Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Bharat Forge Ltd on 8 October, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL No. E/1253/09-Mum (Arising out of Order-in-Appeal No. P-I/VSK/196/09 dated 4.9.2009 passed by Commissioner of Central Excise (Appeals), Pune-I) For approval and signature: Honble Mr. P.K. Jain, 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?
====================================================== Commissioner of Central Excise, Pune-III Appellant Vs. Bharat Forge Ltd. Respondent Appearance: Shri Ashutosh Nath, Assistant Commissioner (AR), for appellant Shri S. Narayanan, Advocate, for respondent CORAM: Honble Mr. P.K. Jain, Member (Technical) Date of Hearing: 8.10.2014 Date of Decision: 14.10.2014 ORDER NO
The respondent is engaged in the manufacture of auto-ancillary parts. On scrutiny of the trial balance sheet for the year 2003-04, it was found that as on 31.3.2004, there were certain obsolete inputs, WIP worth Rs.1,22,20,110/- against which provision of Rs.73,33,865/- was made in the accounts by reducing the value. The respondent was asked to report the status of the said goods vide letter dated 30.11.2007. The respondent, after discussion with the range Superintendent, reversed an amount of Rs.23,44,281/- (as central excise duty) and Rs.46,885/- (as education cess). The said amount was reversed on the written off raw material and WIP during the period 2006-07. Since the respondent could not submit the one-to-one correlation as demanded on 30.11.2006, a demand notice was issued demanding duty of Rs.19,94,322/- invoking the extended period of limitation. The case was adjudicated wherein the said demand along with interest and penalty under Section 11AC was confirmed. The respondent filed appeal before the Commissioner (Appeals) who, after hearing the party, set aside the order-in-original on the ground of limitation of time. Against the said order of the Commissioner (Appeals), the Revenue has come in appeal before this Tribunal.
2. The main grounds in the appeal are that as per Rule 3(5B) of the Cenvat Credit Rules introduced by Notification No.26/2007-CE(NT) dated 11.5.2007, the respondent is required to pay an amount equivalent to the cenvat credit taken on the said inputs. The Revenue has also taken support from the Boards circular No.645/36/2002-CX dated 16.7.2002, where clarification on the said subject has been issued. It was also submitted by the Revenue that the Commissioner (Appeals) has erred in holding that the extended period was not invokable as the facts of the case have been misrepresented by the respondent and the respondent has not informed the department till date the whereabouts of inputs, inputs in WIP which have been written off as obsolete in the books of account in the year 2003-04.
3. The learned AR vehemently supported the grounds of appeal as also the miscellaneous application filed by the department, wherein it has been stated as follows:-
The assessee have not reversed the cenvat credit on written off inputs as well as they have not disclosed this fact to the department on their own accord with an intention to evade payment of central excise duty. As such, the assessee have not fulfilled the conditions as laid down in Rule 3(5B) of the Cenvat Credit Rules, 2004, as amended vide Notification No.26/2007-CE(NT) dated 1.5.2007. Therefore, the extended period is invokable in this case under Section 11A(1) of the Central Excise Act, 1944.
4. The learned counsel for the respondent, on the other hand, stated that none of the items have been taken away or clandestinely removed by the respondent. It is only for the accounting purposes that they have reduced the value of the goods and this is in accordance with the requirement of accounting practices as also the income-tax law. The learned counsel also stated that many a times the goods on which reduced value is taken are put to use in the subsequent period and the finished products so reduced are cleared on payment of duty. The learned counsel further stated that Rule 3(5B) has been introduced only w.e.f. 11.5.2007 and that also only in respect of the goods where the value is fully written off. In their case the value was partially written off. The Cenvat Credit Rules have been further amended vide Notification No.3/2011-CE(NT) dated 1.3.2011 wherein Rule 3(5B) has been further amended so as to include the cases which are partially written off. The learned counsel stated that thus in the situation covered by the present case, it is only from 1.3.2011 that the respondent is required to reverse the credit. The learned counsel also stated that in their case the period involved is prior to 2003-04 and, therefore, the amended rule cannot be applied. The learned counsel also stated that in 2007 when the issue was brought up and the rule was amended, though for fully written off cases, they have decided to reverse the credit as on 1.4.2007. Obviously these figures would include even the figures of trial balance sheet of 2003-04 on which the demand has been raised. The learned counsel has also stated that practically it is not possible for one-to-one correlation of each item and what has happened to the said item. The learned counsel also quoted the following case law in support of his contention:-
(i) CCE, Navi Mumbai vs. Hindalco Industries Ltd. reported in 2011 (272) ELT 161 (Bom.);
(ii) CCE vs. Ingersoll Rand (India) Ltd. reported in 2014 (300) ELT 347 (Guj.);
(iii) Phillips Electronics India Ltd. vs. CCE, Pune reported in 2011 (274) ELT 311 (Tri-Mum);
(iv) Sakata Inx (India) Ltd. vs. CCE, Jaipur reported in 2009 (240) ELT 225 (Tri-Del);
(v) CCE, Jamshedpur vs. Tata Motors Ltd. reported in 2008 (221) ELT 545 (Tri-Kolkata);
(vi) Hindustan Zinc Ltd. vs. CCE, Visakhapatnam reported in 2005 (191) ELT 724 (Tri-Bang);
(vii) ADC India Communications Ltd. vs. CCE, Bangalore reported in 2012 (283) ELT 415 (Tri-Bang).
5. As far as limitation is concerned, the learned counsel stated that there was no misstatement by the respondent whatsoever and there has been no suppression of facts anywhere. The fact that the value was reduced in the trial balance sheet was only as per the requirement of the accounting practices. It is not as if the raw material or WIP were removed from the factory or were sold as scrap from the factory. Under the circumstances, it is not a case of suppression of fact or any misstatement or misrepresentation. It cannot be said that there was any intention to evade any duty whatsoever. The learned counsel also argued that even when Rule 3(5B) was introduced in 2007, even though the said rule did not cover the situation of partially writing off, they decided to reverse the credit as on 1.4.2007 as is clear from their letter dated 4.10.2007. The learned counsel also undertook that they are not asking for the amount paid on 4.10.2007 by reversing the cenvat credit. Their grievance is relating to penalty provision. The learned counsel also quoted the Honble Supreme Courts judgment in the case of UOI vs. Rajasthan Spinning & Weaving Mills reported in 2009 (238) ELT 3 (SC), to support his contention that there were no ingredients so as to invoke extended period of limitation.
6. I have considered the rival submissions. It is observed that the Commissioner (Appeals) in his order has noted as under:-
10. I have gone through the facts of the case including the oral and written submissions made. This is a case relating to reversal of Cenvat Credit on inputs in respect of which provision for write off was made for the financial year 2003-2004. The Department sought to demand duty of Rs.19,94,322/- in terms of the provisions of Rule 3(5B) of the Cenvat Credit Rules 2004 based on the scrutiny of the Trial Balance for the year 2003-04. The extracts of Rule 3(5B) of the Cenvat Credit Rules which is relevant is reproduced below:
Rule 3(5B) If the value of any,
(i) input, or
(ii) capital goods before being put to use, on which CENVAT credit has been taken is written off fully or where any provision to write off has been made in the books of account, then the manufacturer shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods. (emphasis supplied).
11. I find that the above Rule came into effect from 11.5.2007. The appellants have argued out that irrespective of the merits of the case the demands were barred by limitation of time as there was no misstatement and suppression of facts warranting invoking of the extended period, in terms of Section 11A of the Central Excise Act. I find merit in the argument of the appellants. The appellants have made a provision for write off in accordance with the Accounting Standards which were duly reflected in the Book of the Accounts including the Trial Balance, for the period 2003-04. Even the quantification of the demand by the Department was based on figures given in the financial records which were documents in the public domain. Therefore in my view there was no ground for invoking the extended period. I am therefore of the view that the demands were barred by limitation of time and I therefore do not propose to go into the merits of the case.
7. I find that the issue on merits is already settled in favour of the respondent as is evident from the judgment of the Honble Bombay High Court in the case of Hindalco Industries Ltd. (supra) as also by the Honble Gujarat High Court in the case of Ingersoll Rand (India) Ltd. (supra), wherein the Honble Courts have taken the view that the said provisions are applicable only from the date of introduction. The demand in this case is for the period prior to the date of introduction. I also find that the Revenue has not been able to elaborate what is the misrepresentation or misstatement done by the respondent. Similarly, I do not find any suppression of fact with intention to evade duty in the whole case.
8. Keeping in view the above observation, the appeal of the Revenue is dismissed.
(Pronounced in Court on 14.10.2014) (P.K. Jain) Member (Technical) tvu 1 8