Custom, Excise & Service Tax Tribunal
M/S Mrpl vs Commissioner Of Central Excise on 19 January, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/856/2004 E/461/2005 [Arising out of Order-in-Original No. 01/2004 dated 29/04/2004 passed by Commissioner of Central Excise Mangalore] For approval and signature: HONBLE SHRI M.V. RAVINDRAN, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s MRPL, Kuthethoor Post, Mangalore Appellant(s) Versus Commissioner of Central Excise, Mangalore Respondent(s)
Appearance:
Mr. Rajesh Chandra Kumar, Adv For the Appellant Mr.Ajay Saxena, A.R. For the Respondent Date of Hearing: 11/01/2016 Date of Decision:19/01/2016 CORAM:
HONBLE SHRI M.V. RAVINDRAN, JUDICIAL MEMBER HONBLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No._20060-20061/2016 Per : M.V.RAVINDRAN These two appeals are filed by the Revenue as well as the appellant assessee against order-in-original No. 01/2004-05 dated 29.04.2004. Since the appeals challenge the same order-in-original, they are being disposed of by a common order. Appellant assessee is contesting the issue on merits as well as on limitation as to the confirmation of the demand of the central excise duty and the interest thereon while revenue is contesting the non-imposition of penalties by the adjudicating authority.
2. The relevant facts that arise for consideration after filtering out unnecessary details are, during the period April 1998 to June 2002, appellant assessee had availed CENVAT credit on various items after installation of their refinery, during the process of which, various scrap were generated and the appellant assessee cleared the same without payment of duty. Show-cause notice dated 23.04.003, alleging suppression of facts, demanded duty liability on the same which was noticed, as per the show-cause notice during the visit of the officers to the factory premises. The appellant contested show-cause notice on merits as well as on limitation. The adjudicating authority after following due process of law did not agree with the contentions raised by the appellant, accordingly, confirmed demand raised with interest and also imposed minor penalty while attributing the proposition in the show-cause notice for imposing penalties under Section 11 AC of the Central Excise Act 1944.
3. Learned counsel appearing on behalf of the appellant assessee takes us through the entire records. Drawing our attention to show-cause notice, he submits that the allegations in the show-cause notice are very vague and it is stated that the appellant might have cleared certain scrap which is generated during the fabrication of structures during the period in question and cleared without payment of duty as per Annexures 1,2 & 3. He would then draw our attention to the impugned order and submit that the said impugned order has come to a conclusion that scrap generated in the factory premises of the appellant is classifiable under Chapter Heading No 72 while it is not the proposition in the show-cause notice. Subsequently he would take us through the entire findings and submit that the scrap which is generated in the factory premises is nothing but scrap which has arisen due to replacement of the machinery. While the adjudicating authority has held that the clearances are of the inputs or the capital goods as such which according to him is inappropriate findings. He would submit that appellant assessee had not fabricated any structures but has purchased duty paid structurals that were used to set up refinery and scrap obtained out of duty paid bought out items on which MODVAT/CENVAT credit was not taken, the question of payment of duty does not arise and hence they were cleared without payment of duty. It is his submission that every clearance has been recorded by the appellant assessee as they are public sector undertakings. He would rely upon the following judgements.
1) Zuari Cement Ltd (ZCL) Vs CCE & C Tirupathi [2007(210)ELT 219 (Tri-Bang)
2) Apollo Tyres Ltd Vs CCE Vadodara [2005(185)ELT 183(Tri-Del)]
3) Hindalco Industries Ltd Vs CCE Allahabad [2002(144)ELT 339 (Tri-Del)]
4) Grasim Industries Ltd Vs UOI [2011(273)ELT 10 (SC)]
5) Ceat Ltd Vs CCE, Nasik [2005(192)ELT 380 (Tri-Mumbai)]
6) Precot Mills Ltd Vs CCE Tirupathi [2007(208)ELT 510 (Tri-Bang)]
7) CCE Pondicherry Vs CESTAT Chennai [2013 (297)ELT 498 (Mad)]
8) CCE Raigad Vs Alkyl Amines Chemicals Ltd [2008(229)ELT 159 (Tri-Mum)]
9) CCE Bangalore Vs Brindavan Beverages (P) Ltd [2007(213)ELT 487(SC)]
4. Learned DR on the other hand while relying upon the same adjudicating authoritys order submits that the appellant assessee had availed CENVAT credit on various structurals. Extracts of RG 23 A & C Part I & Part II indicate that the appellant assessee had availed CENVAT credit on the items and the said items were in fact used for construction/fabrication in the refinery. He would submit that the adjudicating authority has given detailed reasoning to come to a conclusion that waste and scrap arising out of such fabrication would be liable to duty. He would then take us through the order-in-original and submit that on issue of limitation, appellant has no case inasmuch as they had never informed the department about the removal of scrap without payment duty. He relies upon the judgment of the Tribunal in the case of Hindustan Zinc Ltd Vs CCE Jaipur [2011 (272)ELT 400 (Tri-Del)]. He would also draw our attention to the specific finding recorded by the adjudicating authority as to what are all the items that were cleared and submits that description of the items which were cleared was very specific and could have been used only by the actual users. It is his submission that the clearance of scrap was never to the scrap dealers but to the actual users is undisputed fact.
5) In rejoinder learned counsel submits that on the question of limitation, the appellant being Public Sector Undertaking, the allegation of suppression of facts cannot arise as there will not any mensrea as held by the following decisions:
1) CCE Chennai I Vs Chennai Petroleum Corpn Ltd [2007)(211)ELT 193(SC)
2) CCE Allahabad Vs Bharat Yantra Nigam Ltd [2014 (36) STR 554 (Tri-Del)]
3) Indian Oil Corporation Ltd Vs CCE Ahemdabad [2013(291) ELT 449 (Tri_Ahmd)]
4) Hindustan Petroleum Corpn Ltd Vs CCE Calcutta-I [2001(136) ELT 943(Tri-Kol)]
6) We have considered the submissions made at length by both sides and perused the records.
7) The issues involved in this case is regarding:-
1) The liability to pay duty on clearance of structural scrap as per annexure-1 to the show-cause notice,
2) Clearance of waste and scrap of inputs and capital goods, rejected/damaged inputs and capital goods as detailed in Annexure-2 to show-cause notice and
3) Clearance of inputs as such as detailed in Annexure-3 to the show-cause notice.
8) On perusal of the records, as regards point No. (1), we find that Annexure-I to the show-cause notice has alleged that the following items have been cleared without payment of duty:
* Boring/turning scrap * Brass boring scrap * Heavy structural scrap * Misc. steel scrap * MS plate scrap * MS Steel * MS structural * Scrap * Scrap steel plates * Scrap structural steel * SS plate * Steel scrap * Structural steel scrap * Structural scrap * Template/structural scrap * Turning scrap/brass boring * Used MS plates It can be seen from the above reproduced clearances effected by the appellant assessee that the said items are scrap arising out of working on the structural/steel procured by the appellant assessee for construction/fabrication of refinery. The said scrap cannot be considered as arising during the course of manufacturing activity within the factory premises of the appellant. Appellant was not engaged in the manufacturing of iron and steel, in order to hold that the scrap generated would be liable to duty. This view is fortified by the judgement of the Tribunal in the case of Zuari Cement Ltd (supra), Apollo Tyres Ltd (supra) and Hindalco Industries Ltd (supra). There is no dispute as to the fact that the said waste and scrap which is generated, as indicated herein above is generated during the fabrication of the refinery in the factory premises of the appellant. In our considered view this kind of waste and scrap as indicated hereinabove cannot be dutiable in the hands of appellant as waste and scrap arising out of the manufacturing activity.
9) As regards point No. (2) i.e. clearance of waste and scrap of inputs and capital goods, rejected and damaged inputs and capital goods as such, we find that Annexure-2 to the show-cause notice has alleged that the following items (few of them are listed) have been cleared by the appellant without payment of duty:
It can be seen from the above reproduced specimen list that the said items which are cleared by the appellant are scraps arising during the course of manufacturing, replacement, repair or reconditioning of the various machineries, pipes, fittings etc. in the refinery. The finding recorded by the adjudicating authority is that the said items are inputs as such, seems to be mis-construed inasmuch as the description itself indicates that the said items are nothing but scrap or damaged goods which cannot by any stretch of imagination be considered as clearance of inputs or capital goods as such. When there is no clearance of inputs or capital goods as such, question of reversal of CENVAT credit availed on such items does not arise. We find that this matter is now settled by the Apex Court in the case of Grasim Industries Ltd. (supra) and followed by the Tribunal in the case of CEAT Ltd (supra), Precot Industries Ltd (supra) and CCE Pondicherry Vs CESTAT Chennai (2013(297)ELT 498 (Mad)]. In view of the foregoing we are of the view that the demands confirmed under Point No. 2 are not sustainable.
10) As regards point No. 3 i.e. the clearance of the inputs as such, we find merits in the orders passed by the learned adjudicating authority. It is seen from the records that the appellant had cleared various inputs without payment of duty. He has admitted and deposited partly some amount for the clearance of inputs as such. In view of the foregoing we are of the considered view that appellant has not made out any case in respect of the allegation at Point No. 3 and demand of the duty on the said point is liable to be upheld along with interest.
11) As regards the point of limitation, we do agree with the learned counsel for the appellant assessee that the appellant being a Public Sector Undertaking could not have had any malafide intention for non-payment of duty liability if any, on various scrap generated in their factory premises, more so when all the removals have been recorded in the books maintained by them. We find strong force in the contentions raised that the judgements of the Tribunal i.e. CCE Chennai I Vs Chennai Petroleum Corpn Ltd (supra), CCE Allahabad Vs Bharat Yantra Nigam Ltd (supra), Indian Oil Corporation Ltd Vs CCE Ahemdabad (supra), Hindustan Petroleum Corpn Ltd Vs CCE Calcutta-I (supra) are very clear and the ratio applies to the case. Accordingly, we hold that on limitation also, the appeal succeeds.
12) Since we have disposed of the appeal on merits and limitation in assessees favour, Revenues appeal for imposition of penalties does not merit any further consideration.
13) In view of the foregoing, in the facts and circumstances of this case, we hold that the impugned order is unsustainable at least in respect of point No 1 & 2 as indicated in paragraphs 8 to 10 while the demand confirmed under Point No 3 along with interest are held to be sustainable.
15) The appeals are disposed of as indicated herein above. Since we have disposed of the main appeal itself, the stay petition filed by the appellant assessee also gets disposed of.
(Order pronounced in open court on 19.1.2016) ASHOK K. ARYA M.V. RAVINDRAN TECHNICAL MEMBER JUDICIAL MEMBER Pnr....
5