Custom, Excise & Service Tax Tribunal
M/S Accurate Chemicals Industries vs Cce, Noida on 16 July, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. COURT NO. II DATE OF HEARING : 24/05/2013. DATE OF DECISION : 16/07/2013. Excise Appeal No. 1798 of 2008 [Arising out of the Order-in-Original No. 18/COMM/NOIDA/2008 dated 15/05/2008 passed by The Commissioner, Central Excise, Noida.] For Approval and signature : Honble Shri D.N. Panda, Judicial Member Honble Shri Rakesh Kumar, Technical Member 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Accurate Chemicals Industries Appellant Versus CCE, Noida Respondent
Appearance Shri Rajesh Chhibber, Advocate for the appellant.
Shri Sanjay Jain, Authorized Representative (DR) for the Respondent.
CORAM : Honble Shri D.N. Panda, Judicial Member Honble Shri Rakesh Kumar, Technical Member Final Order No. 56796/2013 Dated : 16/07/2013 Per. Rakesh Kumar :-
The facts leading to filing of this appeal are, in brief, as under.
1.1 The appellant having their unit in Industrial Area, U.P., SIDCO, Sikandrabad, Distt. Bulandshahar manufacture MS tanks and radiators for transformers. They are a unit of Accurate Transformers Ltd. (ATL), Ghaziabad which manufactures transformers. The MS tanks and radiators manufactured by the appellant are transferred by them to Ghaziabad Unit of the ATL for its use in the manufacture of transformers. During the period of dispute i.e. during period from 2002-2003 to 2005-2006, in respect of clearances of MS tanks and radiators to their own unit in Ghaziabad for use in the manufacture of transformers, the duty was being paid on the price which was much less than 110%/115% of the cost of production, which was the value on which the duty was required to be paid in terms of Rule 8 of the Central Excise Valuation Rules. When this irregularity came to the notice of the department in course of audit of the Central Excise records, a show cause notice dated 16/8/07 was issued to the appellant for
(a) recovery of Central Excise duty amounting to Rs. 1,61,05,450/- alongwith interest in respect of clearances of MS tanks and radiators of transformers to their transformer unit in Ghaziabad during the period from 2002-2003 to 2005-2006, alongwith interest on this duty at the applicable rate as per the provisions of Section 11AB of Central Excise Act and
(b) imposition of penalty on the appellant under Rule 25 of Central Excise Rules, 2002 readwith Section 11AC of Central Excise Act, 1944.
1.2 The above show cause notice was issued by invoking extended period under proviso to Section 11A (1) of Central Excise Act, 1944 alleging that the appellant have suppressed the relevant facts from the department with intend to evade the payment of duty.
1.3 The above show cause notice was adjudicated by the Commissioner vide order-in-original dated 04/5/08 by which the above-mentioned duty demand of Rs. 1,61,05,450/- was confirmed against the appellant alongwith interest and beside this penalty of equal amount was imposed on them under Rule 25 of the Central Excise Rules, 2002 readwith Section 11AC of Central Excise Act. In this order, the Commissioner held that since the goods had been cleared by the appellant to their another unit which manufactured transformers for its captive consumption, duty was required to be paid on the value determined under Rule 8 of the Central Excise Valuation Rules and that longer limitation period under proviso to Section 11A (1) would be applicable as the appellant have suppressed the relevant facts from the department.
1.4 Against this above order of the Commissioner, this appeal has been filed.
2. Heard both the sides.
3. Shri Rajesh Chhibber, Advocate, the learned Counsel for the appellants, pleaded that while during the period of dispute the entire production of MS tanks and radiators was being stock transferred to the appellants transformer unit, earlier the appellant were selling the goods at the factory gate also to other parties and, hence, duty has been correctly paid by them on the sale price to other independent persons, that stock transfer to another unit parent unit cannot be called captive consumption so as to attract the provisions of Rule 8 of Central Excise Valuation Rules, 2000, that in any case the longer limitation period under proviso to Section 11A (1) and penal provision under Section 11AC are not invokable, as there was no suppression of any fact on the part of the appellant in as much as throughout during the period of dispute, the appellant were filing ER-1 returns in which these clearances of the MS tanks and radiators to their transformer unit in Ghaziabad on stock transfer basis had been declared and even in the Central Excise invoices it had been clearly indicated that the appellant Accurate Chemicals Industries are owned by Accurate Transformers Ltd. and that the clearances to Accurate Transformers Ltd. are not for sale, but for captive consumption, that the fact that the appellant are a unit of their parent unit M/s Accurate Transformers Ltd., Ghaziabad was clearly indicated in every letter addressed by the appellant to the department, that there was absolutely no intention to evade the duty as any duty paid by the appellant in respect of their clearances on stock transfer basis to M/s Accurate Transformers Ltd., Ghaziabad was available to M/s Accurate Transformers Ltd., Ghaziabad as Cenvat credit, that Larger Bench of the Tribunal in the case of Jay Yuhshin Ltd. vs. CCE, New Delhi reported in 2000 (119) E.L.T. 718 (Tribunal LB) has held that when Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by the way of availability of credit to the buyer of the assessees manufactured goods, proviso to Section 11A (1) of Central Excise Act would not be invokable, that Division Bench of the Tribunal in the case of Aarvee Denims & Exports Ltd. vs. CCE, Ahmedabad II reported in 2009 (247) E.L.T. 645 (Tri. Ahmd.) has held that when the appellant had cleared the goods on stock transfer basis to their another unit for its captive consumption and Cenvat credit of the duty paid by the appellant was available to their unit II, there would not be any intention to evade the duty on the part of the appellant in respect of clearances made by them to their Unit II and extended period would not be invokable, that same view has been taken by the Tribunal in the case of CCE, Vadodara vs. SICGIL Industrial Gases Ltd. reported in 2009 (245) E.L.T. 693 (Tri. Ahmd.), that in view of this, the entire duty demand for the period from 2002-2003 to 2005-2006 raised vide show cause notice dated 16/8/07 is time barred, that since there was no intention to evade the payment of duty, penal provision of Section 11AC would not be invokable and that in view of the above submissions the impugned order is not sustainable.
4. Shri Sanjay Jain, learned DR, defended the impugned order by reiterating the finding of the Commissioner and pleaded that the appellant themselves do not dispute that during the period of dispute, there were no sales at the factory gate to the independent buyers and entire production of MS tanks and radiators was being stock transferred to their own unit at Ghaziabad for use in the manufacture of transformers, that in view of this, these clearances have to be treated as clearances to a related person for its captive use and in view of the provisions of Rule 9 readwith Rule 8 of the Central Excise Valuation Rules, 2000, duty would be payable on 110%/115% on the cost of production while the appellant had paid duty on much lower value, that the appellant had never declared to the department that the value on which the duty was being paid by them is not in accordance with the provisions of Rule 8 of the Central Excise Valuation Rules i.e. 110%/115% of the cost of the production and, hence, the appellant have suppressed the relevant facts from the department, that in view of this, extended period under proviso to Section 11A (1) has been correctly invoked and penalty of equal amount under Section 11AC has been correctly imposed. He, therefore, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records.
6. The appellant unit, undisputedly, is owned by M/s Accurate Transformers Ltd., Ghaziabad. In fact, this fact is clearly mentioned in all the invoices issued by the appellant which clearly mention that the proprietor of the appellant unit located in Bulandshahar Distt., is M/s Accurate Transformers Ltd., Ghaziabad. There is also no dispute that during the period of dispute, there were no sales independent buyers at the factory gate and entire production of MS tanks and transformers was being stock transferred to M/s Accurate Transformers Ltd., Ghaziabad for use in the manufacture of transformers. Even the fact regarding captive use is also clearly mentioned in the invoices issued by the appellant. In view of this position, the clearances made by the appellant to their parent unit M/s Accurate Transformers Ltd., Ghaziabad have to be treated as the clearances made to a related person for its captive use and, hence, in accordance with the provisions of Rule 9 readwith Rule 8 of the Central Excise Valuation Rules, 2000, the duty was payable on 110%/115% of the cost of production, while the duty had been paid on much lower value. Accordingly, we hold that the duty was payable on 110% / 115% on the cost of production.
7. The second question is of the limitation. The period of dispute is from 2002-2003 to 2005-2006. The show cause notice had been issued on 16/08/07 i.e. beyond the normal limitation period of one year from the relevant date. The show cause notice, therefore, would be valid only if extended period under proviso to Section 11A (1) is invokable for which it has to be proved that the short levy had taken place due to fraud, wilful misstatement, suppression of facts or contravention of any provisions of the Central Excise Act, 1944 or of the Rules made thereunder with intent to evade the payment of duty. On going through the records, we find that all the sample invoices placed on record clearly mention that the appellant unit is owned by M/s Accurate Transformers Ltd. and that their clearances to M/s Accurate Transformers Ltd., Ghaziabad are for captive consumption. Though invoices are not required to be enclosed alongwith the ER-1 returns, the ER-1 returns were being filed by the appellant.
7.1 Though with effect from 1/10/96, self assessment has been introduced and the monthly ER-1 return filed by an assessee are not required to be assessed by the Range Superintendent (RO), in terms of the following instructions issued by the Central Board of Excise & Customs (CBEC) not only every ER - 1 return filed by an assessee is required to be scrutinized by the RO for correctness of rate of duty applied to the goods cleared, arithmetical accuracy of duties/amounts dues and payable; Cenvat credit availment, valuation etc., this scrutiny must be completed within 3 months and the returns of the units whose annual duty payment is Rs. 1 crore to Rs. 5 crores and more than Rs. 5 crores, are also to be cross checked by the Assistant Commissioner and Additional Commissioner, respectively.
(1) Circular No. 249/83/96-CX dated 11/10/96 (para 3) ;
(2) Circular No. 311/27/97-CX dated 15/4/97 (regarding maintenance of register of scrutiny and reporting progress of scrutiny of ER-1 returns in monthly Technical Report being sent to the Board.) (3) Circular No. 818/15/05-CX dated 15/5/05 issued by CBEC under Rule 12 (3) of Central Excise Rules, 2002 prescribing two stage scrutiny of ER-1 and ER-3 returns preliminary scrutiny and detailed scrutiny as per detailed check list prescribed for this purpose.
7.2 From the above Circulars of the CBEC regarding scrutiny of ER-1 returns, it is clear that the returns filed by an assessee are required to be subjected to detailed scrutiny in course of which the concerned officer can call for the documents from the assessee wherever necessary for scrutiny. Therefore in this case, if the concerned Range officer/Assistant/Deputy Commissioner or concerned Additional Commissioner had checked the returns, the short payment would have been immediately detected as, as observed by the Commissioner in para 4.5 of the impugned order, even the registration certificate of the appellant mentioned them as a unit of Accurate Transformers Ltd., and in all the documents of the appellant, the transfer of goods from the appellant to Accurate Transformer Ltd. had been reflected as inter unit transfer. Neither there is any allegation nor evidence to prove that there was some collusion between the appellant and the Jurisdictional Central Excise officers. The short payment was detected when during visit by the audit team, the records maintained by the appellant and made available by them to the audit officers were examined by them, - something which should have been done by the Jurisdictional Range Officers and Divisional Assistant Commissioner/Deputy Commissioner much earlier. The assessee cannot be penalized by invoking extended period under proviso to Section 11 A (1) for demand of duty and penal provisions of Section 11AC for indolence on the part of the jurisdictional Central Excise officers. Moreover Apex Court in a series of judgments CCE vs. Champher Drugs & Liniments reported in 1989 (40) E.L.T. 276 (S.C.) ;
Padmini Products vs. Collector reported in 1989 (43) E.L.T. 195 (S.C.) ;
Pushpam Pharmaceuticals vs. CCE reported in 1995 (78) E.L.T. 401 (S.C.) ;
Anand Nishikawa Co. Ltd. vs. CCE, Meerut reported in 2005 (188) E.L.T. 149 (S.C.) ;
Continental Foundation Jt. Venture vs. CCE, Chandigarh reported in 2007 (217) E.L.T. 177 (S.C.) has held that something positive other than mere inaction or non payment of duty is required for invoking extended period under proviso to Section 11A (1) and that suppression means failure to disclose full information with intent to evade the payment of duty and mere omission to give certain information is not suppression of fact unless it is deliberate with intention to evade the payment of duty. The above condition for invoking extended period prescribed in these judgments is not satisfied in this case.
7.3 There is one more reason why this demand is time barred. We also find that entire duty paid by the appellant in respect of clearances of MS tanks and radiators to their transformer unit, was available to the transformer unit as Cenvat credit. It is not disputed that the unit of the appellant in Bulandshahar Distt. and the transformer unit of M/s Accurate Transformers Ltd. at Ghaziabad are owned by the same person. Larger Bench of the Tribunal in the case of Jay Yuhshin Ltd. vs. CCE, New Delhi (supra) has held that when Revenue neutral situation comes about in relation to the credit available to an assessee himself in respect of the duty paid by him and not by the way of availability of the credit to the buyer of the assessees manufactured goods, the assessee cannot be accused of having contravened the rules with intent to evade the payment of duty and extended period under proviso to Section 11A (1) would not be invokable. Applying the ratio of this judgment to the facts of this case, longer limitation period for short paid duty under proviso to Section 11A (1) would not be applicable. Same view has been taken by the Division Bench of the Tribunal in the case of Aarvee Denims & Exports Ltd. vs. CCE, Ahmedabad II (supra) and CCE, Vadodara vs. SICGIL Industrial Gases Ltd. (supra).
7.4 We, therefore, hold that the extended limitation period is not invokable and, as such, the entire duty demand is time barred. Since, there is no evidence of the appellant having committed any fraud or wilful misstatement, suppression of facts with intent to evade the payment of duty, the penal provisions of Section 11AC also would not be applicable.
8. In view of the above discussion the duty demand is time barred, the impugned order is not sustainable on this count. The same is set aside. The appeal is allowed.
(Order pronounced in the open court on 16/07/2013.) (D.N. Panda) Judicial Member (Rakesh Kumar) Technical Member PK ??
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