Custom, Excise & Service Tax Tribunal
Hwaseung Materials India Pvt Ltd vs Cce Chennai-Ii on 29 January, 2019
1
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
[COURT III : Division Bench B1]
Appeal Nos.: E/40822, 40823, 40824 & 40825/2017
[Arising out of Order-in-Original Nos. 1 to 4/2017 dated
30.01.2017 passed by the Commissioner of Central Excise,
Audit-II Commissionerate, Chennai]
M/s. Hwaseung Materials India Pvt. Ltd., : Appellant
Survey No. 54, Block No. 100, Thandalam Post,
Melvurkuppam, Sriperumbudur,
Tamil Nadu - 602 105
Versus
The Commissioner of G.S.T. & Central Excise, : Respondent
Chennai South Commissionerate Appearance:-
Shri. K. Senguttuvan, Advocate Shri. V. Veeraraghavan, Advocate for the Appellant Shri. B. Balamurugan, AC (AR) for the Respondent CORAM:
Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) Hon'ble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing: 14.01.2019 Date of Pronouncement: 29.01.2019 Final Order Nos. 40181-40184 / 2019 Per Bench :
Appellants are manufacturers of rubber compound falling under CETH 40051000 and 40169990 of the Customs Excise Tariff Act (CETA), 1985.2
2.1 Pursuant to visit by Departmental Officers, the following facts emerged :
(i) Appellants had removed their rubber compound to M/s.
HSI Automotives Ltd ('M/s. HSI' for short) and M/s. HIS holds 100% of equity shares of appellant. Hence, appellant and M/s. HSI are related companies;
(ii) Appellants are manufacturing and removing all the compounded rubber to their holding company M/s. HSI for use in the manufacturing of automobile components;
(iii) The value adopted for the payment of duty by the appellant for the compounded rubber cleared to M/s. HSI was below 110% of the cost of production.
2.2 The Department took the view that appellants have not followed valuation of such clearances as per Cost Accounting Standard 4 (CAS-4). Hence, there has occurred short payment of duty liability. Appellant had also appointed independent Cost Accountant to determine the cost of production and re-calculated the assessable value of the impugned clearances for the period from 01.04.2010 to 31.12.2014 by adopting CAS-4 method and paid up the differential duty of around Rs. 5,25,85,400/-. 3 2.3 Show Cause Notice dated 01.05.2015 was issued to the appellant proposing demand and appropriation of the said duty liability of Rs. 5,25,85,400/- with interest as also imposition of penalty under Section 11AC of the Central Excise Act, 1944. Statements of Demand dated 29.01.2016, 29.04.2016 and 08.07.2016 were also issued inter alia proposing demand of differential duty liabilities of Rs. 4,40,598/-, Rs. 3,66,901/- and Rs. 3,18,262/- respectively. In adjudication, the Commissioner vide impugned Order dated 30.01.2017 confirmed the demands as proposed in the Show Cause Notice/Statements of Demand with interest thereon and also imposed penalties under various provisions of law. Hence, this appeal.
3.1 Today when the matter came up for hearing, Ld. Advocate Shri. K. Senguttuvan appearing on behalf of the appellant made oral and written submissions which can be broadly summarized as under :
(i) Products manufactured by the appellant were cleared to M/s. HSI and the price adopted for these clearances was the price as per the directions of M/s. HSI. The orders are made by M/s. HSI on a monthly basis as per requirement. Such 4 assessable value was worked out to around 103% of the cost of production;
(ii) However, pursuant to the visit of the Departmental Officers, the appellants have agreed to follow CAS-4 method of valuation and had appointed an independent Cost Accountant for that purpose.
(iii) Accordingly, the appellants have paid up the amount of Rs. 5,25,85,400/- through CENVAT Credit. They have paid the same before the issuance of the Show Cause Notice dated 01.05.2015. They have also paid up the amounts proposed to be demanded in the three Statements of Demand proximate to their issue. Hence, the short payment was only due to a wrong practice adopted by the appellants. There was no intention to evade payment of duty.
(iv) In any case, the entire exercise is revenue neutral. M/s.
HSI would be able to avail CENVAT Credit only to the extent of the duty discharged by the appellant.
3.2 Ld. Advocate relies on the ratio of the following decisions :
M/s. Jay Yushin Ltd. Vs. C.C.E., New Delhi - 2000 (119) E.L.T. 718; M/s. Nirlon Ltd. Vs. C.C.E., Mumbai - 2015 (5) T.M.I. 101 (S.C.); C.C.E., Chennai-IV Vs. M/s. Tenneco RC India Pvt. Ltd. - 2015 (323) E.L.T. 299 (Mad.).5
4.1 On the other hand, Ld. AR Shri. B. Balamurugan appearing on behalf of the respondent supports the impugned Order. He submits that only after being pointed out by the Department and appointment of the independent Cost Accountant have the appellants agreed to pay up the differential duty liability. Further, the appellants had not informed of the requirement of the following CAS-4 valuation pursuant to their audit in July, 2013. 4.2 He also submits that the plea of revenue neutrality will not help the case of the appellant. Ld. AR submits that the Hon'ble Supreme Court in the case of M/s. Nirlon Ltd. (supra) relied upon by the Ld. Advocate has held that the appellants therein had filed price list from time to time whereas this is not the case in the present appeal.
5. Heard both sides and have gone through the facts.
6. A perusal of the case laws relied upon by the Ld. Advocate indicates that in all these cases, the demand had been set aside on the grounds of revenue neutrality. In M/s. Nirlon Ltd. (supra), the Hon'ble Supreme Court noted that the important question in such matters is "about the intention, namely, whether it was done with bona fide belief or there was some mala fide intention in doing so." 6 The Hon'ble Apex Court in that judgement also held that when "the entire exercise was revenue neutral, the appellant could not have achieved any purpose to evade the duty." We find that in the present appeal before us also, revenue neutrality is very much present since the goods manufactured by the appellant were removed only to their holding company M/s. HSI. It is true that the appellants have calculated the assessable value only at around 103% of the cost of production instead of 110%, as required by CAS-4 valuation method. In any case, even if the discharge of duty liability was at 110%, the Department would have been able to avail the same to that extent. It is seen that the appellants have discharged the entire duty liability in respect of the Show Cause Notice dated 01.05.2015 before the issuance of the same and even the remaining amounts proposed in the three Statements of Demand were paid up proximate to their issue.
7. We find that this very Bench in the case of M/s. Anglo French Textiles Vs. Commissioner of Central Excise, Puducherry - 2018 (360) E.L.T. 1016 (Tri. - Chennai) where the facts were identical, has held as under :
" 5. On considering the fact that the goods are cleared to the sister unit and also the fact that the appellant is eligible for credit on the duty paid, the entire exercise is a revenue neutral situation as contended by the Learned Counsel for 7 the appellant. This being the case, even if the appellant is directed to pay duty, other sister unit would be eligible for the credit. In the case of Jay Yuhshin Ltd. (supra), in a similar situation, the Larger Bench of the Tribunal has held that when there is revenue neutrality, the demand of duty is unsustainable.
6. We find that it is a fit case to set aside the demand on the basis of revenue neutrality which we hereby do. The impugned order is set aside and the appeal is allowed with consequential relief, if any."
It is pertinent to note that the above decision has been affirmed by the Hon'ble Supreme Court as reported in 2018 (360) E.L.T A301 (S.C.).
8. In the event, we are of the considered opinion that the short payment on the part of the appellant was not with any intention to evade payment of duty and further, since they were clearing the goods only to their holding company, there is definitely revenue neutrality in the entire transaction. This being so, following the decisions and judgements cited supra, we hold that the demands cannot then sustain and will have to be set aside, which we hereby do.
9. The appeals are allowed with consequential benefits, if any, as per law.
(Pronounced in open court on 29.01.2019)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
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