Custom, Excise & Service Tax Tribunal
C.C.E. Raipur vs Abs Steels Ltd on 26 August, 2014
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK-2 R.K. PURAM, NEW DELHI
SINGLE MEMBER BENCH,
Cross Application No. E/CROSS/132/2007 &
Appeal No.E/656/2007-EX(SM)
Cross Application No. E/CROSS/133/2007 &
Appeal No.E/657/2007-EX(SM)
(Arising out of Order-in-Appeal No. 125-126/RPR-II/2006 dated 15.12.2006 passed by Commissioner (Appeals-I) Customs & Central Excise Raipur)
Date of Hearing: 24.10.2013
Date of pronouncement 26/08/2014
1. C.C.E. Raipur Appellants
Vs.
ABS Steels Ltd. Respondent
2. C.C.E. Raipur Appellants Vs. D.M. Engineering Ltd. Respondents Appearance: Shri M.S. Negi, DR for the Appellants None for the Respondent CORAM: Hon'ble Mr.Manmohan Singh, Member (Technical) FINAL ORDER NO. 53248-53249/2014 Per: MANMOHAN SINGH
Revenue has come in appeal against Order-in-Appeal No. 125-126/RPR-II/2006 dated 15.12.2006 passed in respect of M/s ABS Steels Ltd. and M/s D.M. Engineering Ltd. in Appeal No. E/656/2007-EX (SM) and in Appeal No. E/657/2007-EX(SM) wherein Commissioner (Appeals) has set aside the Order-in-Original No. 264-265/Chap 72/Bhi-II/ADC/2006 dated 31.10.2006 passed by the adjudicating authority. The authority has confirmed the demand of Rs.11,55,492 (Rupees eleven lakhs fifty five thousand four hundred ninety two only) and cess amounting to Rs.75,524/-alongwith penalty of Rs.12,31,016/- (Rupees twelve lakhs thirty one thousand sixteen only) on M/s ABS Steel Ltd., Bhilai. Cenvat Credit of duty and cess after deduction of excess duty and cess was made admissible to M/s D.M. Engineering Ltd. A penalty of Rs.1,00,000/- (Rupees Onel lakhs only) was also imposed as M/s D.M. Engineering for availing and passing wrong and irregular credit.
2. Initially the case was fixed for hearing on 24.10.2013 in appeal No. 657/2007 in respect of M/s D.M. Engineering Ltd. (Respondent No. 2), when the matter was under process for writing the order, it was observed that appeal by first respondent namely M/s ABS Steel Ltd. has also been filed. To consider the matter in totality, appeal in respect of M/s ABS Steel Ltd. respondent was also got listed on 06.6.2014 so that consolidated decision could be taken.
3. Since matter in both the appeal is arising out of same Order-in-Appeal No. 125-126/RPR-II/2006 dated 15.12.2006, both appeals are taken up for disposal together.
4. Facts of the case are briefly stated to appreciate the issue. M/s ABS Steels Ltd, 137-A, Light Industrial Area, Bhilai (Respondent No.1) were engaged in the manufacture of H.B. wire and winding wire falling under chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985. They purchased inputs from M/s SAIL, Bhilai Steel Plant, Bhilai. It was observed that M/s ABS Steel Ltd. (Respondent No.1) had cleared these inputs purchased from M/s SAIL to M/s D.M. Engineering Ltd, Bhilai (Respondent No. 2) by terming the said removal as clearance of inputs as such under rule 3(4) of the erstwhile Cenvat Credit Rules, 2002. While purchasing the inputs from M/s SAIL, the M/s ABS Steels Ltd. (Respondent No. 1) had paid excise duty @ 8% adv. However on removal of such inputs to the M/s D.M. Engineering Ltd. (Respondent No. 2), the appellants paid duty @ 12% adv. Education cess on the enhanced value of the goods @ Rs. 700 PMT. The Department observed that the amended rule 3(3) (b) of the erstwhile Cenvat credit Rules, 2002 required that the Cenvat credit utilization should be equal to Cenvat credit taken on inputs if inputs are removed as such. The provisions contained in rule 3(4) & rule 3 (5) of the said Rules also paid down such stipulations.
5. Revenue has alleged that the M/s ABS Steels Ltd. (Respondent No. 1) had violated the provisions of the Cenvat Credit Rules by resorting to encash the Cenvat credit lying with them. Such wrongly availed and utilized credit was liable to be recovered from the M/s ABS Steels Ltd. (Respondent No. 1) alongwith penal action under rule 13. It is also alleged that the M/s D.M. Engineering Ltd. (Respondent No. 2) had willfully mis-stated the name and details of the M/s ABS Steels Ltd. (Respondent No. 1) as the manufacture whereas the M/s ABS Steels Ltd. (Respondent No. 1) was not the manufacturer of the said goods. Accordingly, the M/s D.M. Engineering Ltd. (Respondent No. 2) passed on the excess credit to the customers in contravention of the provisions contained in rule 3 of the said rules. Demand to the extent of Rs.11,55,492/- and cess of Rs.75,524/-, has been raised also proposing imposition of penalty on both the respondents alongwith recovery of interest.
6. After considering the submissions made by M/s ABS Steels Ltd (Respondent No. 1) and M/s D.M. Engineering Ltd. (Respondent No. 2), the Additional Commissioner, Central Excise, Hqrs. Raipur vide his Order-in-Original No. 264-265/CH 72/Bhi-II/ADC/2006 dated 31.10.2006 after adjudication confirmed the duty amounting to Rs.11,55,492/-, education cess of Rs.75,524/- against the M/s ABS Steels Ltd. (Respondent No. 1) alongwith imposition of Rs.12,31,016/- (Rupees twelve lakhs thirty one thousand sixteen only) as penalty and order for recovery of interest under rule 13 (2). A penalty of Rs.1,00,000/- was also imposed on the M/s D.M. Engineering Ltd. (Respondent No. 2) under rule 13(2).
7. Respondents preferred appeals before the Commissioner (Appeals), Raipur. The Commissioner (Appeals), vide his Order-in-Appeal No. 125-126/RPR-II/2006 dated 15.12.2006 set aside the Order-in-Original and allowed the appeal of the respondents on the ground enumerated in para 9 of his order. Conclusion was based on premise that there was no willful mis-statement or suppression of facts and it was a simple case of debit of excess credit the first appellants (respondent in present appeal).
8. The impugned order issued by the Commissioner (Appeals-II), Central Excise, Raipur was not considered legal and proper by the revenue appeal has been before Honble Tribunal on the following grounds of appeal:
(a) Rule 3 (3) (b) of the erstwhile Cenvat Credit Rules, 2002 provided that Cenvat credit may be utilized for payment of an amount equal to Cenvat credit taken on inputs, if such inputs are removed as such or after having been partially processed.
(b) Reference has been made, to case of Eicher Tractors reported in 2004 (175) ELT 277 (T), Following was reiterated.
X X what as assessee is required to do when he removes inputs as such can only be to restore the credit which be had taken ... Nothing more was required of them.
(c) The Tribunal in the case of Lakshmi Machine Works Vs. CCE Coimbatore [2005 (184) E.L.T. 61 (Tri-Chennai) has, interalia, held that:
If the assessee wants to remove the inputs as such, they have to comply with the condition specified in the rules.
(d). The subrule 2 to rule 7 of the Cenvat Credit Rules, 2002 provides that the manufacturer or producer taking CENVAT credit on inputs or capital goods shall take all reasonable steps to ensure that the inputs or capital goods in respect of which he has taken the CENVAT credit are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid.
9. Heard the Ld. D.R. None present from respondent side. However written submissions filed by respondents have been gone through. Records has been also examined with the help of learned DR. Basically respondents have relied upon the findings recorded by Commissioner (Appeals) wherein it was observed that revenue has failed to show any tangible evidence to illustrate the motive to encash the Cenvat credit. Relevant Para 9 of Commissioner (Appeals)s Order is capitulated for ready reference:-
Para 9. In order to impose penalty under rule 13 (2) of the Cenvat Credit Rules, 2002, it is necessary to show that the appellants had taken or utilized wrongly the credit on account of willful mis-statement or suppression of facts, etc with intend to evade duty. No findings has been given by the lower authority on this count. Even otherwise from the fact that have been brought forth, this is a simple case of excess credit debited by the first appellant. No material has been brought forth that there was willful mis-statement of facts or suppression of facts with intend to evade duty. When the excess credit has been debited and paid to the Government, there can hardly be a case of willful mis-statement, suppression etc. with intent to evade duty. In fact there is no evasion of duty as the excess amount has been paid to the Government itself. On the other hand, the second appellant has taken the credit of the same amount as what was shown in the duty paying document. There is no evidence that the second appellant did this with ant intention. Even otherwise rule 13 (2) is applicable to manufacturer and not to a dealer. Therefore, this is not a case where either the first appellant or the second appellant had wilfully mis-stated or suppressed facts with intent to evade duty. In view of this the penalties imposed on both the appellants are set aside. Even the restriction placed on the second appellant is set aside.
10. On perusal of above facts, main issue which emerges for consideration is whether a dealer could have passed on higher credit @ 12% when credit was available only @8%. It is admitted by Commissioner (Appeals) in his order that wrongful higher credit has been availed by M/s ABS Steels Ltd. Bhilai. Duty Paid by SAIL was 8%, however, credit passed by M/s ABS Steel was 12%. Acting as dealer and clearing inputs as such, they could not have passed on credit at 12%. This is basic principle of law unless specified otherwise. Once it is evident, excess passing of credit is unlawful manifesting intent to cause subterfuge to revenue. Case laws referred by revenue also amplify the position. Commissioner (Appeals) despite accepting the facts on record, has tried to justify passing on higher credit by the respondents on a ground which is totally unlawful and flimsy. How passing on higher credit could result in enriching the government coffers? Passing on higher credit could only be due to airmatical calculation. I find that if leviable duties are allowed to be manipulated, it will result in collapse of tax structure and governmental policy.
11. Further it is also evident that respondent i.e M/s D.M. Engineering (Respondent No. 2) have not taken adequate steps to ensure that no extra credit is availed. Fraud prevention steps are inbuilt in Rule 7 (2) of Cenvat credit Rules 2002. Small effort at their level would have clearly brought out that original material has suffered duty @8% but credit has been passed on @12%.
12. In view of above, it is clearly established that M/s D.M. Engineering Ltd. (Respondent No. 2) has passed extra amount of credit by manipulating entries in record. Through credit @ 8% was availed, however credit @ 12% has been passed by way of illegal means. Fraudulent intent is clearly manifested. Reversal of excess credit is justified as claimed by revenue. Of course, invocation of penal action is also justified.
13. In view of above, I find force in revenues appeal. Both the Commissioner (Appeals)s orders are set aside. Departmental appeal is upheld.
(Pronounced on 26/08/2014) (MANMOHAN SINGH) MEMBER (TECHNICAL) K. Gupta 2