Customs, Excise and Gold Tribunal - Mumbai
Indorama Synthetics (I) Ltd. vs Commissioner Of Central Excise on 26 May, 2005
Equivalent citations: 2005(190)ELT193(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. This appeal arises out of order in Original no 60/2004/C Dated : 27/10/2004 confirming duty demand of Rs. 75.91 lakhs by invoking Proviso to Section 11A on finished goods made on M/s Indorama synthetics (I) Ltd on the ground that there is a change of ownership of the factory premises. An amount of Rs. 23 lakhs demand made on credit availed, and penalty imposed besides demand. The question that arises for consideration in this appeal is as to whether the appellant has to pay/reverse the cenvat credit in respect of capital goods and inputs lying as such and inputs (raw materials) contained in finished products lying as such and transferred to IRTL as on 1.4.2003
2. a) On careful consideration of the submissions made by both sides we find that the appellant prepared a scheme for transfer of sprun yarn business to another company namely M/s Indorama Textiles Ltd (for short IRTL) and got approved by MP High Court.
b) The appellants transferred portion of the appellants its spurn yarn manufacture to IRTL by segregating by building a boundary wall in between with different gates/entrance. IRTL applied for separate C.EX registration and the raw materials for the sprun yarn and the finished goods lying as on 1/4/2003 was also transferred but not removed; so the provision of Rule 3(4) of cenvat credit rules does not apply as in the case citied by Ld. Advocate of Metazeller Automotive Profiles India (P) Ltd 2004 (167) ELT 208 wherein "ownership of factory changed but capital goods and inputs not removed from factory-Held Rules 9, 49 and explanation to Rule 57AB of erstwhile C.EX Rules 1944 not applicable as there was no removal of goods, and no duty was required to be paid. Disallowance of Modvat credit set aside"
Rule 4 of C.EX Rules 2002-Rule 8 of CER 2002 by allowing appeals.
3. a) The appellants submit that in terms of Rule 8 of the Cenvat Credit Rules and in the light of the decisions of Cegat in the case of Jamna Auto Industries Ltd v. CCE-2001 (130) ELT 181 and in the case of Whirlpool of India Ltd v. CCE 2003 (58) RLT 241 such reversal was not required.
b) It is submitted that when spurn yarn (finished goods) business was transferred by the appellants to IRTL, the inputs and capital goods on which Cenvat Credit was taken, and the finished products lying in stock were sold to IRTL and not removed the goods. The appellants submit that there inputs and capital goods remained & were retained, in the same place where they were installed or & stored prior to the transfer of business and the provisions of Rule 3(4) of Cenvat Credit Rules would not apply to the Present case. The finished products lying in factory were not physically removed i.e. physically shifted therefore there is no liability to pay duty on such finished goods & inputs capital goods. The finished goods which cleared by IRTL by paying duty.
c) The Ld. Advocate submits that the demand of duty on the goods can be raised only at the time of removal and not before the goods were removed from the factory & relies upon
d) BPL' Electronics Ltd v. CCE 1944 (71) ELT 801
e) Jamna Auto Inds Ltd and Anr. v. CCE indore 2000 (41) RLT 826
f) Metzeler Automotive Profile India P Ltd v. CCE 2004 (167 ELT 208.
4. In the present case it is uncontested that the spurn yarn manufacture had been transferred to IRTL without any physical shifting of capital goods, finished products and inputs lying in the appellants factory. IRTL got separate registrations. The appellant deleted the portion of area and contents therein transferred to IRTL from the ground plan as was in the case of Jamna Auto Inds. Provisions of Rule 57F (2) is similar to Rule 3(4) of Cenvat Credit Rules on inputs and capital goods and such a transfer in law, following the decisions submitted by appellant.
a) Whirlpool of India Ltd. v. CC, New Delhi 2003 (58) RLT 241
b) Associated Cement Companies Ltd. v. CCE Belgaum 2004 (64) RLT 153 cannot call for any demands under the Central Excise Law.
In this view & following the above decision, no credit could be demanded to be reversed or recovered.
5. The impugned order demanding duty under section 11A of CCEX Act as duty on the finished goods lying in stock on the day of transfer of spurn yarn business to IRTL is incorrect Under Central Excise Act 1944 even though the levy is on manufacture the recovery is differed to the point of removal settled by the Federal Court & Supreme Court decisions.
a) The Province of Madras v. Boddu Paidanna & Sons 1978 ELT J (277)
b) J K Spinning & Weaving & Weaving Mills Ltd & 1987 (32) ELT 234SC wherein para 44 it has been laid -
"44 ....... Thus, there being no question of specification of the place of manufacture, the contention of the appellants that without such specification there cannot be any deemed removal fails"
The above position in law, when read with the observation in para 38 of the very decision. "Removal means physical shifting of goods" has been laid down & 'place of removal' to be may be a factory or any other place or premises of production or manufacture of excisable goods. Therefore, in the present case by mere change in ownership & possession 'Removal' of goods cannot be construed. There was no reason to order recovery of duty on excisable goods before the registration was altered there is no reason for such determination after alteration of registration as no shifting in physical term has occasioned IRTL has to and has discharged duty on removal/clearance from the premises.
6. In view of the finding the appeal is required to be allowed after setting aside the order. ordered accordingly.