Custom, Excise & Service Tax Tribunal
Ispat Industries Ltd vs The Commissioner Of Central Excise on 27 April, 2010
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No.I APPEAL No.E/1777/03 (Arising out of Order-in-Original No.25/Commr/02-03 dated 31/03/2003 passed by Commissioner of Central Excise & Customs, Navi Mumbai) For approval and signature: Honble Mr.P.G.Chacko, Member (Judicial) Honble Mr.S.K. Gaule, 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 : 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 : Yes authorities?
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Ispat Industries Ltd., Appellants
Vs.
The Commissioner of Central Excise,
Raigad Respondents
Appearance:
Shri.Vishal Agarwal, Advocate for the Appellants
Shri.K. Lal, SDR for the Respondents
CORAM:
Mr.P.G. Chacko, Member (Judicial)
Mr.S.K. Gaule, Member (Technical)
Date of hearing : 27/04/2010
Date of decision : 27/04/2010
O R D E R No:..
Per: S.K. Gaule, Member (Technical)
1. Heard both sides.
2. This appeal is directed against the order-in-original No.25/Commr./02-03 dated 31/03/2003 whereby the ld. Commissioner has disallowed MODVAT credit on certain capital goods and imposed penalty against the appellants.
3. Briefly stated facts of the case are that the appellants are engaged in the manufacture of Sponge Iron falling under SH 7203.00 of schedule of CETA 1985. They were availing MODVAT credit facility as per Rule 57A and 57Q for the production of final products. On the visit of officers of Central Excise, certain discrepancies were noticed on availment of MODVAT credit on capital goods. The said discrepancies can be grouped in three broad categories as under:
i) Credit taken on original invoices without prior permission from the proper officer Amount involved Rs.20,53,765/- Invoice No.1134/15.12.1997, 1144/17.12.97 & No.AI-02190 dated 31.12.97.
ii) MODVAT credit on power transformer received from BHEL Jhansi Invoice No.1162/31.12.96 Rs.23,00,000/- and Invoice No.T-1170 dated 31.03.98 involving duty credit Rs.18,20,000/-.
iii) Credit availed on items, viz., printer ribbon cable, fire fighting equipment pars and cafi cored wire amounting to Rs.4,26,502/-.
4. Accordingly show cause notice was issued and after adjudication proceedings, the ld. Commissioner confirmed the demand of Rs.66,00,257/- and appropriated the said demand, imposed a penalty of Rs.66,00,257/- under Rule 57U (6) of the Central Excise Rules 1944 and imposed a penalty of Rs.1.00 lakh on the company under Rule 173Q (1) (bb) read with Rule 57U (6) ibid and ordered for recovery of interest under Rule 57U (8) ibid. Aggrieved by the same, the appellant file this appeal.
5. (I) The contention of the appellant in case of credit availed on the strength of original copy of invoices is that they made an application to proper officer seeking permission to avail credit on the strength of original copy of invoice. They also submitted supporting documents, viz., affidavits from the transporter and original copy of the invoice. The contention is that Rule 57T did not prescribe any time limit. Rule 57T (8) did not speak of prior permission.
(II) Regarding the MODVAT credit availed amounting to Rs.23.00 lakhs vide invoice No.1162 dated 31/03/96, the contention of the appellant is that the consignment was damaged in transit and the same went back to BHEL for carrying major repair. The said consignment was cleared by BHEL after repair on payment of duty of Rs.18,20,000/- vide invoice No.T-1170 dated 31/03/98 and they have accordingly availed the CENVAT credit. They also contended that there was no infringement of Rule 57R (3) and they have followed the procedure prescribed under Rule 57R (3).
(III) In case of credit amounting to Rs.4,26,502/- the appellant did not press for the MODVAT credit in respect of Sl.No. (i) and (iii) during the adjudication itself and remaining items they submitted that they are capital goods.
6. The respondent reiterated the findings in the impugned order-in-original. They further contended that the provision relating to availment of credit on the basis of original copy of invoice in certain situation under Rule 57T (8) were introduced with effect from 02/06/98 and they were not given retrospective effect.
7. We have considered the submissions and perused the records. The MODVAT credit amounting to Rs.20,53,765/- was availed on the strength of original copy of invoices. The ld. Counsel pointed out that they have applied to the Assistant Commissioner for seeking permission to avail MODVAT credit on the strength of original copy of the invoices and the application was accompanied by necessary supporting documents and they had availed the MODVAT credit only after at least three months of filing of the application which was in accordance with the provisions of Rule 57T (8). The Ld. SDR contended that the provision relating to avail credit on the basis of original copy of invoice in certain situation under Rule 57T (8) were introduced with effect from 02/06/98 and they were not given retrospective effect. The ld. Counsel pointed out that though the invoices were prior to 02/06/98 but the credit was availed only after 02/06/98 and the amendment in the provisions of Rule 57T(8) was regarding inclusion of certain other documents, viz., duplicate/triplicate copy of bill of entry generated on Electronic Data Interchange System in addition to duplicate/original copy of the invoice with effect from 02/06/98 and not as contended by the respondent that the Rule 57T (8) was introduced with effect from 02/06/98. No action was taken by the jurisdictional Assistant Commissioner on that application and the Commissioner during the adjudication brushed aside the issue stating that the appellant can contest before the Divisional Assistant/Deputy Commissioner and obtain necessary order of availing credit. The ld. Counsel pointed out that as per Section 12E, a Central Excise officer can discharge the function of his subordinate officer. The jurisdictional Assistant Commissioner did not dispose of the application of the appellant for over five years and if the appellant have to go back to the Assistant Commissioner again as per the ld. Commissioners above observations, the matter would linger on for indefinite period. Further, the Assistant Commissioner and the ld. Commissioner had not given any decision on the application whether the averment made in the application were not correct nor any action has been taken to prove that the averments made by the appellant were wrong. The eligibility of MODVAT credit on the impugned capital goods has not been under dispute. Nor this is the case of department contended that the goods were not received in the manufactory of the appellant, the duty paid characteristic of the goods were also not in doubt. We find that the action of the ld. Commissioner (Appeals) disallowing the credit availed on the basis of original copy is neither legal nor sustainable. Therefore, the appeal is allowed to this extent.
8. As regards the MODVAT credit amounting to Rs.18.2 lakhs taken on the transformer was sought to be denied for not following the procedure under Rule 57R(3). The appellant contended that they have followed the procedure of Rule 57R (3) and there is no infringement of Rule 57R (3). It is noted in para 7.1.2 of the order-in-original that the appellant had submitted 57T declaration. They repeated their argument regarding filing of lease agreement and certificate from leasee prior to payment of first lease which was payable only in the year 2003-2004. Till such time there could not be any violation of the said condition. They submitted that the lease agreement had been converted to term loan agreement with IFCL, consequently there cannot be any violation of the conditions of Rule 57R (3) of the Central Excise Rules, 1944. The ld. Counsel pointed out that as per Rule 57R (3) (ii) (b) does not contain any stipulation to the effect that, credit on capital goods acquired on lease can be availed only after reimbursement of the excise duty component to the financing company. They also relied upon the Tribunals decision in their own case (Order No.A/1393/WZB/06-C-III (EB) dated 24/07/2006 wherein similar view was held. Therefore, disallowance of credit is not sustainable. The impugned order is set aside and the appeal is allowed to this extent.
9. As regards the MODVAT credit availed on transformer amounting to Rs.23.00 lakhs which was not received in the manufactory of the appellant. The contention of the appellant is that duty has been paid by their suppliers, therefore they are entitled for the MODVAT credit on the transformer. Admittedly, it is not in dispute that the transformer in this case was not received in the manufactory of the appellant, they are not entitled for the MODVAT credit. The ld. Counsel has pointed out that the demand on this aspect is hit by limitation of time as they have been filing the declaration prescribed under Rule 57T (10) and they have submitted the invoice on the strength of which the credit was availed to the department for the verification. The ld. Commissioner has not given any findings on this aspect. Therefore, in the interest of justice, the case is remanded to the ld. Commissioner to consider limitation issue along with penalty related issue, afresh. The appellants are directed to produce the documents on which they rely upon that there was no suppression of facts, invocation of larger period or mis-statement to the Commissioner for verification. Needless to say that reasonable opportunity of hearing should be given to the appellants before deciding this aspect. Appeal is allowed by way of remand to this extent.
10. As regards the MODVAT credit amounting to Rs.4,26,502/-, the appellant did not press for the MODVAT credit on printer ribbon cable and cafi cored wire at the time of adjudication itself. In case of MODVAT credit on fire fighting equipment, we find that this item was excluded from the definition of capital goods at the material time. In case of MODVAT credit on nozzles, the appellant was not able to inform that nozzles are parts/accessories of which machine and whether the said machine was covered under the definition of capital goods, therefore, the credit is not allowable. The impugned order is upheld and the appeal is dismissed to this extent.
11. Since the major portion of the MODVAT credit is allowed by us and penalty related issue in case of MODVAT credit amounting to Rs.23,00,000/- is linked with limitation issue which has been remanded the equal amount of penalty of Rs.66,00,257/- imposed under Rule 57U (6) of Central Excise Rules 1944 and penalty of Rs.1,00,000/- is set aside and the appeal is allowed to this extent.
12. In these circumstances, it is hereby ordered that:
(i) In case of MODVAT credit amounting to Rs.20,53,765/- and Rs.18,20,000/- the impugned order is set aside and the appeal is allowed.
(ii) In case of MODVAT credit amounting to Rs.4,26,502/- the impugned order is upheld and the appeal is dismissed
(iii) The equal amount of penalty of Rs.66,00,257/- imposed under Rule 57U (6) of Central Excise Rules 1944 and penalty of Rs.1,00,000/- is set aside and the appeal is allowed to this extent
(iv). In case of MODVAT credit amounting to Rs.23,00,000/- the case is remanded to the ld. Commissioner for deciding the issue relating to limitation and penalty afresh.
13. The appeal is disposed of accordingly.
(Pronounced in Court) (P.G.Chacko) Member (Judicial) (S.K. Gaule) Member (Technical) pj 1 8 2