Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Pune vs Hi-Mile Rubber Pvt Ltd on 12 October, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/2174/03 (Arising out of Order-in-Appeal No.P-II/BKS/49/03 dated 24/02/2003 passed by Commissioner of Central Excise & Customs (Appeals), Pune) For approval and signature: Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. M. Veeraiyan, 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 : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
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Commissioner of Central Excise, Pune Appellant
Vs.
Hi-Mile Rubber Pvt Ltd., Respondent
Appearance:
Shri.V.K. Singh, JDR appellant
None for respondent
CORAM:
Honble Mr. P.G. Chacko, Member (Judicial)
Honble Mr. M. Veeraiyan, Member (Technical)
Date of Hearing : 12/10/2010
Date of Decision :12/10/2010
ORDER NO
Per: P.G. Chacko
1. This appeal was filed by the Revenue, aggrieved by the decision of the Commissioner (Appeals), who set aside the demand of duty confirmed against the assessee (present respondent) by the original authority. The appellant is represented today by the learned SDR. There is no representation for the respondent despite notice, nor any request for adjournment.
2. A perusal of the records shows that the respondent was engaged in the manufacture of compounded rubber products during the period of dispute (March to September 1998) and was clearing these goods without payment of duty after classifying them under SH 4005.10, for which the tariff prescribed nil rate of duty. During the above period, the respondent was also clearing certain compounded rubber products on payment of duty as applicable to SH 4005.90. In respect of common inputs, they were availing MODVAT credit also without maintaining separate accounts for the inputs used in the manufacture of dutiable final products and inputs used in the manufacture of the exempted final products. In this situation, the respondent was paying an amount @ 8% of the value of the goods cleared at nil rate of duty. They were doing so in terms of Rule 57CC of the Central Excise Rules, 1944. In two show-cause notices, covering parts of the period of dispute, the department demanded duty on the compounded rubber products, which was cleared at nil rate and also proposed penalties. The demand was based on the view that the said product, which was cleared at nil rate, was chargeable to duty @ 18% as applicable to SH 4005.90 inasmuch as MODVAT credit had been availed on the inputs used in its manufacture. The demand was contested but the adjudicating authority confirmed the demand of duty amounting to Rs.16,477/- against the respondents and imposed on them a penalty of Rs.5,000/-. The appeal filed by the aggrieved party was allowed by the Commissioner (Appeals), who took the view that the procedure adopted by the assessee was in accordance with the Honble Supreme Courts decision in Chandrapur Magnet Wires (P) Ltd., Vs. CCE, Nagpur 1996 (81) ELT 3 (SC). At present, the Revenue is aggrieved by the decision of the Commissioner (Appeals).
3. The learned SDR has, at the outset, referred to the relevant entries, which we reproduce below:
40.05 Compounded rubber, unvulcanised, in primary forms or in plates, sheets or strip, other than the forms and articles of unvulcanised rubber described in heading No.40.06 4005.10 Plates, sheets or strip, whether or not combined with any textile material, in relation to the manufacture of which no credit of the duty paid on the inputs used has been availed under Rule 57A of the Central Excise Rules, 1944. - Nil 4005.20 Used within the factory of production for the manufacture of excisable goods falling within this Schedule Nil 4005.90 Other - 18%
4. It is submitted that it has never been in dispute that the respondents products were classifiable, during the period of dispute, under Heading 4005. It is submitted that the respondent had admittedly availed MODVAT credit on the inputs used in, or in relation to, the manufacture of the said products, whether classified under SH 4005.10 or under SH 4005.90. The learned SDR has argued that, in view of availment of MODVAT credit on the inputs by the manufacturer of the compounded rubber products, the said products could only be classified under SH 4005.90, which attracts duty @ 18%. Where the goods fell for such classification, it was not open to the respondent to take recourse to Rule 57CC, the SDR agues. It is, therefore, prayed that the order of adjudication be restored after setting aside the impugned order.
5. We have found on record a letter submitted by the respondent, which says that the matter can be disposed of on merits without giving them any opportunity of being heard.
6. In this letter, the respondent has relied on the Tribunals Larger Bench decision in Nicholas Piramel India Ltd., 2008 (232) ELT 37 (Tri-Bom) wherein it was held that reversal of credit irregularly taken on inputs used in the manufacture of exempted final product was as good as non- availment of the credit and, therefore, any demand of duty on the exempted final product was not justifiable. The learned SDR, at this stage, points out that the said decision of the Tribunal has been set aside by the Honble High Court of Bombay vide CC Vs. Nicholas Piramal India Ltd., 2009 (244) ELT 321 (Bom). We have found this submission of the SDR to be factually correct. As rightly submitted by the learned SDR, the issue involved in the instant case is one on which Nicholas Piramal India Ltd., (supra) will not have any bearing.
7. On considering the submissions of the learned SDR, we have found a good case for the appellant. Classification of excisable goods is a fundamental part of assessment of the goods to duty of excise. The compounded rubber products manufactured and cleared by the respondent during the relevant period was rightly classified under heading 4005 and sub-heading 4005.90 by the Revenue inasmuch as, admittedly, the manufacturer had availed MODVAT credit of the duty paid on inputs used in the manufacture of the said goods. It is not in dispute that the respondent did not manufacture any intermediate product classifiable under SH 4005.20 during the material period. In this scenario, the products cleared by them after availing MODVAT credit on inputs was rightly classifiable under the residuary sub-heading 4005.90, residuary to SH 4005.10. This classification would necessarily result in levy of duty on the goods at the rate applicable to SH 4005.90 and this was done by the original authority, with which we are in full agreement. The decision taken by the learned Commissioner (Appeals), which is focused on Rule 57CC without regard to the correct classifiability of the goods, is not sustainable in law. Before application of Rule 57CC, the manufacturer should classify his final products correctly and ascertain whether some of such products are dutiable and others exempted. If it is found that, upon correct classification of the final products, some are dutiable and others exempted, the manufacturer can start thinking of the procedure under Rule 57CC if he does not opt to maintain separate accounts in respect of common inputs used in, or in relation to, the manufacturer of the dutiable and exempted final products. The decision taken by the learned Commissioner (Appeals) has done violence to this scheme of law.
8. In the result, we set aside the impugned order and restore the order-in-original with the modification, in the facts and circumstances of this case that there shall be no penalty on the respondent. The appeal is accordingly disposed of.
(Pronounced in Court) (M. Veeraiyan) Member (Technical) (P.G. Chacko) Member (Judicial) pj 1 6