Customs, Excise and Gold Tribunal - Tamil Nadu
Southern Iron And Steel Co. Ltd. vs Cce on 20 February, 2004
Equivalent citations: 2004(167)ELT450(TRI-CHENNAI)
ORDER Jeet Ram Kait, Member (T)
1. By this appeal, the appellants challenge the order in Appeal No. 150/2002 (CBE)(GVN) dated 12.7.2002 passed by the Commissioner (Appeals), Trichy whereby the Commissioner has upheld the order passed by the original authority and rejected the appeal filed by the Appellants before him.
2. The brief facts of the case are that the appellants are manufacturers of pig iron, steel billets and bars and rods falling under CSH 72 of CETA 1985. They were availing Modvat Credit on various capital goods received by them in their factory. During the period 8/2000 to 2/2001, it was noticed that they had removed capital goods on which CENVAT credit was availed, viz. Gunning Mass. Whytheat, Graphite Electrodes by debiting only 50% of duty amounting to Rs. 1,44,1282/- in their CENVAT Credit Part II Register. In terms of Explanation to clause (b) of the of sub-rule (10) of Rule 57AB when the capital goods are removed from the factory, the manufacturer of the final product shall pay the appropriate duty of excise leviable thereon as if such capital goods have been manufactured in the said factory and such removal shall be made under the cover of an invoice prescribed under Rule 52A. In the circumstances show cause notice was issued which culminated in order in original passed by the Deputy Commissioner rejecting the appeal against which the party went in appeal before the Commissioner (Appeals), who also rejected the appeal. Hence this appeal.
3. Shri S Jayakumar, learned Counsel for the appellant referred to the grounds of appeal and submitted that some of the capital goods on which they have availed credit are rejected by them due to various reasons and had to be sent back to the original suppliers and while clearing such rejected capital goods, to the original supplier they pay duty amount equal to the Cenvat Credit availed. Further, the assessees have a vailed only 50% of the excise duty amount as Cenvat Credit and the same has been paid at the time of return of the capital goods. He has submitted that neither was there any manufacture of capital goods nor sale of capital goods in their case and they rejected certain of the capital goods being unfit for their use. The capital goods rejected are as such and were not put into use by them. In such cases, there is no ground to demand differential duty. As regards, levy of interest and imposition of penalty, he has submitted that provisions relating to interest and penalty can be invoked only when there was fraud, or wilful misstatement, or suppression of fact etc. with a view to evade payment of duty. He submitted that appellants have paid the amount equal to the Cenvat credit taken and in such circumstances, the allegation that they have suppressed the facts or there was any intention to evade duty, is without any basis and he prayed for allowing the appeal. He has also relied upon the Judgment of the Larger Bench in the case of CCE, Vadodara vs. Asia Brown Boveri Ltd. reproted in 2000 (120) ELT 228 wherein the Tribunal has held that "Legal fiction of treating the inputs as having been manufactured by the recipients of the inputs was only to see that the manufacturer restores to the original position by debiting the same rate of duty at which he had taken the credit.
4. Shri C Mani, learned JDR appearing on behalf of the Revenue defended the impugned order and submitted that in the present case certain of the capital goods are removed as such and in the circumstances in terms of the explanation to Rule 57AB (1), the assessee shall pay the appropriate duty of excise leviable thereon as if such capital goods have been manufactured in the said factory.
5. We have considered the rival submissions and gone through the case records and the case law cited by the learned Counsel for the appellants. We observe that - the facts as enumerated are not disputed by either side. The appellants have removed some of the capital goods on which they have taken CENVAT credit as those capital goods were found unfit for their use. It was their contention that the removals have been effected to the original supplier of the goods and not to any one else. It was their further contention that they had availed only 50% of the excise duty amount as CENVAT credit and the same amount is paid at the time of return of the rejected capital goods to their original suppliers. These contentions are not contested by the Revenue. The appellants have also filed copies of the invoice by which the removal of capital goods have been effected. We find from the copies of invoice that the appellants have clearly indicated therein that the goods in question are rejected. This factual position is not disputed by the Revenue. We have perused the CENVAT Credit (Second Amendment), Rules, 2000. Sub Rule (b) of Rule 57AB(1) reads as under :
The CENVAT Credit may be utilized for payment of any duty of excuse on any final products manufactured by the manufacturer or for payment of duty on inputs or capital goods themselves, if such inputs are removed as such or after being partially processed or such capital goods are removed as such.
The explanation to above rule reads as under :
"When inputs or capital goods are removed from the factory, the manufacturer of the final products shall pay the appropriate duty of excise leviable thereon as if such inputs or capital goods have been manufactured in the said factory, and such removal shall be made under the cover of an invoice prescribed under Rule 52A"
On a reading of sub rule (1) reproduced above, it is clear that the credit taken may be utilized for payment of duty on inputs or capital goods themselves if they are removed as such. In other words, for payment of duty on capital goods or on inputs removed as such, the credit taken (emphasis supplied by us) may be utilized. So, there is a clear reference to the quantum of credit taken and the stress is on the amount of credit taken. We are, therefore, of the considered opinion that the quantum of duty to be paid should be equal to the quantum of credit availed in case where capital goods have been rejected. This is exactly what the appellants have done. Further, a parallel provision relating to removal of capital goods as such, exists under Rule 57S, sub-rule 2(a) which reads as under :
"Where capital goods are removed without being used from the factory for home consumption on payment of duty, or for export on payment of duty of excise, such duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such capital goods under Rule 57 Q.
6. It is clear from the above that the excise duty paid shall not be less than the quantum of credit taken. As noted above, in the present case, they have availed only 50% of the excise duty as CENVAT credit As per existing rules, and while removing the capital goods to their original suppliers without being used, they have paid the duty equal to the amount of credit taken. We further find that the ratio laid down in the case of CCE, Vadodara., Asia Brown Boveri Ltd. reported in 2000 (120) ELT 228 wherein it was held that "legal fiction of treating the inputs as having been manufactured by the recipients of the inputs was only to see that the manufacturer restores the original position by debiting the same rate of duty at which he had taken the credit," squarely applies to the facts of the present case. In view of our discussion and finding above, we are of the considered opinion that no differential duty is required to be paid by the appellants. We, therefore, set aside the impugned order and allow the appeal with consequential relief, if any.