Custom, Excise & Service Tax Tribunal
M/S. Jayaswal Neco Industries Limited vs Commissioner Of Central Excise, Nagpur on 21 January, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/937/11 [Arising out of Order-in- Original No. 109/2010-11/C dated 4/3/2011 passed by the Commissioner of Central Excise & Customs, Nagpur] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) Honble Mr. Raju, Member (Technical) =======================================================
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 :
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?
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M/s. Jayaswal Neco Industries Limited
:
Appellants
VS
Commissioner of Central Excise, Nagpur
:
Respondent
Appearance
Shri. Gajendra Jain, Advocate with Shri. Rajesh Ostwal, Advocate for the Appellants
Shri. V. K. Agrawal, ADC.,(A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Honble Mr. Raju, Member (Technical)
Date of hearing: 21/1/2016
Date of decision /2016
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in- Original No. 109/2010-11/C dated 4/3/2011 passed by the Commissioner of Central Excise & Customs, Nagpur whereby Ld. Commissioner passed following order:
1) I disallow the Cenvat Credit of duty on Inputs amounting to Rs. 1,45,10,363/-[BED Rs. 1,41,95,115/- + Education Cess Rs. 2,89,007/- + Secondary & Higher Secondary Education Cess Rs. 26,241/- ] ( in words: Rs. One Crore Forty Five Lakhs Ten Thousand Three Hundred and Sixty Three only) taken on the Central Excise duty, Education Cess and Secondary & Higher Secondary Education Cess and order the recovery of the same from the Noticee in terms of Rule 14 of Cenvat Credit Rules, 2004 read with first proviso to Section 11A of Central Excise Act, 1944 along with interest.
2) I disallow the Cenvat credit of Service Tax paid on Inward carriage amounting Rs. 49,55,479/- (inclusive of Education Cess and Sec. & Higher Edu. Cess) (in words: Rs. Forty Nine Lakhs Fifty Five Thousand and Four Hundred and Seventy Nine only] taken on Service tax, Education cess and Secondary & Higher Secondary Education Cess and order the recovery of the same from the noticee in terms of Rule 14 of Cenvat Credit Rules, 2004 read with first proviso to Section 11A of Central Excise Act, 1944 along with interest.
3) I order the recovery of the interest at the appropriate rate from the noticee, on the amount demanded as above in terms of Section 11AB of the Central Excise Act, 1944.
4) I impose penalty of Rs. 1,94,65,842/- on the Noticee under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
2. The fact of the case is that the appellant are engaged in the manufacture of Automotive Casting falling under Chapter heading No. 87089900 and 73251000 of Central Excise Tariff Act, 1985. The appellant have availed Cenvat Credit of duty paid on input and Capital goods and of Service Tax paid on Input Services received by them, under the provisions of Rule 3 Cenvat Credit Rules, 2004. The appellant during the period from 1/4/2005 to 31/3/2010, received 2686 Nos. of Oil Slump Body, Cylinder Head & Rover Cylinder from their sister concern M/s. NSSL Ltd. MIDC, Hingna, Dist. Nagpur and sold to its constomer without doing any manufacturing process and thereby such goods had been treated in common parlance of business activity. For the transport of aforesaid goods, while procuring the same from their sister concern, appellant paid service tax on GTA on reverse charge basis and availed Cenvat credit of the said service tax. The adjudicating authority, while adjudicating the show cause notice denied the Cenvat credit on the Oil Slump Body, Cylinder Head & Rover Cylinder on the ground that no manufacturing activity has been undertaken on the said goods therefore for non manufacturing activity Cenvat Credit is not permissible. Consequently Cenvat credit in respect of service tax paid on inward GTA service in relation to purchase of goods has also been denied on the ground that since goods namely Oil Slump Body, Cylinder Head & Rover Cylinder are not inputs, the transportation of the goods cannot be treated as inward transportation of goods which are other than inputs.
3. Shri. Gajendra Jain, Ld. Advocate with Shri. Rajesh Ostwal, Advocate for the Appellants appearing on behalf of the appellant submits that the appellant purchased Oil Slump Body, Cylinder Head & Rover Cylinder on payment of duty under the cover of duty paying excise invoice. On receipt of the said goods, in some cases where cylinder received without fitment, fitments are fitted by the appellant and in all the cases the process of painting, testing, checking, dimension measurement, fitting of fitments in case of exports and packing has been carried out. Thereafter the goods duly processed were either cleared for exports under bond or in domestic market on payment of excise duty. He submits that even if the process carried out by the appellant is not amount to manufacture, Cenvat credit is permissible in the nature of the above transaction as provided in Rule 16 of Central Excise Rules, 2002. In this support he placed reliance in case of CCE Vs. Tapsheel Enterprises[2007(216) ELT 284 (T)] and Brakes India Ltd Vs. CCE[2007(214) ELT 389(T)].
He submits that all the goods i.e. Oil Slump Body, Cylinder Head & Rover Cylinder sold by the appellant falls under Chapter 87 and Section XVII Section Note 6 to Section XVII states that conversion of incomplete and unfinished goods into complete and finished goods amount to manufacture therefore activity carried out by the appellant is amounts to manufacture. In support of this submission, he placed reliance on the following judgments:
(a) Western Refrigeration Pvt Ltd Vs. CCE[2009(245) ELT 485(T)]
(b) CCE Vs. Indo Asian Fuse Gears[1992(68) ELT 207(T)]
(c) Rico Auto Industries Vs. CCE[2007(210) ELT 583 (T)]
(d) S.M. Telesys Ltd Vs. CCE[2006(201) ELT 275(T)] He alternatively submits that since transaction is between the group companies, had the appellant and NSSL followed alternate procedure under Rule 4(5)(a) of Cenvat Credit Rules, 2004, no demand would have been arisen. In this regard, he placed reliance on the following judgments:
(a) International Auto Ltd Vs. CCE[2005(183) ELT 239(SC)]
(b) Lawkim Limited Vs. CCE, Pune- II[2007(218) ELT 142(T)]
(c) P.R. Rolling Mills Private Limited Vs. CCE[2010(249) ELT 232(T)] He submits that it is undisputed that against the availment of Cenvat credit, they have paid excise duty on the sale value of the same goods therefore Cenvat credit which was availed stood paid on the clearance of final products. For this reason also demand of Cenvat credit not sustainable he placed reliance on following judgments:
(a) CCE Vs. Rane NSK Steering Systems[2007(218) ELT 354(P&H)]
(b) AB Stamping Pvt Ltd Vs. CCE[2010 (259) ELT 299(T)] He further submits that even assuming the activity of the appellant is not of manufacture, in such case clearance of the goods in question shall be treated as clearance of inputs as such. In that event whatever Cenvat credit was availed is required to be paid on the removal of input as such. In the present case on the quantum of domestic clearance the excise duty was paid to the tune of Rs. 58,24,273/- as against the Cenvat credit availed on the same goods amounting to Rs. 57,12,225/-. For this reason also whatever credit was availed stand paid back, hence no further recovery can be made. He submits that as regard the quantum of goods cleared for export, Cenvat credit involved is Rs. 87,53,287/. In this case even though activity does not amount to manufacture, no duty is required to be paid on the export of goods, hence, the Cenvat credit is admissible as goods have been exported. As regard the Cenvat credit on the GTA services to the tune of Rs. 49,55,479/-, he submits that as per the above submission since the Cenvat credit is admissible treating the goods as input inward transportation of these goods are admissible for Cenvat credit. He further submits that the quantification of Cenvat credit of GTA service was wrongly done by the Adjudicating authority, for this reason that the department has taken entire amount of freight for the period 2005-06 to 2008-09 whereas actual transportation of machine casting from the appellant to NSSL and NSSL to the appellant is involving service tax of Rs. 8022/- only therefore there is apparent mistake in the show cause notice as well as adjudication order. On limitation, he submits that demand is for the period from 1/4/2005 to 31/3/2009 whereas show cause notice was issued on 29/4/2010 therefore entire demand is beyond one year. He submits that the departmental authorities were fully aware of the facts that availment of Cenvat credit and payment of duty, therefore there is no suppression of fact on the part of the appellant, hence the demand hit by limitation also.
4. Shri. V. K. Agrawal, Ld. ADC., (A.R.) appearing for the Revenue reiterates the findings of the impugned order.
5. We have carefully considered the submissions made by both sides.
6. We find that the Ld. Counsel made various alternative submissions. We find that activity of the appellant i.e. receipt of duty paid goods i.e. Oil Slump Body, Cylinder Head & Rover Cylinder, availment of Cenvat credit thereon and reissue the same on payment of duty or for export is squarely covered by Rule 16 of the CER, 2002, which is reproduced below:
Rule 16. Credit of duty on goods brought to the factory. -
(1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules.
(2) If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.
Explanation. - The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by the manufacturer who removes the goods.
(3) If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (2), the assessee may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the Commissioner.
From the above rule, it is clear that the assesee is entitle to avail Cenvat credit on the duty paid goods even though the said duty paid goods does not undergo manufacturing process. The only condition is that if the duty paid goods is cleared after process which amounts to manufacture, the assesee is required to pay duty on the transaction value and if the goods are cleared without manufacturing process the duty which required to be paid is equal to the Cenvat credit availed. Rule 16 also holds the duty paid goods as inputs therefore the Cenvat credit is admissible. The judgment in this regard relied upon by the Ld. Counsel are squarely applicable in the present case. As regard the Cenvat credit in respect of inward GTA service, the adjudicating authority has denied the Cenvat credit only on the ground that since the goods on which credit was allegedly wrongly taken is not input service. As discuss above in terms of Rule 16, since the goods are inputs, inward transportation of such goods shall be undoubtedly qualified as input service, even as per the interpretation drawn by the Ld. Commissioner, therefore the credit on inward GTA service in respect of transportation of the goods namely Oil Slump Body, Cylinder Head & Rover Cylinder is also admissible. Since we are of the view that Cenvat credit in respect of the goods is admissible in terms of Rule 16 and consequently Cenvat credit is admissible on GTA service, we are not going into other issues raised by the Ld. Counsel.
7. As per above discussion, the impugned order is set aside and the appeal is allowed with consequential relief, if any, in accordance with law.
(Order pronounced in court on _________________) Raju Member (Technical) Ramesh Nair Member (Judicial) sk 10 E/937/11