Custom, Excise & Service Tax Tribunal
Mro-Tek Ltd vs Bangalore-I on 25 March, 2024
E/546-547/2012
STOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Central Excise Appeal No. 546 of 2012
(Arising out of Order-in-Original No. 36/2011 dated 30.11.2011
passed by the Commissioner of Central Excise, Bangalore
Commissionerate, Bangalore.)
M/s. MRO-Tek Limited, Appellant(s)
29b/1, Electronic City, Hosur Road,
Bangalore - 560 100.
VERSUS
Commissioner of Central
Excise,
Bangalore-I Commissionerate, P.B.
No.5400, Central Excise Revenue
Respondent(s)
Building, Queens Road, Bangalore - 560 001.
With Central Excise Appeal No. 547 of 2012 (Arising out of Order-in-Original No. 37/2011 dated 30.11.2011 passed by the Commissioner of Central Excise, Bangalore Commissionerate, Bangalore.) M/s. MRO-Tek Limited, 29b/1, Electronic City, Hosur Road, Bangalore - 560 100.
Appellant(s) VERSUS Commissioner of Central Excise, Bangalore-I Commissionerate, P.B. No.5400, Central Excise Revenue Building, Queens Road, Bangalore - 560 001. Respondent(s) APPEARANCE:
Smt. Neethu James & Sh. Md. Ibrahim, Advocates for the Appellant Shri Rajesh Shastry, Superintendent, Authorised Representative for the Respondent CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MR. PULLELA NAGESWARA RAO, MEMBER (TECHNICAL) Final Order No. 20219-20220 /2024 Page 1 of 16 E/546-547/2012 DATE OF HEARING: 26.09.2023 DATE OF DECISION: .03.2024 PER : DR. D.M. MISRA These two appeals are filed against respective Orders-in- Original passed by the Commissioner of Central Excise, Bangalore, since involve issues inter-connected to each other, taken up together for hearing and disposal.
Appeal No.E/247/2012
2. Briefly stated the facts of the case are that the appellant's premises at 29B/3, Electronic City, Hosur Road, Bangalore- 560 100 was registered with the department under the category of 'Registered Dealer' as per the provisions of Central Excise Act, 1944 read with the relevant rules. The appellants import 'modems' falling under Chapter 8551762 of CETA,1985 on payment of appropriate duties of customs, CVD and additional duty, education cess, secondary and higher education cess. The modems are stored at the said trading premises; then the packing of modems are opened and after testing, accessories placed, repacked and labelling with their name, logo and address sold to their customers passing on the amount of CVD and other duties paid on the imported goods mentioning in the said dealer's invoice. The appellant's said premises was visited by the Excise Department in March 2010, and on completion of investigation, alleging that the activities carried out in the registered dealer's premises 29B/3, resulted into 'manufacture' in terms of Section 2(f)(iii) of Central Excise Act, 1944, show- cause notice was issued to the appellant on 17/02/2011 for recovery of duty amounting to Rs.4,66,90,550/-with interest and penalty. On adjudication the demand has been confirmed with interest and equivalent amount of penalty.
Page 2 of 16E/546-547/2012 Appeal No. E/246/2012 The appellants are having their factory at 29B/1, Electronic City, Hosur Road, Bangalore - 560 100 which is adjacent to their dealer's premises, also registered with Department for manufacture and clearance of excisable goods such as modems, converters, ethernet switch, ISDN terminals, multiplexes etc. in their own brand name falling under Chapter heading 851762 of the Central Excise Tariff Act, 1985 (CETA, 1985, for short). They avail cenvat credit on inputs used in manufacturing of finished goods under CENVAT Credit Rules, 2004. After visit of their trading premises by the Officers in March 2010, it was opined by the Department that the activities carried in their trading premises on imported modems amounts to 'manufacture, the appellant availed cenvat credit of the CVD and other admissible duties/cess paid on the modems at the time of its import amounting to Rs.5,88,26,035/-in the cenvat credit register maintained in the manufacturing premises. Later, the liability calculated on the manufactured modems at trading premises that is, 4,66,90,550/-, and was debited from the cenvat account. Also, an amount of Rs.1,16,79,843/- was debited from the said credit amount of for clearance of manufactured goods. Alleging that the appellant are not entitled to avail cenvat credit pertaining to their trading premises, show cause notice was issued for recovery of the amount 4,66,90,550/- debited towards duty on traded modems and also for recovery of Rs.1,16,79,843/- utilised in discharging the duty liability for the period from 05/06/2010 to 31/10/2010 alleging violation of Rule 8(3A) of the Central Excise Rules, 2002 (CER, 2002, for short) with interest and penalty. On adjudication, the demand with interest and penalty have been confirmed by the Commissioner.
3.1. At the outset, the learned advocate for the appellant has submitted that the Appellants are having two premises, one registered as manufacturing unit located at 29B/1 and the second one situated adjacent to it and part of the same Page 3 of 16 E/546-547/2012 compound at 29B/3, Hosur Road, Electronic City, Bangalore 560100. The appellants are primarily engaged in the manufacture of communication and network equipment. For the activity of manufacture, they are registered with the Department and the manufactured goods are sold in considerable volume from the manufacturing premises. The products which were not sold in big volumes, being uneconomical for manufacture, the same are imported by the appellants and supplied to the customers after testing and packing in cartoons. The said activity is carried out in their trading premises, also registered with the Department.
3.2. Explaining the activities undertaken at the trading premises, the learned advocate has submitted that they import modem and other goods in fully manufactured condition which is functional and marketable and ready for sale in domestic market. After receiving the imported goods in their trading premises, undertake the following activities:-
• The modems are unpacked from the boxes (in which they are imported) and subjected to
(a) physical inspection to ascertain if there is any transit damage which would have occurred to the product and is visible from outside and
(b) functionality test to ascertain that no damage is caused (during transit) to the internal components of the Modem and to ensure that the same is in working condition.
• After completion of such testing process, a label containing the Company's logo is affixed on the top cover of the Modem and a logo containing the words 'Marketed by MRO-TEK Ltd. Bangalore' is affixed on the bottom cover of the Modem.
• The serial number of the product as allotted by the Original Manufacturer, which is affixed by the manufacturer by way of a label and is found even at the time of importation by the appellants, continues to be valid and remains unaltered at the time of sale by the Appellants.
• The Appellants indigenously procure certain accessories such as AC power chord, DC cable, RJ45 to Roset Box Page 4 of 16 E/546-547/2012 Cable etc. which accessories are also supplied as such, along with the imported Modems.
• The individual modems are affixed with stickers depicting before clearance of the same to their respective customers.:
(a) Name of the manufacturer (which is the overseas supplier),
(b) imported and marketed by MRO-TEK Limited'
(c) And other requirements such as MRP, quantity etc., as stipulated under SW&M Act;
• Along with such accessories, the required number of modems as per customer order is packed in carton boxes.
3.3. She has submitted that the modems are specified under the Third Schedule of the Central Excise Act, 1944 referred to under Section 2(f)(iii) of the Central Excise Act, 1944 and w.e.f. 24/01/2008, brought under MRP based assessment vide Notification No.5/2008-CE(NT) dt. 24/01/2008. From 24/01/2008, the appellant imported modems on payment of appropriate import duties including CVD on the declared MRP and also discharged Special Additional Duty(SAD). Since the appellant was of the impression that activities undertaken in respect of the imported modems do not result into manufacture, they have not availed the credit of the CVD and SAD paid by them on its import. She has submitted that after investigation, a show-cause notice was issued to them on 17/02/2011 demanding excise duty of Rs.4,66,90,550/- on the imported modems. Also, simultaneously another show-cause notice was issued to their manufacturing unit proposing to disallow and recover cenvat credit of Rs.5,88,26,035/- availed during March 2010 alleging that the modems were not received in their factory but were received in the dealers premises.
3.4. It is her contention that the activities undertaken by the appellant on the imported modems does not amount to manufacture in terms of Section 2(f)(iii) of the Central Excise Act, 1944. Referring to the definition of 'manufacture' at Section 2(f)(iii), she has submitted that it extends the definition of manufacture and artificially brings into tax net certain products Page 5 of 16 E/546-547/2012 or activities which would not have otherwise come under the scope of the definition of manufacture in terms of Section 2(f)(iii) and thus would not attract excise duty. Therefore, the meaning of 'manufacture' in such circumstances would have to be strictly interpreted. In support, she placed reliance on the following decisions:-
(i) Union of India & Others v. Bombay Tyre International Limited [1983 (14) ELT 1896 (SC)]
(ii) Commissioner of Customs (Import), Mumbai v.
Dilip Kumar [2018 (361) ELT 577 (SC)] 3.5. She has further submitted that in the present case, the modems as imported are packed in unit containers. The appellant undertakes testing of the modems, affixes labels on the modems and thereafter packs the modems in the very same unit container in which it was imported. Mere packing of product after undertaking the activity of testing and inspection is not re- packing. Along with such modems, accessories are packed in carton boxes. The appellants do not undertake repacking of modems in unit containers nor labelling or re-labeling of the containers. Also they do not undertake any other treatment on the goods to render the same marketable. It is her contention that the impugned products at the time of import are complete and fully marketable condition and are ready to sale to the end customers. The testing activity undertaken by the appellant was merely to ensure that the product is not damaged; hence it cannot be called a treatment on the goods to render the same as marketable. In support, she placed reliance on the judgment of the Tribunal in the case of Velere Power India Pvt. Ltd. Vs. CCE, Bangalore-I [2011(265) ELT 156 (Tri. Bang.)].
3.6. She has submitted that the impugned order wrongly held that the appellants undertake repacking of the imported modems in unit containers, whereas they repack the required number of modems in a carton box which is not repacking in unit containers as laid down under Section 2(f)(iii) of the Central Excise Act, Page 6 of 16 E/546-547/2012 1944; hence the activity cannot be considered as amounting to manufacture.
3.7 She has further submitted that the credit of Rs.5,88,26,035/- availed on the imported modems at their manufacturing premises have been utilised to the extent of Rs.4,66,90,550/- for payment of duty on the imported modems; the balance credit of Rs.1,21,35,485/- stands utilised in the clearance of manufactured goods. Referring to the judgment of Hon'ble Supreme Court in the case of CCE Vs. Narmada Chematur Pharmaceuticals [2008(229) ELT 485 (SC)] that where the amount of Cenvat/Modvat credit wrongly availed is equivalent to the amount of excise duty paid by not availing the exemption, the consequence is revenue neutral; hence the demand is bad in law.
3.7. Further she has submitted that if it is held that the activities undertaken by the appellant amount to manufacture, then they are entitled to cenvat credit of additional duties of Customs (CVD) and also Special Additional Duty (SAD) paid by them on import of the said modems. She has argued that when it is held that the activity undertaken by the appellant at their trading premises amounts to manufacture, the duty paid on the inputs at the time of import is admissible as credit for payment of duty on the final product. In support, they have referred the following judgments:-
(i) Siddhartha Tubes Ltd. Vs. CCE, Indore [2006(193) ELT 3(SC)]
(ii) ITW Signode India Ltd. Vs. CCE [2003(158) ELT 403 (SC)]
(iii) United Distributors vs. CCE, Thane [2014 (309) E.L.T. 571 (Tri. - Mumbai)]
(iv) L'Oreal India Pvt. Ltd. v. CCE, Raigad [2014 (308) E.L.T. 746 (Tri. - Mumbai)]
(v) BASF India Ltd. Versus CCE, Vapi [2009 (245) E.L.T. 381 (Tri. - Ahmd)] 3.8. Further she has submitted that the entire exercise is revenue neutral inasmuch as the input credit availed has been Page 7 of 16 E/546-547/2012 used to pay duty on the final products. In support, she has referred the following judgments:-
➢ Nirlon Ltd. Vs. CCE, Mumbai [2015(320) ELT 22 (SC)] ➢ United Distributors vs. CCE, Thane [2014 (309) E.L.T. 571 (Tri. - Mumbai)] ➢ L'Oreal India Pvt. Ltd. v. CCE, Raigad [2014 (308) E.L.T. 746 (Tri. - Mumbai)] ➢ BASF India Ltd. Versus CCE, Vapi [2009 (245) E.L.T. 381 (Tri. - Ahmd.)] 3.9. It is further submitted that since the Department considered the activity undertaken by the appellants results into manufacturing, then the dealers premises be considered as manufacturing unit and automatically covered under the Central Excise registration obtained as manufacturer. In support, they have referred to the following judgments:-
(i) CCE & ST, LTU, Bangalore vs. Biocon Ltd. - 2014 (309) E.L.T. 66 (Kar.)
(ii) Munjal Shawa Ltd. vs. CCE, New Delhi - 2000 (116) E.L.T. 684 (Tribunal)
(iii) Greenply Industries ltd. Vs. CCE, Kolkata-VII [2014(314) ELT 356 (Tri. Kolkata)]
(iv) Maruti Udyog Ltd. Vs. CCE, New Delhi [2000(118) ELT 43 (Tri. LB)]
(v) Lakshmi Gayatri Iron & Steel P. Ltd. Vs. CCE, Hyderabad [2016(340) ELT 724 (Tri. Hyd.)]
(vi) CCE, Coimbatore Vs. Habasit Iakoka P. Ltd.
[2014(306) ELT 455 (Mad.)]
(vii) Vadilal Industries Ltd. Vs. CCE, Ahmedabad [1998(99) ELT 513 (Tri.)] 3.10. On the issue of alleged violation of Rule 8(3A) of Central Excise Rules, 2002, she has submitted that the said rule is applicable only in those cases where the assessee has defaulted in payment of duty beyond 30 days from the due date. In such circumstances, the assessee is required to pay excise duty for each consignment at the time of removal without utilising cenvat credit till the amount is paid with interest. The submission of the learned advocate is that the entire case of the Department rests on the question whether cenvat credit availed by the appellant on the imported modems is irregular or otherwise. It is her contention that the cenvat credit was availed after due Page 8 of 16 E/546-547/2012 intimation and directions from the Department and cannot be treated as irregular. Hence, there is no question of vilation of the said Rule 8(3A) as they had not defaulted in payment of duty payable during the month. Also, she has submitted that Rule 8(3A) of the Central excise Rules, 2002 has been held to be ultra vires by the Hon'ble Gujarat High Court in the case of Indsur Global Ltd. Vs. UOI [2014(310) ELT 833 (Guj.)].
3.11. Further, she has submitted that the demand notices issued on 17/02/2011 demanding duty from 24/01/2008 to 31/03/2010 is completely barred by limitation as there is no suppression of facts. The appellants under bona fide belief that activity does not amount to manufacture did not avail credit of CVD and SAD of Rs.5,88,26,035/- paid at the time of import of the modems against the duty liability of Rs.4,66,90,550/- which clearly indicates their bona fide belief. The entire demand is based on interpretation of Section 2(f)(iii) of CEA, 1944; hence invocation of extended period of limitation is bad in law. In support, they have referred the following judgments:-
➢ Ford India Ltd. vs. CCE, LTU, Chennai - 2018 (363) E.L.T. 737 (Tri. - Chennai) ➢ Shatabdi Chemicals Pvt. Ltd. Vs. CCE. & S.T., Ghaziabad - 2022 (381) E.L.T. 795 (Tri. - All.) and ➢ STI Industries vs CCE, Daman - 2015 (327) E.L.T. 514 (Tri. - Ahmd.)
4. Learned AR for the Revenue reiterated the findings of the learned Commissioner.
5. Heard both sides and perused the records.
6. The issues involved in the present appeals for determination are whether: (i) the activities carried out by the appellant on the imported Modem at their Registered trading premises at 29B/3 resulted into 'manufacture' as per Section 2(f)(iii) of Central Excise Act, 1944; (ii) duty paid after availing cenvat credit of the CVD paid on imported modems from the Page 9 of 16 E/546-547/2012 manufacturing unit at 29B/1 is permissible; and (iii) the Appellant contravened Rule 8(3A) of the Central Excise Rules, 2002 in discharging the duty by utilising the credit from their manufacturing unit situated at 29B/1.
7. The admitted facts are that there are two units operated by the appellant situated adjacent to each other at 29B/1 and 29B/3, Hosur Road, Electronic City, Bangalore; the former one is registered as a manufacturing unit and the second one Registered as trading Unit. The appellant are manufacturing and trading the same items viz. modems, converters, etc. falling under Chapter heading 851762 of Central Excise Tariff Act. After import of the modems on payment of applicable CVD and SAD,etc. the same are received at their premises at 29B/3 and subjected to certain activities/processes before sale of the same to customers. The activities include opening of the boxes containing modems, testing the same about its working condition, damages during transit etc. and on completion of such testing, label containing the appellant's logo is affixed on the cover of the modem and also sticker/label as "Marketed by MRO- Tek, Bangalore". Also, the Appellant procure indigenously accessories like AC power chord, DC cable,RJ45 Roset Box cable etc. supplied/packed along with the imported modems. Modem is notified under the Third schedule to the CEA,1944, accordingly, these activities have been considered by the Revenue as deemed 'manufacture as specified under Section 2(f)(iii) of the Central Excise Act, 1944. To examine the said allegation, the relevant provision is reproduced below:-
Section 2(f) "manufacture" includes any process
(i) ..... ....
(ii) .... ...
(iii) Which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer;Page 10 of 16
E/546-547/2012
8. A plain reading of the extended meaning of 'manufacture', it is clear that for the goods specified in Third Schedule, the activities of packing or repacking of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of the retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer have been considered as amounting to 'manufacture' even if the said activities do not fall under main part of Section 2(f). Modems are specified at Sl.No.81A of the Third Schedule to the Central Excise Act, 1944.
9. The contention of the appellant is that they only open the packages containing modems and there is no re-packing, nor labelling or relabelling except affixing the logo and details of the appellant, that is, "Marketed by MRO-TEK Ltd. Bangalore". Also, it is argued that these activities cannot fall under the scope of "adoption of any other treatment on goods to render the goods marketable" as the Modems are already in marketable condition at the time of its import. The Revenue's argument on the other hand is that the imported modems are not sold as such but subjected to the process of testing, affixation of the logo of the appellant and selling and clearing the same along with other accessories by repacking in cartoons so as to make the modems usable and functional by the end consumers; hence definitely fall under the definition of deemed 'manufacture' and in particular under the scope of the expression "adoption of any other treatment on the goods to render the product marketable to the consumer".
10. A careful analysis of the activities undertaken by the appellant from the dealers premises, it reveals that the imported modems were not simply cleared 'as such' but it has been opened, tested (for whatsoever reason); the purpose is not only visual inspection as a formality, but tested by qualified engineers which necessarily includes, if damaged or any manufacturing deficiency, to repair/remove the same, to put in saleable Page 11 of 16 E/546-547/2012 condition; the tested modems then repacked in the boxes and placed in bigger cartons along with other modems, accessories which would make the modems marketable, procured and supplied along with the modems after affixing the logo and labelling the modems with appellant's name and address. These activities definitely relevant and necessary for marketing the product to the end consumer. The argument of the Appellant that the Modems imported already in marketable condition may not stand the test of deemed 'manufacture' as prescribed under Clause(iii) of Section 2(f) as the same has to be examined from the point of end consumer as held by the Hon'ble Supreme Court in the case of Air Liquide North India Pvt. Lt. Vs. CCE, Jaipur 2011(271) ELT 321(SC) It is observed by their Lordships as:
"18. It is also pertinent to elucidate on the phrase "marketable to the consumer". The word "consumer" in this clause refers to the person who purchases the product for his consumption, as distinct from a purchaser who trades in it. The marketability of the product to "the purchaser trading in it" is distinguishable from the marketability of the product to "the purchaser purchasing the same for final consumption" as in the latter case, the person purchases the product for his own consumption and in that case, he expects the product to be suitable for his own purpose and the consumer might purchase a product having marketability, which it did not possess earlier.
19. Therefore, the phrase "marketable to the consumer" would naturally mean the marketability of the product to "the person who purchases the product for his own consumption". Hence, the argument of the appellant that as the product was already marketable, the provisions of Chapter Note 10 of Chapter 28 of the Act would not be attracted, will have to be rejected."
11. The Learned Commissioner in the impugned order dt. 30/11/2011 (appeal No.ST/547/2012) observed that by undertaking various processes like opening the boxes, testing the modems, making it functional and thereafter repacking, affixing their logos, definitely enhances the marketability and usability by the end user.
12. In similar circumstances for the product, 'switch gears', this Tribunal in the case of HPL Electronic & Power Ltd. (supra) Page 12 of 16 E/546-547/2012 held that the activities of packing and repacking, labelling and relabelling of switch gear amounts to manufacture within the definition of Section 2(f)(iii) of the Central Excise Act, 1944. The said decision has been upheld by the Hon'ble Supreme Court as reported in 2018(12) GSTL J33(SC). More or less, similar view also has been expressed by the Tribunal in the case of Komatsu India Pvt. Ltd. Vs. CCE, Nagpur [2017(345) ELT 256 (Tri. Mum.)]. Following the above precedents, we are of also of the view that the activities carried by the appellant in the premises at 29B/3 on imported modems would result into 'manufacture' within the meaning of Section 2(f)(iii) of Central Excise Act, 1944. Consequently, the appellant are required to discharge duty on the imported modems for the aforesaid activities in their trading premises, which amounts to manufacture..
13. The next issue to be addressed relates to discharge of duty liability by the Trading unit on the imported modems, debiting through the CENVAT credit account maintained in Manufacturing Unit.
14. We find that on visit of the officers of the HQ. Preventive to the premises of the appellant and during the course of recording the statement of Shri R. Ramaswamy, Company Secretary of the appellant on 29.3.2010, initially though he has not accepted the activities carried out by them would result into manufacture; however made a statement that they would discharge the duty and accordingly stated that the appellant be permitted to take credit in their RG23A Part-II register at their manufacturing premises situated adjacent to dealers premises. On the next day i.e. on 30/03/20210, the appellant addressed a letter to the Superintendent of Central Excise, Headquarters, Preventive, Bangalore-I Commissionerate stating that they had availed credit of Rs.5,64,65,587/- in their RG23A Part-II register giving a break up of the said credit comprising of CVD, Education Cess and Secondary and Higher Education Cess and additional duty paid up to 28/02/2008 and Rs.1,16,38,131/- being duty paid on Page 13 of 16 E/546-547/2012 imports from March 2008 to 28/02/2010. Also, they have informed that they would be debiting an amount of Rs.4,45,73,347/- being the duty paid in respect of modems removed by them by way of sales during the period 24/01/2008 to 28/02/2010. Thereafter the appellant availed the credit at the manufacturing unit and debited the amount payable on the modems sold earlier as such without considering the same as 'manufacture' within the scope of definition of 2(f)(iii) of the Central Excise Act, 1944.
15. We find that the Commissioner in the impugned order no. 36/2011(Appeal No.546/2011) has not discussed the correctness of the amount of CENVAT credit equal to the admissible duties paid on the imported modems, which later subjected to various processes and found to be resulted in deemed manufacture, but did not accept the payment of duty by debiting the CENVAT account maintained at the manufacturing unit involved on the said modems, observing that the appellant had not complied with the procedure of amending the Central Excise registration of the manufacturing premises and merging the dealers registration with manufacturing unit registration.
16. In our view, the observation of Ld. Commissioner seems to be purely technical in nature as the appellant had sold the imported modems after certain processes carried out on the said modems which they considered as not resulting into 'manufacture' and accordingly issued dealer's invoices passing on the amount of cenvat credit to the customers, as a 'first stage registered dealer'. When the Department examined the processes/activities carried out by the appellant opined that the activities would result into deemed 'manufacture'; hence duty is payable, therefore in all fairness, the dealer's Registration for the said premises belonging to the appellant ceases and the trading premises became manufacturing premises as there is no other items other than 'modems' which was traded from the said premises . In the normal course, they would have been asked to Page 14 of 16 E/546-547/2012 change their registration and discharge duty after availing admissible cenvat credit on the inputs used in the manufacture of final product. Since in the present case, the same products are manufactured and cleared by them on payment of duty from their registered premises as manufacturing unit, therefore, merging both dealer's registration with manufacturing registration of the adjacent premises is only a procedural issue which cannot come on the way of allowing credit to discharge duty on the imported modems, once it is considered that the activities undertaken on the said modems amounts to manufacture. Therefore, we do not find any irregularity in availing the cenvat credit even though the input-modems had already sold/cleared by the appellant. Further, when there is no dispute that the imported modems earlier received and cleared from trading premises; the credit subsequently availed only for the purpose of discharging duty leviable on the 'modems', when the activities found to be 'manufacture' under Section 2(f)(iii) of Central Excise Act, 1944. However, the excess credit that remained in balance after debiting the credit equal to the duty payable on the imported modems, and utilised for the clearance of their own manufactured modems at the manufacturing premises, is definitely inadmissible, as the said excess credit attributable to imported modems had already been passed on by the Appellant to their customers while selling the imported modems, by issuing dealer's invoice. Now, availing the same credit again and utilising it for clearance of indigenous modems and other goods manufactured in the manufacturing premises, would result in availing and utilising cenvat credit twice on the same amount of CVD and other duties relating to imported modems, that is, once mentioning in the dealer's invoice and second time in the manufacturer's invoice while clearing the manufactured goods from the manufacturing premises. The said excess credit has been subsequently paid by the appellant by debiting their PLA account with interest and the ld. Commissioner has rightly appropriated the same in the order.
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17. The next issue is whether there has been any violation of Rule 8(3A) of the Central Excise Rules, 2002. As contended by the Ld. Advocate for the Appellant since Rule 8(3A) of the Central Excise Rules, 2002 has been held to be ultra vires of the rule making power by the Hon'ble Gujrat High Court in the case of Indsur Global Ltd. (supra), therefore, the findings of the learned Commissioner on this count also cannot be sustained.
18. We find that the issue involved in the present case is interpretation of law, and consequent actions of debiting the duty from cenvat credit account maintained in the manufacturing premises was after due intimation to the Department, therefore imposition of penalty on the appellants is unwarranted and accordingly set aside.
19. In the result, the impugned orders are modified to the extent mentioned as above and the Appeals are disposed of accordingly.
(Pronounced in Open Court on )
(D.M. MISRA)
MEMBER (JUDICIAL)
(PULLELA NAGESWARA RAO)
MEMBER (TECHNICAL)
Raja...
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