Custom, Excise & Service Tax Tribunal
M/S.Hindustan Coca-Cola Beverages ... vs Cce Thane I on 30 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. E/522, 523, 524, 525/10 Mum
(Arising out of Order-in-Appeal No. VSK/38 to 41/Th-I/2009 dated 16.12.2009 passed by the Commissioner of Central Excise (Appeals), Mumbai I.)
For approval and signature:
Shri. M.V. Ravindran, Member (Judicial)
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 : No
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.Hindustan Coca-Cola Beverages Pvt. Ltd.
Shri Suresh Shinde
Shri K.V.R.Subramaniam
Shri Ashish Desai
:
Appellant
Versus
CCE Thane I
Respondent
Appearance Shri Naresh Thacker, Advocate for Appellants Shri Ashutosh Nath, Asst. Commissioner (A.R.) for Respondents CORAM:
Shri. M.V. Ravindran, Member (Judicial) Date of Hearing : 30.03.2015 Date of Decision : 2015 ORDER NO.
Per : M.V. Ravindran These appeals are directed against Order-in-Appeal No. VSK/38 to 41/Th-I/2009 dated 16.12.2009.
2. Since all the appeals are arising out of the very same impugned order, they are being disposed of by a common order.
3. Relevant facts that arise for considerations are that M/s. Hindustan Coca-Cola Beverages Pvt. Ltd. (main appellant) had made clearances of capital goods to their sister concern during the period 23.03.2000 to 22.01.2003. The department was of the view that the main appellant should have discharged the duty on the value of the capital goods cleared as such based upon the Valuation Rules. Coming to such conclusion, show-cause notice was issued to the appellants. The appellants contested the show-cause notice on merits as well as on limitation on the ground that the capital goods which were cleared by them were purchased outright from M/s. McCoy Bottling Company Pvt. Ltd. (M/s. McCoy in short) under asset purchase agreement and no CENVAT Credit was availed on the same by the main appellant and no transfer of CENVAT Credit was effected to the main appellant on such capital goods. Adjudicating authority did not agree with the contentions raised by the appellants and confirmed an amount as ineligible of CENVAT Credit, interest thereof and also imposed penalties on all the appellants. Aggrieved by such an order, all the appellants preferred appeals before the first appellate authority. The first appellate authority concurred with the views of the adjudicating authority and rejected the appeals filed by the appellants. Hence all the appellants are before the Tribunal.
4. Learned Counsel appearing on behalf of the appellants took me through the show-cause notice and the allegations thereof. He would submit that it is undisputed that the main appellant had purchased the entire assets of the Company M/s. McCoy. He also submit that McCoy had availed CENVAT Credit on various capital goods purchased by them and were engaged in the manufacture of mineral water, aerated water and various other excisable goods. It is his submission that the CENVAT Credit availed by M/s. McCoy was never in dispute. He then took me through the order-in-original, more specifically para No.39, and submit that it is an admitted fact that M/s. McCoy after availing CENVAT Credit on the capital goods utilized the same on clearances of the finished goods and at the time of sale of assets to the main appellant here-in CENVAT Credit was Rs.830/-. It is his submission that the main appellant had not availed any CENVAT Credit on the capital goods purchased from M/s. McCoy. It was his further submission that it is undisputed that the capital goods which were purchased by the main appellant was transferred to their own sister concern and hence there would be no revenue loss even if demand is raised against the main appellant. He then took me through the records and submits that the Central Excise Registration granted to M/s. McCoy was surrendered and no objection was raised by the department as to ineligible availment of CENVAT Credit by the said M/s. McCoy and no demands were also raised on them for the clearance of the capital goods. After taking me through Order-in-Appeal which is impugned before the Tribunal, he would submit that the first appellate authority has totally mis-interpreted the provisions of Cenvat Credit Rules, 2002 inasmuch as the said provisions of Cenvat Credit Rules, 2002 clearly indicate that the CENVAT Credit availed on capital goods and clearance of them should be reversed as such by a manufacturer. It is his submission that there is nothing on record to indicate that they had availed CENVAT Credit on the capital goods procured from M/s. McCoy. It is his submission that the penalties imposed on the individuals is unwarranted as they had clearly recorded in their statement as to that they had not availed CENVAT Credit on the capital goods purchased from M/s. McCoy and did not discharge the duty liability on the same capital goods when cleared to their sister concern. He would submit that the impugned order be set aside and the appeals be allowed.
5. Learned Departmental Representative reiterated the findings of the lower authorities and he would read the provisions of CENVAT Credit during the relevant period from the impugned order. He would submit that the appellant is required to pay Central Excise duty equivalent to CENVAT Credit availed by M/s. McCoy and the assets in the form of capital goods were transferred to the appellants. He would submit that it is the requirement of the provisions of Cenvat Credit Rules, 2004 that CENVAT Credit availed should be reversed when the capital goods are removed as such. He would specifically read the provisions of Rule 57AB (1C) of the Central Excise Rules, 1944 as also the provisions of Rule 3(4) of the Cenvat Credit Rules, 2002. He would rely upon the decision of the Honble Apex Court in the case of Macson Marbles Pvt. Ltd. vs. Union of India 2003 (158) ELT 424 (S.C.), Hero Motors Ltd. vs. CCE 2014 (310) ELT 729 (All.) and Autolite (India) Ltd. v. Commissioner 2003 (154) ELT A169 (S.C.) for the proposition that the liability to pay excise duty dues will get transferred on transfer of industrial units and successor needs to discharge the said liability.
6. Learned Counsel in rejoinder would submit that the judgement of the Honble Apex Court in the case of Macson Marbles Pvt. Ltd. (supra) was rendered on the fact that the industrial unit was transferred to the said Macson Marbles Pvt. Ltd. and recovery of excise dues was fastened upon them. He would submit that in the case in hand the main appellant was not aware that there are excise dues nor the department has the case that CENVAT Credit which is availed by M/s. McCoy has to be recovered from them, in short there were no legal dues of the said M/s. McCoy to be recovered from the main appellant. On the other hand, he would rely upon the judgement of the Honble Supreme Court in the case of CCE v. Jamshedpur Beverages 2007 (214) ELT 321 (S.C.) for the proposition that the revenue neutrality will arise in such situation like this in hand. He also relied upon the ratio of the decision of the Honble High Court of Gujarat in the case of CCE & Service Tax v. Patel Alloys Steel P. Ltd. 2014 (305) ELT 476 (Guj.) for the proposition that transfer of the capital goods to sister concern within the Commissionerate for undertaking jobwork, no error or illegality that the entire case is revenue neutral. He also relied upon the decision of the Honble Karnataka High Court in the case of CCE v. Solectron Centum Electronics Ltd. 2014 (309) ELT 479 (Kar.) for the proposition that there is no need to reverse CENVAT Credit on the goods purchased from Domestic Tariff Area and removed to EHTP unit; and also for the proposition that till the amendment of CENVAT Credit Rules 2004 as on 13.11.2007 in respect of used capital goods there was no liability to pay duty prior to that date and it was only that addition of the proviso thereto, that the situation changed.
7. I have considered the submissions made at length and perused the records.
7.1 On perusal of the records it transpires that the issue involved in this case is regarding the demand of CENVAT Credit availed by the appellants predecessor in respect of the capital goods which were removed by the main appellant to their sister unit. The facts are undisputed inasmuch as the main appellant had procured/purchased the capital goods from M/s. McCoy for a consideration. It is also undisputed that the appellant had only purchased the assets and had not taken over the running unit of M/s. McCoy; there was no transfer of business to the main appellant from M/s. McCoy; the main appellant had not taken any responsibility towards liability of M/s. McCoy in any form. It is also undisputed that the capital goods which were purchased by the main appellant from M/s. McCoy were procured by the said M/s. McCoy during the period 1997-98 and availed CENVAT Credit which is not disputed by the department; the said capital goods were put to use by M/s. McCoy and dutiable final goods were manufactured and cleared on discharge of Central Excise duty and also utilizing the CENVAT Credit of the capital goods availed by M/s. McCoy.
7.2 On this factual matrix it has to be seen that whether the main appellant who have purchased the assets in the form of capital goods and cleared their machinery to their own sister concern is required to discharge CENVAT Credit availed by M/s. McCoy. Yet another fact is when the assets were purchased by the main appellant there was no balance of CENVAT Credit in the statutory records viz. RG-23 Part II of M/s. McCoy. Provisions of sub-Rule (1C) of Rule 57AB of Central Excise Rules, 1944 effective from 1.4.2000 reads as under:-
(1C) When inputs or capital goods, on which credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under section 4 of the said Central Excise Act, and such removal shall be made under the cover of an invoice referred to in rule 52A. 7.3 I have to also consider the provisions of Rule 3(4) of Cenvat Credit Rules, 2001 effect from 1.7.2001 which reads as under:-
(4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under section 4 or section 4A of the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in rule 7. It can be noticed from the above reproduced provisions during the relevant period that capital goods on which CENVAT Credit has been taken are removed from the factory of the manufacturer of final product is required to pay an amount equivalent to the duty of excise on the said capital goods on removal. As is noted from the facts that the appellant here-in had not manufactured any goods at the factory premises, which were purchased by them along with capital goods. It is also to be noted that when CENVAT Credit is availed by the manufacturer and is not contested by the department during the material period and credit was availed, the purchaser of the capital goods cannot be saddled with the duty liability of CENVAT Credit which was availed by the original manufacturer as I do not find any provisions of law which indicate so. The findings of the first appellate authority as to the CENVAT scheme placed onus on the user of CENVAT Credit to maintain proper documents and accounts hence the main appellant is liable to discharge the duty liability, is also incorrect inasmuch as, it is on record that the main appellant here-in has not utilised CENVAT Credit of the capital goods which were received by M/s. McCoy. The first appellate authority has also recorded in the findings that non-transfer of CENVAT Credit does not mean non-applicability of CENVAT scheme to the appellant is also an erroneous findings inasmuch as the provisions of Cenvat Credit Rules as reproduced here-in above puts onus on the manufacturer of the final product who has availed CENVAT Credit of the Central Excise duty paid on the capital goods. It is undisputed that the main appellant has purchased the capital goods from M/s. McCoy and had not availed benefit of CENVAT Credit on the capital goods by the said M/s. McCoy. In my considered view, the department should have demanded the Central Excise duty equivalent to CENVAT Credit availed on capital goods from M/s. McCoy, as having sold the assets they have parted with the capital goods on which CENVAT Credit was availed.
7.4 I find that ratio of the judgement of the Honble Karnatka High Court in the case of Solectron Centum Electronics Ltd. (supra) is very pertinent in these cases. In that case, the High Courthas considered the provisions of Rule 3(4) of the Cenvat Credit Rules, 2004 and after analyzing the entire provisions held as under:-
9.?The next question is whether the assessee was not liable to pay any duty when capital goods after it is being used was removed to the EOU unit.
10.?Rule 3 sub-rule (4) of Cenvat Credit Rules, 2002 reads as under :
(4)?When inputs or capital goods, on which : CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7.
11.?The liability to pay duty on capital goods arises after the capital goods have been removed as such. The word as such is being the subject matter of interpretation by the various Courts. Punjab and Haryana High Court in the case of Commissioner of Central Excise, Ludhiana v. Khalsa Cotspin (P) Ltd., reported in 2011 (270) E.L.T. 349 (P & H) has held as under :
The assessee having validly availed cenvat credit, same is required to be reversed only if goods were cleared in the same position without payment of excise duty. In the present case, it has been held by the Tribunal that goods were not cleared in the same position but after having been used and in such situation Rule 3(5) of the Rules will not apply.
12.?Bombay High Court in the case of Cummins India Ltd. v. Commissioner of Central Excise, Pune-III reported in 2007 (219) E.L.T. 911 (Tri.-Mumbai) confirmed the order of the Appellate Tribunal which has held as under :
The plain and simple meaning of expression as such would be that capital goods are removed without putting them to use. Admittedly, in the present case capital goods have been used for a period of more than 7 to 8 years. As such, interpretation given by the authorities below would lead to absurd results if an assessee is required to reverse the credit originally availed by them at the time of receipt of the capital goods, when the said capital goods are subsequently removed as old, damaged and unserviceable capital goods. This would defeat the very purpose of grant of facility of Modvat credit in respect of capital goods and would not be in accordance with the legislative intent.
13.?The Delhi High Court in the matter of Harsh International (Khaini) Pvt. Ltd. v. Commissioner of Central Excise reported in 2012 (281) E.L.T. 714 (Del.), after referring to the various judgments held as under :
In the present case the appellant purchased the capital goods in the period between 2003 and 2005 and used them in its factory till they were sold to M/s. Harsh International (Khaini) Pvt. Ltd., in June and July, 2007. Thus the capital goods were used for a period of 2 to 4 years. They cannot, therefore, be stated, to be sold as such capital goods. They were sold as used capital goods.
14.?Therefore, it is clear, till the law was amended as on 13-11-2007 in respect of used capital goods, there was no liability to pay duty. In fact, this is evident from the fact that in Cenvat Credit Rules, 2004, the proviso was added making the position clear which was not there in the earlier orders. The proviso reads thus :
if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit. The ratio as laid down by the High Court in a similar set of facts would be applicable in this case and I am bound by the said ratio.
7.5 As regards the reliance by the learned A.R. on the decision of the Honble Apex Court in the case of Macson Marbles Pvt. Ltd. (supra) I find that in that case there was a transfer of running industrial unit to the appellant there-in hence the High Court has come to a conclusion that the successor is liable to discharge the excise dues. In the case in hand, there is no excise dues which have been confirmed against the seller of the capital goods namely M/s. McCoy. In the absence of there being any dues that has been confirmed against M/s. McCoy, the same cannot be recovered from the main appellant.
7.6 As regards various case laws which have been cited by the learned A.R., the facts of these cases were totally different inasmuch as in the case of Hero Motors Ltd. (supra), the factory was sold/leased out to the jobworker and hence separate registration certificate was given and hold that the CENVAT Credit has to be allowed as there was no removal of capital goods.
8. In view of the foregoing, I find that the impugned order which confirmed the demand of duty as ineligible CENVAT Credit is unsustainable and liable to set aside and I do so. Since the demand is set aside, the question of imposition of penalties or demand of interest on all the appellants does not arise.
9. The impugned order is set aside and the appeals are allowed.
(Order Pronounced in Court on..) (M.V. Ravindran) Member (Judicial) nsk ??
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