Custom, Excise & Service Tax Tribunal
Hindustan Zinc Ltd vs Cce, Jaipur-Ii on 12 October, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Date of Hearing : 12.10.2011 Excise Appeal No. 307-308 of 2006 [Arising out of common Order-in-Original No.30/CE/JP-II/2005 dated 15.7.2005 passed by the Commissioner, Customs & Central Excise, Jaipur-II] Coram: Honble Shri Ashok Jindal, Member (Judicial) Honble Shri Mathew John, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Whether their Lordships wish to see the fair copy of the order? 4. Whether order is to be circulated to the Department Authorities? Hindustan Zinc Ltd. Appellants Shri R.K. Daga, Auth. Signatory Vs. CCE, Jaipur-II Respondent
Appearance:
Appeared for Appellant : Shri B.L. Narasimhan, Advocate
Appeared for Respondent : Shri S.R. Meena, DR
CORAM: Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri Mathew John, Member (Technical)
Order No.dated.
Per Mathew John:
The Appellants are manufacturers of non-ferrous metals and their by-products. The process of manufacture commences from extraction of ores from mines and continues with enriching the ore to form concentrates, transporting such concentrates to smelters and smelting the said concentrates to get metal. The factory for enriching the ores and the smelters are all owned by the Appellants. The Appellants submitted that entire quantity of concentrate obtained from the mines (except the quantity which is exported out of India) is transferred to the smelters of the Appellants. So they point out that the duty paid by the company on the clearances made from the unit manufacturing concentrates to units smelting concentrates is available as Cenvat credit at the smelting unit.
2. When excise duty was imposed with effect from 23.7.1996 on concentrates, the Appellants started paying duty on the concentrates based on cost construction method as prescribed under Rule 6(b)(ii) of Central Excise (Valuation) Rules, 1975. The Appellants claim that such cost sheet was prepared in consultation with the department and it was decided that the value of the concentrate for the financial year 1996-97 would be based on the figures of the last available 13th cost sheets and duty would be paid by adding 10% profit on the said cost. During the period from 01.08.1999 to 30.6.2000 also the same pattern was followed by the mining unit of the Appellants.
3. However, the department issued three Show Cause Notices for different periods from 1.4.1997 to 30.6.2000 alleging that the cost arrived at was not proper and that a different cost construction method had to be adopted and that resulted in short levy of Central Excise duty amounting to Rs.7,23,74,887/- and to this extent their declaration in the price list filed under Rule 173C of Central Excise Rules 1944, was not correct. The matter was adjudicated by order dated 5.6.2003 confirming Rs.4,77,58,898/- for the period 1.8.99 to 30.6.2000. Amount demanded for previous period was dropped as time-barred. In the said adjudication proceedings, no penalty under Section 11AC of Central Excise Act, 1944 was imposed on the Appellants because there was no suppression involved.
4. Being aggrieved by the said order, the Appellants filed an Appeal before the Tribunal. The ld. Counsel submitted at that time that the short levy if correctly worked out came to Rs.1,27,00,000/- only. In view of this submission, the Appellants were directed to deposit an amount of Rs.1,27,00,000/-. They paid such amount. Out of this amount Rs.80,60,820/- related to differential duty on concentrates sent to zinc smelter unit at Dabri. Supplementary invoice No. 2280 dated 31.12.2003 was issued in favour of the smelter unit of the Appellants at Dabri and that factory took credit of the said amount.
5. The Appellants were issued with a Show Cause notice dated 29.11.2004 asking them to show cause as to why Cenvat credit of Rs.80,60,820/- availed by the Appellants should not be disallowed to them and equal penalty imposed on them on the ground that such Cenvat credit taken against supplementary invoices was wrongly availed. The contention of the department was that the deposit made in pursuance of an order of the Tribunal to meet the requirement of Section 35F of the Central Excise Act cannot be considered as deposit of duty and therefore no Cenvat credit can be taken against supplementary invoices showing such deposit.
6. The Appellants argue that the credit was taken on the basis of a document received under the provisions of Rule 7(1)(b) of erstwhile Cenvat Credit Rules, 2002. Whatever may be the reason for issuing supplementary invoices by the Zawar Mines unit, the fact remained that the said unit had issued a supplementary invoice under Rule 7(1)(b) of the Cenvat Credit Rules, 2002 and they cannot denied of the said credit at their Dabri factory. The adjudicating authority did not agree with the contention and confirmed the demand for Rs.80,60,820/-, as improper Cenvat credit availed and also demand appropriate interest under Section 11AB and imposed penalty equal to this 80,60,820/- under provisions of Section 11AC of the Act. A penalty of Rs.50,000/- was also imposed on Sh. R.K. Daga, Authorised signatory of the Company. Aggrieved by the said order, the Appellants have filed these Appeals.
7. The Counsel for the Appellants submits that the very provisions under Section 35F calls for pre-deposit of duty involved and therefore the argument that what is deposited is not duty is not a sustainable argument to the situation in hand. He points out that there have been a few decisions of the Tribunal in the matter of refund of such deposits made wherein it has been held that deposit made under Section 35F is on a different footing for the purposes of establishing unjust enrichment. Quite often such deposits are made from the assessees own resources after clearance of the goods and the same is not passed on to the buyer of the goods. The observation made by the Tribunal in such a context cannot be relied upon to argue that the pre-deposit of duty made under Section 35F of the Central Excise Act is not duty at all. They further submit that provisions under Rule 7(1)(b) of the Cenvat Credit Rules, 2002 for taking credit on the basis of supplementary invoice prohibits such credit only if the supplementary payment has arisen in a situation involving mis-declaration, fraud or suppression by the assessee and there is no such allegation in the present case.
8. The ld. DR points out that it has been decided by the Tribunal in the case of Suvidhe Ltd. Vs. Union of India reported in 1996 (82) ELT 177 (Bom.) and in the case of Nelco Limited Vs. Union of India reported in 2002 (144) ELT 56 (Bom.) and Killick Caribonium Vs. Union of India reported in 2002 (143) ELT 491 (Bom.) that the deposit made under provisions of Section 35F of Central Excise Act, 1944 is not a payment of duty but it is only a pre-deposit for availing right of Appeal. Therefore, he submits that Cenvat credit can be taken only on deposit of duty and not deposit made under the provisions of Section 35F of the Central Excise Act.
9. The ld. Counsel points out that the Supreme Court in the case of Harinagar Sugar Mills Ltd. Vs. State of Bihar reported in 2004 (176) ELT 48 (SC) held that the amount deposited as condition for hearing of Appeal was not merely a deposit but was part of ascertained amount of liability already fixed. Therefore, the contention that what is deposited under Section 35F is not duty is not maintainable.
10. Considered arguments on both the sides.
11. The decisions quoted by the ld. DR were in the context of applicability of provisions regarding unjust enrichment in the matter of refund of amounts deposited under Section 35F. In that context, the Tribunal held the view that the amount deposited under Section 35F is different from duty paid while excisable goods are cleared. In such situation, most often, the amount deposited is out of funds of the assessee making such deposit and is not passed on to the buyer of the goods. In this case, the amount deposited has in fact been passed on to the factory which was receiving the goods and the Appellants are not claiming any refund of the deposit made under Section 35F. They are only on the limited point that as per Section 35F they were required to make deposit of duty for hearing of Appeal and what they have deposited is therefore towards duty liability they should be allowed to take credit of such duty paid. The decision of the Honble Supreme Court in the case of Harinagar Sugar Mills Ltd. (supra) is more appropriate to the situation in hand.
12. The ld. DR points out that the Tribunal vide its order dated 18.8.2008 when the matter was heard last time had made an observation that the decision of Larger Bench of Tribunal in the case of M/s Bosch Chassis Systems India Ltd. Vs. CCE, Delhi-III in Excise Appeal No. 855 of 2008 would have a bearing on the outcome of the Appeal and put off decision in the matter. The Larger Bench decision is now reported at 2008 (232) ELT 622 (Tri.-LB) and this aspect should be taken into consideration.
13. We have scrutinised the decision of the Larger Bench in the case of Bosch Chassis Systems (I) Ltd. This is a case where the assessee went to the Settlement Commissioner and paid duty suo motto. The question was whether an application filed before the Settlement Commission would amount to admission of fraud, collusion, suppression etc. The issue was answered in the negative by the Larger Bench. In this case, there is no application filed before Settlement Commissioner. Further there is a categorical finding by the Commissioner that there was no mis-declaration, suppression etc.
14. Therefore, we are of the view that there is no reason to deny the Cenvat credit for duty paid under Section 35F of Central Excise Act. In this matter the Revenue has not been able to show any loss of revenue or any unjust enrichment or any reasonable ground for denying such credit except that in some other context the Tribunal has observed in some cases that the deposit under Section 35F has a slightly different character than duty normally paid. Considering the totality of the facts and circumstances of the case, we are of the view that the demand confirmed by the impugned order is not sustainable against the Appellants and accordingly the Appeals are allowed with consequential benefit, if any, to the Appellants.
(Pronounced in Court) (Ashok Jindal) Member (Judicial) (Mathew John) Member (Technical) RM