Custom, Excise & Service Tax Tribunal
M/S. Dynamic Dish India Ltd vs C.C.E. Hyderabad-Iv on 14 October, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Application(s) Involved: E/COD/27616/2013 in E/27307/2013-SM E/Stay/27617/2013 in E/27307/2013-SM Appeal(s) Involved: E/27307/2013-SM [Arising out of Order in Appeal No.01/2013 (H-IV) (D) CE dt. 28/02/2013 passed by Commissioner of Central Excise , HYDERABAD-II( Appeal) ] M/s. Dynamic Dish India Ltd. Appellant Versus C.C.E. Hyderabad-IV Respondent
Appearance:
Mr. B. Venugopal, Advocate For the Appellant Mr. R. Gurunathan, Addl. Commissioner (AR) For the Respondent CORAM:
HON'BLE SHRI B.S.V.MURTHY , TECHNICAL MEMBER Date of Hearing: 14/10/2013 Date of Decision: 14/10/2013 Final Order No 26751 / 2013 Order Per : B.S.V.MURTHY The learned counsel submits that there is a delay of 24 days in filing the appeal which occurred because of illness of Managing Director. Since the delay is only of 24 days and has been explained satisfactorily, the delay is condoned.
2. The assessee being a SSI unit had filed ER-3 quarterly return for quarter ending 06/2011 on 9.7.2011 for the goods manufactured and cleared during April 2011 to June 2011. During the scrutiny of the said quarterly ER-3 return filed by them, it was observed that an amount of Rs.2,76,068/- was shown to have been taken as CENVAT credit in CENVAT abstract during the said quarters. However, on scrutiny of the document on whose strength the credit was taken, it was found that the duty paid on M.S. scrap was taken as credit. Since the scrap is not an input for manufacture of dish ends and not eligible for CENVAT credit a detailed study of the issue was taken up and the same revealed that the said invoice is issued by M/s. Bharat Heavy Electricals Ltd. (BHEL) in the name of the assessee vide invoice No.HY-SA-1-400032 dated 31.8.2010 where in the duty paid is on M.S. scrap and the said invoice reflects a note mentioning that amount adjusted during 8/2010 towards scrap generated at subcontractors work.
3. On further enquiry, it was noticed that the assessee was a job worker to M/s. BHEL and had received an order to do the job work on the materials supplied by them. It was further observed that after completion of the said job work the principal manufacturer evaluates the quantity and value of material used for the job work and further evaluates the value of unused quantity of raw material which is leftover with the assessee and the same is treated as scrap sold to the assessee. The value of scrap is deducted from the job work charges to be paid to the assessee for carrying out job work. In this connection, the principal manufacturer raises invoice for the scrap as if the same has been sold to the assessee. The present invoice on whose strength the notice have taken credit was one such invoice where BHEL had adjusted the payment to the job worker. Other than the above commercial adjustment, it appears that the scrap material has nothing to do with the manufacture of final products by the assessee.
4. Proceedings were initiated by issuing show-cause notice on 12.6.2012 and original adjudicating authority came to the conclusion that the assessees claim that what was purchased by them were left over materials and the same could be used for manufacture of dish ends has to be accepted and accordingly, he dropped the proceedings. On an appeal filed by the Revenue, Commissioner (A) in the impugned order held that the original adjudicating authority erred in coming to this conclusion. He observed that he should have investigated as to whether MS plates which were purchased by the assessee which according to them was left over and according to BHEL was waste was correct or not and whether it was in reality could have been used in the manufacture of dish ends. Further, he also observed according to Notification No.214/86-CE dated 23.5.1986 under which the materials were sent by BHEL, the material should have been returned to BEHL and therefore there is a violation of the condition of the Notification. On these grounds, the Commissioner (A) confirmed the demand for the CENVAT Credit of Rs.2,76,068/- availed by the assessee with interest thereon. However, no penalty has been imposed.
5. Heard both the sides in considerable detail. Since the issue was argued extensively and considered from all angles, I do not find it appropriate to postpone the final decision on appeal by granting stay. Hence the appeal itself is taken up for final decision. Accordingly the requirement of pre-deposit is waived and the matter is taken up for final decision.
6. After considering the submissions and going through the records, I find that show-cause notice itself has stated that according to the appellant what was purchased by them from BHEL or what was invoiced by BHEL were leftover MS plates. The show-cause notice also says that BHEL treated it as scrap. Therefore, the show-cause notice itself accepts the fact that the material under dispute was scrap in the eyes of BHEL and was leftover material in the eyes of assessee. However, no investigation was conducted as to what was the real nature of the material and whether it could have been used by the appellant or not especially in view of the fact that show-cause notice was issued on the ground that these were not inputs. At the time of original adjudication proceedings, the assessee replied to the show-cause notice intimating that what was received by them was leftover materials and they were using it for the manufacture of dish ends, which is their final product and this contention was accepted by the original adjudicating authority, who did not feel the need for any investigation. However, when the department filed an appeal, the Commissioner (A) came to the conclusion that the verification / investigation which was not felt as a necessity at the time of issue of show-cause notice or at the time of adjudication by the original adjudicating authority was required. This conclusion was reached only because he did not believe the assessee. The whole system of collection of indirect taxes is based on the trust placed on the assessee and the assessee has to do the self-assessment and considering whether a particular item is input or not, whether credit is admissible or not, and same can be used or not is a part of assessment process. That being the situation, if an assessee has assessed the goods in a particular manner and has explained the same, if that is not to be accepted by the Revenue, some investigation or verification was definitely required. If the same was not felt necessary at the time of issue of show-cause notice, at least at the time of adjudication process, the original adjudicating authority, when a claim was made about the leftover material and its use, could have got the facts verified and given the verification report to the assessee and thereafter proceeded to adjudicate. In my opinion, the adjudicating authority when he accepted the reply to the show-cause notice by the assessee since he had no reason to disbelieve the assessee. What can be said is that at the time of issue of show-cause notice and subsequently at the time of adjudication, officers exercised their discretion and believed the assessee in what they have claimed. Now the Commissioner (A) has confirmed the demand only on the ground that such investigation/verification was not taken up by the lower authorities. This means that the Commissioner, without any basis but the disbelief on the assessee claim and on a totally new ground, allowed the appeal. In my opinion, the confirmation of demand and allowing the Revenues appeal on this ground is against the spirit or letter of law and would not be proper. Therefore allowing of the Revenues appeal on this ground cannot be sustained.
6.1 Coming to the second point taken up by the Commissioner (A) that goods should have been returned, in my opinion, when the assessee purchases the leftover materials (scrap in the eyes of BHEL) from BHEL, the obligation under Notification No.214/1986 in respect of the assessee as well as BHEL can be said to have been fulfilled. Even though learned AR vehemently argued against this observation, I feel that this interpretation of Notification No.214/1986, in the facts and circumstances of this case, are correct and there is no need to go into further discussion on this issue especially in view of the fact that no contrary precedent judicial pronouncement covering this type of issue and taking a contrary view has been produced before me.
7. Under these circumstances, the impugned order cannot be sustained and appeal has to be allowed and accordingly appeal is allowed.
(Order dictated and pronounced in open court) B.S.V.MURTHY TECHNICAL MEMBER rv 4 4 1