Custom, Excise & Service Tax Tribunal
M/S Essar Steel Limited vs Cce, Ludhiana on 16 March, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi COURT-I Date of hearing/decision: 16.03.2011 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. 1078 of 2005 [Arising out of common Order in Appeal No. 681/CE/Appeal/LDH/2004 dated 31.12.2004 passed by the Commissioner of Central Excise (Appeals), Ludhiana]. M/s Essar Steel Limited Appellants [Rep. by Shri L.P. Asthana, Advocate] Vs. CCE, Ludhiana Respondent
[Rep. by Shri Nitin Anand, DR] AND Excise Appeal No. 1312 of 2005 [Arising out of Order in Appeal No. 681/CE/Appeal/LDH/2004 dated 31.12.2004 passed by the Commissioner of Central Excise (Appeals), Ludhiana].
CCE, Ludhiana Appellant [Rep. by Shri Nitin Anand, DR] Vs. M/s Essar Steels Limited Respondent [Rep. by Shri L.P. Asthana, Advocate] Coram: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Member (Technical) Oral Order No.____ Per Shri Justice R.M.S. Khandeparkar: Heard the learned Advocate for the assessee and DR for the Revenue.
2. Both these appeals arise from the order dated 31.12.2004 passed by the Commissioner (Appeals), Ludhiana. By the impugned order the lower appellate authority has partially modified the order passed by the adjudicating authority by reducing the penalty to Rs. 2 lakh from the penalty of Rs. 38 lakh which was imposed by the adjudicating authority. The Additional Commissioner, Ludhiana by his order dated 12.08.2004 had disallowed the modvat credit to the tune of Rs. 37,55,264/- and had ordered recovery of interest thereon alongwith equal amount of penalty, further penalty of Rs. 38 lakhs.
3. The assessees are the registered dealers for trading in excisable goods including HR Coils classifiable under sub-heading No. 7208.39 of the first schedule to the Central Excise Tariff Act, 1985 and have sales depot of M/s Essar Steels Limited, Hazira, Distt-Surat, Gujarat, which is a manufacturing unit.
4. In the case in hand, the goods which were manufactured by M/s Essar Steels Limited, Hazira and were meant to be supplied to M/s Hero Cycles Limited after being cleared from the factory of M/s Essar Steels Limited, Hazira were first unloaded in depot premises of the assessees herein at Ludhiana and from their depot they were subsequently transported to the factory of M/s Hero Cycles Limited. In the background of these undisputed facts, it is the case of the department that the assessees were required to enter the receipt of those goods in their RG-23D register and issue necessary invoices at the time of clearance of those goods from the assessees depot to be transported to the factory premises of M/s Hero Cycles Limited but they failed to make such entry as well as to issue such invoices and, therefore, the goods were liable to be confiscated and penalty was imposable in terms of Rule 209A of the erstwhile Central Excise Rules, 1944.
5. The learned Advocate for the assessees drawing our attention to Circular No. 96/7/95-CX dated 13.02.1995 and in particular clause 9 (c) thereof submitted that the assessees was not required to enter into RG 23D register details of the consignments received under Rule 52A invoice or 57G invoice for which they were not suppose to issue modvatable invoices and consequently in relation to the goods in question were received by the assessees in their depot under Rule 52A invoices and, therefore, there was no requirement of entry in respect thereof in RG23D register by the assessees. Reliance is placed in the decision in the matter of Commissioner of C. Ex. Chandigarh vs. Sangam Sales Corporation reported in 2011 (263) ELT 319 (Tri. Del.), Chandan Chemicals vs. Commissioner of Central Excise, Allahabad reported in 2004 (167 ELT 120 (Tri. Del.).
6. On the other hand, the DR while placing reliance in the decision in the matter of Indian Aluminium Company Limited vs. Thane Municipal Corporation reported in 1991 (55) ELT 454 (SC), U.K. Enterprises vs. Commissioner of C. Ex. Goa reported in 2002 (140) ELT 419 (Tri. Del.) and drawing our attention to Rule 57GG of the Central Excise Rules, 1944 submitted that it was incumbent upon the assessees to make necessary entry in the RG23D register in relation to the goods received in their depot as also to issue necessary invoices while clearing the goods from depot and in the absence thereof the goods were liable to be confiscated.
7. He further submitted that it was to the knowledge of the assessees that they required to maintain necessary record in such circumstances and to issue the invoices while clearing such goods from depot and this is clearly revealed from the statements of in-charge of depot recorded in the course of the investigation.
8. The proceedings for contravention of the provisions comprised under Rule 57GG and non entering and failure to make entry in RG23D register were the basis for initiating the action against the assessees for which the show cause notice dated 01.12.2003 came to be issued and the same was sought to be contested by the assessees by filing their reply dated 16.08.2004. Therein, it was specifically stated by the assessees that during the period from November and December 1998, 77 HR Coils which were sold by M/s Essar Steels Limited at Hazira to M/s Hero Cycles Limited were brought to the godown of the assessees as a transit point and were thereafter collected by M/s Hero Cycles Limited. It was further stated that since the goods were neither transferred to the sales depot of the assessees nor they were consigned to the assessees neither the same was recorded in the RG23D register nor did the assessees availed credit in respect of the same, nor they issued any invoice under Rule 57GG of the said Rules in respect of the said goods. It was also specifically stated that we were acting only as a transit point agents in respect of the same and consequently no infirmity attributed towards us in acting as transit point agents, inasmuch as, we did not avail credit in respect of said goods or did we issue a invoice under erstwhile Rule 57GG in respect of the same. In short, it was the defence of the assessees right from the beginning of the proceedings against the assessees that the goods were received in the godown merely as a transit point. Neither they were consigned to the assessees nor they were transferred to the depot of the assessees, neither the assessees took any credit in respect of the duty paid on those goods nor they issued any invoice under Rule 57GG and, therefore, there was no justification to fasten any duty liability against the assessees.
9. The authorities below proceeded to hold the assessees responsible for non issuance of invoices and failure to make entry in RG23D register essentially on the ground that the goods were received in the depot of the assessees and moment such goods were received in the depot, the assessees were duty bound to comply with the said provisions of law.
10. Perusal of the said provisions of the law and procedure to be followed thereof as is understood by the Board and described in the form of instructions issued under Circular dated 13.02.1995 and particularly comprised under clause 9 (c) thereof is as under:-
9. There are two situations relating to passing of Modvat credit by a registered person. A registered person receives a consignment under Rule 52A invoice from the manufacturer. He then issues invoices under rule 57G. In the second situation a registered person say X receives a consignment from another registered person say Y (or from any other person registered under Rule 174) on the strength of the invoice under Rule 57G issued by registered person X. This registered person Y then further issues invoices under Rule 57G and so on.
(a) Whenever a registered person receives a consignment under Rule 52A invoice or 57G invoice and in respect of the same he proposes to issue either one or more modvatable invoices, he shall keep complete account of each such consignment and all transactions relating thereto in RG23D register.
(b) In respect of any consignment part of which is sold under a modvatable invoice and the other part under the cover of non-modvatable invoice, then the details of sales under non-modvatable invoices have also to be entered in the prescribed register RG 23D. The non modvatable invoices are not required to be issued in the prescribed proforma.
(c) A registered person need not enter into RG 23D register details of those consignments received under Rule 52A invoice or 57G invoice for which he does not propose to issue modvatable invoices.
11. The said clause relates to two situations relating to passing of the Modvat credit by registered person. In other words, the instructions regarding issuance of invoices in terms of Rule 57GG of the said Rules while dealing with the two situations relating to the modvat credit, the Board has described the procedure to be followed in this regard specifically under clause 9. But, at the same time, it has been clarified by the Board in cases where the registered person does not propose to issue a modvatable invoice i.e. in other words it does not intend to pass any credit in favour of the consignee, in such cases the registered person need not enter the goods in the RG23D register nor need to issue the invoice. It is only in case where credit is proposed to be passed on to the consignee in that case in the situation described in the circular, question of making necessary RG23D register and issue of invoice would arise.
12. As already seen above, in the case in hand, the assessees never intended to issue any modvatable invoice nor to pass any credit and in fact they themselves had not availed the credit in respect of goods in question. This was not only the defence of the assessees but it is an undisputed fact as it is not the case of the department that the assessees had availed any credit in respect of duty paid on such goods or that any attempt was made to pass on credit by the assessees to M/s Hero Cycles Limited in relation to the 77 H.R. Coils.
13. The decision of the Apex Court in Indian Aluminium Company Ltd. was in relation to requirement of compliance of condition of exemption notification. In that regard, the Apex Court held thus:-
The declaration contemplated in Form 14 is to the effect that the goods imported shall not be used for any other purpose for sale or otherwise etc. It can thus be seen that an incentive is sought to be given to such entrepreneurs by such concession if the raw material which is imported is also utilized in the industrial undertaking without selling or disposing of otherwise. That being the object a verification at the relevant time by the octroi authorities becomes, very much necessary before a concession can be given. In the absence of filling such a declaration in the required Form 14, there is no opportunity for the authorities to verify. Therefore the petitioner Company has definitely failed to fulfil an important obligation under the law though procedural. The learned Counsel, however, submitted that even now the authorities can verify the necessary records which are audited and submitted to the authorities and find out whether the material was used in its own undertaking or not. We do not think we can accede to this contention. Having failed to file the necessary declaration he cannot now turn around and ask the authorities to make a verification of some records. The verification at the time when the raw material was still there is entirely different from a verification at a belated stage after it has ceased to be there. May be that the raw material was used in the industrial undertaking as claimed by the petitioner Company or it may not be. In any event the failure to file the necessary declaration has necessarily prevented the authorities to have a proper verification.
(Emphasis supplied)
14. The Apex Court further referring to its earlier decision in the matter of Kedarnath Jute Manufacturing Co. vs. Commercial Tax Officer, Calcutta and Ors. reported in (1965) 3 SCR 626 reiterated the decision therein while quoting a paragraph from the said decision which reads as under:-
There is an understandable reason for the stringency of the provisions. The object of Section 5 (2)(a)(ii) of the Act and the rules made thereunder is self-evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will well-nigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the two-fold object, namely, prevention of fraud and facilitating administrative efficiency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both of which the provisions of the said clauses seek to avoid.
(Emphasis supplied)
15. The Apex Court thereafter ruled thus:-
It can thus be seen that the submission namely that the dealer, even without filing a declaration, can later prove his case by producing other evidence, is also rejected. This ratio applies on all fours to the case before us. As already mentioned the concession can be granted only if the raw material is used in the industrial undertaking seeking such concession. For that a verification was necessary and that is why in the rule itself it is mentioned that a declaration has to be filed in Form 14 facilitating verification. Failure to file the same would automatically disentitle the company from claiming any such concession.
16. Apparently, the ruling was in relation to the mandatory requirement for claiming exemption benefit under an exemption notification. What was further noted by the Apex Court in order to ensure that the assessees has not taken undue advantage of the exemption benefit, it was necessary for the authorities to verify whether the raw material imported has been utilized appropriately in the manufacture of the final product or not and in that regard mere verification of the records was not sufficient and, therefore, appropriate declaration at appropriate time was necessary for claiming benefit under the exemption notification. That is not the case in the matter in hand. In the case in hand, the assessees have not claimed any benefit out of the transaction in question.
17. It is also a matter of record that the goods at Hazira being sold to M/s Hero Cycles were in fact, received by M/s Hero Cycles Limited and it was merely in transit they were stored in the depot of the assessees. In other words, there is neither a case of any clandestine removal of the goods in the course of transportation thereof, nor it is a case of mere issuances of invoices without goods having accompanied and in these circumstances, we do not found any case having been made out for taking action in terms of Rule 209A. The findings arrived at by the Commissioner (Appeals) that the goods were liable for confiscation is clearly not born out from the record and are not sustainable.
18. For the reasons stated above, therefore, the appeals succeed, the impugned order is hereby quashed and set aside with consequential relief. Considering the fact that the order taking action against the assessees itself is not sustainable, question of imposing penalty does not arise. For the same reason, question of enhancing the penalty does not arise. The appeal filed by the department fails and hereby dismissed.
(Justice R.M.S. Khandeparkar) President (Rakesh Kumar) Member (Technical) /Pant/ 1