Custom, Excise & Service Tax Tribunal
Eii Ess Engineering Pvt. Ltd vs Commissioner Of Central Excise, ... on 26 June, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/515/11-MUM [Arising out of Order-in-Appeal No. PKS/475/BEL/2010 dtd. 20/12/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone II] For approval and signature: Honble Mr Ramesh Nair, Member (Judicial) =======================================================
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?
=======================================================
EII Ess Engineering Pvt. Ltd.
:
Appellants
VS
Commissioner of Central Excise, Belapur III Div.
:
Respondent
Appearance
Shri Manoj Kasle, Advocate for the Appellants
Shri N. N. Prabhudesai, Asst. Commissioner (A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 26/6/2015
Date of decision: /2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in-Appeal No. PKS/475/BEL/2010 dtd. 20/12/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone-II, wherein Ld. Commissioner (Appeals) upheld the order-in-original dated 28/8/2007 and rejected the appeal of the appellant.
2. The fact of the case is that the appellant is engaged in the manufacture of excisable goods falling under Chapter 84 of the Central Excise Tariff Act, 1984. They are also availing Cenvat credit as per the terms of Cenvat Credit Rules, 2004. During the course of EA 2000 audit, it was noticed that they had availed Cenvat credit on the goods covered under following invoices, which were initially cleared by the appellant and returned by their customers:
Sr. NO.
Invoice No. & Date Cenvat Credit Entry No. & Date Amount of credit availed (Rs.)
1.
22/10.09.2003 16/68 dtd 03.07.04 93,600/-
2. 08/05.06.2004 18/68 dtd 06.07.04 38,400/-
3. 11/06.07.2004 26/69 dtd 04.08.04 3,360/-
4. 30/04.12.2003 30/69 dtd 10.08.04 2,434/-
5. 14/20.07.2004 39/70 dtd 29.09.04 6,960/-
Total 1,44,754/-
Duty of the above four items against above rejected goods covered under invoices mentioned at Sr. No. 1 and 2 were declared as obsolete in the balance sheet of the appellant for the year 2004-05. The returned goods covered under the invoices mentioned at Sr. No. 3 to 5 also appear to be obsolete as the goods were not cleared subsequently. It was alleged that appellants products are tailor made to suit for particular industry and the same cannot be used by others without making major changes and hence appellants cleared parts/components were used by them in their products and cleared on payment of duty subsequently is not correct as it is not substantiated with documentary evidence. Since, the rejected and returned goods were not cleared on payment of duty subsequently, the Cenvat credit availed on the said goods totally amounting to Rs. 1,44,754/- was not correct and the same needs to be reversed. On pointing out by the Audit the appellant paid part of the duty amounting to Rs. 31,200/- and interest amounting to Rs. 7436/-. During the audit it was also noticed that in the balance sheet for the year 2003-04 and 2004-05 of the appellant, input worth Rs. 4,35,630/- and Rs. 3,25,000/- respectively were shown as obsolete. As the inputs on which credit availed, were not used in the manufacture of final product the Cenvat credit availed on such obsolete input amounting to Rs. 1,21,701/- was not admissible. The show cause notice dated 6/12/2006 was issued wherein Cenvat credit of Rs. 1,44,754/- and Rs. 1,21,701/- was proposed to be denied and payment of Rs 31,200/- already debited was proposed to be appropriated against demand. Interest under Section 11AB was also proposed and amount of Rs. 7,436/- paid by the appellant on account of interest was proposed to be appropriated. Penalty under Section 11AC was also proposed. Show cause notice was adjudicated vide order in original dated 21/8/2007 wherein the adjudicating authority confirmed the proposal made in the show cause notice. Aggrieved by the aforesaid order, the appellant preferred an appeal before the Commissioner (Appeals), who upheld the order-in-original dated 21/8/2007 and rejected the appeal, therefore appellant is before me.
3. Shri Manoj Kasle, Ld. Counsel for the appellant submits that as regard the credit of Rs. 1,44,754/- admittedly these were in respect of returned goods and credit was taken in terms of Rule 16 of Central Excise Rules, 2002. The credit was denied on the ground that these goods after receipt become loss and therefore credit is not admissible. It is his submission that after receipt of these goods the appellant dismantle the machines and some of the parts were used in manufacture of the final product and some of the parts got defected and on account of that defective part loss was booked in the balance sheet for the year 2004-05. He submits that there is no dispute for duty paid goods returned to the factory and it was not cleared from the factory. The material was used for further production in their routine production and whatever quantity got wasted that has been cleared as scrap on payment of duty and value of such defective goods was booked by the appellant in the balance sheet as loss. Therefore entire credit availed on the goods received cannot be denied because it was used in terms of Rule 16. As regard the credit of Rs. 1,21,701/- it is his submission that this credit was denied on the ground that credit is attributed to the amount of Rs. 4,35,630/- and Rs. 3,25,000/- shown in the balance sheet as loss during the year 2003-04 and 2004-05 respectively. He submits that in the entire show cause notice, it was alleged that credit is not admissible for the reason that the appellant has booked amount as shown obsolete in their balance sheet which is apparently wrong for the reason that the appellant booked in their balance sheet under head of loss merely due to design fault. Therefore, no goods was become obsolete. He also submits that there is no evidence adduced by the department after taking credit of returned goods; the same have been cleared from the factory without payment of duty. He submits that whatever returned goods received in the factory was admittedly used in the production. Only there is some deterioration of the goods on account of which the loss was booked in the balance sheet. He also submits that the credit of Rs. 1,44,754/- is on five invoices against which goods were returned to the factory, out of the said goods, the value of loss on account of some defective goods was booked in the balance sheet. Adjudicating authority as well as the Commissioner (Appeals) has made serious error that in one hand demand of Rs. 1,44,754/- was confirmed on the invoices of the returned goods and at the same time Cenvat credit in respect of said loss of Rs. 4,35,630/- and Rs. 3,32,000/- booked in year 2003-04 and 2004-05 was demanded. Thus lower authority has demanded duty of the same material twice i.e. on direct invoices and other loss booked in the balance sheet, therefore, there is clear duplication of demand.
4. On the other hand, Shri N. N. Prabhudesai, Ld. Superintendent (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.
5. I have carefully considered the submissions made by both sides and perused the record.
6. I find that there are two limbs of the demand, first is Rs. 1,44,754/- and second is 1,21,701/-. I observed that there is force in the argument of the Ld. Counsel that demand of Rs. 1,21,701/- was repetition of demand includes in Rs. 1,44,754/- for the reason that show cause notice itself first denied credit of Rs. 1,44,754/- on the returned goods and subsequently credit of Rs. 1,21,701/- was denied as amount shown in the balance sheet as loss. Show cause notice itself contended that this loss against returned goods which were received under the five invoices on which already demand was confirmed. I am of the view that demand in respect of the loss booked under the balance sheet has to be sustained for the reason that if explicitly assessee booked loss is nothing but value which was written off. Therefore on written off value, Cenvat credit is not admissible. Therefore demand of Rs. 1,21,701/- in respect of loss credit is not admissible. As regard Cenvat credit in respect of five invoices which were admittedly towards returned goods in my view credit correctly admissible in terms of Rule 16. As regard the disposal of the goods the appellant submitted that the goods returned from their customers were dismantled and used in the fresh production which is strictly in terms of Rule 16 of the Central Excise Rules, 2002. I also observed that in the whole proceedings Revenue could not adduce a single evidence by which it can be established that out of the goods covered under five invoices, goods were cleared from the factory without payment of duty. Even if it is accepted that part of the returned goods were defective and cleared as scrap, same was cleared on payment of duty. However, the loss booked in the books of account is on account of said defective parts, credit is not admissible as already held above. As regard the five invoices, there are no evidence regarding clandestine removal or otherwise. In terms of Rule16, there no one to one co-relation has been provided or any other procedure required. Rule 16 only provides that on receipt of duty paid goods, receipt should be booked thereafter if the said goods is cleared as such duty equal to Cenvat credit required to be paid and if the goods cleared after carried out manufacturing process then duty on transaction value has to be paid. In the present case, I find that there is no clearance of goods as such. Therefore it deemed to be used in the fresh manufacture which cleared in the normal course of removal of dutiable goods. I, therefore, of the view that the appellant is not entitle for the credit of Rs. 1,21,701/- however credit of Rs.1,44,754/- availed by them is allowed. The appeal is partly allowed in above terms.
(Operative part pronounced in court on______________) Ramesh Nair Member (Judicial) sk 7 APPEAL NO. E/515/11-MUM