Custom, Excise & Service Tax Tribunal
M/S. Cipla Ltd vs Commissioner Of Central Excise, ... on 31 March, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.1
APPEAL NO.E/1123 & 1140/08-Mum
(Arising out of Order-in- Appeal No.SRK/497 & 498/MUM.III/2008 dtd.12.8.08 passed by the Commissioner of Central Excise(Appeals), Mumbai)
For approval and signature:
Honble Mr P.G.Chacko, Member(Judicial)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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M/s. Cipla Ltd.
:
Appellant
Vs.
Commissioner of Central Excise, Mumbai.III
Respondent
M/s. Cipla Ltd.
Appellant
Vs.
Commissioner of Central Excise, Mumbai.III Respondent
Appearance
Ms. Purnima L. advocate for Appellant
Shri K.Lal, Authorized Representative (DR)
CORAM:
Mr.P.G.Chacko, Member(Judicial)
Date of hearing: 31/03/2010
Date of decision 31/03/2010
ORDER NO.
Per : P.G.Chacko
After examining the records and hearing both sides, I find that, in the first appeal, the issue arising for consideration is whether the appellant was required to reverse CENVAT credit taken on capital goods imported by them when the goods were cleared under bond for export under claim of drawback. The appellant had imported capital goods in two consignments and cleared the same on payment of duties of customs including CVD. CENVAT credit of the CVD was taken by them. Subsequently, these capital goods were cleared under bond for export. In the relevant shipping bills, the appellant claimed drawback of the duty to the extent permitted under Section 74 of the Customs Act. In adjudication of the relevant show-cause notice, the original authority took the view that, as the capital goods were cleared for export shortly after the import, they were not intended to be used for manufacture of excisable goods and therefore the appellant was not entitled to avail CENVAT credit on such goods in terms of Rule 3(1) of the Cenvat Credit Rules, 2004. That authority held that, under Rule 3(5) of the said Rules, the assessee was required, at the time of clearing the capital goods as such from their factory, to pay an amount equal to the credit availed. On this basis, demand of duty of Rs. 3,43,348/- was confirmed against the assessee under Section 11A of the Central Excise Act read with Rule 14 of the Cenvat Credit Rules, 2004. Interest on duty was also demanded under Section 11AB read with Rule 14. Penalty equal to duty was imposed on the assessee under Rule 15 read with Section 11AC. Aggrieved by the order of adjudication, the assessee preferred an appeal to the Commissioner(Appeals) before whom they submitted that, as they had already modified their drawback claim so as to exclude CVD therefrom, the CENVAT credit of CVD taken on the capital goods was not liable to be reversed. The ld.counsel has reiterated the same contention before me today and the ld.SDR has opposed it. I find that the above contention of the assessee was not examined by the ld.Commissioner(Appeals) though it was noted by him. In this scenario, the issue discussed hereinbefore requires to be remanded to the lower appellate authority. Accordingly, the ld.Commissioner(Appeals) is directed to consider and decide on the question whether the assessee is entitled to retain the CENVAT credit of CVD paid on the capital goods covered by Bill of Entry No.508560 dated 12.1.06 and Bill of Entry No.516366 dated 20.1.06, while pursuing their drawback claim under Sec.74 of the Customs Act to the reduced extent in relation to the capital goods reexported under Shipping Bills No.93 and No.94 dated 10.5.06. Needless to say that the assessee should be given a reasonable opportunity of being heard. The first appeal stands allowed by way of remand.
2. The records of the second appeal indicate that the assessee had indigenously procured both inputs and capital goods on which they took CENVAT credit. The inputs were used in the manufacture of final product. One of these inputs viz. ascorbic acid, on which CENVAT credit was taken on 22.1.03 on the strength of invoice dated 21.1.03 issued by the supplier (M/s. Hindustan Biologicals) was cleared as such from the factory on the same day under cover of invoice dated 22.1.03 whereunder duty of excise was paid at a lower assessable value vis-`-vis the credit availed. In the relevant show-cause notice, the department demanded differential duty. The capital goods which were procured by the assessee in the month of Nov.1997 and on which CENVAT credit was availed on the strength of the suppliers invoice were used in the factory for manufacture of excisable goods over a period of time and ultimately cleared as such from the factory in December, 2001 on payment of duty on the transaction value which was lower than the original value. In the relevant show-cause notice, the department sought to recover differential duty on the capital goods on the premise that, under the relevant provision of the Cenvat Credit Rules, the noticee was liable to pay duty equal to the CENVAT credit originally availed. In adjudication of the show-cause notice, the original authority confirmed the demand of duty after rejecting the various contentions raised by the assessee. Thus demand of duty of Rs. 7,16,576/- came to be raised against the assessee, besides equal amount of penalty. The order of adjudication was sustained by the Commissioner(Appeals). Hence the present appeal.
3. After hearing the ld.counsel for the assessee and ld.SDR for the Revenue, I have not found any valid ground against the demand of duty sustained by the lower appellate authority against the assessee. In so far as the input (ascorbic acid) is concerned, I find that it is not in dispute that this input was cleared as such from the factory at a lower assessable value vis-`-vis the CENVAT credit taken thereon and that such clearance was effected on the same day on which the input was procured. In this scenario, the assessee ought to have paid duty equal to the CENVAT credit taken on the input as required under Rule 3(4) of the Cenvat Credit Rules, 2004. Instead, what they did was to pay duty at a lower assessable value at the time of clearance of the input on the same day on which it was procured. It is obvious that, in this conduct of the assessee, there was intent to evade payment of the differential duty. As regards the capital goods, it is the case of the assessee that the capital goods were removed as scrap after they were put to use in their factory for a long period and that the correct amount of duty was paid on the transaction value of such scrap. The ld.SDR has contested this plea on the strength of the Tribunals Larger Bench decision in the case of Eicher Tractors vs Commissioner of Central Excise, jaipur [2005 (189) ELT 131 (Tri-LB)] wherein, after considering the Boards Circular No.813/10/2005 dated 25.4.05, the Bench held that a manufacturer removing capital goods as such should pay an amount equal to the credit availed thereon under Rule 3(5) of the Cenvat Credit Rules, 2004 as under Rule 3(4) of the Cenvat Credit Rules, 2002. In the cited case, the department had wanted to demand duty on the transaction value of the inputs cleared as such. On the other hand, the ld.counsel has claimed support from Cummins India vs Commissioner of Central Excise [ 2007(219)ELT 911(Tri-Mum)] as affirmed by the Honble Mumbai High Court in the case of CCE vs Cummins India [2009 (234) )ELT A120 ]. In the cited case, the expression as such used in sub-rule 4 of Rule 3 of the Cenvat Credit Rules 2002 had arisen for consideration. The Tribunal took the view that any capital goods could be considered to have been removed as such where it was removed without putting them to use. If the capital goods were used for a long period before removal from the factory, they would not be considered to have been removed as such. On this basis, the departments demand to the assessee to reverse the credit originally taken on the capital goods was held to be unsustainable. The appeal filed by the department against the Tribunals order was dismissed on merits by the Honble High Court which observed that the view taken by the Tribunal is in consonance with law. Similar subsequent decisions of this Tribunal have also been cited by the ld.counsel. The ld.SDR has relied on Modernova Plastyles Pvt.Ltd vs. Commissioner of C.Ex.Raigad [ 2008(232) ELT 29 (Tri-LB)], wherein the Larger Bench was considering the expression as such occurring in Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The Larger Bench held that reversal of credit availed on capital goods was required when the goods were removed, whether used or not.
4. After considering the submissions, I find that the question before me is whether the credit-availed capital goods could be said to have been removed as such for purposes of Rule 3(5) of the Cenvat Credit Rules, 2004 where such removal was after having used the goods for the manufacture of final products in their factory over a period of time. An apparently similar question was considered in the case of Cummins India Ltd. (supra). The Larger Bench which dealt with the case of Modernova Plastyles Pvt.Ltd. (supra) noted the difference between Rule 3(4) and Rule 4(5) and therefore did not consider the decision in Cummins India Ltd.s case to be relevant to the issue on hand which did not involve Rule 4(5). It is on record that the Tribunals decision in Cummins India Ltds case stands affirmed by the Honble High Court and hence that decision would override the Tribunals decisions to the contra. It appears from the appellate Commissioners order that the relevant question pertaining to the capital goods was not examined in the correct perspective . I am, therefore, of the view that this question should also be readdressed by the lower appellate authority. It is ordered accordingly. The ld.Commissioner(Appeals) is directed to consider and decide on the question relating to capital goods in the light of the relevant provisions of the Cenvat Credit Rules, 2004 and the relevant case law after giving the assessee a reasonable opportunity of being heard. The input-related issue stands decided at this stage in favour of the Revenue. The second appeal is accordingly disposed of.
(Pronounced in court) P.G.Chacko Member(Judicial) pv 5