Madras High Court
India Pistons Ltd vs The Commissioner Of Central Excise on 10 January, 2013
Bench: Chitra Venkataraman, R.Karuppiah
In the High Court of Judicature at Madras Dated : 10.1.2013 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN and The Honourable Mr.JUSTICE R.KARUPPIAH Civil Miscellaneous Appeal (NPD) No.1696 of 2005 & CMP.No.9471 of 2005 India Pistons Ltd., Chennai-11 ... Appellant Vs The Commissioner of Central Excise (Appeals), Chennai-34. ... Respondent APPEAL under Section 35G of the Central Excise Act, 1944 to set aside the order No.301 of 2005 in Appeal No.E/1225/2001 dated 10.3.2005 of the Customs, Excise and Service Tax Appellate Tribunal, Chennai-6.
For Appellant : Mr.Krishna Srinivasan for Mr.S.Ramasubramaniam For Respondent : Mr.E.Vijayanand JUDGMENT WAS DELIVERED BY CHITRA VENKATARAMAN,J This civil miscellaneous appeal, filed at the instance of the assessee, was admitted by this Court on the following substantial questions of law:
"i. Whether the CESTAT failed to see that the scheme of deemed credit on aluminium, which itself postulates the availment of credit by the manufacturer without production of any duty paying documents, is a departure from the normal MODVAT Scheme and in such circumstances, whether the appellant could be denied the benefit of MODVAT on aluminium ingots received from a supplier, who has not claimed the benefit of any exemption Notification ? ii. Whether the CESTAT failed to see that in law and in facts there is a presumption that all stocks of aluminium lying in the country are duty paid, such duty having been paid by the original manufacturer when the aluminium came into existence in the market for the first time ? iii. Whether the CESTAT was right in denying the MODVAT credit to the appellant merely on the ground that they had received the same from the supplier, who has not availed the benefit of any exemption, whereas any other assessee, who even purchases the aluminium from a trader was entitled to the benefit of the deemed credit and whether such a gross discrimination between availment of deemed credit on stocks procured from a trader without duty paying document and procuring the stocks from a supplier, who had not availed the benefit of any exemption Notification was permissible ? iv. Whether the CESTAT was right in confirming the order of the Lower Authorities which had transgressed the order of remand dated 2.2.1996 passed by the Larger Bench of the Tribunal ? v. Whether the CESTAT committed a fundamental error in disregarding the evidence given by the supplier himself, that they had not availed the benefit of any exemption Notification, by placing a most untenable interpretation that the evidence of the supplier was not 'gospel truth' that too in the absence of any cross examination by the Department ? vi. Whether the order of the CESTAT committed a manifest error by going into issues which were not the subject matter of the Larger Bench's order of remand and in this connection whether the CESTAT failed to see that the order of remand of the Larger Bench was a limited remand and not an open remand ?"
2. It is seen from the facts that the appellant herein is a manufacturer of automobile pistons, gudgeon pins and piston rings from unwrought aluminium alloy ingots, unwrought aluminium ingots, unwrought aluminium castings procured from smelters, who manufactured the same from the duty paid aluminium. The assessee availed of MODVAT credit on imports such as aluminium ingots, aluminium castings, aluminium alloy ingots etc., in terms of Sub Rule (2) of Rule 57(G) of the Central Excise Rules, 1944.
3. It was noticed that during the period 1.3.1988 to 12.9.1998, the appellant/assessee had availed deemed credit to the extent of Rs.10,37,337.48 on aluminium alloy ingots. As per the Government Order F.No.342/1/88-TRV dated 20.5.1988, deemed credit was not available on aluminium alloys ingots, if such ingots were recognisable as being non-duty paid or wholly exempted from duty or charged to nil rate of duty. It was pointed out that the aluminium alloy ingots were manufactured by the manufacturer out of the duty paid unwrought aluminium falling under Chapter 76 and were exempted vide notification No.100/88. Thus, the assessee was not eligible for deemed credit for the above-said inputs from 1.3.1988. On appeal, the Collector (Appeals), allowed the claim of the assessee, holding that the exemption under the notification was only conditional and there was no evidence from the side of the Revenue to show that the aluminium ingots were manufactured out of non-duty paid goods. Thus, by order dated 15.12.1989, the Collector set aside the order of the Assistant Collector dated 3.3.1989, holding that the assessee was entitled to avail the deemed credit on the aluminium alloy ingots during the period 1.3.1988 to 19.5.1988, as there was no condition on payment of duty on the ingots as per F.No.332/30/87/TRU dated 2.11.1988 and hence directed restoration of the credit. As regards the deemed credit from 20.5.1988, exemption under Notification No.100/88 was conditional and yet, there was no evidence that the ingots were manufactured from out of non-duty paid goods. Thus, for the period 20.5.1988 to 12.9.1988, the matter was remanded for de novo enquiry.
4. Aggrieved by this, the Revenue went on appeal before the CEGAT that the letter issued by the supplier Indica Metal Trading Company on aluminium alloy ingots showed that what was cleared by them were non-duty paid item only and hence, in the absence of evidence to show that they were manufactured out of duty paid aluminium, the benefit of the notification could not be granted. On its part, the assessee filed cross objection and contended that in the light of the findings by the Appellate Authority, the relief should have been granted by the Appellate Authority itself for the period from 20.5.1988 to 12.9.1988.
5. It is further seen from the records that for the period 20.5.1988 to 12.9.1988, on a fresh enquiry, once again, an order was passed on 10.5.1994, negativing the claim of the assessee. This led to the filing of the appeal before the Collector.
6. The appeal filed by the Revenue for the period 1.3.1988 to 19.5.1988 before the Tribunal came up for consideration in the meanwhile. Pointing out to Notification No.100/88, the Tribunal, in its order in No.A/315-323/96-NB dated 2.2.1996 in Appeal E190/90, held that the exemption was a conditional exemption. The question whether the manufacturer of the inputs satisfied the condition on duty payment had to be investigated. If the manufacturer satisfied the condition and availed of the exemption, then the inputs had to be regarded as wholly exempted from duty and as such, clearly recognisable as being non-duty paid or charged to nil rate of duty and the assessee would not be entitled to deemed credit from 1.3.1988 to 19.3.1988 and 20.5.1988 to 12.9.1988. If the manufacturer did not avail of any benefit of exemption, the assessee would be entitled to deemed credit. Thus, the Tribunal remanded the case and allowed the Department's appeal. Thus, following the said order, the first Appellate Authority once again remanded the matter for de novo enquiry.
7. Admittedly, in the remand proceedings before the Assistant Commissioner (Central Excise), the appellant had an opportunity of cross examining its supplier. In question No.18, the appellant herein categorically asked its supplier as to whether it had availed of any exemption during the relevant period. The supplier replied that it had not claimed any exemption on the aluminium ingots. In spite of such an information elicited from the supplier, the Adjudicating Authority passed an order against the appellant herein, once again rejecting the claim, holding that the condition imposed in Notification No.100/88, superseded by Notification No.180/88, thus governing the case, the goods are recognisable as being non-duty paid aluminium. Thus, the claim of the appellant was rejected.
8. Aggrieved by this, the appellant went on appeal before the Commissioner. Stating that the supplier had stated in their letter dated 06.02.1991 and 07.02.1991 that they were availing of the benefit of exemption under Notification No.100/88, superseded by Notification No.180/88, the Commissioner held that deemed credit was not available to the assessee. Aggrieved by this, the assessee went on appeal before the CESTAT. The Tribunal rejected the case of the appellant herein on the ground that the Adjudicating Authority had given a finding that the manufacturer of the inputs had satisfied the condition and availed the exemption. The Tribunal found that whatever stated in the cross examination was not a gospel truth to be accepted without critical examination. It further pointed out that there was no evidence that they had paid duty and as the manufacturers were not entitled to exemption, they should have paid duty. Since the raw materials were non-duty paid, the assessee was not entitled to deemed credit. In the circumstances, the claim of the appellant was rejected. Aggrieved by this, the present appeal has been filed.
9. Learned counsel appearing for the appellant pointed out that in the course of the appeal proceedings, the Commissioner of Appeals pointed out in paragraph 12 that from the case records, he found that the supplier himself has stated in letters dated 6.2.1991 and 7.2.1991 that they had availed the exemption under Notification No.100/88, which was superseded by Notification No.180/88. According to the learned counsel for the appellant, there are no such letters and nothing was available on record.
10. Considering the specific question raised as to the existence of these letters and the denial that there are no such letters, this Court directed the learned Standing Counsel to ascertain from the Office of the Commissioner of Appeals as to the availability of these letters dated 6.2.1991 and 7.2.1991, addressed by the supplier. By letter dated 14.12.2012, the Deputy Commissioner, addressed to the Superintendent of Central Excise, Legal Section, Chennai II Commissionerate, and pointed out that the two letters are not available in the records and the assessee is not in possession of the said letters.
11. Thus, in the face of the above information on the alleged letters written by the supplier, the very basis of the order suffers a serious illegality.
12. Under Notification No.100/88 dated 1.3.1988, unwrought aluminium ingots alloyed or not and castings were wholly exempt from duty, if manufactured from goods falling under Chapter 76 or 83, if duty had been paid. The Notification reads as under:
"In exercise of the powers conferred by Sub-Rule (1) of Rule 8 of the CER, 1944 and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.183/84-Central Excises, dated the 1st August, 1984, the Central Government hereby exempts aluminium of the description specified in column 2 of the table hereto annexed and falling within Chapter 76 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column 3 of the said table subject to the condition, if any, laid down in the corresponding entry in column 4 thereof.
THE TABLE
---------
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SNo Description of Goods Rate Conditions (1) (2) (3) (4) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1 Unwrought aluminium, NIL If manufactured whether or not alloyed from goods falling within and cast articles Chapter 76 or 83 of of aluminium the said schedule on which duty of excise leviable under the said schedule or the additional duty leviable under the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has already been paid.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Provided that in respect of goods, mentioned against Sl. Nos.1,5,6,10 and 11 of the said table, the exemption shall not be applicable if they are manufactured by producers who produce unwrought aluminium from Bauxite or alumina or both, whether in the same factory or any factory in India."
13. The said Notification was superseded under Notification No.180/88 dated 13.5.1988, which reads as under :
"In exercise of the powers conferred by Sub-Rule (1) of Rule 8 of the CER, 1944 and in supersession of the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No.100/88-Central Excises, dated the 1st March 1988, the Central Government hereby exempts goods of the description specified in column 3 of the table hereto annexed and falling under Heading Nos. Or Sub. Heading Nos. Of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as are specified in the corresponding entry in column 2 of the said table, from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column 4 of the said table subject to the condition, if any, laid down in the corresponding entry in column thereof.
THE TABLE
---------
=============================================================================================== S.No. Heading Nos/Sub Heading Nos. Description of Goods Rate Conditions (1) (2) (3) (4) (5) =============================================================================================== 1 76.01 & 7616.90 Unwrought aluminium, NIL If manufactured whether or not from goods alloyed and cast falling within articles of aluminium Chapter 76 of the said schedule on which duty of excise leviable under the said schedule or the additional duty leviable under the Customs Tariff Act, 1975 (51 of 1975) as the case may be, has already been paid.
=============================================================================================== Provided that in respect of goods, mentioned against Sl.Nos.1,5,6,10 and 11 of the said table, the exemption shall not be applicable if they are manufactured by producers who produce unwrought aluminium from Bauxite or alumina or both, whether in the same factory or any factory in India."
14. Except for omitting goods falling under Chapter 83 of the Schedule to the Central Excise Tariff Act, 1985 there is no substantive variation between Notification No.100/88 and Notification No.180/88. Thus, the purport of the Notification is that unwrought aluminium, whether alloyed or not and cast articles of aluminium, would be exempt from duty, if they are manufactured from duty suffered goods, falling under Chapter 76 or 83 of the Schedule.
15. As already pointed out, the Notification in question is a conditional Notification, wherein the exemption is only subject to the satisfaction of the conditions stated therein on duty paid materials, falling under Chapter 76 or Chapter 83, being used in the manufacture of unwrought aluminium, whether or not alloyed. After the remand by the Tribunal, in the first instance, admittedly, the suppliers were examined by the Department and a right to cross-examination was given to the appellant. As seen already, in question No.18, the appellant herein cross-examined the supplier, which reads as follows :
"Are you availing any exemptions under the Central Excise during the relevant period ? No."
In the face of such categorical statement made by the supplier and in the absence of any material produced by the Revenue to hold that such a statement could not be accepted on its face value and further, in the absence of any letters from the supplier alleged to have been written and which were relied upon by the Appellate Authority to disallow the claim, we do not find any justifiable ground to uphold the finding of the Tribunal that the assessee was not entitled to the benefit of exemption.
16. As rightly pointed out by the learned counsel for the appellant, when the very basis of the Adjudicating Authority's order is not there, the Tribunal's order thereby suffers a serious infirmity in law, which calls for an interference by this Court. We may point out that the Tribunal, in its order, in paragraph 5 clearly pointed out that in the cross examination, no doubt Mr.Anser Basha of M/s.B.S.Metal Mart stated that they had not availed any exemption. Commenting on the reliance placed by the assessee on this answer given by the supplier, the Tribunal pointed out that the Adjudicating Authority had given a very well reasoned order. As already pointed out, if the Department felt that the statement of the supplier was not reliable, nothing prevented it from going in for a further enquiry into the matter. In fact, as pointed out by the learned counsel for the appellant, the registers pertaining to the suppliers were very much available before the Revenue and no efforts were taken to discredit any of those registers belonging to the suppliers. In the circumstances, we do not find any logic in the Tribunal raising a question as to why the supplier did not pay the duty and the answer given towards the end of paragraph 5 to such a question raised, seems to be a vague one, not supported by any material.
17. In the circumstances, we set aside the order of the Tribunal, allow the civil miscellaneous appeal and hold that the appellant is entitled to the benefit of exemption. No costs. Consequently, the above CMP is closed.
RS To The Commissioner of Central Excise (Appeals), Chennai 34