Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Raigad vs M/S. Wartsila (I) Pvt. Ltd on 7 January, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. E/523/07-Mum [Arising out of Order-in-Original No. 117-118/IDG(34)COMMR(ADJ)/05-06 dated 23/03/2006 passed by the Commissioner of Central Excise, Raigad] For approval and signature: Honble Mr. Ramesh Nair, Member (Judicial) Honble Mr. Raju, Member (Technical) =======================================================
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 :
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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Commissioner of Central Excise, Raigad
:
Appellant
VS
M/s. Wartsila (I) Pvt. Ltd.
:
Respondent
Appearance
Shri V.K. Agarwal, A.D.C. (AR) for the Appellant
Shri Prasad Paranjape, Advocate for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Honble Mr. Raju, Member (Technical)
Date of hearing: 07/01/2016
Date of decision: 07/01/2016
ORDER NO.
Per : Ramesh Nair
The Revenues appeal is directed against Order-in-Original No. 117-118/IDG(34)COMMR(ADJ)/RGD/05-06 dated 23/03/2006 passed by the Commissioner (Adj), Central Excise, Raigad Commissionerate, wherein the Ld. Commissioner dropped the proceeding initiated under show cause notice No. V/(Cen)Adj/4-65/04-05 dated 09-09-2004 and No. V/Adj(SCN)15-70/RGD/05/7068 dated 06-10-2005.
2. The fact of the case is that the respondent in the month of October 2003 cleared D.G. Sets and parts thereof to M/s. Mazgaon Dock, Mumbai (A/c Indian Navy) at nil rate of central excise duty under the provisions of Notification No. 64/95-CE dated 16-03-1995 as amended by Notification No. 25/2002-CE dated 11-04-2002. The respondent also obtained a certificate as required in the Notification from the Indian Navy. Show cause notice dated 09-09-2004 was issued wherein it was alleged that the Notification No. 64/95-CE dated 16-03-1995 was applicable to the goods supplied to the Indian Navy. However, in the present case, the goods was supplied to M/s. Mazgaon Dock, Mumbai and therefore wrongly claimed the exemption of excise duty. Another show cause notice No. V/Adj(SCN)15-70/RGD/05/7068 dated 06-10-2005 was also issued wherein it was alleged that the respondent instead of paying 8% of the exempted final product, they reversed the actual cenvat credit in respect of goods used for the manufacture of goods on which exemption notification No. 64/95-CE was availed and paid an amount of Rs. 23,97,567/-. In the adjudication, Ld. Commissioner dropped the demand of excise duty by allowing the exemption notification No. 64/95-CE and also dropped the demand of differential amount as proposed in the show cause notice under Rule 6(3)(b) of Cenvat Credit Rules, 2002. Aggrieved by the impugned order, the revenue filed this appeal.
3. Shri V.K. Agarwal, Ld. Addl. Commissioner (AR) appearing on behalf of the Revenue reiterates the ground of the appeal. He submits that the exemption is available for supplies made to Indian Navy. In the present case, supplies were admittedly made to M/s. Mazgaon Dock and not to Indian Navy. Therefore, the exemption is not admissible. He placed reliance on Honble Supreme Court judgment in the case of Leader Engineering Works vs. Commr. of C.Ex., Chandigarh 2007 (212) E.L.T. 168 (S.C.). As regard the demand under Rule 6(3)(b) of Cenvat Credit Rules, 2002, he submits that since the respondent has availed the cenvat credit on certain inputs which have been used in the exempted goods, the only option left is to pay 8% of the value of the exempted goods in terms of Rule 6(3)(b) and only reversal of actual credit will not be sufficient. Hence the demand on this ground was wrongly dropped by the Ld. Adjudicating Authority.
4. On the other hand Shri Prasad Paranjape, Ld. Counsel for the respondent, submits that though the goods were supplied to Mazgaon Dock, but for the construction of warship of Indian Navy and to this effect, a certificate from Indian Navy was produced. The exemption is clearly available in terms of Sr. No. 21 of table appended to the Notification No. 64/95-CE dated 16-03-95. He further submits that the judgment of Leader Engineering Works (supra) is not relevant in the present case for the reason that the said judgment is in contest of exemption entry i.e. All goods other than Cigarettes if supplied as store for consumption on board a vessel of the Indian Navy, whereas in the present case the exemption is covered under Entry No. 21 of the table of the Notification No. 64/95-CE dated 16-03-95 as amended vide Notification No. 25/2002-CE dated 11-04-2002. Therefore, the judgment is clearly distinguishable. He further submits that in various subsequent judgments, the judgment of Leader Engineering Works (supra) was distinguished. He placed reliance on the following judgments:
(i) Vulcan Gears vs. Commr. of C.Ex, Vadodara
- 2014 (306) E.L.T. 655 (Tri.-Ahmd.)
(ii) Commissioner vs. Vulcan Gears
- 2014 (309) E.L.T. A50 (S.C.)
(iii) Akzo Nobel Coatings (India) Pvt. Ltd. vs. Commr. of C.Ex, Bangalore 2005 (184) E.L.T. 306 (Tri.-Bang.) In view of the above judgments, the respondent is entitled for the exemption notification No. 64/95-CE. On the issue of the demand under Rule 6(3)(b), he submits that the respondent before the removal of exempted goods reversed the actual cenvat credit of inputs used in manufacture of exemption goods. Therefore, liability of 8% of the value of such goods does not arise. In this support, he placed reliance on the following judgments:
(i) Rochees Watches Ltd. vs. Commr. of Customs, Jaipur
- 2003 (152) E.L.T. 420 (Tri.- Del.)
(ii) Chandrapur Magnet Wires vs. Collector of C.Ex, Nagpur
- 1996 (81) E.L.T. 3 (S.C.)
(iii) Commr. of C.Ex, Pune-II vs. Indian Hume Pipe
- 2008 (223) E.L.T. 302 (Tri.- Mum.)
(iv) Commr. of C.Ex, Mumbai-I vs. Bombay Dyeing & Mfg. Co.
- 2007 (215) E.L.T. 3 (S.C.)
(v) Madhyadesh Papers Ltd. vs. C.C.E., Nagpur
- 2015-TIOL-2562-CESTAT-MUM
5. We have carefully considered the submissions made by both the sides.
6. We find that the respondent have claimed exemption notification No. 64/95-CE on the clearance of the goods to M/s. Mazgaon Dock which is meant for construction of Indian Navy warship. The relevant exemption entry which was in corporated vide Notification No. 25/2002-CE dated 11-04-2002 is reproduced below:
Goods supplied for use in construction of warships of the Indian Navy Exemption Amendment to Notification No. 64/95-C.E. In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 64/95-Central Excise, dated the 16th March, 1995, namely :-
In the Table annexed to the said notification, after S. No. 20 and the entries relating thereto, the following serial No. and entries shall be inserted, namely :-(1) (2) (3)
21.
All goods.
If, -
(a) the said goods are supplied for use in construction of warships of the Indian Navy; and
(b) before clearance of the said goods, a certificate from an officer not below the rank of a Rear Admiral of the Indian Navy or of any other officer of the Indian Navy equivalent to the Joint Secretary to the Government of India, to the effect that the said goods are intended for the said use, is produced to the proper officer..
[Notification No. 25/2002-C.E., dated 11-4-2002] From the above entry, it is observed that the goods supplied should be used in the construction of warship of Indian Navy and a certificate from the Indian Navy should be produced to the Central Excise officer. In the said condition, it is no where mentioned that the goods has to be supplied to Indian Navy. Therefore, there is no dispute that the goods supplied to Mazgaon Dock for manufacture of Indian Navy warship, therefore in our considered view there is no need that the goods should be supplied to Indian Navy only. The judgment of Honble Supreme Court in the case of Leader Engineering Works (supra), it is not a case of supply of goods for construction of Indian Navy warship but it is in respect of goods supplied as stores for consumption on board a vessel of the Indian Navy. Therefore the fact of the present case is completely different from the fact of the judgment of Honble Supreme Court. Therefore, the said judgment is clearly distinguished. Due to the difference of facts in the subsequent judgments as cited by the Ld. Counsel the Tribunal distinguished the judgment of Leader Engineering Works (supra). The said judgment and its relevant paras are reproduced below:
Vulcan Gears vs. Commr. of C.Ex, Vadodara - 2014 (306) E.L.T. 655 (Tri.-Ahmd.) 3.?We have considered the submissions made by both sides. In this case, the Tribunal while deciding in favour of the appellant, took note of the circular issued by the Board in respect of Notification No. 184/86, which is precedent notification to Notification No. 63/95. In Circular vide F. No. 213/18/91-C.Ex.6, Circular No. 5/92, dated 19-5-1992 and another letter from Ministry of Finance F. No. IV/16/4/2003, dated 7-11-2003, it has been clarified that the exemption will be extended to all job workers and venders supplying inputs required by BEML for manufacture of finished goods supplied to Ministry of Defence. Tribunal had relied upon the decision of Honble Supreme Court in the case of Dhiren Chemicals as reported in 2002 (139) E.L.T. 3 (S.C.), and had taken a view that the circular issued by the Board is binding on the department. The learned SDR submitted that this has been overruled by Honble Supreme Court in the case of M/s. Ratan Melting & Wire Industries case - 2008 (231) E.L.T. 22 (S.C.). We find that since in M/s. Ratan Melting Industries case, the Apex Court only observed that the departmental officers are not precluded from filing an appeal if the circular issued by the Board is contrary to the law. In this case, it is seen that the department is not in appeal. Further, the decision of Honble Supreme Court in the case of Leader Engineering Works - 2007 (212) E.L.T. 168 (S.C.) was in the case of exemption Notification No. 64/95, which is a totally different notification.
4.?In view of the circular and letter from the Board and Ministry of Finance, we agree with the learned advocate that the appellant is eligible for benefit of this notification.
5.?Accordingly, the appeal is allowed. The above judgment was upheld by the Honble Supreme Court as reported in 2014 (309) E.L.T. A50 (S.C.):
Akzo Nobel Coatings (India) Pvt. Ltd. vs. Commr. of C.Ex, Bangalore 2005 (184) E.L.T. 306 (Tri.-Bang.) 2. We have heard both sides in the matter and find from the Notification that there is no prohibition to Indian Navy through sub-contractors. There is no dispute with regard to the receipt of the goods by the Indian Navy and they have issued certificate certifying about the receipt of the goods in respect of purchase orders placed by the Indian Navy to M/s MDL and M/s. Western Indian Shipyard, Goa. We find from the citations referred to the appellant that the Mumbai Bench in the case of Goa Paints and Allied Products Vs. CCE, Goa [2001 (127) E.L.T. 489] in identical facts and circumstances pertaining to the same Notification and supplies made to Indian Navy through sub-contractor has been approved by the Tribunal and the benefit has been extended. In the cited case, the goods were supplied by the appellants therein to M/s. MDL and M/s. Goa Shipyards Ltd. who in turn supplied the goods to Indian Navy. In terms of the said Notification, the Tribunal approved the said supplies and set aside the Commissioner (Appeals) Orders denying the benefit in the matter. We find that this judgment of the Tribunal applies with in all fours to the present case. It has also been approved by the Apex Court as noted in [2001 (129) ELT A308] by dismissing the Revenue Appeal. In view of this Tribunal ruling having been approved by the Apex Court, we find that the contra orders by the Tribunal in the case of CCE vs Leader Engeening Works [2000 (122) ELT 831(Tri.)] and CCE vs. Haji Patrawala Pvt Ltd [1999 (114) ELT 620] has no applicability. Following the ratio of the decision in the case of Goa Paints and Allied Products cited above, which has been approved by the Apex Court, the impugned Order is set aside and appeal is allowed with consequential relief if any. In view of the above judgments, it is clear that the respondent is entitled for exemption notification No. 64/95-CE (Sr. No. 21) on their goods supplied for construction of warship of Indian Navy. As regard demand under Rule 6(3)(b), we find that the respondent have admittedly reversed the cenvat credit in respect of inputs used in exempted goods at the time of clearance of such exempted goods which tentamount to non-availment of credit. This view is supported by various judgments cited by the Ld. Counsel. Moreover as per the retrospective amendment made in Rule 6 vide Finance Act; the assessee is required to reverse the actual centvat credit attributable to exempted goods. For this reason also the demand of 8% proposed in the SCN under Rule 6(3)(b) is not correct. We are therefore of the considered view that the order passed by the Ld. Commissioner is just and legal, which does not require any interference. We therefore, uphold the impugned order and dismiss the appeal filed by the Revenue.
(Operative order pronounced in court) Raju Member (Technical) Ramesh Nair Member (Judicial) saifi 9 Appeal No. E/523/07-Mum