Custom, Excise & Service Tax Tribunal
M/S Bando India (P) Ltd vs Cce, Delhi-Iii on 11 June, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi. Date of hearing/decision: 11.06.2010 For approval and signature: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Member (Technical) ---------1. Whether Press Reporters may be allowed to see 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 of the Order? 4 Whether Order is to be circulated to the Departmental authorities? Excise Appeal No. 2967 of 2009 [Arising out of order-in-Original No. 208/MA/GGN/2009 dated 13.08.2009 passed by the Commissioner of Central Excise (Appeals), Delhi-III, Gurgaon]. M/s Bando India (P) Ltd., Appellants Vs. CCE, Delhi-III Respondent
Appearance: Rep. by Sh. L.P. Asthana, Ms. Reena Khair & Sh. Abhishek Jaju, Advocates for the appellants.
Rep. by Sh. Anil Khanna, DR for the respondent.
Coram: Honble Sh. Justice R.M.S. Khandeparkar, President Honble Sh. Rakesh Kumar, Member (Technical) Oral order No._____ Per: Shri Justice R.M.S. Khandeparkar:
This appeal is being heard in terms of order passed today in Stay application No. 3056 of 2009.
This appeal arises from the order dated 13.08.2009 passed by the Commissioner (Appeals) Gurgaon dismissing the appeal filed by the appellants against the order of the adjudicating authority dated 29.12.2008. By the said order, the adjudicating authority had confirmed the demand to the tune of Rs.16,63,268/- alongwith interest thereon and had imposed equal amount of penalty against the appellants. The claim has been confirmed on the ground that the appellants had wrongly availed cenvat credit on the basis of non-cenvatable invoice issued by the contractor which was not valid document in terms of Rule 7 of the Cenvat Credit Rules, 2002 and Rule 9 of the Cenvat Credit Rules, 2004.
3. The relevant facts of the case in brief are that the appellants are engaged in the manufacture of power transmission belts, rubber belts and other items and for the purpose of setting up of its plant, the machinery equipments were imported from M/s Bando Singapore Pte Ltd., while the work of installation of the plant was being entrusted to M/s Mitsui Kensetsu India Limited.
4. On June 15, 2003 the Singapore Company issued a Letter of Intent to Mitsui for supply, erection and installation of machinery and other civil work, for the setting up of the factory at Gurgaon (Haryana). In Paragraph 8 of the Letter of Intent (hereinafter referred to as LOI), it was mentioned that the Singapore company is the promoter and proposed to set up a company in India, under the name of Bando India Pvt. Ltd. It was also mentioned that necessary steps had been initiated to incorporate the said company in India and on incorporation thereof, the LOI would be assigned and transferred to Bando India Pvt. Ltd. (the appellant in the present appeal).
5. Pursuant to the LOI, Mitsui placed an order on the Singapore Company, for supply of equipment for setting up the factory of the appellant.
6. The goods were supplied to Mitsui under cover of invoice dated October 29, 2003 alongwith the Certificate of Origin and Bill of Lading. In the Amended Bill of Lading, the consignee and notify party was shown as under:-
Mitsui Kensetsu India Ltd. (A/c Bando (India) Ltd).
7. Mitsui filed a bill of entry on December 17, 2003 wherein the importers name and address was declared as under:-
M/S MITSUI KENSETSU INDIA LTD, A-1/20, SAFDARJUNG ENCLOAVE, NEW DELHI, NOTIFY M/S BANDO INDIA PVT. LTD., PLOT NO. 26, SECTOR-34, EHTP, GURGAON.
Mitsui also made an endorsement on the Bill of Entry which read as under:-
This bill of entry is endorsed in favour of M/s Bando India (P) Ltd., Gurgaon. Plant and machinery covered by this BOE to be delivered at Plot No. 26, Sector-34, Gurgaon.
8. After clearance of the imported goods, the same were taken directly to the factory of the appellants for installation and setting up. On installation of the capital goods, the appellants took credit of 50% of the additional duty of customs (CVD) paid under the aforesaid Bill of Entry, with due intimation to the Department in the ER-1.
9. On January 2, 2008 the Additional Commissioner of Central Excise issued a notice to the appellants proposing to disallow the credit on the ground that the same was not taken on a valid document as specified in Rule 7/ Rule 9 of the Cenvat Credit Rules, 2002/2004. The notice called upon the appellants to show cause as to why duty amounting to Rs. 16,63,268/- should not be demanded and recovered from them by invoking the proviso to Section 11A of the Act. The notice also proposed to levy interest and to impose penalty.
10. In response to the notice, it was the case of the appellants that the goods were imported for the appellants factory and were routed through Mitsui only for convenience. The payment through Mitsui was reimbursement of the cost of the equipments and therefore credit was correctly availed.
11. The adjudicating authority rejected the defence raised by the appellants and confirmed the demand as stated above. The appellants appeal against the same before the Commissioner (Appeals) also failed and hence the present appeal.
12. Learned Advocate for the appellants placing reliance in the decision of the Bombay High Court in the matter of Marmagoa Steel Ltd. vs. Union of India reported in 2005 (192) ELT 82 (Bom.) confirmed by the Apex Court in the matter of Union of India vs. Marmagoa Steel Ltd., reported in 2008 (229) ELT 481 (SC) as also that of the Gujarat High Court in the matter of Vimal Enterprise vs. Union of India reported in 2006 (195) ELT 267 (Guj.) submitted that the records clearly disclose that the credit was availed in relation to the duty paid goods which were factually received in the factory premises of the appellants and were utilised by the appellants and, therefore, the authorities below erred in denying the credit to the appellants.
13. Learned DR on the other hand, placing reliance in the decision of the Tribunal in the matter of Forma Pack Industries vs. CCE, Delhi-II reported in 2005 (192) ELT 525 (Tri. Del.) as also drawing our attention to Rule 9 of the Cenvat Credit Rules, 2004 submitted that the appellants were not entitled to claim credit on the basis of the document which could not be the basis for claiming the cenvat credit in view of the specific provisions comprised under Rule 9 of the said Rule. He further submitted that the decisions sought to be relied upon are on the basis of Rule 57A read with Rule 57G of the Central Excise Rules, 1944 which were not in paramateria with rule 9 of the said Rules. Attention was also sought to be drawn to the Letter of Intent issued by Bando Singapore in favour of the contractors.
14. The adjudicating authority referring to the bill of entry in the matter in hand and the provisions of the said Rules has observed that there is no provision for endorsement of bill of entry and ex-facia bill of entry is in favour of the contractor and, therefore, there is no valid document in favour of the appellants to claim cenvat credit in relation to the goods stated to have been received by the appellants in their factory. In this view of the matter, according to the adjudicating authority, the case law cited by the appellants was not applicable to the facts of the case.
15. The Commissioner (Appeals) while dismissing the appeal filed against the said order has held that the issue involved relates the eligibility for availing cenvat credit of duty paid in respect of the goods imported under the bill of entry and the said bill of entry had been in the name of the contractor and, therefore, on the basis of such document and taking into consideration the provisions of the said Rules, the appellants were not entitled to avail the cenvat credit.
16. It is an undisputed fact that the bill of entry was issued in the name of the contractor with a rider that notify M/s Bando India (P) Ltd.,. It is also apparent from the records that the bill of lading disclosed the consignee to be the contractor alongwith the name of the appellants in the bracket stating that the consignment was on account of the appellants. It is also undisputed fact that the contractor had not taken the credit in relation to the duty paid on the said goods. Likewise, the facts that the said goods were received in the factory of the appellants on clearance thereof and were utilized for installation and setting up of the appellants factory are not in dispute. Undisputedly, the credit availed correspondence to the amount of duty paid on the imported goods.
Copy of the Letter of Intent dated 15.6.2003, issued in favour of the contractor further discloses that the Bando (Singapore) Pvt. Ltd. were the promoters and proposed to set up a company under the name of Bando (India) Pvt. Ltd. or Bando India Ltd. and necessary steps had already been initiated by the said company to incorporate the said company in terms of Indian Companies Act, 1956 much prior to import of the goods in question. On incorporation of such company in India, the Letter of Intent was to be assigned and transferred to such company in India which was to enter into a detailed agreement with the contractor and to issue the works order for installation of the factory.
18. The Letter of Intent further specifically mentioned that terms and conditions of this LOI shall be legally binding on Bando India, and all payments shall be made to you under this LOI/contract by Bando India, failing which we stand full guarantee to you for all the payments due and payable to you under this LOI/contract. The above letter of intent read with the bill of entry and bill of lading apparently discloses that the goods under the bill of entry were for the appellants and further there being no dispute that the said goods were subjected to the payment of duty and were directly transported to the premises of and utilized by the appellants and that the contractor had not availed the credit, one fails to understand as to how the appellants could be denied the benefit of the credit.
19. Undoubtedly, Rule 7(1) of the Cenvat Credit Rules, 2002 provides that the cenvat credit shall be taken by the manufacturer on the basis of an invoice issued by an importer in terms of the provisions of Central Excise Rules, 2002. Sub-rule (2) thereof provides that the manufacturer or producer taking CENVAT credit on inputs or capital goods shall take all reasonable steps to ensure that the inputs or capital goods in respect of which he has taken the CENVAT credit are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid. The manufacturer or producer taking CENVAT credit on inputs or capital goods received by him shall be deemed to have taken reasonable steps if he satisfies himself about the identity and address of the manufacturer or supplier, as the case may be, issuing the documents specified in rule 7, evidencing the payment of excise duty or the additional duty of customs, as the case may be, either from his personal knowledge or on the strength of a certificate issued to the manufacturer or the supplier, as the case may be, by the Superintendent of Central Excise within whose jurisdiction such manufacturer has his factory or the supplier has his place of business, and where the identity and address of the manufacturer or the supplier is satisfied on the strength of a certificate, the manufacturer or producer taking CENVAT credit shall retain certificate for production before the Central Excise Officer on demand.
20. Rule 9(1) of the CENVAT Credit Rules, 2004 similarly provides that the CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of an invoice issued by an importer as also on the basis of bill of entry.
21. Sub-rule (1A) of Rule 7 of the CENVAT Credit Rules, 2002 provides that the cenvat credit under Rule 3 shall not be denied on the ground that any of the documents mentioned in sub-rule (1) does not contain all the particulars required to be contained therein under those Rules, if such document contains details of payment of duty, description of the goods, assessable value, name and address of the factory or warehouse provided that the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise having jurisdiction over the factory of a manufacturer intending to take CENVAT credit is satisfied that duty due on the inputs has been paid and such inputs have actually been used or are to be used in the manufacture of final products, and such Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise shall record the reasons for not denying the credit in each case.
22. Similarly, sub-rule (2) of Rule 9 of the CENVAT Credit Rules, 2004 provides that no cenvat credit under sub-rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, assessable value, Central Excise or Service tax registration number of the period issuing the invoice, as the case may be, name and address of the factory or warehouse or premises of first or second stage dealers or provider of taxable service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit.
23. Rule 7 of Cenvat Credit Rules, 2002 and sub-rule (9) of Cenvat Credit Rules, 2004, undoubtedly describes the various documents based on which the cenvat credit can be claimed. They include invoice issued by the importer as well as bill of entry. Sub-rule (1A) of Cenvat Credit Rules, 2002 and sub-rule (2) of Rule 9 of Cenvat Credit Rules 2004, however, further clarifies that in case of any deficiency to be found in such documents in relation to the particulars which are required to be disclosed therein to justify the claim of credit, such deficiency shall not be in relation to the relevant aspects which are specified in those provisions. However, the said clarification nowhere provides that the presence of name of the contractor in the invoice alongwith that of consignee would disentitle the manuf`acturer to avail credit on the basis of such invoice irrespective of the fact that goods were actually received and utilized by the manufacturer and the contractor had not availed any credit in respect of the duty paid on such goods. Therefore, merely because the invoice discloses the name of the contractor alongwith that of the consignee, but the documentary materials placed before the authority establish to the satisfaction of the adjudicating authority that the goods which described in the invoice were in fact received in the factory of the consignee/ manufacturer and those goods were subjected to payment of duty as disclosed in the invoice and further that the goods were utilized or were to be utilized by the manufacturer, certainly the credit in relation to duty paid on such goods cannot be disallowed to such manufacturer.
24. The Punjab & Haryana High Court in Commissioner of Central Excise, Ludhiana vs. Ralson India Ltd. reported in 2008 (10) STR 505 (P&H), while dealing with a substantial question of law as to whether Modvat Credit on original documents, which were not prescribed documents, could be availed without following the procedure laid down in that regard, after taking note of the provisions of law comprised under Rule 57G and in particular sub-rules (3) and (6) thereof, held that From a conjoint reading of sub-rules (3) and (6), the intent and object of the Legislature is manifestly clear. It is to prevent the misuse of the modvat claims and any fraud being played by a manufacturer. Being a beneficial legislation, its object of input duty relief to a manufacturer should not be defeated on a technical and strict interpretation of the Rules governing modvat.
25. The Bombay High Court in Marmagoa Steel case while considering the scope of Rule 57G has held thus:-
10. For availing the credit of duty, what is required to be established under Rule 57G is that the inputs received are in fact duty paid. The procedure set out in Rule 57G of the Central Excise Rules is to ensure that the credit is taken on the basis of duty paid documents. The bill of entry is one such document set out in Rule 57G. The said rule does not require that the bill of entry should be in the name of the person claiming credit of duty. It is not in dispute that the goods imported and cleared on payment of duty by one person can be used as inputs and credit of duty can be claimed by another person by establishing that the imported duty paid goods have been received as inputs and that the importer has not taken credit of that duty. In the present case, it is established that the duty paid goods are received as inputs, however, the credit is denied on the ground that the Bill of entry is not endorsed in the name of the appellant. Rule 57G does not require that for taking credit of duty, the bill of entry should be endorsed in the name of the claimant. Counsel for the revenue could point out any provision of law in the Act or the Rules regarding the endorsement of bills of entry. In the absence of any provision regarding endorsement on the bill of entry, the credit of duty cannot be denied on the ground that the bill of entry is not endorsed in the name of the claimant. As stated hereinabove, what is required to be established for taking credit of duty is that the goods used as inputs are duty paid and that the credit of duty paid on the said goods has not been taken. In the facts of the present case, the evidence on record i.e. the bill of entry together with the certificates issued by excise authorities at Surat and Goa, clearly show that the goods imported and cleared under the bills of entry on payment of duty were received and utilized by the appellant as inputs in its factory and that the importer has not utilized the credit of duty paid on the said goods. Thus, the appellant has established that the inputs received under the bills of entry were duty paid and, therefore, the authorities below were not justified in denying the credit of duty to the appellant. The two decisions relied upon by the Tribunal do not support the case of the revenue in the case of Balmer Lawrie & Co. (supra), the issue was not relating to the endorsement on the bills of entry and, therefore, the said decision is distinguishable on facts. Similarly, the decision of the Tribunal in the case of Tata Iron & Steel Co. Ltd. (supra) is also distinguishable on facts as the said decision is based on erroneous concession made by the Counsel for the appellant therein, that in the case of Balmer Lawrie & Co. it is held that the Modvat credit is not available on the basis of endorsed copies of bills of entry.
26. The Apex Court while approving the said view taken by the Bombay High Court in relation to the entitlement of the manufacturer for modvat credit on the basis of the bill of entry had observed thus:-
10. On reading Rule 52A the position which emerges broadly is that the said Rule refers to eligibility for claiming MODVAT Credit, whereas Rule 57G refers to procedure to be observed by the manufacturer for taking credit for the duty paid on the inputs received by him. A bare reading of Rule 52A shows that no excisable goods shall be delivered from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent. Rule 52A, therefore, applies to a situation where goods are cleared from a factory or a warehouse to the place of assessee. For such a situation the proviso in Rule 57G stipulates that no credit shall be taken unless the inputs are received in the factory under the cover of an invoice issued under Rule 52A. However, that situation does not arise in this case for the simple reasons that the importer M/s Essar Gujarat Limited had loaned the goods to the assessee (which transaction is not doubted in the show cause notice). Further the goods were transferred directly by the importer to the Unit of the assessee from the Port. Therefore, the goods never went to the manufacturing Unit of M/s Essar Gujarat Limited. For such a situation the proviso to sub-rule (2) of Rule 57G states that the relevant document indicating payment of duty would be Bill of Entry.
11. Now in the present case, as far as Bills of Entry dated 30th May, 1994 and 31st May, 1994 are concerned, Bills of Entry were produced by the assessee which indicate that M/s Essar Gujarat Limited had paid duty at the time of import and, therefore, the assessee was entitled to take MODVAT Credit for the duty paid on the imported goods. However, when we come to the 3rd Bill of Entry dated 6th June, 1994, only the above Certificate at Page No. 42 of the Paper Book was relied upon and the triplicate copy of the Bill of Entry was not produced. In the circumstances, in our view, the respondent had wrongly availed of MODVAT Credit of Rs. 1,78,582/- on the quantity of 212.659 MT scrap referred to in the above Chart.
27. The Gujarat High Court in Vimal Enterprise case had clearly ruled that if the identity of supplier and the genuineness of the transaction is established there is no reason why the assessee should be denied what is legitimately due to it. Bearing in mind the provisions of law, the rulings of the High Court and the Apex Court and applying to the facts of the case as has been established by documentary evidence on record, we are of the considered opinion that the authorities below clearly erred in refusing the appellants to avail credit which was claimed by the appellants on the basis of the bill of entry in question.
28. Similar view was taken by the Punjab & Haryana High Court in Commissioner of Central Excise, Ludhiana vs. Ralson India Ltd. reported in 2006 (202) ELT 759 (P&H) wherein it was held that if the duty paid character of inputs and their receipt in manufacturers factory and utilization thereof for manufacturing final product is not disputed, then credit cannot be denied.
29. Similar was the view expressed in Commissioner of C. Ex. Delhi-III, Gurgaon vs. Myron Electricals Private Limited reported in 2007 (207) ELT 664 (P&H). Therein the credit was sought to be denied on the ground that the registered dealer had stopped functioning from the registered premises w.e.f. 30.9.1999, wherein the credit was sought to be taken for the period from January 2000 to August 2000. It was held that if the goods were actually received, the payment of duty and utilization of goods was verifiable then credit could not have been denied merely on the ground that the document did not contain all the particulars.
30. The decision of the Tribunal in Forma Pack Industries case was in a totally different set of facts as well as on the basis of the Board Circular dated 29.02.1996. In any case, in view of the decision of the Bombay High Court confirmed by the Apex Court in Marmagoa Steel case and other decisions referred above, we find that the said ruling in Forma Pack Industries case cannot be applied to the facts in the case in hand.
31. The contention of the department that there is no provision for endorsement of the credit and therefore the appellants are not entitled to claim credit on the basis of the endorsement is devoid of substance for more than one reason. Firstly, the credit is taken not because of endorsement but on the basis of bill of entry which also disclosed the name of the appellant, apart from the fact that the goods accompanying the Bill of entry were subjected to the payment of duty, and on clearance, were directly transported to the appellants factory premises and were utilized by the appellants for installation of their factory, and no credit in respect of duty paid on those goods was taken by the contractor. Secondly, the effect of endorsement is only to amend the name of consignee and nothing more. Blacks Law dictionary depicts the term endorsement as amendment of the installment signifying the same being made referable to a person other than the one disclosed earlier. And, it is not the case of the department that on endorsement of the Bill of entry in favour of the appellant, it was, in any manner, rendered to be invalid document or that the import under such document become unlawful.
32. For the reasons stated above, therefore, the appeal succeeds the impugned order is hereby set aside with consequential relief.
(Justice R.M.S. Khandeparkar) (President) (Rakesh Kumar) Member (Technical) Pant `