Custom, Excise & Service Tax Tribunal
M/S. Molex (India) Private Ltd vs Commissioner Of Central Excise on 30 August, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/3090/2012 & E/25430/2013 (Arising out of Order-in-Appeal No.217/2012-CE dated 9.8.2012 passed by the Commissioner of the Commissioner of Central Excise (Appeals-I), Bangalore.) For approval and signature: HON'BLE SHRI S.S. GARG, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s. Molex (India) Private Ltd. Plot No.6A, Sadarmangala Industrial Area, Bangalore 560 067. Appellant(s) versus Commissioner of Central Excise Bangalore-I Commissionerate Bangalore. Respondent(s)
Appearance:
Mr. Shailendra, CA For the Appellant Mr. N. Jagadish, Superintendent (AR) For the Respondent Date of Hearing: 18/07/2016 Date of Decision: 30/08/2016 CORAM:
HON'BLE SHRI S.S. GARG, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No. 20677-20678 / 2016 Per : S.S. Garg, The present appeal is directed against the order of the Commissioner (A) dated 9.8.2012 vide which the Commissioner (A) has rejected the appeal of the appellant and upheld the decision of the adjudicating authority. Briefly the facts of the present case are that the appellant is engaged in the manufacturers of electronic connectors, parts of connectors, electronic connector harness and other IT products classifiable under Chapter 85 of the First Schedule to the Central Excise Tariff Act, 1985. The appellant procures duty paid inputs, capital goods and input services for use in the manufacture of dutiable final product and also avail CENVAT credit of duty paid on purchase of inputs and capital goods and service tax paid on input services. During the period August 2007 to January 2010, appellant procured certain inputs from a 100% EOU situated in the State of Karnataka. The supplier of the inputs has paid excise duty under proviso (ii) to Section 3(1) of the Central Excise Act, 1944. The supplier at the time of clearance of the goods from the EOU discharged excise duty under Section 3 of Central Excise Act, read with Sl. No.1 of the Notification No.23/2003-CE dated 31.3.2003 as amended. During the internal audit conducted by the Department, the objection was raised which was replied by the appellant and thereafter a show-cause notice was issued to the appellant on the allegation that the duty paid by the EOU under Section 3 of Central Excise Act, read with Sl. No.1 of the Notification No.23/2003-CE is not relevant to the appellant as credit in full and that the availment of credit by the appellant is not in accordance with the provisions of CENVAT Credit Rules, 2004 (CCR, 2004). The extended period was also invoked. The allegation in the show-cause notice was controverted by the appellant by filing the reply to the show-cause notice. The adjudicating authority vide its order dated 15.3.2011 upheld the demand and imposed penalty and demanded appropriate interest. Aggrieved by the said order, the appellant filed an appeal before the Commissioner (A) on the ground that the duty paid by 100% EOU is a duty of excise; and Rule 3(1) of CCR, 2004 allows CENVAT credit of the whole of the duty charged by EOU; and they have alleged that there is no suppression of fact with intent to evade payment of duty and hence extended period of limitation was not invokable. The learned Commissioner (A) vide the impugned order rejected the appeal of the appellant on the ground that the credit of duty availed in excess of additional duty leviable under Section 3 of the Customs Tariff Act equivalent to duty of excise specified in Clauses (i) (ii) (iii) (iv) (v) (vi) (via) of Rule 3(1) of CCR, 2004 is irregular and also justified the invoking of extended period. Aggrieved by the said order, the appellant is before us.
2. Learned counsel for the appellant submitted that the impugned order is contrary to facts, law and evidence on record and also contrary to the provisions of CCR, 2004 and Central Excise Act, and therefore not sustainable in law. He also submitted that the Commissioner (A) has not considered the judgments cited by the appellant which squarely covers the case of the appellant. He further submitted that the levy of excise duty on goods manufactured by an EOU and sold in India would be equivalent to the duty paid on import of goods. The measure of computation of duty does not alter its nature of being a duty of excise. He further submitted that in the impugned order at para 5 and the adjudicating authority at para 13.7 have accepted the fact that the duty discharged by an EOU is a duty of excise but have proceeded to restrict the credit of the amount which is equivalent to basic custom duty. He further submitted that once it is accepted that the duty paid is a duty of Excise, the question of dissecting the said duty into different components such as basic custom duty, additional duty of customs or any other customs duty does not arise. In support of his submission, reliance was placed in the case of Vikram Ispat vs. Commissioner of Central Excise, Mumbai reported in 2000 (120 E.L.T. 800 (Tri.-LB) which is also relied upon by the Honble High Court of Gujarat in the case of Commissioner of Central Excise vs. H. K. Moulders: 2010-TIOL-908-HC-AHM-CX wherein the Larger Bench of the Tribunal in para 16 of the aforesaid decision have held as follows:
16. Notification No.2/95-C.E., dated 4.1.95 provides that the goods manufactured and cleared by a 100% EOU to DTA will be exempted from so much of duty of excise as is in excess of the amount calculated at the rate of 50% of each of duty of customs leviable read with any other notification for the time being in force on the like goods produced or manufactured outside India, if imported into India, provided that the amount of duty payable shall not be less than the duty of excise leviable on the like goods produced or manufactured by the units in Domestic Tariff Are read with any relevant notification. It is, thus apparent that notification No.2/95 provides a minimum limit of the rate of duty which has to be paid by a 100% EOU. While clearing the goods to DTA and this limit is provided by the duty of excise leviable on like goods, manufactured outside 100% EOU. However, if the aggregate of duty of customs leviable on goods cleared by 100% EOU is more than the duty of excise leviable on like goods, a 100% EOU, has to pay more duty. The Revenue want to restrict the availment of Modvat credit to the components of additional duty of customs paid under Section 3 of the Customs Tariff Act, by bringing the fiction that 100% EOU is a place which is not in India and the sale there from within India is akin to import into India. We do not find any substance in this view of the Revenue. The clearance of the goods by 100% EOU are not import in the terms in which it has been defined under Section 2(23) of the Customs Act, according to which, import with its grammatical and cognate expression means bringing into India from a place outside India. This is also apparent from the fact that when the goods are cleared from 100% EOU to any other place in India, central excise duty under section 3(1) of the Central Excise Act is levied and not the customs duty under the Customs Act. If it is to be regarded as import, then the duty has to be charged under Section 12 of the Customs Act, read with Section 3 of the Customs Tariff Act. The Revenue, it seems is confusing the measure of the tax with the nature of the tax. The nature of the duty levied on the goods from 100% EOU is excise duty and nothing else, whereas for determining the quantum of duty the measure adopted is duty leviable under Customs Act, as held by the Supreme Court in many cases referred to above. The method adopted by the law makers in recovering the tax cannot alter its character. Once it is held that the duty paid by the 100% EOU in respect of goods cleared to any place in India is excise duty, the question of dissecting the said duty into different components of basic customs duty, auxiliary duty, additional duty of customs or any other customs duty does not arise. The proforma of AR-1A on which the reliance was placed by the learned D.R., cannot change the legal position that the duty levied on 100% EOU is a duty of excise and not customs duty. 2.1 He further submitted that Rule 3(1) of CCR, 2004 does not allow CENVAT credit of basic custom duty which is chargeable under Section 12 of Customs Act, 1962; whereas in the present case the duty charged by EOU is a duty of excise charged under Section 3(1) of Central Excise Act. Further there is no restriction under Rule 3(1) of CCR, 2004 on availment of CENVAT credit of duty charged under Section 3(1) of CCR, 2004. Learned counsel admitted that there is a restriction for availing CENVAT credit for purchases made from EOU under Rule 3(7) of CCR, 2004 but the same is not applicable in the facts and circumstances of this case. Learned counsel also placed his reliance on the judgment in the case of Gopala Polyplast Ltd. vs. CCE, Ahmedabad reported in 2014-TOIL-1898-CESTAT-AHM. wherein identical issue was involved and the Honble Tribunal in para 5 and 6 held as under:
5. Revenue has relied upon the case law of the Apex Court to the effect that a proviso cannot enlarge the scope of the main Section and no CENVAT credit of duty other than paid under First Schedule to Central Excise Tariff Act, 1985, is eligible. If the view put forth by the Revenue is accepted than under proviso to Section 3(1) no duty more than the duty of excise leviable under the First Schedule to Central Excise Act can be recovered from a 100% EOU. Revenue can take not one stand while recovering duties and take another stand once it comes to taking of CENVAT credit. It is, therefore, a logical conclusion that the sum total of duties paid by a 100% EOU represents Central Excise duty chargeable as per Section 3(1) of the Central Excise Act, 1944. In the invoices the entire duty has been shown as excise duty paid under proviso to Section 3(1) of the Central Excise Act, 1944. This proviso is existing in Section 3 right from 01.3.1982.
6. In the present appeal also the duty indicated on the invoices show the same to be Central Excise duty though the method used for calculating the measureof such excise duty also include elements of customs duties. Therefore, the entire duty paid on the invoices will have to be considered as Central Excise duty paid under Section 3(1) of the Central Excise Act, 1944. It is not the case of the Revenue in these proceedings that CENVAT credit of the excise duty paid by the 100% EOU was required to be reduced under any other provisions of the Cenvat Credit Rules, 2004.
3. On the other hand, learned AR reiterated the findings of the Commissioner (A).
4. We have heard both the sides and perused the records and have gone through the judgments cited by the appellant. Section 3(1) of CCE, 1944 along with its proviso reads as follows:
Section 3(1) of the Central Excise Act, 1944 along with its proviso reads as follows:-
Section 3. Duties specified in First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied.
(1) There shall be levied and collected in such manner as may be prescribed, -
(a) a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(b) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods excluding goods produced or manufactured in special economic zones specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as, and at the rates, set forth in the said Second Schedule.
Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured, -
(i) * * * * *
(ii) by a hundred percent export-oriented undertaking and brought to any other place in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 (52 of 1962) or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975).
Rule 3(1) of the Cenvat Credit Rules, 2004 reads as follows:-
Rule 3. CENVAT credit. - (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
4.1 On perusal of the bare provisions as cited supra and the interpretation given to these provisions by the decisions cited supra, we find that the duty charged by an EOU is a duty of excise charged by 100% EOU and the amount of duty charged is one single amount and does not contain any bifurcation as to basic custom duty, additional duty of customs, etc. We also find that the invoices issued by the 100% EOU indicate excise duty as per the proviso to Section 3(1) of the Central Excise Act where only Central Excise duty has been prescribed to be calculated in a particular manner. We also find that Revenue was wrong in further bifurcating the Central Excise duty paid into basic custom duty and education cess. Though the method used for calculating the measure of such excise duty was also to include element of customs duties but the entire duty paid on the invoices will have to be considered as Central Excise duty paid under Section 3(1) of Central Excise Act. Therefore keeping in view the material on record and judgments cited supra which squarely covers the case of the appellant in his favour, we set aside the impugned order by allowing the appeal with consequential relief, if any.
(Order was pronounced in open court on 30/08/2016.) ASHOK K. ARYA TECHNICAL MEMBER S.S. GARG JUDICIAL MEMBER rv 11