Custom, Excise & Service Tax Tribunal
M/S Cipla Ltd vs Commissioner Of Customs Central ... on 7 July, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal Nos. E/1407 TO 1412/07, 1045 & 624/08 (Arising out of Order-in-Original No. 26/2007-ADJ dated 31.7.2007 passed by Commissioner of Central Excise, Pune III, Order-in-Appeal No. P-III/160/08 dated 04.07.2008 passed by Commissioner of Customs & Central Excise (Appeals), Pune III and Order-in-Appeal No. P-III/PAP/145/08 dated 26.03.2008 passed by Commissioner of Customs & Central Excise (Appeals), Pune III.) For approval and signature: Honble Mr.P.G. Chacko, Member (Judicial) Honble Mr. P.R. Chandrasekharan, 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 of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== M/s Cipla Ltd M/s Meditab Specialities Pvt Ltd Jivan C. Patil Appellant (Represented by: Mr. Bharat Raichandani, Advocate) Vs Commissioner of Customs Central Excise, Pune III Respondent (Represented by: Mr. K.M. Mondal, Consultant & Mr. P.N. Das, SDR) Commissioner of Customs Central Excise, Pune III Appellant (Represented by: Mr. K.M. Mondal, Consultant & Mr. P.N. Das, SDR) Vs M/s Meditab Specialities Pvt Ltd Respondent (Represented by: Mr. Bharat Raichandani, Advocate ) CORAM:
Honble Mr.P.G. Chacko, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) Date of Hearing : 07.07.2011 Date of Decision:07.07.2011 ORDER NO..
Per: P.G. Chacko
1. M/s Cipla Ltd and M/s Meditab Specialities Pvt Ltd (hereinafter referred to as the assessees) are the appellants in most of these appeals which are against denial of CENVAT credit of the excess amounts of duty paid on their inputs by the manufacturers/suppliers of the inputs. For instance, in Appeal No. E/1407/2007 filed by one of the assessees, the challenge is against denial of CENVAT credit amounting to Rs 1,52,84,200/- on inputs manufactured and supplied by their sister units. The sister units at Bangalore and Kurkumbh manufactured bulk drugs and stock-transferred the same, on payment of Central Excise duty, to the assessees factory at Patalganga where CENVAT credit of the said duty was availed by the assessee and utilized for payment of duty on the medicinal formulations (final product) manufactured out of the bulk drugs (inputs). The payment of duty on the bulk drugs by the units at Bangalore and Kurkumbh was based on provisional assessment. When the provisional assessments were finalized, the assessing authority found that excess amounts of duty had been paid than what was leviable by those units at the time of clearance of the goods. If the amount of duty provisionally assessed and paid at the time of clearance of the bulk drugs was adjusted against the amount of duty found, upon finalization of the provisional assessment, to be payable, the excess amount of duty arising out of such adjustment could be claimed as refund by the manufacturer. The bulk drug manufacturers, however, did not claim any such refund. The case of the Revenue as made out in the show-cause notice issued to the Patalganga unit of M/s Cipla Ltd is that the Patalganga unit was not entitled to avail CENVAT credit of any amount of duty in excess of what was liable to be paid on the inputs (bulk drugs) by the other two units (input-manufacturers) as per the finalized assessments. Hence CENVAT credit of the differential amount of duty (i.e., difference between the duty paid on the inputs on the basis of provisional assessments and the duty found payable as per the finalized assessments) was sought to be denied to the assessee (Patalganga unit). In adjudication of the show-cause, the Commissioner of Central Excise disallowed the credit to the assessee and ordered its recovery under Rule 12 of the CENVAT Credit Rules with interest under Section 11AB of the Central Excise Act. Penalty equal to duty was also imposed by the adjudicating authority. Similar orders were passed by the Commissioner against certain other units of M/s Cipla Ltd also on similar sets of facts. Hence the appeals of M/s Cipla Ltd.
2. Appeal No. E/1412/07 was filed by a functionary of the company against the penalty imposed on him.
3. Appeal No E/1045/08 filed by the other assessee viz M/s Meditab Specialities Pvt Ltd (M/s MSPL) is against denial of CENVAT credit amounting to Rs 42,194/- by the lower authorities and against equal amount of penalty imposed by them. The assessee had taken CENVAT credit of Rs 42,1924/- on their input supplied by M/s Cipla Ltd who had paid the said amount of duty on the goods provisionally assessed under Rule 7 of the Central Excise Rules, 2002. When the provisional assessment was finalized by the proper officer of Central Excise, the assessable value of the goods decreased and consequentially the amount of duty paid by M/s Cipla Ltd was higher than what was leviable on the goods. In the show-cause notice issued by the department to the assessee (M/s MSPL), it was alleged that they were not entitled to CENVAT credit of the differential amount of duty (difference between the amount of duty paid by the input manufacturer on the basis of provisional assessment and the amount of duty payable as per final assessment) and, therefore, duty of Rs 42,194/- was recoverable from them with interest thereon under Rule 14 of the CENVAT Credit Rules, 2004. Show-cause notice also proposed a penalty on M/s MSPL under Rule 25 of the Central Excise Rules, 2002 read with Rule 15 of the CENVAT Credit Rules, 2004. M/s MSPL contested these proposals. The original authority, in adjudication of the dispute, disallowed the above credit to MSPL. An amount of Rs 42,194/- already paid by the party was appropriated towards the demand. Equal amount of penalty was imposed on them under Rule 25 ibid. An appeal filed against the Order-in-Original was dismissed on merits by the Commissioner (Appeals). Appeal E/1045/08 of M/s MSPL is directed against the Appellate Commissioners order.
3. M/s MSPL had also availed CENVAT credit of Rs 1,66,098.26 on their inputs (bulk drugs) which were received from M/s Cipla Ld (input manufacturer) during the period from 01-02 to 03-04. The credit was of the duty provisionally paid by M/s Cipla Ltd under Rule 7 of the Central Excise Rules. When their provisional assessments were finalized by the proper officer of Central Excise, it was found that the amount of duty paid by them was higher than what was leviable on the goods cleared to M/s MSPL. Subsequently, in a show-cause notice issued to M/s MSPL, the department sought to recover the differential amount of duty (difference between the amount of duty paid by the input manufacturer on the basis of provisional assessment and the amount of duty payable as per final assessment) which was allegedly taken in excess of the credit they were entitled to. Apart from demand of interest on duty under Rule 12 of the CENVAT Credit Rules, there was also a proposal to impose penalty under Rule 13 (2) of the CENVAT Credit Rules. These proposals were contested by the noticee. In adjudication of the dispute, the original authority confirmed the demand of duty of Rs 1,66,098/- with interest against M/s MSPL and imposed on them equal amount of penalty. Aggrieved, the party preferred an appeal to the Commissioner (Appeals), which was allowed by the appellate authority holding thus:
There is no dispute regarding the duty paid by Cipla and also there was no allegation that Cipla Ltd. Has received refund of duty paid. Under the above circumstances the appellant is correct in taking credit of duty paid by Cipla.
4. The above decision of the Commissioner (Appeals) is under challenge in Appeal No. E/624/08 filed by the department.
5. Heard both sides. According to the learned counsel for M/s Cipla Ltd and M/s MSPL, the substantive issue involved in this batch of appeals is no longer res integra after the Honble Supreme Courts decision in the case of Commissioner vs MDS Switchgear Ltd 2008 (229) ELT 485 (SC), wherein their Lordships upheld the view taken by this Tribunal, quoted below:
Reasons given by the appellants for the alleged inflation of the value of the intermediate goods are logical. What was required of the Commissioner was to examine the quantum of the loading of the assessable value by the Modvat credit on the earlier inputs. That exercise has nowhere been done. If the department was of the opinion that the value of the final product was depressed, then they could have charged, the Jalgaon unit with under-invoicing of their product. That has also not been done. The valuation as given by the Sinnar unit was duly approved by the department and the payment of duty was also duly accepted. We find absolutely no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into deposit of duty. There is no legal basis for such presumption. The rules entitled the receipt manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers in charge of recipient unit [2000 (38) RLT 179].
6. The Honble Supreme Courts decision was followed by the Honble High Court of Bombay (Goa Bench) in Order dated 6.10.2008 in Excise Appeal Nos 29 and 32 of 2008 (Commissioner of Central Excise vs M/s Betts India Ltd). Yet another decision cited by the learned counsel, which is directly on the issue debated before us, is contained in Order No. A-2285-2287/WZB/Ahd/2008 dated 1.10.2008 in Appeal Nos E/666/08 and E/808-809/08 (Advance Remedies Pvt Ltd and anr vs Commissioner of Central Excise, Vapi), the Tribunal held as follows:
2. Duty of Rs 8,41,394/- and Rs 38,84,590/- are confirmed against the applicants, by denying the benefit of modvat credit of duty paid by the input supplier on the ground that at the time of final assessment of the input at the input suppliers end, the duty was assessed at lower amount. We find that the input supplier has actually paid higher quantum of duty and on the final assessment, has not claimed refund of the same. The said demand stand confirmed by the authorities on the ground that the availment of credit by the appellant to the extent of duty actually paid by the input supplier is not correct and the credit could have been availed to the extent of duty required to be paid by the input supplier. We find that the issue is no more res-integra and stand decided by various decisions of the Tribunal Reference in this regard is made to Tribunals judgment in case of M/s Hero Cycles Ltd vs CCE, Chandigarh as reported in 2003 (54) RLT 764 (CEGAT-Del), as also in the case of CCE Chennai vs CEGAT Chennai 2006 (202) ELT 753 (Mad), CCE vs Jyoti Ltd. 2008 (223) ELT 171 (Guj), Evergreen Engineering Co Pvt Ltd vs CCER Mumbai 2007 (215) ELT 134 (Tri-Mumbai).
3. The ratio of all these decisions is that the credit cannot be varied at recipients end on the ground that the supplier should have paid lesser duty. We, accordingly, are of the view that denial of the credit to the appellant is not justified. The learned counsel has referred to certain other decisions of the Tribunal also, which we need not discuss in this case inasmuch as the issue stands settled in favour of the parties by the Honble Supreme Courts judgment in MDS Switchgear case and the Honble High Courts order in Betts Indias case. The text of Rule 3 of the CENVAT Credit Rules, 2002, which allowed credit on inputs and capital goods to the manufacturers of final products, is also significant. It reads as follows:
A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of
(i) the duty of excise..
(ii) the duty of excise..
(iii) the additional duty of excise.
(iv) the additional duty of excise.
(v) the National Calamity Contingent duty..
(vi) the additional duty .
(vii) the additional duty of excise paid on any inputs or capital goods received in the factory It is significant to note that the rule allowed credit of duty paid on inputs/capital goods rather than credit of duty payable on the goods. Therefore, whatever duty was paid by the input manufacturer/supplier should be available as CENVAT credit to the manufacturer of the final product.
7. In the result, it has to be held that the parties cannot be compelled to reverse the CENVAT credit availed on their inputs being credits of the amounts of duty paid by the input manufacturers/suppliers and covered by the statutory invoices issued by them. It goes without saying that the demand of duty from M/s Cipla Ltd and M/s MSPL and the imposition of penalties on them are unsustainable in law and that the appeal filed by the Revenue is only liable to be dismissed.
8. Accordingly, the Revenues appeal is dismissed and other appeals are allowed.
(Operative part pronounced in Court.) (P.R. Chandrasekharan) Member (Technical) (P.G. Chacko) Member (Judicial) rk 8