Custom, Excise & Service Tax Tribunal
M/S Siemens Ltd vs Commissioner Of Central Excise, ... on 23 May, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/275 & 572/08 (Arising out of Order-in-Original No. 71-73/COMMR/DIV-IV/AKP/2007-08 dated 30.1.2008 passed by the Commissioner of Central Excise, Belapur). For approval and signature: Honble Shri S.S. Kang, Vice-President Honble Shri Sahab Singh, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No
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 : Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy : Seen
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4. Whether order is to be circulated to the Departmental : Yes
authorities?
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M/s Siemens Ltd.
Commissioner of Central Excise, Belapur
Appellants
Vs.
Commissioner of Central Excise, Belapur
M/s Siemens Ltd.
Respondents
Appearance:
Shri Naresh Thacker, Advocate with
Shri J.H. Motwani, Advocate
Shri P.N. Das, Commissioner (A.R.)
for Appellants
Shri P.N. Das, Commissioner (A.R.)
Shri Naresh Thacker, Advocate with
Shri J.H. Motwani, Advocate
for Respondents
CORAM:
SHRI S.S. KANG, VICE-PRESIDENT
SHRI SAHAB SINGH, MEMBER (TECHNICAL)
Date of Hearing: 23.05.2012
Date of Decision: .2012
ORDER NO.
Per: Sahab Singh
Out of these two appeals, first Appeal No. E/275/08 is filed by M/s Siemens Ltd. (hereinafter referred to as assessee) and second Appeal No. E/572/08 is filed by the Revenue against the same Order-in-Original No. 71-73/COMMR/DIV-IV/AKP/2007-08 dated 30.1.2008.
2. The brief facts of the case are that the assessee is manufacturer of motors and generators falling under Heading No. 8501 of the Central Excise Tariff Act, 1985 and availing CENVAT Credit in respect of inputs. Windmill Generators manufactured by them are exempted in terms of Notification No. 6/2000-CE dated 1.3.2000 being a non-conventional energy device. The assessee, at the time of clearance of the goods, paid an amount equivalent to 8%/10% of the total price of the exempted final product as envisaged under Rule 57AD(I) of the Central Excise Rules, 1944 read with Rule 6(3)(b) of the Cenvat Credit Rules. It was observed that assessee was availing CENVAT Credit on end shields and stator housings which are exclusively used in the manufacture of exempted windmill generators having capacity of 1000 KV to 1250 KV. The other dutiable motors or generators manufactured by them are of capacity of 600KV to 650 KV. Since these inputs were exclusively used in the manufacture of exempted windmill generators, the credit availed on these inputs was not admissible to them under Cenvat Credit Rules. Accordingly, show-cause notices dated 29.3.2006 and 31.8.2006, covering the period from 1.10.2001 to 30.9.2005 and from 1.10.2005 to 30.4.2006 seeking recovery of the CENVAT Credit on these inputs used exclusively for manufacture of exempted goods, were issued to the assessee. Total duty demanded in these show-cause notices is Rs.1,89,17,525/-. The interest and penalties were also proposed to be imposed on the assessee. The case was adjudicated by the Commissioner by his Order No. 02/COMMR/2007-08 dated 30.4.2007 and duty amount of Rs.1,89,17,525/- was confirmed and equivalent penalty was imposed on the assessee. The assessee went in appeal before the Tribunal and Tribunal vide Order No. A-513/2007/C-II(EB) dated 31.10.2007 remanded the matter back to the adjudicating authority on the ground that the principles of natural justice had not been followed by the adjudicating authority.
3. There is also another demand notice issued vide show-cause notice dated 13.4.2007 for the period 1.5.2006 to 31.1.2007 on the same ground denying the CENVAT Credit of Rs.73,25,180/-. This show-cause notice along with the other two show-cause notices, which were part of the de novo order of the Tribunal, adjudicated by the Commissioner vide impugned order, who has confirmed the Central Excise duty demanded under two show-cause notices amounting to Rs.1,89,17,525/- for the period 1.10.2001 to 30.4.2006 and imposed a penalty of Rs.1,80,00,000/- under Section 11AC and Rule 15 of the Cenvat Credit Rules and also confirmed the interest under Section 11AB of the Central Excise Act. However, the Commissioner has dropped the demand of Rs.73,25,180/- involved in third show-cause notice.
4. The Revenue is in appeal against the impugned order on the ground of dropping the demand involved under show-cause notice dated 13.4.2007 and also non-imposition of equivalent penalty on the assessee, whereas the assessee in its appeal No. 275/08 has challenged the confirmation of demand as well as imposition of penalty on them.
5. The learned Advocate appearing for the assessee submitted that end shields and stator housings are not the inputs, which are exclusively used in the manufacture of exempted windmill generators. He submitted that both these inputs are used in the manufacture of both dutiable motors and exempted generators and the purported denial of the credit on these inputs is not legal in ambit of law. He submitted that the findings of the Commissioner that dutiable motors were manufactured from May, 2006 only and purported denial of the CENVAT Credit prior to May, 2006 is illogical and illegal as the inputs are common for both dutiable and exempted goods and even if the dutiable goods are not manufactured for some period, it will not mean that the inputs are non-common and there is nothing under the Rule 6 of the Cenvat Credit Rules, which allows the credit on duty paid common inputs only. He also contended that the explanation III of the Rule 6(3)(c) of the Cenvat Credit Rules does not debar them from taking credit of duty paid on the excisable inputs used in the manufacture of exempted final products. He further contended that this explanation was added by a Notification No. 27/2005 dated 16.5.2005, therefore, there is no doubt that credit is admissible to these inputs prior to 16.5.2005. He also pointed out that reversal of 10% of the sale price of the exempted goods is more than total CENVAT Credit taken on all the inputs used in the manufacture of exempted goods and, therefore, there is no reason to demand duty from them as amount equivalent to 10% of the sale price paid by them is more than the credit taken on inputs used in the manufacture of exempted goods. He submitted in this connection, a certificate from Cost Accountant was submitted before the adjudicating authority but the Commissioner has not given any finding on the Cost Accountants certificate filed before him. The learned Advocate also submitted that the assessee have exported the generators of capacity of 1000 KV and 1250 KV and the proceedings to deny the credit in respect of inputs used in the manufacture of these generators exported under Bond were dropped by the then Commissioner vide Order No. 56/2005-06 dated 23.2.2006. Under the provisions of Central Excise law, if the exempted goods are exported under Bond, the assessee is eligible for taking of the credit in respect of the inputs used in the manufacture of exempted goods and denying the credit on those inputs vide impugned order is contrary to the provisions of Central Excise law. He contended that the demand made pursuant to the show-cause notice dated 29.3.2006 is beyond the period of one year and is therefore time barred under Section 11A of the Central Excise Act. Since they have paid 8%/10% of the sale price of the exempted goods, there was no intention of any evasion of duty by them and, therefore, there is no ground for imposition of penalty on them. In support of his contention he relied upon the following decisions: -
(i) Hetero Labs Ltd. Vs. Commissioner of Central Excise, Hyderabad 2005 (192) ELT 714 (Tri-Bang)
(ii) Koya Company Construction Pvt. Ltd. Vs. Commissioner of Central Excise, Hyderabad-III 2007 (214) ELT 35 (Tri-Bang)
(iii) Mahindra & Mahindra Ltd. Vs. Commissioner of Central Excise, Mumbai 2007 (211) ELT 481 (Tri-Mum)
(iv) PSL Ltd. Vs. Commissioner of Central Excise, Visakhapatnam-I 2007 (214) ELT 238 (Tri-Bang)
(v) Commissioner of Central Excise, Vadodara Vs. Narmada Chematur Pharmaceuticals Ltd. 2005 (179) ELT 276 (SC).
6. He submitted that in view of these decisions, they are entitled to avail CENVAT Credit on the inputs used in the manufacture of exempted goods, when they have paid 8%/10% of the sale price of the exempted goods to the department.
7. The learned Commissioner (A.R.) appearing for the Revenue submitted that under the provisions of Cenvat Credit Rules, once the goods are exempted, the benefit of CENVAT Credit is not admissible to the assessee and this is the fact on record that assessee was manufacturing the exempted goods upto the period of 2006 and, therefore, the assessee was not entitled to CENVAT Credit on the inputs used by them for manufacture of the exempted goods. He submitted that the Commissioner has dropped the demand made in the third show-cause notice observing that end shields and stator housings are no longer exclusively used in the manufacture of windmill generators as the assessee has started the manufacture of dutiable windmill generators from May, 2006. This finding of the Commissioner is not proper and legal. He submitted that the adjudicating authority has drawn the conclusion based on the submissions of the assessee, which was verified at the buyers factory by deputing the Central Excise officer as discussed in para 25 of the Order-in-Original and this conclusion is not proper and cannot be considered as having any evidential value and bearing in the instant case as it is for the assessee to produce the documentary evidence in support of his defence and discharge the allegation in the show-cause notice and it is incumbent upon the adjudicating authority to consider such evidences as produced by the assessee. In the instant case, the adjudicating authority was not satisfied with the submission and documentary evidence produced by the assessee so far as the question of findings to determine all the goods used in the manufacture of the exempted goods and the adjudicating authority directed for investigation to be done at the buyers end to know the dimension of such inputs. He further pointed out that the report of the said officer is self explanatory of the facts but the conclusions drawn are not correct by the adjudicating authority. He also mentioned that in the verification report, the technical persons expressed difficulty saying that it was not possible to know the dimensions of end shields and stator housings without dismantling the machine. Therefore, it cannot be taken as the evidence, which can discharge the assessees burden to prove their case against the show-cause notice. He further submitted that the fact remains that these items are clearly identifiable as being exclusively used in the manufacture of the exempted products and, therefore, the learned Commissioner has incorrectly dropped the demand in respect of third show-cause notice, while he himself has confirmed the demand on the same issue in respect of the first two show-cause notices. Regarding non-imposition of equivalent penalty, he submitted that the Commissioner has imposed the penalty of Rs.1.8 crores only on the ground that second demand notice invoked Rule 15 of the Cenvat Credit Rules and this finding is not proper as once the charge of suppression has been held to be correct while confirming the demand against the assessee, the penalty under Rule 15 comes into play and equivalent penalty is imposable by virtue of Section 11AC incorporated under Cenvat Credit Rules. He, therefore, requested that findings of the Commissioner with regard to dropping of demand in third show-cause notice as well as non-imposition of penalty equal to the duty may be set aside.
8. Heard both sides.
9. The Commissioner has adjudicated three show-cause notices dated 29.3.2006 and 31.8.2006 covering the period from 1.10.2001 to 30.4.2006 and show-cause notice dated 13.4.2007 covering the period 1.5.2006 to 31.1.2007. The Commissioner has confirmed the demand for the period 1.10.2001 to 30.4.2006 and dropped the show-cause notice for the period 1.5.2006 to 31.1.2007.
10. The issue involved in these appeals is whether the credit on duty paid on inputs end shields and stator housings is available to the assessee as these inputs were exclusively used in the manufacture of exempted final products particularly when the assessee has paid 8%/10% of the price of the exempted final products to the department. It is the one of the contention of the assessee that they had started manufacturing dutiable motors of 660KV w.e.f. March, 2006. They contended that they have actually used the stator housings and end shields in the manufacture of 4 dutiable motors of 660KV supplied to M/s Shakthi Sugar Mills, Madurai. The use of said inputs was got verified by the Commissioner by deputing officer to the said Sugar Mills. Revenue has stated that the verification done at the buyers factory is not proper and cannot be considered as having any evidential value particularly when the Commissioner himself was not satisfied with these contentions of the assessee and that is why the Commissioner directed for further verification to be done at the buyers factory. Revenue also mentioned that the verification done is vague as the machine has not been dismantled and report was submitted by the officer on the basis of photograph of the machine.
11. We have gone through para 25 of the Order-in-Original. It is stated in the order that the use of said stator housings and end shields in the manufacture of 660KV motor was verified by deputing the Central Excise officer from Belapur Division office to the Shakthi Sugar Mills and he has confirmed the assessees contention. There is another finding by the Commissioner based on assessees quotation dated 2.5.2006 placed on M/s Shakthi Sugar Mills and a purchase order dated 15.5.2006 for four sets of 660KV dutiable motors, which was received by the assessee on 15.5.2006, that end shields and stator housings become common inputs from May, 2006.
12. We find that the verification report is not clear as the report is based on photograph without dismantling the machine. We also find that the first clearance of the dutiable goods was made in November, 2006 as evident from the four invoices submitted by the assessee before the Commissioner. The date of receipt of stator housings and end shields gone in the manufacture of the first dutiable goods would be the relevant date for treating the non-exclusive use of inputs in the exempted goods. We find that this can be verified from the records of the raw materials/inputs maintained by the assessee for ascertaining the date of procurement of the stator housings/end shields for use in the manufacture of 660KV motors manufactured by the assessee. Once the date is determined, from that date the inputs can be taken as not exclusively used in the manufacture of exempted goods. We, therefore, do not agree with this finding of the Commissioner that based on placing of quotation and purchase order, the date can be taken from May, 2006 and we direct the Commissioner to ascertain the date of receipt of the inputs gone into the manufacture of dutiable goods of 660KV after examining the raw materials/inputs record of the assessee.
13. The assessee has also raised the issue of exporting generators of capacity of 1000KV and 1250 KV under bond and submitted that proceedings of denial of the CENVAT Credit in respect of inputs used in exported goods were dropped by the Commissioner. The Commissioner in his order has stated that the issue involved in these proceedings was whether 8%/10& of duty is required to be recovered from the assessee. It is not clear from the show-cause notice or the impugned order that what quantum of duty demanded in the impugned show-cause notices, pertains to goods exported under bond. Under the scheme of the Cenvat Credit Rules, the assessee is eligible for taking the CENVAT Credit in respect of inputs even if used in the manufacture of exempted goods, if goods have been exported under bond. Therefore, if any duty has been demanded in respect of inputs used in the manufacture of exempted export goods, the same is required to be excluded from the demand. The Commissioner is directed to quantify the amount of duty involved on inputs used in manufacture of export goods.
14. There is another submission of the assessee that the generators of 1000 KV and 1250 KV have been cleared by them reversing the credit equal to the amount of 8%/10% of price of exempted goods during the relevant period. It is their contention that the said reversal is in excess of total CENVAT Credit taken by them on all inputs used in the manufacture of exempted goods. To prove this fact, they have submitted a certificate from the Cost Accountant. According to them, the cost of all inputs used in 1250 KV generators is Rs.7,60,500/- and maximum of CENVAT Credit @ 16.32% comes to Rs.1,24,114/-. They submitted that they have reversed 10% of the price of generator which is Rs.13,40,000/- i.e. Rs.1,34,000/-, which is more that the total CENVAT Credit on all inputs including the disputed inputs.
14.1. We find that the dispute relates to two inputs i.e. end shields and stator housings. From the certificate submitted by the Cost Accountant, the cost of these two inputs can be ascertained. The total duty attributable to these two inputs out of Rs.1,34,000/- can be ascertained by multiplying Rs.1,34,000/- by the ratio of the cost of these two inputs to Rs.7,60,500/-. On same lines, total amount attributable to these inputs in respect of the show-cause notices can be ascertained. If the amount attributable to these two inputs out of total amount paid is more than the duty demanded in respect of these two inputs in the show-cause notice, then issuing the demand notice would not be justified. We find that the Commissioner has not given any finding on this submission of the assessee. We, therefore, remand the case back to the Commissioner for verification of the assessees contention that the 10% of the amount paid by them on exempted goods attributable to these two inputs is more than the CENVAT Credit demanded in the show-cause notices and thereafter demand is to be re-quantified based on such verification . The imposition of penalty will depend on the amount quantified.
15. In view of the above observations, we set aside the order and remand the case back to the Commissioner for fresh adjudication after giving a reasonable opportunity of being heard to the assessee. Both sides are free to place any case law before the adjudicating authority in support of their contention. The appeal is disposed of by way of remand.
(Pronounced in Court on .)
(S.S. Kang) (Sahab Singh)
Vice-President Member (Technical)
Sinha
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