Custom, Excise & Service Tax Tribunal
Hindustan Coca Cola Beverages Pvt. Ltd vs Commissioner Of Customs & Central ... on 1 January, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 20001 /2014 Appeal(s) Involved: E/449/2008-SM [Arising out of Order-in-Appeal No. 14/2008 dated 20/02/2008 passed by the Commissioner of Central Excise and Customs, Guntur] Hindustan Coca Cola Beverages Pvt. Ltd. 19/1, Gudipallipadu, 524 314, District Nellore, Andhra Pradesh Appellant(s) Versus Commissioner of Customs & Central Excise C.R. Buildings, Kannavarithota, Guntur Respondent(s)
Appearance:
Mr. Raghavendra B., Advocate For the Appellant Ms Sabrina Cano, Superintendent (AR) For the Respondent CORAM:
HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER Date of Hearing: 04/12/2013 Date of Decision:01/01/2014 Brief facts of the case are as follows. The appellants are engaged in the manufacture of Aerated Waters falling under Chapter Sub-Heading No. 2202.20 of the Central Excise Act, 1985. The unit is availing the facility of CENVAT credit by taking credit of duty paid on raw materials and capital goods and utilizing the same towards payment of central excise duty on finished products. During the course of verification of the records the department noticed that the appellants have cleared a total of 11,17,200 nos. of Glass Bottles and 33,400 number of crates both valued at Rs. 89,26,000/- in the month of November, 2001 to their sister concerns at Nashik, Wada and Ahmedabad under Shipment documents. They have not discharged the appropriate duty of Rs. 14, 28,160/- @ 16% on the value though they have taken and availed CENVAT credit on the above said quantities of inputs. As per the provisions of Sub Rule 1(C) of Rule 57 AB of erstwhile Central Excise Rules, 1944 and provisions of sub Rule (4) of Rule 3 of CENVAT Credit Rules, 2001/2002, 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 the relevant sections of the said Central Excise Act and such removal shall be made under the cover of an invoice referred to in Rule 52A of the erstwhile Central Excise Rules, 1944/Rule 7 of the CENVAT Credit Rules, 2001/2002.
2. The appellants had removed the inputs in question without raising any invoice and cleared them under there own private documents. When it was pointed out, the appellants raised three consolidated Central Excise invoices in respect of transfer/removal of glass bottles and crates during the period 2001-2002 and subsequently paid the duty of Rs. 14,28,160/-. Proceedings were initiated by issuing show-cause notice for recovery of interest under Section 11AB and imposition of penalty under Section 11AC of Central Excise Act 1944. The demand for duty, interest have been confirmed and penalty equal to the duty was imposed and hence the appeal.
3. The learned advocate on behalf of the appellants submitted that matter had come up before the Tribunal in the case of very same appellant but in respect of the unit at Visakhapatnam. In that case the issue involved was clearance of 9992 plastic crates on 15.12.2003 and 16.12.2003 to their sister unit at Nellore on loan basis. In that case after considering the issue, the Tribunal had allowed the appeal. The relevant portion of the decision are contained in paragraph 8 and the same are extracted as under:
On perusal of the entire proceedings before the lower authorities, I find that the appellant had been taking a stand that 9992 plastic crates which were transferred to their Nellore unit were out of the crates which were procured by them prior to 1.4.2000 and no credit of duty paid on such crates was availed by the appellant in their factory. It is seen that the appellant was able to produce invoices and evidences regarding the availment of credit of central excise duty paid on 5, 86,708 crates which were procured by them during the period 1.4.2000 to 14.12.2003. If that be so, then the lower authorities should have verified the statutory records like RG 23 Part I and physical stock, for coming to a conclusion as to crates which were cleared from the factory premises of the appellant to their own unit in Nellore, were a part of the quantity of 586708 crates, procured during the period 1.4.2000 to 14.12.2003 and credit was availed. A Simple exercise of stock taking and asking the appellant to reconcile the entire receipt of crates post 1.4.2000, could have resulted whether the claim of the appellant was correct, i.e., as to 9992 crates were received prior to 1.4.2000 and no CENVAT credit was availed on the central excise duty paid on such crates. This exercise is not done by the lower authorities, despite the claim of the appellant that they had not availed the credit on the 9992 crates, which were cleared from the factory premises to their own unit in Nellore. The Revenue authorities could not controvert the said claim of the assessee. Learned SDRs claim that it was for the assessee to justify their claim of 9992 crates being non duty paid will not carry the case of the Revenue any further, as the assessee have been taking the very same plea before the lower authorities and has produced the evidences regarding the duty paid character of crates which were brought into their factory from 1.4.2000 to 14.12.2003. In find that the appellants have made out a case that the crates which were cleared to their Nellore unit were non duty paid and they have not availed any CENVAT credit on the said crates. 3.1. On this submission, the learned AR submitted that the facts leading to the adjudication proceedings and culminating in the order are not same and therefore the decision cannot be applied. She submits that in that case the appellant had been taking the stand throughout that the crates which were transferred were out of the stock procured by them prior to 1.4.2000 during which time no credit was admissible. It was also observed by the Tribunal that appellant had been able to produce invoices and evidences regarding availment of credit of duty paid on 5,86,708 crates which were procured by them subsequent to 1.4.2000. When such submissions were made, the Tribunal took the view that the department should have conducted stock taking, verified the records and only after confirming that the crates were duty paid ones proceedings should have been initiated. The SDR submits that it was for the assessee to justify their claim was not accepted. The Tribunal made a categorical observation that the appellant has made out a case that the crates cleared to Nellore unit were not the ones on which credit was not taken. She submits that in this case when the authorized signatory was asked specifically as to whether CENVAT credit was taken on glass bottles and crates cleared by them, the authorized signatory Shri. Mamidi Siva Prasad had stated that we could not say surely whether we had taken the CENVAT credit or not, as these includes very old bottles prior to April 2000, why because these are durable and returnable nature. To the question as to whether the appellant had paid any duty on the transferred goods, the authorized signatory explained that they had not raised any excise invoice because the bottles which were sent were used bottles. The above two answers according to the learned AR show clearly that the appellants did not have any records or evidence to show that the goods which were cleared were the ones on which credit had not been taken. She submits that according to CENVAT Credit Rules, it is the responsibility of the assessee to account for the goods which are received and once CENVAT credit is taken, if the inputs are removed as such, assessee is liable to pay the credit taken on such inputs/capital goods. Therefore when there was a mix up of inputs on which credit was taken and the ones on which credit was not taken, it was for the assessee to ensure to maintain records or at least come up with evidence to show that the goods cleared were actually the ones on which credit had not been taken. From the annexures given by the authorized signatory it is quite clear that the assessee did not do any exercise at all at the time of clearing the inputs as such and did not verify whether the same were the different ones on which credit had been taken or they were the ones on which credit was not taken. Obviously no verification had been done. That being the position and in view of the legal provision which requires an assessee to account for the goods on which credit had been taken and to show that these are used in relation to manufacture and in the event of non-use reverse the credit taken, failure to do so would attract the duty as well as the interest and penalty. This was countered vehemently by the learned counsel who relied upon a letter dated 28.11.2002 written by the appellant to the Superintendent in charge of the Range. In that letter, the appellants had stated that prior to 1.4.2000, glass bottles and crates were not eligible for modvat credit and these submissions were made in the letter:
As you would be aware, prior to 01.04.2000, glass bottles and crates were not eligible for modvat credit by virtue of the exclusion clause contained in erstwhile Rule 57B(2)(iv). Accordingly, we had not taken modvat credit on crates obtained prior to 01.04.2000. Such glass and crates, on which modvat credit was not taken by us, constitute a significant number. It is our submission that it was these glass and crates, on which modvat credit was not availed, which was transferred by us to our sister units. Therefore, Rule 3(4) would not be applicable to these transfers as the amount specified in Rule 3(4) becomes payable only in case of inputs on which modvat credit had been taken and which are removed as such from the factory. Accordingly, the amount of Rs. 11, 78,107/- is not payable by us. 3.2. This was again countered by the learned AR to submit that no doubt this letter was received by the department but thereafter departmental officers conducted investigation and recorded the statements of the Plant Manager Shri Sanjay Kumar Awasthi and the authorized signatory Shri. Mamidi Siva Prasad. The statement of Shri. Mamidi Siva Prasad was recorded on 18.08.2005 and Shri Sanjay Kumar was recorded on 12.03.2003. She submits that Plant Managers statement was basically about the procedure and methods adopted by the appellants in their operations and authorized signatory who was in charge of excise matters was asked specifically questions relating to the removal of the inputs. She submits that since the submission made by the appellants in 2002 simply made a statement without supporting any evidence, department proceeded to conduct investigation and if they were to produce any documents or evidence or if the authorized signatory were not to admit that he was not sure as to what was the input cleared, question of further investigation would have arisen. In the case of Visakhapatnam unit the appellant throughout took the stand that what was cleared were only old crates received prior to 01.04.2000 and unlike in the present case there was no such statement admitting that appellant was not sure about the correct position. In view of the legal provision requiring the appellant to account for the goods, in the absence of fulfillment of such legal obligation duty has been correctly demanded from them.
3.3 The next ground advanced by the learned counsel in defence is limitation. He submits that show-cause notice was issued beyond the normal period and extended period has been invoked in this case. If the appellants were to pay duty and clear the goods, the receiver unit could have taken the credit. There is no dispute on this aspect. Therefore it is a revenue-neutral situation. When the situation is revenue-neutral, question of suppression of fact with intent to evade payment of duty does not arise and therefore the demand is not sustainable. To this learned AR submits that the appellants simply cleared it under their own dispatch documents, did not raise any central excise invoice and did not intimate the department and did not include the details in the returns filed with the department also. If the situation was totally revenue-neutral, the question arises as to why the appellants did not pay duty and clear under a proper invoice. Further she also raised the question as to why they did not raise a proper invoice as required under the Rule without debiting the excise duty at all. The very fact that goods were cleared under private documents and but for the detection by the department, duty could not have been demanded would show that there was suppression of fact and appellants failed to follow the relevant rules. No doubt revenue-neutrality could be a relevant factor but first what is required to be examined is whether the appellants followed the rules. In this case it is quite clear that appellants did not even bother to check whether the inputs that were being transferred were the ones on which credit had been taken or not leave alone ensuring that duty liability was discharged and requirement of law such as preparation of invoice, reduction of stock from the CENVAT credit account were followed. Even at the time of reply to the Range officer or after nearly 3 years when the statement was recorded, the appellant could not produce any documents or evidence to show the accountal of goods. When CENVAT credit is taken on the inputs, they have to be properly accounted. From 01.04.2000 the appellants started taking the credit, in respect of the earlier stock, naturally there would be an account to show what was the stock available. As and when the stock becomes useless such as glass breaking or crates breaking, the quantity has to be debited from the input stock account and if that accounting procedure was being followed correctly the appellant could have easily shown to the department that the goods were non-duty paid. The very fact that appellants were asked and could not come up with any evidence would show that they were not maintaining proper accounts for utilization of the inputs in question. This would show that the appellants did not maintain proper accounts in accordance with law, did not prepare proper documents at the time of removal and did not pay the duty which was required to be paid and when it was pointed out, simply informed the Superintendent in 2002 that what was cleared was out of the stock of inputs on which credit had not been taken. When further investigation was taken up and statements were recorded, under oath to submit the truth the officer of the company had to admit that he was not sure as to whether the inputs cleared were out of duty paid stock on which credit had not been taken. Whether the benefit of revenue-neutrality and normal period of limitation should be extended to such assessees who do not bother about the legal provisions and who did not maintain proper accounts and who are not able to show that the legal obligation cast on them have been fulfilled is the question that arises in this case and obvious answer would be a categorical no. Therefore I am unable to agree with the learned counsel that extended period could not have been invoked in this case.
3.4 The third point that was raised by the learned counsel was that there was no provision in the law for recovery of the duty if it was not paid under Rule 3(4) at all. He submitted that sub-section to Rule 3(5) was added only in 2013 therefore there was no recovery mechanism for the duty not paid on inputs cleared as such prior to 2013. In the absence of recovery mechanism the amount cannot be recovered. The learned AR first of all submitted that this was not a point which was raised before the original authority or the Commissioner (Appeals) or even in the appeal memorandum filed before the Tribunal. No application for inclusion of additional grounds has been filed. Today when both the submissions regarding merit and limitation were not being responded favourably by the Bench, the learned counsel came up with totally new plea which had never been taken earlier. Nevertheless she submits that explanation is clarificatory in nature and the absence of such explanation did not mean that there was no recovery mechanism earlier.
4. Before amendment Rule 3(4) of CENVAT Credit Rules read as under:
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. The explanation to Rule 3(5) erstwhile Rule (4) was added w.e.f. 1.03.2003 vide Notification No. 13/2003-CE (N.T). The explanation reads as under:
If the manufacturer of goods or the provider of output service fails to pay amount payable under sub-rules 5, 5A and 5B which will be recovered in the manner as provided in Rule 14, for recovery of CENVAT credit wrongly taken. It should be appropriate to see the provisions of Rule 14 also which is not undergone any amendment. Rule 14 reads as under:
Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or Sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries. What is required to be seen is whether without the explanation, recovery proceedings could have been initiated or not. In this case clearly the CENVAT credit which has been demanded has been wrongly utilized. Once the view taken is that the bottles and crates cleared by the appellants were ones on which credit had been taken, when they are cleared as such without being used in accordance with the provisions of CENVAT Credit Rules, the credit attributable to these inputs would have been utilized for payment of duty in respect of final products in which these inputs were used. That would mean that the credit was wrongly utilized. Once the CENVAT credit is wrongly utilized, provisions of Rule 14 of CENVAT Credit Rules is attracted. That being the position, I am inclined to agree with the learned AR that the explanation is only clarificatory in nature and a study of the relevant provisions would clearly show that even without the invocation of Rule 3(4) (presently Rule 5), the amount was recoverable. Even though learned counsel sought time for making further submissions, the learned AR vehemently opposed it stating that on the one hand the learned counsel has submitted a totally new ground during the course of hearing and on the other hand when he finds that Bench was not very responsive to his submissions, he is seeking time. In any case I consider that the matter does not require any further consideration in view of the analysis of the relevant rules made by me above. Further I find that the very same issue of recovery of the amount payable on capital goods had come up before me for consideration. During the hearing it was found that there was a Larger Bench decision which had gone into the issue of actual amount payable when the capital goods are removed as such. If the stand taken by the learned counsel that in the absence of recovery mechanism no recovery could have been made is correct, the matter of amount payable as per the Rule on used capital goods cleared would not have come up before Larger Bench. The relevant decision is:
Modernova Plastyles Pvt. Ltd. Vs. Commissioner of C. Ex., Raigad [2008 (232) E.L.T. 29 (Tri. - LB)] This is the reason why I am inclined not to accede to the request of the learned counsel.
5. In the result, appeal filed by the appellant has no merit and is rejected.
(Pronounced in open court on )
(B.S.V. MURTHY)
TECHNICAL MEMBER
iss