine that department has committed no error while taking the average value for calculating the reversal of cenvat credit.
10. Now adjudicating show cause notice wise:
For show cause notice dated 24.08.2015 the adjudicating authority below has confirmed the demand levied therein. It is submitted on part of the appellant that he has no documentary evidence available with him, any more, to defend himself and to show that he has paid more duty than the cenvat credit availed even for the period October, 2011 to January, 2013 hence he cannot afford to contest the levy confirmed. However the show cause notice has been objected as been barred by time. It is alleged that Commissioner (Appeals) has wrongly held department entitled for invoking extended period. It is submitted that the department was not entitled to invoke the extended period of limitation on the simple ground that they had already issued the show cause notice dated 27.02.2013. For a period immediately succeeding the period in demand in the show cause notice dated 24.08.2015 hence it does not lie in the month of the department that they had no notice or knowledge of the alleged short payment on part of the 10 | P a g e E/50382/2016 -[DB] appellant. In the given circumstances the question of suppression of fact or the misrepresentation as is alleged against the appellant is not sustainable.
11. Though ld. DR has justified the findings of the adjudicating authority below submitting that the period of October, 2011 to January, 2013 of show cause notice dated 24.8.2015 could not be covered under the earlier show cause notice dated 27.02.2014 as the related information was not provided by the party during the preparation of the said earlier show cause notice. The copy of ER-Return for the said period was submitted later hence the department has rightly invoked the extended period of limitation. But we are not convinced with the arguments lead by ld. DR as it is very much apparent from the documents in defense that the appellant were regularly reporting their activities in their ER-Return. Every year the audit team was checking their records hence the amount of duty paid by the appellants on the clearance of CRGO Coils 72261100 and the cenvat credit availed also the difference thereof was very much to the notice of the department. Therefore no intention of alleged misrepresentation is apparent on part of the appellants. Appellant had always been under the belief of their activity to be of manufacture though the same has been adjudicated otherwise, as above but it does not falsify the presumption of the said bonafide belief in favour of the appellants until and unless there is some other evidence
11 | P a g e E/50382/2016 -[DB] produced by the department qua the alleged misrepresentation or suppression of fact Department's own circular no 1053/02/2017-CEX dated 10.03.2017 clarifies that extended period can be invoked only when there are ingredients necessary to justify the demand for the extended period. In a case leading to short payment or non- payment of tax, the onus of establishing that these ingredients are present in a given case is on revenue and these ingredients need to be clearly brought out in the show cause notice along with the evidence thereon. The active element of intent to evade duty by action or in action need to be present for invoking extended period of limitation Hon'ble Supreme Court in the Nestle India Ltd. Vs. Commissioner of Central Excise, Chandigarh 2009 (235) ELT 577 (SC) has held that extended period of limitation is applicable only when there is some conscious or deliberate act of with-holding of information by the manufacturer to invoke larger period of limitation once the it is apparent fact of the appellant had already joined investigation/ enquiry in furtherance of the show cause notice dated 27.02.2014 for the period w.e.f February 2013 to January 2014. By no stretch of imagination, it can be presumed that department was not aware of the issue of short levy for the immediate proceeding period i.e. w.e.f October, 2011 to January, 2013 (vide the show cause notice dated 24.08.2015). The mere ground that ER Return for the 12 | P a g e E/50382/2016 -[DB] said period was not made available at the time of enquiry qua show cause notice dated 27.02.2014 is not opined to be a justified reason for holding the department entitled for invoking the extended period of limitation. In the given circumstances, we are of the opinion that the adjudicating authority below has committed an error while permitting the extended period of limitation. Resultantly the show cause notice dated 24.08.2015 being beyond the one year of normal period of limitation is held to barred by time. The order under challenge is accordingly set aside to this extent.
12. With respect to this show cause notice dated 27.10.2015 the appellant has submitted that the adjudicating authority below has failed to consider the documents of the appellant i.e. Exhibit-F at page no. 155 wherein it has been specifically shown that the cenvat credit availed by the appellant is much less than the duty paid by him. Perusal of the document reflects correctness in the contention of the appellant order under challenge is observed to be silent to this aspect. Since the computation is required for the present purpose we deem it appropriate that the matter be remanded to the adjudicating authority for the computation of the amount of cenvat credit availed by the appellant and the amount of total duty paid by him so as to know as to whether there is any difference which may be called as short levy as has been alleged. Resultantly the order under challenge qua this show cause notice also 13 | P a g e E/50382/2016 -[DB] stands set aside. The matter is remanded back to the Additional Commissioner however for the limited purpose as above i.e. for computation.
13. As a result entire above discussion the appeal in hand stands allowed as with respect to the show cause notice dated 24.08.2015 the order is set aside, the show cause notice being barred by time. With respect to show cause notice dated 27.10.2015, the matter is remanded back for fresh computation. It has also been clarified that if after the said computation the duty paid by the appellant is found more than the cenvat credit availed the consequential benefit we allow to the appellant accordingly.
(Pronounced in the open court on _14/08/2018_) (C.L. MAHAR) (RACHNA GUPTA) MEMBER(TECHNICAL) MEMBER (JUDICIAL) Sakshi