Custom, Excise & Service Tax Tribunal
) Ran India Steels Pvt. Ltd., Unit Ii vs Commissioner Of Customs & Central ... on 23 February, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNALSOUTH ZONAL BENCH
CHENNAI
Appeal No.E/42499/2014
[Arising out of Order-in-Appeal No.157/2014-CE dated 14.8.2014 passed by the Commissioner of Central Excise (Appeals), Salem]
Appeal No.E/41030/2015
[Arising out of Order-in-Appeal No.09/2015-SLM-CEX dt. 19.3.2015passed by the Commissioner of Central Excise (Appeals), Salem]
Appeal No.E/40612/2015
[Arising out of Order-in-Original No.15/2014-C.Ex dt. 31.12.2014 passed by the Commissioner of Central Excise & Service Tax, Salem]
1) Ran India Steels Pvt. Ltd., Unit II
2) Ran India Steels Pvt. Ltd., Unit-II
3) Ran India Steels Pvt.Ltd., Unit-I Appellant
Versus
Commissioner of Customs & Central Excise,
Salem Respondent
Appearance:
Shri J. Shankarraman, Advocate Shri S. Ravi, Advocate For the Appellant Ms. Indira Sisupal, AC (AR) For the Respondent CORAM :
Honble Shri R. Periasami, Technical Member Honble Shri P.K. Choudhary, Judicial Member Date of Hearing: 16.2.2016 & 23.2.2016 Date of Decision: 23.2.2016 FINAL ORDER No.40412-40414/2016 Per P.K. Choudhary There are three appeals filed by the appellants, M/s.Ran India Steels Private Ltd., two by appellant's Unit-II (E/42499/14 &E/41030/2015) and the other appeal filed by their Unit-I (E/40612/2015). The issue involved in appeal Nos.E/42499/14 &E/41030/2015 is rejection of value adopted by appellant and impositionof penalty under Rule 26 & 27 of Central Excise Rules 2002 and the issue involved in appeal E/40612/2015) relates to denial of cenvat credit. With the consent of both sides, we take up all the appeals together for disposal.
2. Appeal Nos.E/42499/14 & E/41030/2015 Appellant M/s.Ran India Steels Pvt. Ltd., Unit-II located in Nallur Village, Namakkal District, Tamil Nadu are engaged in the manufacture of MS Ingots falling under Chapter Heading 72061090 and registered with Central Excise. The entire M.S ingots manufactured by appellant Unit-II are cleared to their own Unit-I located in the same Nallur Village, Namakkal District for captive consumption in the manufacture of TMT bars. Appellant paid duty by adopting market value of MS ingots and obtained CAS-4 certificate for determining the value of goods cleared to their own inter-unit. The adjudicating authority issued SCN No.7/2013 dt. 7.5.2013 and another SCN No.05/14 AC dt. 12.3.2014 on the charge of passing on the excess credit to their Unit-I and proposing for penalty under Rule 26 & 27 of CER 2002. Accordingly, the adjudicating authority passed two Orders-in-Original viz. OIO No.1/2014 (AC) dt.20.3.2014 (in respect of Appeal E/42499/14) and OIO No.4/2014 (AC) dt. 17.11.2014 (in respect of Appeal 41030/15). In both the OIOs, the adjudicating authority rejected the value adopted by appellant's Unit-II and imposed penalty under Rule 26. Since the value was not determined under Rule 8 of Central Excise Valuation Rules, he directed the jurisdictional range officer to quantify the amount and the amount of duty shall be the penalty imposed under Rule 26. He also imposed penalty of Rs.5000/- each in both the OIOs under Rule 27 of the CER 2002. Based on the adjudication order, the jurisdictional Range Superintendent in his letter dt.11.8.2014 determined the value as per CAS-4 certificate and quantified the duty of excess credit passed on to the Unit-I of Rs.3,28,78,965/- and directed the appellant to pay equal penalty under Rule 26 as held by the adjudicating authority. Similarly, the Range Superintendent in his letter dt. 19.11.2014 redetermined the value and quantified the duty demand of Rs.2,11,557/- and directed the appellant to pay duty as well as equal penalty under Rule 26. On appeal, the Commissioner (Appeals) upheld the OIOs and rejected the appeals filed by appellants. Hence the above two appeals before Tribunal.
3. Appeal No.E/40612/2015 The brief facts of the case are that the Commissioner of Central Excise, Salem issued a SCN No.27/2013 dt. 7.5.2013 to appellant's Unit-I denying cenvat credit of Rs.3,28,78,965/- availed by them and also ordered for recovery of the credit by invoking the proviso to Section 11A and also proposing for interest and equivalent penalty under Section 11AC. The adjudicating authority in his OIO No.15/2014-CE dt.31.12.2014 ordered for recovery of ineligible credits availed by unit-I along with interest and also imposed equivalent penalty under Rule 15 (2) of CER 2004 read with Section 11AC of the Act.
4. Heard both sides. The matter was heard on 16.2.2016 and today.
5. Ld. Advocate Shri J. Shankarraman and Shri S. Ravi, appeared for the appellants and submitted written submissions dt. 23.2.2016 and reiterated the same. Ld. Advocate submits in respect of Appeal Nos.E/42499/14 & E/41030/15, that both the Unit I & Unit II are one and the same entity. The goods manufactured by Unit-II were not sold to DTA clearance but the entire quantity was transferred to unit-I for manufacture of TMT rods & bars. He submits that since there is no sale to any unrelated person they are covered under Rule 8 of Central Excise Valuation Rules and the value has to be adopted as per the CAS-4 formula. Pending receipt of CAS-4 certificate from the Cost Accountant they have paid excise duty on the goods transferred to their Unit-I based on the market value which is higher than 110% of cost of production. He further submits that there was no dispute on the duty paid by the appellant on the higher value. The department alleged that higher duty was paid with intention to pass on the credit. He submits that there is no intention to pass on the excess credit as the duty was paid by Unit-II, they are eligible for taking credit by Unit-I by calculating excise duty on the finished goods viz. TMT bars cleared from unit-I. Therefore there is revenue-neutrality. He further submits that there is no provision in Section 11A for alleging contravention of payment of higher duty. He submits that Section 11A is only for non-payment, misdeclaration or other contraventions. He further submits that adjudicating authority in the first two appeals has simply rejected the value and not quantified or determined the value as per Rule 8 of Central Excise Valuation Rules. Though the adjudicating authority imposed penalty under Rule 26, on the quantum of penalty he directed the penalty amount to be determined based on the redetermined duty amount. He submits that they have to pass on the amount to Unit-I as the same entity, they have paid cash. He further submits that during the material period CAS-4 certificate was issued periodically by Cost Accountant. The first CAS-4 was issued on 30.9.2008 for the period 14.3.2008 to 21.4.2008 and subsequently same CAS-4 certificates were issued for the subsequent periods periodically after the clearance. He drew our attention to invoices of Unit-II at page 52 of appeal Memo in Appeal E/40612/2015 wherein appellants have cleared M.S.Ingots from Unit-II to Unit-I and referred to invoice issued by Unit-I available at page 31 of appeal Memo in Appeal E/42499/2014 wherein unit-I paid excise duty on the finished goods viz.TMT bars cleared for DTA. The goods were self-assessed and the department never made an attempt to re-assess value under Rule 8 as there is no short payment and even after determination of value under Rule 8 they have paid excess duty. He submits that for paying higher duty appellants are penalized for no fault of theirs. Appellants paid duty both in cenvat credit account as well as cash PLA. In Unit-II they paid excise duty in cash in PLA of Rs.5,55,02,497 (Appeal E/42499/15) for inter-unit transfer of the goods to Unit-I after exhausting credit. Therefore they were not in a position to transfer excess credit. He submits that Unit-I also paid excise duty vide both cenvat credit as well as cash which shows that there is no malafide intention or any arrangement or passing of credit to the other unit. Therefore, on the one hand Revenue alleges that they have paid higher rate of duty, whereas adjudicating authority, considering payment of higher duty, has not passed any order on the consequential refund which is not due to the government. Therefore, imposition of penalty under Rule 26 is not justified as they have not contravened any of the provisions of the rules. He relied on the following citations :-
(1) CCE Pondicherry Vs Jeevan Diesels & Electricals Ltd.
2010 (254) ELT 99 (Tri.-Che.) (2) Super Forgings & Steel Ltd.
2007 (208) ELT 153 (Tri.-Kol.) (3) Grauer & Weil (I) Ltd. Vs CCE & Cus. Daman 2009 (234) ELT 101 (Tri.-Ahmd.) (4) Monga Brothers Ltd. Vs CCE Ludhiana 2013 (294) ELT 322 (Tri.-Del.)
6. In respect of appeal E/40612/2015, Ld. advocate submits that denial of input credit to Unit-I is not justified as they have not contravened any of the provisions of CCR as the goods were MS rods, original input for manufacture of finished goods got duty paid invoice. He further submits that it is not the case before transfer of any credit, the goods were received by Unit II under valid central excise invoice and availed input credit. The goods were consumed in the manufacture of finished goods. Therefore, denial of cenvat credit on the ground of passing on the excess credit from Unit II to Unit I is not within the provisions of CCR. He submits that rule 26 cannot be invoked. Rule 26 penalty is imposable where no goods involved and also only before transaction. Whereas in the present case, the goods were transferred to their Unit I for captive consumption. The commissioner has denied entire credit based on the ground that Unit-I has passed on the credit. He relied on the following decisions :-
(1) CCE Vs Purity Flexpack Ltd.
2008 (223) ELT 361 (Guj.) (2) Parasrampuria Synthetics Ltd. Vs CCE Jaipur 2005 (191) ELT 899 (Tri.-Del.) (3) Acero Fabrica Vs CCE Mumbai 2005 (191) ELT 670 (Tri.-Mumbai) (4) CCE Mumbai Vs Anand Arc Electrodes Pvt. Ltd.
2010 (252) ELT 411 (Tri.-Mumbai) (5) CCE Rajkot Vs Advance Diesels Engines Pvt. Ltd.
2012 (278) ELT 491 (Tri.-Ahmd.) (6) CCE Vs MDS Switchgear Ltd.
2008 (229) ELT 485 (SC) (7) Cipla Ltd. Vs CCE Pune-III 2011 (273) ELT 391 (Tri.-Mumbai) He submits that appellants have paid higher duty which is not in dispute. Denial of credit to Unit-I is not justified and pleaded to set aside the order and the penalty.
7. On the other hand, Ld.AR submits that determination of value under Rule 8 is not in dispute as the goods were transferred to their own Unit and the appellant knew well that valuation has to be adopted under Rule 8 and there is no concept of paying higher rate of duty. He drew our attention to para-11 of OIO where they have admitted adopting payment of higher duty on provisional basis. He further submits that as per the CAS-4 certificate submitted by the assesse, the cost of production determined by the Cost Accountant is Rs.31,097/-per MT (approx.) whereas what is declared by Unit-II approx. is Rs.42,000/- per MT and the difference is more than 50% which is substantial. Therefore, he submits that the adjudicating authority has rightly rejected the value under rule 8. He also submits that adjudicating authority brought out clearly the intention of appellant that they have not availed the entire credit available to Unit-II but passed on to Unit-I. Therefore higher value adopted by the appellant is not justified and is not in accordance with the rules. He relied paras 11.0, 11.1 of the OIO dt. 20.3.14 and paras 2.01, 3.02 of the SCN at page 109 (E/40612/2015). He relied on the following case laws :-
(1) CCE Chennai Vs Eveready Industries Ltd. -
2011-TIOL-1115-CESTAT-MAD (2) Jay Yushin Ltd. Vs CCE New Delhi -
2002-TIOL-126-CESTAT-DEL-LB (3) Eicher Motors Ltd. & Others Vs CCE Indore 2008-TIOL-977-CESTAT-DEL (4) Tata Iron & Steel Co. Ltd. Vs CCE Thane-II 2013-TIOL-707-CESTAT-MUM.
8. On the denial of cenvat credit, he submits that adjudicating authority has rightly denied credit as it was excess credit passed on to Unit-I.
9. In rejoinder, ld. Advocate countered the arguments and reiterated that Rule 26 cannot be invoked in the present case for imposition of equivalent penalty. He further submits that they have never assessed the goods provisionally and submits what was done is they had only paid on provisional basis by adopting higher market value so as to avoid litigation on demand of duty on account of short payment. He further submits that presently they are paying appropriate duty as per the CAS-4.
10. The main issue is that the valuation adopted for removal of finished goods viz., M.S. Ingots was rejected on the ground that the appellant has not paid duty on CAS-4 value but paid duty on the market value which was slightly on the higher side and therefore penalty under Rule 26 was imposed which is equal to the alleged excess credit. The appellant had to pay duty on 110% of the cost and they had paid duty on the market value due to delay in obtaining the CAS-4 certificate from the Cost Accountant. The reason for paying duty on the market value is not on account of any malafide intention but due to delayed receipt of CAS-4 certificate only. A perusal of the CAS-4 certificates issued would show that the period for which the certificate was issued and the date of issue of such certificates was much after the clearance and therefore they could not have waited for the certificate. They cannot be faulted for adopting market value which was slightly higher than the CAS-4 certificate.
11. In the first place, whether the value is higher or lower will be known only after the receipt of the certificate from Cost Accountant and in this case it was received much after the clearance. If there was a shortage then it would have resulted in a demand of differential duty and if there is an excess, then it is a question of refund of duty. It is normally not possible for anybody to pay duty with mathematical precision at 110% of the cost. In all cases there may be shortage or excess payment. That will be known in the next financial year after getting a Cost Accountant certificate. Merely because there is variation, that too in favour of the Revenue, there cannot be a ground for imposing penalty under Rule 26.
12. Further the self assessment of the appellant has become final. The lower authority has not taken any effort for reassessment. Only after reassessment, the authority can say that there is an excess or shortage of payment of duty. There was no proposal in the notice to arrive at the correct value for the purpose of assessment. Since the correct value has not been determined, it cannot be presumed that the appellant has passed on excess credit to their own unit I. As rightly pointed out earlier, there was no necessity to pass on excess credit to Unit I as both unit II and unit I are one and the same entity. The excess amount can be transferred as cash also. They can pass on the cash legally to Unit I instead of credit. Hence the entire basis on which the Department proceeded against the appellant is incorrect.
13. If the Department feels that they will not accept any body paying more duty then the same should have been granted as refund. In the present case, no such order has been passed. No doubt the refund is subject to Section 11B.
14. In the instant case, there is no evasion of duty nor is there any violation of Central Excise Rules/Acts by the Appellant. In any case the entire transaction is revenue neutral as Unit I had taken credit and paid duty on their finished product TMT Rods. Further the appellant had not merely paid duty by debiting the credit alone but also paid by way of cash. [The following decisions of the Tribunal lends support to the above view.
(i) CCE, Pondicherry Vs Jeevan Diesels & Electricals Ltd (Supra)
(ii) Grauer & Weil (I) Ltd Vs CCE, Daman (Supra)
(iii) Monga Brothers Ltd. Vs- CCE, Ludhiana (Supra) The above decisions would apply with greater force in the present case and the orders of the lower authorities are liable to be set aside on this ground also.]
15. Further a perusal of Rule 26 of the Central Excise Rules, 2002 would show that it has no applicability to the appellant . Rule 26(2)(i) applies only where there is no delivery of goods by the manufacturer of inputs. In the present case there is no dispute with regard to the fact that the goods were supplied to Unit I. The goods which are cleared in the instant case falls within the definition of input as found under Rule 2(k) of the CENVAT Credit Rules, 2004. They have been used in the manufacture of goods by the receiving Unit I of the appellant. Thus, the present issue is not a case of ineligibility, also and therefore Rule 26(2)(ii) will not operate. The appellant has not enabled the receiving unit to take credit without payment of duty. Hence the lower authorities have wrongly applied Rule 26 for imposing penalty. Similarly, imposition of penalty under Rule 27 is also not correct.
16. With regard to Appeal No.E/40612/2015, there was no dispute raised by the department during the disputed period about the higher value adopted at the time of clearance from Unit II. Further for the reasons stated supra it cannot be said that there was excess or shortage of payment of duty by the appellant. Hence on this ground alone this appeal has to be allowed. However, in the light of these facts, the credit taken by Unit I based on actual duty paid by Unit II is in order. In Brakes India Ltd v. CCE, Delhi III 2008 (230) ELT 621 (T) the Tribunal held that whatever duty was paid was taken as credit, hence, entire exercise being revenue neutral and does not involve any fraud or manipulation etc and therefore, credit is not deniable. Hence, the demand is not sustainable and the impugned order is liable to be set aside.
17. Rule 3 of the CCR, 2004 provides for taking credit of the duty paid on the inputs and capital goods received in the factory on the strength of documents specified in Rule 9 (1) thereof. Rule 9 (1) of the Cenvat Credit Rules, 2004 specifies the documents on which Cenvat credit can be taken and one such document is invoice issued by a manufacturer from his factory or depot or from the premises of the consignment agents or any other premises from where such goods are sold.
18. The invoices on which Cenvat credit was taken were issued by the manufacturer namely, M/s Ran India Steels Pvt. Ltd., Unit II from their factory from where the said goods were cleared. The receipt of goods covered by the invoices showing payment of duty is not disputed either in the SCN or in the impugned order. The eligibility of the goods for credit, their receipt and use in the factory are also not in dispute. Similarly, the fact that the Appellant has paid the price and the duty as shown in the invoices to the supplier is also not in dispute. As per Rule 11 of the Central Excise Rules, 2002, an invoice shall necessarily contain the registration number, name of the consignee, description, classification, time and date of removal, mode of transport, vehicle number (if any), rate of duty, quantity and value of goods and the duty payable thereon. The invoices issued by Unit II contain all the particulars as stipulated under Rule 11 (2) of the Central Excise Rules, 2002. As long as amount of duty as indicated in the duty paying documents (i.e. excise invoice) has been paid and as long as inputs/capital goods which are indicated in the duty paying documents are eligible for credit and are received and used by a manufacturer in his factory there cannot be any ground for denial of credit. The manner in which the manufacturer has paid the duty on the goods so supplied is irrelevant.
19. It is also seen that during the period from April 2008 to March 2013, Unit II had paid substantial amount from PLA. The Appellant submits that, had Unit II followed the assessable value mentioned in the SCN, then the duty amount need not have been paid by cash by Unit II. As such, it is not the case of the department that Unit II has deliberately adopted higher assessable value to utilize accumulated Cenvat credit. If that had been the case of the department, then the payment of PLA would not have arisen at all. Neither the provisions of Rule 14 of Cenvat Credit Rules, 2004 nor the provisions of Section 11A of the Act are attracted to deny the credit for the following reasons:
(i) Rule 14 ibid deals with the Cenvat credit wrongly taken or erroneously refunded. In the instant case, the Cenvat credit under dispute was taken correctly on MS Ingots received from Unit II and used as input in the manufacture of TMT Rods and there is no dispute on this;
(ii) The Cenvat credit was availed based on valid duty paid documents as prescribed under Rule 9 ibid and there is no dispute on this;
(iii) the Central Excise Audit conducted in the Appellants unit during the past period from time to time also confirmed the eligibility of disputed credit based on duty paid invoices/documents;
(iv) The SCN has not alleged any of the grounds as contemplated under Section 11A to invoke the said provision and hence the provisions of Section 11A (4) [erstwhile proviso to Section 11A (1) of the Central Excise Act] is not attracted.
The assessment of goods and payment of duty on the goods so assessed is a matter between the manufacturer and the Central Excise authorities having jurisdiction over the said manufacturer. In view of the fact that in the appeals filed by Unit II there was no reassessment by the authorities, credit cannot be denied at Unit I. Further the CENVAT credit cannot be disallowed at the end of the Appellant who is the recipient of inputs on the ground that the manufacturer-supplier has paid duty by declaring higher value. The following decisions lend support to the above view.
20. In this regard, reliance is placed by the Appellants on the following decisions:
(i) Parasrampuria Synthetics Ltd Vs CCE, Jaipur (Supra)
(ii) Acero Fabrica Vs CCE, Mumbai (Supra)
(iii) CCE, Mumbai Vs Anand Arc Electrodes Pvt. Ltd (Supra) In the case of CCE vs. MDS Switchgear Ltd (Supra) the Honble Supreme Court while upholding the Tribunals order, held that rules entitled the recipient manufacturer to avail of benefit of duty paid by supplier manufacturer and the quantum of duty already determined by jurisdictional officers of supplier unit cannot be contested or challenged by officers in charge of recipient unit. Even though Unit II and Unit I have the same jurisdictional officer, there was no proposal to reassess the clearance of Unit II and therefore, the Department has erred in denying the credit to Unit I.
21. The Honble High Court of Gujarat at Ahmedabad in the case of CCE Vs Purity Flexpack Ltd (Supra) while dismissing the appeal filed by the Revenue had held that the duty payment at higher rate was not disputed by the Department at suppliers end and hence, credit taken by buyer not variable and the respondent is entitled for CENVAT credit at the higher rate paid on inputs, for which manufacturer of inputs on his own paid duty at the rate of 24% instead of 16%.
22. The ratio of the above referred judgments applies to the facts of the case. In view of the above, Rule 3(1) of the Cenvat Credit Rule allows credit of duty paid by the input manufacturer and not the duty payable by the said manufacturer. As such, the entire amount of duty, which the Appellant has taken credit, having been paid by the manufacturer/supplier, who has not subsequently claimed any refund on account of reduction of assessable value of the inputs, the Appellant would be entitled to the entire Cenvat credit. Therefore, the impugned order is liable to be set aside.
23. When the demand itself is not sustainable as brought out above, the question of payment of interest does not arise. Therefore, demand of interest in terms of Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944 is not sustainable. Since the duty demand is set aside, the various penalties viz. penalty under Rule 15(2) of CER, 2004 read with see 11 AC, Rule 26 & Rule 27 is set aside.
24. For the reasons stated above, the impugned orders are set aside and Appeal Nos.E/42499,41030/2015, filed by Unit II and appeal by Unit I in E/40612/2015 are allowed with consequential relief.
(Operative part of the order pronounced in open court
on 23.2.2016)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
gs
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