Custom, Excise & Service Tax Tribunal
Premier Roofing And Building Systems P ... vs Coimbatore on 26 August, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Excise Appeal No. 41457 of 2014
(Arising out of Order-in-Original No. 03/2014 (Commr.) dated 28.02.2014 passed by
Commissioner of Customs, Central Excise and Service Tax, 6/7, ATD Street, Race Course,
Coimbatore - 641 018)
M/s. Premier Roofing and Building Systems P. Ltd. ...Appellant
No. 14, Vedapatti Road,
Perur,
Coimbatore - 641 010.
Versus
Commissioner of GST and Central Excise ...Respondent
Coimbatore Commissionerate, No. 6/7, A.T.D. Street, Race Course, Coimbatore - 641 018.
With Excise Appeal Nos. 41458 and 41459 of 2014 (Arising out of Order-in-Original No. 03/2014 (Commr.) dated 28.02.2014 passed by Commissioner of Customs, Central Excise and Service Tax, 6/7, ATD Street, Race Course, Coimbatore - 641 018) M/s. Oriental Metals India P. Ltd. ...Appellant No. 47/1577 (A), Vysali Junction, N.H. By Pass, Kochi - 682 032.
Versus Commissioner of GST and Central Excise ...Respondent Coimbatore Commissionerate, No. 6/7, A.T.D. Street, Race Course, Coimbatore - 641 018.
With Excise Appeal No. 41460 of 2014 (Arising out of Order-in-Original No. 03/2014 (Commr.) dated 28.02.2014 passed by Commissioner of Customs, Central Excise and Service Tax, 6/7, ATD Street, Race Course, Coimbatore - 641 018) M/s. Rainbow Metals ...Appellant No. 47/1577 (A), Vysali Junction, N.H. By Pass, Kochi - 682 032.
Versus 2 Commissioner of GST and Central Excise ...Respondent Coimbatore Commissionerate, No. 6/7, A.T.D. Street, Race Course, Coimbatore - 641 018.
And Excise Appeal No. 41461 of 2014 (Arising out of Order-in-Original No. 03/2014 (Commr.) dated 28.02.2014 passed by Commissioner of Customs, Central Excise and Service Tax, 6/7, ATD Street, Race Course, Coimbatore - 641 018) Mr. Vikas Sanghrajka ...Appellant Executive Director, Premier Roofing and Building Systems P. Ltd., No. 14, Vedapatti Road, Perur, Coimbatore - 641 010.
Versus Commissioner of GST and Central Excise ...Respondent Coimbatore Commissionerate, No. 6/7, A.T.D. Street, Race Course, Coimbatore - 641 018.
APPEARANCE:
For the Appellants : Mr. Raghavan Ramabadran, Advocate Ms. Nimrah Ali, Advocate For the Respondent : Mr. M. Selvakumar, Authorised Representative CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER Nos. 41134-41138 / 2024 DATE OF HEARING : 28.02.2024 DATE OF DECISION: 26.08.2024 Order :- Per Mr. VASA SESHAGIRI RAO Excise Appeal Nos. 41457-41561/2014 have been filed by the Appellants assailing the Order-in-Original No. 03/2014 dated 28.02.2014 passed by the Commissioner of Central Excise, Coimbatore confirming the demand of Excise Duty of Rs.4,53,45,054/- under Section 11A(10) of the Central Excise Act, 1944 ('ACT') for the period from 10.06.2010 to 14.04.2012 along 3 with interest under Section 11AA of the act ibid and imposing penalty equal to the duty confirmed in terms of Section 11AC of the ACT and personal penalties imposed under Section 26(1) of Central Excise Rules, 2002 (Rules). The details of the Appeals are as follows provided below:-
Appeal No E/41457/2014 E/41458/2014 E/41459/2014 E/41460/2014 E/41461/2014
Premier Roofing Oriental Metals Oriental Metals Rainbow Metals Vikas
and Building India Pvt. Ltd. India Pvt. Ltd. (RM) Sanghrajka
Appellant Systems Pvt. (OMS) (Oriental Metal)
Ltd. (PRBSPL)
Demand 4,53,45,054/- 42,00,000/- 33,00,000/- 16,00,000/- 1,00,00,000/-
(Rs.) (Duty) (Penalty) (Penalty) (Penalty) (Penalty)
Section 11A(4) Rule 26(1) of Rule 26(1) of Rule 26(1) of Rule 26(1) of
Levy of Central Excise Central Excise Central Excise Central Excise Central Excise
Act, 1944 Rules, 2002 Rules, 2002 Rules, 2002 Rules, 2002
Impugned No. 03/2014 dated 28.02.2014
Order
SCN No. 10/2012-Commr dated 17.10.2012
As all these appeals are connected and involving similar issues and so being taken up together for disposal by this common order.
2. Brief facts emerging from the appeals are that M/s Premier Roofing and Building Systems Pvt. Ltd. (PRBSPL/A1) registered with Central Excise registration No. AAECO8920HEM001 were engaged in the manufacture and clearance of Profiled Roofing Sheets of Iron & Steel and Aluminium falling under Chapter head (CTH) 73089090 and 76109090 of the Central Excise Tariff Act, 1985 (CETA). We find that the Appellant (A1) commenced manufacture during the year 2009-10 and started paying excise duty on the roofing profiles manufactured on its own account after crossing the SSI exemption limit of Rs.1.5 Crores on the value of clearances. Subsequently from June 2010 onwards, the Appellant was engaged in manufacture of profiling roofing sheets of iron & steel and aluminium for traders / suppliers viz., M/s. Oriental Metals India Pvt. Ltd. and M/s. Rainbow Metals.
42.1 On the basis of Intelligence that the Appellant (A1) was indulging in clearances of job worked goods without payment of Central Excise duty, the Department initiated investigation on 16.04.2012 and it was observed that the conversion of coils made of iron & steel and aluminium falling under CTH 72104900 and 76061190 into Profiled Roofing Sheets of Iron & Steel and Aluminium falling under CTH 73089090 and 76109090 respectively would amount to manufacturing which was similar to the manufacturing process carried out by them in respect of their own goods. 2.2 Subsequently, search operations were conducted on 19.04.2012 at the premises of suppliers of raw materials Viz. (i) M/s. Oriental Metals and Steels Pvt. Ltd. (OMS/A2) (ii) M/s. Oriental Metals (OM/A3) (iii) M/s. Rainbow Metals (RM/A4) and seized profiled Roofing Sheets and relevant documents in connection with their investigation. 2.3 Investigations conducted revealed that A1 was engaged in the manufacture of Profiled Roofing Sheets of (i) Iron & Steel falling under CTH 73089090 and (ii) Aluminium falling under CTH 76109090 of CETA . The raw materials Viz. GCC Coils and Aluminium Coils were decoiled and converted into sheets in decoiling machines to make profiled sheets and then crimped with curves to cater to customers' demands. The Appellant was found to be discharging excise duty only on goods manufactured by them and not on the job worked goods reportedly under the wrong notion that excise duty was not attracted on those goods manufactured on job work basis out of the raw materials supplied by the principals without excise invoices. 5 2.4 After detailed investigation, the Department has concluded that A1 was liable to pay duty on job worked goods also along with applicable interest and as the Appellant resorted to suppression of facts with an intent to evade payment of appropriate duty, penalty was imposable under Section 11AC of the ACT.
2.5 Consequently, a Show Cause notice dated 17.10.2012 was issued to A1-A5 proposing interalia to demand excise duty of Rs.4,53,45,054/- under Section 11A(4) along with interest under Section 11AA of the ACT ibid and to impose penalty under Section 11AC of the ACT & Rule 25(1) of Rules, besides seeking to impose personal penalty on Shri Vikas Sanghrajka (Appellant-A5), Executive Director of A1 under Rule 26 and to confiscate goods seized from the premises of A2-A4, under Rule 25(1) of the Rules. The Show Cause Notice also sought to impose penalties under Rule 26(1) of the Rules on A2, A3 & A4 for keeping, depositing and selling excisable goods which were liable for confiscation. 2.6 During the course of the proceedings, the Appellant i.e., Premier Roofing and Buildings System Pvt. Ltd. deposited the entire amount of excise duty with the Government on various dates as tabulated below:-
Amount Paid (Rs.) Nature of payment Date of Payment 4,71,343/- Service Tax 18.02.2012 4,52,980/- Service Tax 24.03.2012 3,02,860/- Service Tax 05.04.2012 9,48,973/- Excise Duty 13.06.2012 15,00,000/- Excise Duty 12.05.2012 51,100/- Excise Duty 18.06.2012 4,16,17,798/- Pre-deposit CENVAT Credit reversed via ER-1 6 Return of January 2015 which was after issuance of impugned order dated 28.02.2014.
3. After due process of law, the Adjudicating Authority vide Order- in-Original No. 03/2014 dated 28.02.2014 confirmed the demands proposed in the said Notice along with applicable interest and imposed penalty of Rs.1,00,00,000/- on Shri Vikas Sanghrajka and penalties of Rs.42,00,000/-, Rs.33,00,000/- and Rs.16,00,000/- on A2, A3 and A4 respectively under Rule 26(1) of the Rules, besides ordering for confiscation of seized goods under Section 25(1) with an option to pay specified fines, in lieu of confiscation, in terms of Section 34 of the Act ibid.
4. Aggrieved by the above Order, the appellants are on appeal before this forum.
5. The contention of the Appellants as evident from the Grounds of Appeals filed are that: -
i. The impugned order was issued without verification of documents relating to Appellants claim for CENVAT credit benefit on the duty paid raw materials received from the three principals (A2-A4) as evidenced by duty paying documents and it was a settled position of law that CENVAT credit benefit was to be extended to tax payers whenever a duty demand is made and in this regard placed reliance on (a) Johnson & Johnson Ltd. Vs CCE, Mumbai [2003 (154) ELT 729 (Tri.-Mum.)]
(b) CCE, Pune Vs Indian Hume Pipe Co. Ltd. [1999 (109) ELT 305]
(c) National Steel Industries Vs CCE, Chandigarh [1999 (111) ELT 80 7 (Tri.)] (d) CCE, BBSRII Vs. re-rolling Mills [2003 (159) ELT 192 (Tri.-
Kol.)] (e) DSM Anti-infective India Pvt. Ltd. Vs CCE, Chandigarh [2004 (165) ELT 69 (Tri.-Del.)] (f) Supreme Industries Ltd. [2004 (64) RLT 135] (g) Muliflex Lami Prints [2004 (64) ELT 532] (h) CCE Vs. Servomed Pvt. Ltd. [2004 (172) ELT 318] (i) Sujana Steel Vs. CCE, Hyderabad [2009 (243) ELT 711], etc. It was submitted that the impugned order had in para 46.3 ignored the above case laws stating that the case laws pertained to Modvat Credit Scheme and not applicable to the demand under the Cenvat Scheme which was erroneous as the object and purpose of the Modvat and Cenvat schemes was one and the same as held in (a) Vikram Cement Vs. CCE, Indore [2006 (194) ELT 3 (SC)] and (b) CCE, Belgaum Vs. Vasavadatta Cement [2008 (230) ELT 335 (Tri.-Bang.)]. Further, the Appellant cited the CBEC Circular No. 962/05/2012-CX8 dated 28.03.2012 which permitted utilisation of cenvat credit towards payment of duty demand.
ii. The Appellant contested the ground as held in the impugned order that the Appellant had failed to discharge duty liability with an intention to evade payment of duty. It was submitted that the Appellant was paying excise duty on roofing profiles manufactured on its own account from the year 2010 and was on the erroneous impression that duty was not payable on roofing profiles manufactured on job work basis, as no cenvat credit was admissible on raw materials received for job work. It was pointed out that if the Cenvat credit would have been verified and found eligible, it would prove that there was no intention to evade payment of duty.
iii. It was submitted that the internal audit wing of the department visited their premises during January 2012 and after witnessing the 8 manufacturing process, advised them to discharge service tax on job work under Business Auxiliary Service, as per which the labour bills raised on principals changed the description from 'roofing profile' to mere 'cutting' and paid service tax thereon and hence it was averred that the observations in para 49.6 of the impugned order that the Audit report was based on Appellants own description of its operation as merely cutting was incorrect as it was evidenced further by manual labour bills seized by the Department. Therefore, it was submitted that the bona fide of the Appellant was not to be suspected or found fault with.
iv. It was averred that the impugned order was incorrect in not adjusting the Service tax of Rs.12,27,183/- voluntarily paid by the Appellant for the period from June 2010 to April 2012 due to audit findings and denied the findings in Para 47.19 of the impugned order that there is no mechanism to swap payments made under accounting code relating to Service Tax towards Central Excise duty account and the only course available to the Appellant was to claim refund of service tax under Section 11AB.
v. It was averred that the Appellant had already paid more duty than required, considering payments of excise duty of Rs.9,48,973/- and Rs.15,51,500/- (during investigation), service tax of Rs.12,27,183 and Cenvat credit availability of Rs. 4,50,26,647/- as against duty demand of Rs.4,53,45,054/- and therefore the excess payment of Rs.37,27,256/- was liable to be refunded.
vi. It was submitted that the amount of Cenvat credit available on the raw materials used in the conversion plus the service tax paid was more than the duty payable on the finished profiles and as the demand was revenue neutral to a large extent, extended period was not invokable 9 as the Appellant had no intention to evade payment of excise duty in as much as the Appellant had duly discharged service tax treating the job work as service.
vii. It was contested that interest was only an accessory to tax and without recovery of tax, interest has no independent existence and reliance was placed on the decision in the case of Pratibha Processors Vs. UOI [1996 (88) ELT 12 (SC)] wherein it was held that once the demand is not sustainable, then the demand for interest cannot survive independently which was also reiterated in Commissioner of Customs Vs. Jayathi Krishna & Co. [2000 (119) ELT 4 (SC)]. 6.1 Shri Raghavan Ramabhadran and Ms. Nimrah Ali, Ld. Advocates for the Appellants reiterated their contentions as submitted in the Grounds of Appeals. They have mainly emphasised that the Appellants were eligible to avail CENVAT Credit on the inputs received for the discharge of output duty liability placing reliance on the following cases: -
• Jai Balaji Industries vs. Commissioner of Central Excise, Bolpur, [2023 (6) TMI 1102-CESTAT Kolkata] • Commissioner of Central Excise, Pune vs. Coca-cola India Private Limited, [2007 (213) E.L.T. 490 (S.C.)] • Hindalco Industries Ltd. vs. CCE, Bhubaneshwar-II, [2023 (5) TMI 720- CESTAT Kolkata] • Hindustan Zinc Ltd. vs. Commissioner of Central Excise, Jaipur-II, [2008 (232) E.L.T. 687 (Tri. - Del.)] • Commissioner of Central Excise vs. Rane NSK Steering Systems Ltd., [2009 (13) S.T.R. 327 (P&H)] 6.2 The Ld. Advocate has pleaded that since the Appellant were not liable to pay the excise duty due to revenue neutrality and as the Appellant had sufficient balance in their CENVAT Account, interest on the excise duty is not leviable in view of the ratio of decisions of various judicial fora as given below: -10
• Jai Balaji Industries vs. Commissioner of Central Excise, Bolpur, [2023 (6) TMI 1102-CESTAT Kolkata] • Tvl. Kumaran Filaments (P) Ltd., vs. Commissioner of Central GST and Central Excise, and others- W.P.(MD) No.11113 of 2020-Madras High Court- Madurai Bench.
• Commissioner of Central Excise, Puducherry-I vs. CESTAT, Chennai, [2017 (346) E.L.T. 80 (Mad.)] • M/s. Refex Industries Limited vs. Assistant Commissioner of CGST and Central Excise, [2020 (2) TMI 794 - Madras High Court] • Pratibha Processors vs. Union of India, [1996 (88) E.L.T. 12 (S.C.)] • M/s Steel Authority of India Limited vs. Commissioner of Central Excise, [2023 (9) TMI 915 - CESTAT Kolkata] 6.3 It was pointed that since excise duty was not payable on account of revenue neutrality, penalty cannot be imposed on the Appellant. Reliance in this regard was placed on the following cases: -
• Commissioner of Central Excise, Chennai-IV v. Tenneco RC India Pvt. Ltd. [2015 (323) E.L.T. 299 (Mad.)] • Nirlon Ltd. v. Commissioner of Central Excise, Mumbai, [2015 (320) E.L.T. 22 (S.C.)] • M//s Matrimony.com Pvt. Ltd. v. Commissioner of GST and Central Excise, [2019 (3) TMI 1180 - CESTAT Chennai] Hence, it was prayed that the penalties imposed under Section 11AC of the Central Excise Act, 1944 and Rule 26(1) of the Central Excise Rules, 2002 merits to be set aside.
6.4 It was submitted that the extended period of limitation cannot be invoked in a revenue neutral situation. Further, as the issue involved was interpretation of legal provisions. It is a settled position that extended period of limitation cannot be invoked in such cases. It was submitted that the levy of service tax and excise duty on the same activity is untenable and as the Appellant has deposited the service tax on the activity of profiling of roofing sheets, excise duty cannot be demanded on the same. 11
7. The Ld. Authorised Representative Shri M. Selvakumar has affirmed the findings of the Original Adjudicating Authority. He has drawn our attention to the fact that the raw materials utilised for the manufacture on its own account and on job work basis were one and the same and there was no difference between the manufacturing process on their own account and on job work basis and stressed that duty was payable on the job worked goods. He further submitted that there is no provision in the law for availment of Cenvat Credit from a retrospective date and as the Appellant had suppressed the fact of job work with an intent to evade payment of appropriate duty, Penalty was imposable. Hence it was prayed to dismiss the Appeals filed by the Appellants and affirm the impugned order.
8. Heard both sides and carefully considered the submissions and evidences on record.
9. The issues which arise for decision in these appeals are: -
(i) Whether the Appellant is eligible to the input Cenvat credit and its utilisation for payment of duty demanded on job worked goods?
(ii) Whether Extended Period is invokable or not considering the evidence and facts in this appeal? and,
(iii) Whether the imposed fines and penalties are justifiable or not?
10. A scrutiny of the relevant records and documents in these appeals indicate that the Appellant (A1) had commenced its manufacturing activity in the year 2009-2010 and started paying excise duty on the roofing profiles manufactured on its own account after crossing the SSI Exemption 12 limit of Rs.1.5 Crores of value of clearances. Subsequently, from June 2010 onwards, the appellant has undertaken manufacturing of roofing sheets of iron & steel and aluminium on job work basis for the Rainbow Group. The inputs required viz., iron & steel and aluminium coils are supplied by M/s. Oriental Metals and Steel Private Limited (A2), M/s. Oriental Metals (A3) and M/s. Rainbow Metals (A4). As the Appellant was engaged in the manufacture of both aluminium and steel profiled roofing sheets on its own account and for the Appellants (A2-A4) on job work basis which is identical like its own manufacturing activity, the Appellant (A1) should have paid excise duty applicable on job worked goods. As the Appellant (A1) has failed to pay the applicable excise duty for conversion of coils into roofing profiles for the above three trading concerns, investigations were initiated resulting in the issuance of the Show Cause Notice dated 17.10.2012 and passing the impugned order No. 3/2014 dated 28.02.2014 confirming the demand of excise duty of Rs.4,53,45,054/- along with interest and imposition of equal penalty. Further, penalties were imposed on M/s. Oriental Metals and Steel Private Limited (A2), M/s. Oriental Metals (A3), and M/s. Rainbow Metals (A4) and Mr. Vikas Sanghrajka (A5) under Rule 26(1) of the Central Excise Rules, 2002 for knowingly dealing in non-duty paid goods which were liable for confiscation.
11. It has to be observed further that the suppliers of raw materials are only traders and not the manufacturers of Excisable goods. The final products are sold by the traders "as such" without subjecting the said goods to any further process. The final products have not suffered Central Excise duty either in the hands of the job worker or in the hands of the suppliers of raw materials. The benefit of Notification No. 214/1986 dated 01.03.2006 13 intended for providing exemption to the job workers from payment of Central Excise duty appears to be inapplicable for Appellant (A1) as the job worked goods were sold as such in the market without any further process subsequently and without payment of Central Excise duty. In these circumstances, the job worker is the manufacturer. However, when the procedure under Notification No. 214/1986 dated 01.03.1986 as amended is followed the liability is shifted to the supplier of materials. In view of the above, the Appellant (A1) in whose hands a different, distinct marketable product viz., roofing sheets, emerge is the manufacturer of Excisable goods and so liable to pay appropriate Central Excise duty on the goods manufactured on job work basis in respect of the raw materials supplied by the traders.
12. The Appellant has mainly submitted that he was under mistaken impression that on the job worked goods, he was not required to pay excise duty as the iron & steel and aluminium coils were not received under excise duty paying documents and not availed Cenvat credit on these inputs received. A reference was also made to the Audit Report of the Central Excise Department conducted during January 2012 wherein, the Appellant was advised to pay Service Tax as job work undertaken amounted to provision of service under Business Auxiliary Services and not manufacturing. Based on the Audit Report dated 16.03.2012, the Appellant discharged the Service Tax on the job charges which amounted to Rs.12,27,183/- from June 2010 to April 2012.
13. We find that the Appellant (A1) has not challenged and rather accepted that the activity undertaken on job work basis would amount to 14 manufacturing. The receipt of iron & steel and aluminium coils from the Rainbow Group were first decoiled and sliced before passing through roll forming and crimping machines to obtain profiled roofing sheets. The main contention of the Appellant (A1) is that while computing the duty payable on the job worked goods as all the inputs were received along with the duty paid documents, they should be allowed to avail Cenvat credit on these inputs used in the manufacture of these profiled roofing sheets.
14. The Ld. Counsel for the Appellants placing reliance on various decisions of judicial authorities had contended that they are eligible to avail Cenvat credit on the steel and aluminium coils received along with the duty paying documents. He has referred to the decisions rendered in the cases of Sidhartha Tubes Ltd. Vs. CCE, Indore [2006 (193) ELT 3 (SC)], Garware Synthetics Ltd. Vs. CCE, Mumbai [2000 (125) ELT 740 (Tri.)], Commissioner of Central Excise, Pune vs. Coca-cola India Private Limited, [2007 (213) E.L.T. 490 (S.C.)] and other similar case laws. In the case of Sidhartha Tubes Ltd. (supra), it was held that the appellant was entitled to take Modvat credit of the duty paid on the sockets. In the case of Garware Synthetics Ltd. (supra), the Tribunal New Delhi has held that duty paid on inputs to be allowed and duty demand has to be redetermined after adjustment of the Modvat credit.
15. But, the Adjudicating Authority has dismissed their eligibility claim for adjustment of Cenvat credit against the demand of excise duty basing on the ground that the appellant had not fulfilled the requirements as mandated in the CENVAT Credit Rules, 2004 and they have never complied with excise procedures and the question of Cenvat credit eligibility is more 15 appropriately left to the jurisdictional officer who should consider it after examining the duty paid documents. However, we find instead of awaiting the verification report from the jurisdictional officer, the case was taken up for adjudication and duty demanded without extending the Cenvat credit benefit as reportedly there was undue delay in completing the verification of the duty paid documents by jurisdictional officers. We are of the view that it is a settled law that the Cenvat credit should be allowed on inputs used in the manufacture of the final products to discharge the output duty liability. The delay on the part of the jurisdictional officers in completing the verification of documents, could not be used against the Appellants to deny the Cenvat credit. The Appellant (A1) has brought to the notice of the Adjudicating Authority that they were eligible for Cenvat credit of Rs.4,50,26,647/- as against the duty demand of Rs.4,53,45,054/-. As the Cenvat credit being a substantive right, the same ought to have been extended at the time of quantifying the demand subject to availability of duty paying documents and after their verification. In respect of job worked goods, it appears that the duty paid invoices and Bills of Entry for transfer of raw materials to the Appellant (A1) were in the name of the suppliers and these need to be transferred in favour of the Appellant (A1) by the suppliers. These iron & steel and aluminium coils were sent by the Coimbatore Branches of the Appellants (A2-A4) under delivery challans to the Appellant's factory for conversion into roofing profiles. While examining the Appellant's claim for Cenvat credit, the relevant provision of CENVAT Credit Rules, 2004 have to be kept in view. The provision of Rule 4 of CENVAT Credit Rules, 2004 reads as below: -
"RULE 4. Conditions for allowing CENVAT credit. -- (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service [or in the premises of the job worker, in case goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be]":16
We find that there is no evidence on record to show that the goods have been directly received by the Appellant on the directions of the principals. The Appellant (A1) has failed to comply with Rule 9(5) of CCR as they have failed to maintain proper records for the receipt, disposal, consumption and inventory of the inputs in which the relevant information regarding the value, duty paid and Cenvat credit taken and utilised, the persons from whom such inputs are procured is recorded and the burden of proof regarding the admissibility of Cenvat credit shall lie upon the manufacturer which is the Appellant (A1) in this case. Further, we find that the Appellant had failed to comply with Rule 9(7) of Cenvat Credit Rules in as much as they have failed to disclose the Cenvat credit in the periodical ER 1 returns filed by them. But, it has to be commented that the impugned order was issued hastily without completion of proper verification of entitlement of Cenvat credit by the jurisdictional officers. It is a settled law that adjustment of Cenvat credit of inputs is permissible whenever demand is made by the Department on the final manufactured goods and the ratio decidendi of relevant case laws cited by the Appellant is clearly applicable. It is also pertinent to discuss the Boards Circular No.962/05/2012-CX 8 dated 28.03.2012 which has been reproduced below for the sake of convenience: -
"Subject : Payment of arrears from Cenvat Credit earned at a later date. Reference was received from the field formation seeking clarification on the issue as to whether the arrears of duty can be paid by utilizing the cenvat credit which has accrued subsequent to the period to which the arrears pertained. Such clarification has been sought in view of first proviso to rule 3(4) of the Cenvat Credit Rules, 2004. As per this proviso, "while paying duty of excise or service tax, as the case may be, the cenvat credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be."17
2. Doubts have been raised whether these restrictions will be applicable to duty payable in terms of Section 11A or duty paid after due date in terms of rule 8 of the Central Excise Rules, 2002.
3. The matter has been examined in the Board. Practice ascertained from field formations points out that in majority of cases the payment of demands confirmed under Section 11A are being permitted to be paid by utilizing cenvat credit without linking the same to the period to which these demand pertain.
4. A harmonious reading of rule 8 of Central Excise Rules, 2002 and first proviso to rule 3(4) of the Cenvat Credit Rules, 2004 indicates that the restriction with regard to the utilization of cenvat credit is relating to the normal payment of duty in terms of rule 8 of the Central Excise Rules, 2002, where duty for a particular month or quarter is to be discharged by the 5th of the next month. For this proviso, the cenvat credit allowed to be used is what was in balance on the last date of that month or quarter and not what accrued thereafter. Even in case of duty paid late in terms of rule 8, the credit available for utilization will remain same i.e. the credit in balance on the last date of month or quarter, as the case may be.
5. Further duty payable under rule 8 is on a different footing from duty payable under Section 11A. Duty under Rule 8 is paid after self- determination by the assessee unlike Duty payable under Section 11A where generally the duty is determined by the Central Excise officer and the payment is mandated after such determination. There is no time limit prescribed under Section 11A i.e., monthly or quarterly unlike the date prescribed under Rule 8 (i.e., 5th of the next month). Therefore, the restriction on the utilization of the cenvat credit accruing subsequent to the last date of the month or quarter in which the arrears arise, is not applicable to the demands confirmed under Section 11A of the Central Excise Act, 1944."
As per the above Circular, it is clear that the Appellants are eligible to utilise the Cenvat credit without any time limit as the demands have been confirmed under Section11A. In the instant case, the Appellant has furnished the details of the Cenvat credit eligible on the basis of duty paying documents under which steel / aluminium coils were received. However, the entitlement of credit is required to be verified with duty paid documents and its permissibility as per Cenvat Credit Rules, 2004. Hence, we are of the opinion that matter of computation on CENVAT Credit eligible needs to be remanded to the original adjudicating authority for the limited purpose of carrying out verification on the basis of duty paying documents produced. Such eligible credit has to be allowed to be adjusted against the duty demanded. As such, the lower adjudicating authority is directed to re- 18 quantify the duty liability after adjusting the CENVAT Credit eligible as above.
16. In view of the aforesaid discussion, we hold that the Appellant (A1) is eligible to avail Cenvat Credit on the inputs used in the manufacture of job worked goods provided the suppliers of these raw materials endorse the documents in favour of the Appellant (A1) and subject to verification of the duty paid nature of input invoices / documents / Bills of Entry, which were already submitted to the Adjudicating Authority. In paragraph 46.15 of the Order of Adjudicating Authority, it was mentioned that all the documents in five spiral bound booklets for examining the Appellant's eligibility for input Cenvat credit were sent to the Assistant Commissioner of Central Excise, Coimbatore-II division for conducting verification. As there is a considerable delay, verification of the documents submitted to be got completed within a period of 6 months from the date of communication of this order. Invocation of Extended Period:
17. It is to be noted that the Appellant has commenced its manufacturing activity in 2009 and started job work for the Appellant traders since June 2010. They have neither paid service tax nor central excise duty uptill the date of receipt of audit objection which was intimated on 16.03.2012. The relevant para in Audit report reads as under: - 19
From the above, it is clear that the Appellants (A2-A4) who are the traders in profiled roofing sheets have supplied galvanized iron and steel coils and also aluminium coils to the Appellant (A1) for carrying out the manufacture of profiled roofing sheets on job work basis starting from June 2010. Whereas, the first Audit of the unit was conducted and Audit objection relating to non-payment of service tax was intimated on 16.03.2012 on the basis of scrutiny of records produced by the Appellant. So, the period from June 2010 when the Appellant (A1) has started manufacturing the goods on job work basis till raising of Audit objection on 16.03.2012, the Appellants have not paid either excise duty or service tax and have not entered into any correspondence with the Department relating to their job work activity. The activity being carried out by the Appellant (A1) was communicated as 'cutting of coils to the requirement of the customers on the basis of labour charges'.20
18. Illustrative copies of the Labour Bills raised which are extracted below indicate that the appellant is raising two types of Labour Bill, one is computerised, and the other one is manually made: - 21
The reason for raising two Labour Bills as above with the same serial number and date giving the details of the job work done is difficult to understand. The computerised bill reads as 'Labour Charges for Coil Cutting'. Whereas the manual bill raised clearly indicate that the 'Labour Charges for Profiling Aluminium Roofing Sheets'. For conversion of steel / aluminium coils into roofing profile sheets, the following processes are required: - 22 The Appellant (A1) has communicated to the Audit officers only the first process above i.e, De-coiling and slicing and failed to inform the other two processes i.e, Roll Forming and Crimping carried out on the job worked goods.
19. It is also seen that Appellant (A1) had produced to Audit a copy of the letter of 'OMI' and of 'RM' both dated 01.06.2010 addressed to Appellant (A1), where in it has been uniformly stated as follows: -
"This has reference to the discussion we had with you on job work for coils (Aluminium/PPGI/PPGL) which we would be sending to you from time to time to be cut/docoiled/silt to our specific lengths and sizes which we shall mention to you as per our requirement as per the rates agreed upon".
20. In the statement recorded on 19.04.2012, Smt. Anu J. Arackel, Head (Finance & Accounts) of M/s. Oriental Metals & Steels Pvt. Ltd. has explained how the suppliers of the raw materials get their job work done from the Appellant (A1) as below: -
i. That they normally place the purchase order for aluminium roofing materials from their head office for both the company and the firm and the suppliers supply the goods directly to their two branch offices situated at Coimbatore.23
ii. that their Coimbatore branches deliver these raw materials under Delivery challans to the Appellant (A1) for manufacture of the final product viz., Roofing Sheets - strong profile and wide profile under the cover of Delivery Challan.
iii. that the final products after manufacture were delivered to their Coimbatore office under the cover of delivery challan and from there, the final products were transported to their Head Office at Cochin. iv. that they delivered the goods received from Appellant (A1) as such to their various branches under the cover of stock transfer for sale and that they were selling the goods directly from the Head Office as well as through the above mentioned branches.
v. that they had purchased and supplied two profiling machines (Capital goods) to Appellant (A1) on loan basis and the price of the same is being adjusted against the payment of labour charges through debit notes.
21. Further, we find that Smt. Libra, Director of M/s. Premier Roofing and Building Systems P. Ltd. (A1) in her statement dated 01.10.2012 had admitted as follows: -
i. that the job working was done in respect of 'OMS', 'OM' and 'RM' on the raw materials supplied by the respective Principal manufacturers was conversion of the Coils into Profiled Roofing Sheets of requisite lengths and not mere cutting, of coils into sheets as the Roofing sheets cannot be marketed and used by the ultimate customers without the essential characteristics of Profiling.
ii. that the mention of "Sheets" in their documents was only for convenience and the goods were actually in the nature of Profiled Roofing Sheets; that Prior to 1.4.2012, they were mentioning the description of the goods in the documents as "Profiled roofing Sheets" 24
and with effect from 01.04.2012, they were mentioning the description of the job worked goods as "Cut to your length" so as to limit their tax liability to Service Tax on the job work charges instead of paying Central Excise duty on the retail sale price at which the goods are sold in the market to unrelated persons.
22. As such, we find that Appellant (A1) in contractual agreement with the suppliers of the raw materials have suppressed the fact of manufacture of profiled roofing sheets as both the Labour Bills raised on the suppliers are not reflecting the actual practice of conversion of the coils into profiled crimped roofing sheets which is clearly an activity of manufacturing. While the actual activity carried out was 'conversion of coils into profiled roofing sheets', the aforesaid letters and rasing of the Labour Bills and the way they deliberately informed the Audit that they were only involved in de- coiling and slicing the raw materials received on job work basis indicate that supression was resorted to. The Appellants have not given the true picture of the activity carried out by them on job work. It is also to be noted that the Appellant (A1) has not paid service tax till the raising of the Audit objection in March 2012 though they have started job work production for the suppliers of raw materials from June, 2010. Neither they have paid excise duty nor service tax during this period. The details relating to manufacture of excisable goods on job work basis out of the raw materials supplied by the traders and non-payment of central excise duty thereon was not disclosed by the Appellant (A1) either in the ER-1 Returns filed or by service tax payment or in any other manner.
25
23. Even, the conduct of appellant defies logic when they have not discharged the excise duty on job worked goods but were paying on its own production of identical goods. In view of the above detailed reasoning, we have to hold that larger period has been rightly invoked. Consequently, demand of duty and imposition of mandatory penalty is legal and proper. As the issue of limitation is decided in favour of Revenue, the orders of confiscation and imposition of fines are upheld. As to the Appellant's submission that they are eligible for refund of service tax paid as the job work manufacturer which cannot be subjected to both duties of excise and service tax, we find merit in these contentions and hold that the Appellant (A1) is entitled to claim refund and we order so accordingly. The mandatory penalty imposable will be equivalent to the net duty payable after adjusting the eligible Cenvat credit on inputs used in job work manufactured goods.
24. We do not find any merit in submission of Shri Vikas Sanghrajka (A5), Executive Director of Appellant (A1) that they were under mistaken impression that job work activity undertaken by them would not be manufacturing activity when they have obtained registration and treating the identical activity as manufacture. He is well aware that there was no difference between the manufacturing activity in respect of their own goods and the job work done in respect of suppliers' goods. He has admitted that the mention of 'sheets' in their documents was only for convenience and the job worked goods were actually in the nature of profiled roofing sheets. As in charge of day to day activities of the company, he is accountable for deliberate and well planned contravention of the provisions of law in job work manufacture and clearance of the excisable goods without payment of duty. The statement of Smt. Libra, Director of Appellant (A1) to the effect 26 that the company had made incorrect mention of the activity as 'cutting' with an objective to limit duty liabiity supports wilful contravention of law to evade payment of applicable excise duty. Thus, he has played a crucial role in facilitation of removal of excisable goods manufactured on job work without payment of duty.
25. Similarly, the suppliers of the raw materials i.e., A2-A4 had entrusted the task of manufacture of excisable goods on job work basis as they are the traders or the dealers in various profiled roofing sheets. Without their active connivence and colloborative efforts, it could not have been possible for the Appellant (A1) in manufacture of roofing sheets on job work basis and delivering the same without payment of central excise duty on transfer challans. Further, the suppliers of the raw materials have invested in purchase and supply of profiling machines to the main Appellant viz., PRBSPL and the cost invoved is agreed to be adjusted against the payment of labour charges by way of debit notes. Being regular dealers and traders in selling various roofing profiles and being registered dealers under Central Excise, they are expected to be aware of the procedures relating to manufactured goods and about the excise duty liability. The modus operandi adopted indicates that the suppliers of raw materials are also beneficiaries and there is a clear cut nexus existing between the manufacturer and the suppliers of the raw materials. Thus, the Appellants (A2-A4) had connived in the commission of offence of non payment of duty on the job worked goods and so are liable to penalty under the Rule 26 (1) of the Central Excise Rules, 2002. The Original Adjudicating Authority has imposed the penalties on Appellants (A2-A5) as follows:- 27
Appellants Penalty Imposed Mr. Vikas Sanghrajka (A5) Rs.1,00,00,000/- M/s. Oriental Metals & Steels Pvt. Ltd. (A2) Rs.42,00,000/- M/s. Oriental Metals (A3) Rs.33,00,000/- M/s. Rainbow Metals (A4) Rs.16,00,000/-
26. Considering the overall facts in these appeals, we are of the view that penalties imposed are on the higher side and to meet the ends of justice, it will suffice, if the same are reduced as follows:-
Appellants Penalty Reduced Mr. Vikas Sanghrajka (A5) Rs.10,00,000/- M/s. Oriental Metals & Steels Pvt. Ltd. (A2) Rs.5,00,000/- M/s. Oriental Metals (A3) Rs.5,00,000/- M/s. Rainbow Metals (A4) Rs.5,00,000/- 27. In summary,
i. The duty demand and invocation of extended period are decided against the Appellant (A1) and in favor of the Department.
ii. The issue of eligibility of Cenvat credit on the raw materials received is decided in favor of the Appellant (A1) who would be eligible for adjustment of such credit towards the duty demanded on the profiled roofing sheets cleared on job work basis. However, the quantum of eligible credit would be subject to verification of the duty paying documents and for this purpose, the issue is remanded to the Adjudicating Authority.
iii. The Appellant (A1) is eligible to claim refund of service tax paid on job work in accordance with the law.
28iv. The penalties imposed on Appellants (A2-A5) under Rule 26(1) of Central Excise Rules, 2002 are modified as mentioned in paragraph 26 above.
28. In the result, the appeals are partly remanded and partly allowed in the above terms with consequential relief, if any, as per the law.
(Order pronounced in open court on 26.08.2024)
Sd/- Sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
MK