Custom, Excise & Service Tax Tribunal
Dakshinanchal Vidyut Vitran Nigam Ltd vs Cgst & Ce Agra on 29 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.70404 of 2016
(Arising out of Order-in-Original No.AGA-EXCUS-000-COM-0025-15-16 dated
20/01/2016 passed by Commissioner of Central Excise & Service Tax, Agra)
M/s Dakshinanchal Vidyut Vitran Nigam Ltd. (Pole Unit),
.....Appellant
(132-KVA Sub-Station, Tajganj, Agra)
VERSUS
Commissioner of Central Excise, Agra ....Respondent
(Commissionerate, Agra) WITH I. Excise Appeal No.71020 of 2018 (M/s Dakshinanchal Vidyut Vitran Nigam Ltd. (Pole Unit), Jhansi; (Arising out of Order-in-Appeal No.208/CE/Appeal/Audit/LKO/2018 dated 28/03/2018 passed by Commissioner (Appeals) Central Excise & Services Tax, Lucknow) II. Excise Appeal No.70149 of 2019 (M/s Dakshinanchal Vidyut Vitran Nigam Ltd. (Pole Unit), Agra; (Arising out of Order-in-Appeal No.568/CE/Appeal/LKO/2018 dated 20/11/2018 passed by Commissioner of Customs, Central Excise & Services Tax, Lucknow) III. Excise Appeal No.70109 of 2021 (M/s Dakshinanchal Vidyut Vitran Nigam Ltd. (Pole Unit) Agra; (Arising out of Order-in-Appeal No.192/CE/Appeal/LKO/2020 dated 17/11/2020 passed by Commissioner of Customs, Central Excise & Services Tax, Lucknow) APPEARANCE:
Ms Stuti Saggi, Advocate & Shri S.P. Ojha, Consultant for the Appellants Shri A.K. Choudhary, Authorised Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NOs.70476-70479/2024 DATE OF HEARING : 09 April, 2024 DATE OF PRONOUNCEMENT : 29 July, 2024 Excise Appeal No.70404 of 2016 2 SANJIV SRIVASTAVA:
These appeals are directed against the orders as detailed in table bellow:-
Table-I Sl.
Appeal No. Impugned Order Number and date No. Arising out of Order-in-Original No.AGA-EXCUS-000-
1. E/70404/2016 COM-0025-15-16 dated 20/01/2016 passed by Commissioner of Central Excise & Service Tax, Agra.
Arising out of Order-in-Appeal
No.208/CE/Appeal/Audit/LKO/2018 dated
2. E/70120/2018
28/03/2018 passed by Commissioner (Appeals) Central Excise & Services Tax, Lucknow.
Arising out of Order-in-Appeal
No.568/CE/Appeal/LKO/2018 dated 20/11/2018
3. E/70149/2019
passed by Commissioner of Customs, Central Excise & Services Tax, Lucknow.
Arising out of Order-in-Appeal
No.192/CE/Appeal/LKO/2020 dated 17/11/2020
4. E/70109/2021
passed by Commissioner of Customs, Central Excise & Services Tax, Lucknow 2.1 Appellants are State Government undertaking holding on by the State Government of Uttar Pradesh.
2.2 During the period of dispute the appellants were manufactured and cleared PCC Poles falling under Sub-heading No.68109990 of the First Schedule to Central Excise Tariff Act, 1985 by engaging labour contractors. The Pole manufactured were cleared to their own electricity Distributions/Division for use in different schemes of State Government including rural electrification schemes.
2.3 Under reasonable belief that excise duty is not payable by them as per exemption Notification No.74/1993-CE dated 28.02.1993 they were not paying any duty nor whether claiming any Cenvat credit on inputs, capital goods and input services. 2.4 Show Cause Notices were issued to the appellants for the periods as detailed in table bellow:-
Table-II Sl.
SCN No. & Date Period involved
No.
V(15) Off/Adj/CE/61/2014/5945
1. April-2013 to June-2015
dated 08.05.2014
V(15) Off/Adj/CE/76/2014
2. November 2011 to May 2016
dated 30.11.2016
V(15) Adj/DVVNL/CE/08/2017/3239
3. July, 2015 to March-2017
dated 04.07.2017
Excise Appeal No.70404 of 2016
3
V(1) CGST/Div-
April-2017 to June-2017
4. I/SCN/DVVNL/284/18/3837
dated 02.11.2018
2.5 The show cause notices have been adjudicated by the
Original Adjudicating Authorities and the appeals were filed before the Appellate Authority. These appeals were decided, as per orders detailed in para-1 table-1 above. 2.6 Aggrieved appellants have filed these appeals. 3.1 We have heard Ms Stuti Saggi Advocate & Shri S.P. Ojha Consultant for the appellant and Shri A.K. Choudhary Authorized Representative for the revenue.
3.2 Arguing for the appellant learned Counsel submits that-
Appellants have not charging duty of excise on clearances of the poles from their factory since duty of excise have been demanded, the price charged should be treated as inclusive duty and assessable value should be determined accordingly.
Since duty has now been demanded, they are should be allowed to avail the Cenvat credit to the extent admissible in respect of inputs, capital goods and service tax paid by them on the input services received by them. Reliance is placed vide the judgment of Hon'ble High Court in the case of Bhawani Weaving Factory Vs CCE, Jalandhar 2010 (255) ELT 2006 (P & H).
In para 28 of the impugned Order-in-Original dated 20.01.2016 Commissioner has himself held that there is no malafide intention on the part of the appellant, hence penalties imposed on them under Rule 25 and 27 needs to be set aside.
In case of their own sister concern namely M/s Paschimanchal Vidyut Vitran Nigam Ltd. Vs CCE, Hapur, Tribunal vide Final Order No.70125 of 2019 has held that extended period of limitation would not be applicable. However, a part demand fall within the normal period of limitation and the matter was remanded for re- quantification.
Excise Appeal No.70404 of 2016 4 In the remand proceedings Principal Commissioner has allowed the benefit of Cenvat credit and also set aside the penalties.
3.3 Learned Authorized Representative reiterates the findings recorded in the orders of the lower authorities.
4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. Issue involved in all the appeals is common and hence all the appeals have been taken up for consideration simultaneously.
4.2 The common issue involved in all the appeals is with regards to admissibility of exemption under notification No 74/1993-CE dated 28.02.1993 and benefit of SSI exemption under Notification No 8/2003-CE dated 01.03.2003. The issue with regards to admissibility of Notification No 74/1993-CE has been decided against the appellant by the Larger Bench in case of Assistant Engineer (Civil) PCC Pole Factory [2008 (232) ELT 628 (T-LB)] holding as follows:
"3. We may at this stage straightaway refer to Notification No. 74/93-C.E., dated 28-2-1993 so far as relevant, as under :
"In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods of the description specified in column (2) of the Table hereto annexed and falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) from the whole of the duty of excise leviable thereon which is specified in the said Schedule :
Provided that such goods are manufactured by a factory belonging to a State Government and such goods are intended for use by any Department of that Government.
......... ......... ........."
Excise Appeal No.70404 of 2016 5 On a plain reading it would appear that in order to claim the benefit of exemption under the above Notification (i) the goods should be manufactured by a factory belonging to State Government (ii) for use by any Department of the Government. The question is whether the appellant fulfils the twin condition. It need hardly be emphasized that the terms of the exemption notification have to be strictly construed and unless the laid down conditions are satisfied, the benefit of exemption cannot be claimed.
4. The core question is whether the State Electricity Boards stand in the same position as State Government and/or they are Departments of the State Government. As seen above, the subject goods must be manufactured in a factory belonging to a State Government and, secondly, they are intended for use by the concerned State Government.
5. The question as to whether a State Electricity Board constituted under the Electricity (Supply) Act, 1948 is „State‟ within the meaning of Article 12 of the Constitution of India is not res integra. Way back in 1967, in Electricity Board v. Mohan Lal, AIR 1967 Supreme Court 1857, the State Electricity Board was held to be an authority and, therefore, a „State‟ within the meaning of Article 12.
However, this does not necessarily mean that every authority which is a „State‟ within the meaning of Article 12 of the Constitution of India is also a part or Department of the Government. Corporations and statutory authorities though „State‟ are different from Government even if they are controlled and financed wholly or partly by the Government. Reference may be made to the cases of S.L. Agarwal v. Hindustan Steel Ltd., 1970 (1) SCC 177, R.D. Shetty v. International Airport Authority of India, 1979 (3) SCC 489, and Ajay Hasia v. Khalid Mujib, 1981 (1) SCC 722.
6. Following the said decisions, the Allahabad High Court in U.P. State Electricity Board v. Collector of Customs & Central Excise, 1992 (61) E.L.T. 14 (All.), rejected the claim of the U.P. State Electricity Board for exemption under Excise Appeal No.70404 of 2016 6 Notification No. 57/75-C.E., dated 1-3-1975. The said notification was couched in more or less similar language -
"hereby exempts all goods ........ manufactured by factory belonging to any State Government for the purpose declared by Parliament by law to be incidental to the ordinary functions of the Government......". The said decision of the Allahabad High Court was cited in Electricity Poles Manufacturing case (supra). However, the Bench found that the decision had received consideration of the Tribunal in Final Order No. F/1676/98-B1, dated 2-11-1998 [2003 (158) E.L.T. 754 (Tribunal)] (in the own case of the said appellant) wherein it was (curiously enough) held that "the fact that the Hon‟ble Court had held that UPSEB would not come within the meaning of Article 12 of the Constitution does not necessarily follow up that the UPSEB constituted under Section 5 of the Electricity (Supply) will not be a State Government Undertaking or a Corporation owned or controlled by the State Government". Following the said order, the Bench held that the factory of the appellant belongs to the U.P. State Govt., and they are eligible for exemption under Notification No. 74/93-C.E. It is relevant to mention here that "Electricity Pole Manufacturing" is a unit of Uttar Pradesh State Electricity Board.
6. Learned consultant appearing for the appellants fairly conceded that the Chhattisgarh State Electricity Board is not a Department of the Government but took the stand that the goods i.e. PCC Poles are intended for use by the Departments of the Government, such as, Public Works Department, Water Resource Department, Public Heath Engineering Department, Education Department, Women & Children Welfare Department etc. Besides, it was stated, Gram Panchayats, Nagar Panchayats, Municipalities and Municipal Corporations which are "directly State" deriving their authority from the Constitution of India, also use the goods manufactured by the appellant Board. Thus as the Excise Appeal No.70404 of 2016 7 intended user of the goods is invariably one or the other Department of the State Government, they qualify for exemption under the notification. The submission is totally misconceived.
7. The State Government - which functions through various Departments created under the Rules of Executive Business - is a consumer of electricity like any ordinary consumer and it is totally incorrect to suggest that the PCC poles are „used‟ by a consumer. The Electricity Board as the „licensee‟ under the Electricity (Supply) Act generates electricity which is transmitted, distributed and supplied by its agencies and for such supply it charges the consumer. In other words, the Electricity Boards ultimately sell electricity to the consumers. The consumers may be individuals, factories, industrial/commercial establishments or even Government or its Departments and so on. The consumer, however, simply consumes electricity for which he pays the price as per the tariff. Besides electricity, he also pays other charges for different items involved in supply of electricity at the consumers end. The fact that the poles are used to facilitate the supply of electricity to consumers at large does not mean that the poles are used by the consumers. The electricity passes through wires running along the poles but does it mean that wires are used by the consumers? The wires or poles etc. are used by the Electricity Board to reach the consumers and supply electricity to them on payment of charges. The PCC Poles are thus manufactured by the Board for its own use. The Authorised Representative of the appellant fairly stated that the PCC poles continue to belong to the concerned Electricity Board for which the consumers pay some amount as security refundable at the stage of termination/cessation of the electric supply. The Government like any other consumer, therefore, cannot be regarded as user of the poles and it would thus follow that the subject goods are not manufactured for use by any Department of the Government.
Excise Appeal No.70404 of 2016 8
8. As a matter of fact, on the admission of the appellant‟s representative that the Electricity Board is not a Department of the State Government, the benefit of exemption has to be denied, for, as seen above, the goods not only should be used by Departments of the concerned State Government, it should also be the manufactured in the factory belonging to a State Government. The status of the Electricity Board being different from the State Government about -which there is no dispute - the exemption has to be rejected on that ground alone. We are thus satisfied that the conditions are not fulfilled by the appellant Board and, therefore, it is not entitled to exemption under the notification as held by the Allahabad High Court in U.P. State Electricity Board (supra) and Executive Engineer, Irrigation Department (supra). The decision in Electricity Poles Manufacturing (supra) does not correctly lay down the law.
9. It was submitted that the decision in Electricity Poles Manufacturing (supra) was upheld by the Supreme Court in Civil Appeal No. 1827 of 2001 vide 2006 (202) E.L.T. A144 (S.C.). From the text of the order, it appears that the appeal of the Department was summarily dismissed observing that Court found no reason to interfere with the order. It is well settled that summary dismissal of SLP/Civil Appeal by the Supreme Court does not amount to affirmation of the judgment/order of the Court/Tribunal appealed against, on merit. It merely means that the Supreme Court declined to interfere in the matter. As a matter of fact, learned DR appearing for the Revenue pointed out that the issue involved in the case of Electricity Poles Manufacturing related to SSI Exemption and, therefore, the fact that the Supreme Court did not interfere with the Tribunal‟s Order has little significance.
10. Be that as it may, as seen above, the Notification lays down twin conditions, and unless both the conditions are satisfied exemption cannot be claimed. Admittedly, Chhattisgarh State Electricity Board is not a Department of Excise Appeal No.70404 of 2016 9 the Government. Merely because 100% capital is owned by State Government does not make it a body at par with the State Government. Hence the PCC poles manufactured in the factories which admittedly belong to the Electricity Board does not qualify for exemption. That apart, the intended or actual user of the poles also being the Board itself, and not any Department of the State Government, the other condition is also not fulfilled.
11. In the result, the reference is answered in the negative and against the appellant. It is held that Chhattisgarh State Electricity Board is not a Department of the State Government so as to be eligible for exemption in respect of goods i.e PCC Poles manufactured in their factories."
4.3 In appeal No E/70120/2018, E/70149/2019 & E/70109/2021, Commissioner (Appeal) and has decided the issues in respect of admissibility of the said notification which is in accordance with above decision of larger bench. In appeal No E/70404/2016 similar view has been expressed. Appellant also do not challenge that the benefit of said notification would not be available.
Appeal No E/70404/2016 4.4 While adjudicating the case Commissioner vide his Order- in-Original in para 45 has observed as follows:-
"45. From the above discussion, it is clear that the noticee is liable to pay duty and entitled to SSI exemption. As regards issue of availment of CENVAT credit is concerned, I find that in principle the noticee is entitled to avail CENVAT credit in terms of CENVAT Credit Rules, 2004 read with Notification No. 21/2014-CE (NT) dated 11.07.2014 and Notification No. 06/2015-CE (NT) dated 01.03.2015."
4.5 From the above observations, it is evident that the Principal Commissioner finds that appellant is entitled to Cenvat credit that being so the benefit of Cenvat credit should have been extended while confirming the demand from the appellant subject to verification of the documents for claiming the said Excise Appeal No.70404 of 2016 10 Cenvat credit. To this extent all the matters needs to be remanded back to the Original Adjudicating Authority. 4.6 The claim of the appellant that the value adopted should be after allowing consideration, the price as cum tax price is without any merits. We find that as the goods have been cleared on the basis of internal documents/challans there were effectively no sale and the value has been determined by application of Rule 8 of Central Excise Valuation (Determination Of Price Of Excisable Goods) Rules, 2000. On the basis of cost of production in case where there were no sale price but determination of value on the basis of cost of production in terms of Rule 8, there cannot be a question of cum duty price because there were no price of sale taken accordingly. The arguments of the appellant to this extent do not merit any consideration. Rule 8 of Central Excise Valuation (Determination Of Price Of Excisable Goods) Rules, 2000 provides as under:-
"RULE 8.[Where whole or part of the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value of such goods that are consumed shall be one hundred and ten per cent of the cost of production or manufacture of such goods.]"
Commissioner has considered the issue in following manner and has observed as follows:
"WHETHER 110% OF ASSESSABLE VALUE UNDER RULE 8 OF VALUATION RULES IS JUSTIFIABLE
31. Before analyzing the captioned subject and it's applicability to the Noticee, relevant provisions are reproduced -
SECTION 4. [Valuation of excisable goods for purposes of charging of duty of excise (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods such value shall-
Excise Appeal No.70404 of 2016 11
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value;
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2008.
Rule 8-where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten percent of the cost of production or manufacture of such goods.
32. I find that when we read to-gather the above referred sub-section 4(1)(b) of the Act with Rule 8 of the Valuation Rules, as amended time to time, it may be seen that the said provision of addition of 10% amount in the cost of production, is to be done only in the cases, where the goods produced are used for consumption by the manufacturer or on his behalf in the production or manufacture of other articles, where as there is no such in the instant case of the noticee, as the P.C.C. Pole manufactured by the noticee, are being used in the various electricity distribution division for transmission of electricity and was not being used in further manufacture of production of the goods. I also find that there is no dispute that P.C.C. poles were cleared for further distribution & not in manufacture of something else. These were cleared finally. Hence, assessable value cannot be increased further by adding 10% further, under Rule 8 of Valuation Rules.
Excise Appeal No.70404 of 2016 12
33. The above conclusion is well supported by following decisions: Electricity Pole manufacturing Vs CCE-2001 (131)ELT 631 & 1999(109) ELT 595(T) & Para 2 is reproduced
2. Upon perusing the records and hearing both sides, we find that the manufacturer is a division of UPSEB and there was no sale of the electricity poles. Therefore, the Revenue is right in its contention that the valuation of the electricity poles should be made under Rule 6(b)(ii) of the Central Excise Valuation Rules. All the same there is no requirement, as a matter of course, to make addition towards notional profit. Rule 6(b)(ii) provides for addition of profits, in case profit is involved in the manufacturing activity. The addition is subject to "profit, if any". Impugned orders do not contain any finding regarding profit. The addition towards profit has been made on a notional prices This is not permissible. The issue is, therefore, required to be decided afresh by the jurisdictional Central Excise authorities after examining data and reaching a conclusion, based on facts as to whether there is profit in the manufacture of electricity poles in question. In order to facilitate that, we set aside the impugned orders and remand the case to the jurisdictional Assistant Commissioner for a fresh decision. The appeal is, thus, disposed of by way of remand.
PCC Pole factory's CCE-2003(158) ELT 429(SC) & Paras 1 & 2 are reproduced as
1. The appellant is a manufacturer of PCC Poles which are used by the Electricity Board for the purposes of laying electric lines and transmission of electric energy. The Department being of the view that there is no captive consumption in terms of Valuation Rules held that 10 Excise Appeal No.70404 of 2016 13 per cent profit will have to be added in finding out the value of these poles and not the actual value disclosed by them. The appellant having lost before the authorities, carried the matter to the Tribunal. The Tribunal upheld the orders made by the authorities and took the view that "PCC poles are marketable and where the work is done by job work, there may be some margin of profit in such activity" forgetting the fact that in the present case Electricity Board itsell was carrying on that Job and has not assigned the job to any other person who can gain such profit and no business was carried on by the Electricity Board after manufacturing the poles and selling them out or dealing out with any other person. On the other hand the poles were used for drawing electric lines over them for purpose of transmission of electricity.
2. In this view of the matter, we think the order of the Tribunal cannot be sustained. The order made by the Tribunal is, therefore, set aside and the enhancement to the extent of 10 percent is deleted."
Though, Commissioner has held against additional of 10%, we are not expressing our observations in respect of such a finding. However, in absence of any challenge by way of cross objection or cross appeal by the Revenue. We do not record any finding on this aspect.
4.7 Having found that there were no malafide intention on the part of the appellant, Commissioner has by his impugned order confirmed the demand only for the normal period by holding as follows:-
"28. Another argument of the Noticee that they are not Commercial entity & are controlled, owned & financed by State Govt. and work towards various Govt related beneficial scheme, hence question of any malatide intention does not arise, is sound argument. No Individual person is going to gain, hence no malafide can be attributed thus extend period canriof be invoked. This Excise Appeal No.70404 of 2016 14 observation is well supported by Hon'ble Supreme Court decision in Tamil Nadu Housing Board-1994 (74) ELT 9 (SC): Pushpam Pharmaceutical Co. - 1995(78) ELT 401 (SC): Pratibha Processors-1996(88) ELT 12(SC)."
4.8 Having held that extended period is not invokable and there is no malafide intention of the part of the appellants for the reason that they are State Government undertakings, we do not find any merits in the penalty imposed upon the appellants in either of the orders.
4.9 In view of the our finds in para 4.5 with regards to admissibility of Cenvat credit to the appellants, we remand these matters to the Original Adjudicating Authority for re-computation of demands only for the normal periods of limitation after allowing the Cenvat credit to the appellant and the benefit of SSI exemption.
5.1 After setting aside all the penalties imposed upon the appellants, all the appeals are allowed by way of remand to the Original Adjudicating Authority.
5.2 Since the appeals have been quite old, Adjudicating Authorities are directed to decide the appeals by following the principles of natural justice within three months from the date of receipt of this order.
(Pronounced in open court on-29 July, 2024) Sd/-
(P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp