Customs, Excise and Gold Tribunal - Calcutta
Sail, Bokaro Steel Plant vs Commr. Of C. Ex., Jamshedpur on 8 February, 2002
Equivalent citations: 2002(82)ECC408, 2002ECR178(TRI.KOLKATA), 2002(142)ELT574(TRI-KOLKATA)
ORDER K.K. Bhatia, Member (T)
1. The appellants manufacture iron and steel products falling under different chapter headings/subheadings of the Schedule to the Central Excise Tariff Act, 1985. They are also availing the facility of the Modvat credit of duty paid on the inputs under Rules 57A and 57B of the Central Excise Rules, 1944. On investigation conducted by the Central Excise Officers, Jamshedpur, it was found that they were clearing the items like hard coke, pearl coke, mixed coke, breeze coke, etc. manufactured in their coke oven plant which the appellants were selling to outside parties without payment of Central Excise duty as the same were chargeable to nil rate of duty. It was further observed that the electricity generated in Thermal Power Plant (TPP) situated within the premises of the assessee as well as high pressure steam, which is generated from the demineralised water along with phenolic water are used in the coke oven plant in or in relation to the manufacture of cokes of different grades. It was, therefore, observed that in the manufacture of coke from different types of coal, electricity, steam and phenolic water were the products of which the appellants were using different inputs on which they had availed the Modvat credit of specified duty under Rule 57A. Accordingly, they were issued show cause notice dated 19-9-97 by the Commissioner of Central Excise, Jamshedpur in which it was alleged that they had suppressed the fact of utilisation of the inputs in or in relation to the manufacture of cokes in contravention of provisions of Rules 57C, 57CC, 57G, 173H and 173G read with Rule 57C(2). It is alleged that they had taken the credit of specified duty of such quantity of inputs which were used in the manufacture of final products on which no duty of excise was payable and that the party contravened the provisions of Rule 57C. It is further alleged and that they had neither followed the procedure prescribed in Rule 57CC by adjusting the amount @ 8% as per the provisions of Sub-rule (2) of Rule 57CC nor maintained separate inventory and account of the receipt and use of inputs for purpose of manufacture of coke, hence they contravened the provisions of Rule 57CC. They further failed to determined the liability on the coke by not adjusting the amount (c) 8% in terms of Rule 57CC (2). Accordingly, they were called upon to show cause as to why the amount of Rs. 4,21,23,768/- should not be demanded and realised from them under Rule 57CC(2) read with Rule 57-I(1)(i). They were further called upon to show cause as to why a penalty should not be imposed upon them under the provisions of Sub-rule (4) of Rule 57-1 read with Section 11AC and Rule 173Q for contravention of Rules 57C, 57CC, 57G, 173F and 173G of the Central Excise Rules, 1944.
2. On considering the reply of the party, the Commissioner of Central Excise, Jamshedpur vide his order dated 15-12-98 held that an amount of Rs. 5,61,56,938.00 calculated @ 8% of the price of coke sold by the appellants to the outside parties without payment of duty during the period from September, 1996 to February, 1998 in terms of the provisions of Sub-rules (1) and (2) of Rule 57CC is liable to be recovered from the appellants under Rule 57-1. He further held that they are liable to penalty under Rule 57-1(4) for irregular availment of credits on the inputs used in or in relation to the manufacture of cokes despatched to outside parties without payment of duty by way of resorting to deliberate suppression of material facts from the department. Accordingly, he confirmed the demand of the aforesaid amount on the appellants under Rule 57CC(1) read with Rule 57-1(1). He further imposed an equal amount of penalty on the appellants under Rule 57-1(4) and also directed that they are liable to pay interest in terms of Rule 57-1(5) of the Central Excise Rules, 1944.
3. The present appeal is against the impugned order dt. 15-12-98 of the Commissioner, Jamshedpur. We have heard Shri S.P. Majumdar, Id. Advocate for the appellants and Shri V.K. Chaturvedi, Id. SDR for the respondents. We have considered these submissions of both the sides. We do not consider it necessary to go into the details of the facts of the case in respect of which the duty and penalty is confirmed on the appellants in view of the legal position obtaining at present. The Mumbai Bench of CEGAT in Push-paman Forgings v. CCE, Mumbai - 2002 (48) RLT 107 (T), have held that in the absence of machinery provisions in the Act or the Rules for the recovery of amount @ 8% of the price under Rules 57CC and 57-1, the said amount if debited, is not recoverable. The operative portion of this order is extracted below :-
"We have considered the interestings submission made by the assessee before us. It is true that the amount sought to be recovered is neither duty nor Mod-vat credit. That is specifically made clear by the Board Circular referred above. When that is so in our view, in the absence of a recovery proceedings machinery provided under the Act and Rules, the amount cannot be claimed from the assessee. Hence, we set aside the impugned order by allowing the appeal."
4. The above legal position in relation to recovery of the amount @ 8% of the value of the goods cleared without payment seems to be also admitted in the Board Circular No. 591/28/2001-CX, dated 16-10-2001. This Board Circular is also reproduced below :--
"1. I am directed to say that a doubt has been raised regarding legal provisions for recovery of amount not paid by an assessee in terms of the provisions of Rule 6 of the Cenvat Credit Rules, 2001 (Rule 57CC of the erstwhile Central Excise Rules, 1944).
2. The matter has been examined in the Board. It is stated the basic principle underlying the Cenvat Scheme is that is admissible if duty is paid on final products. Attention is drawn to Sub-rule (1) of Rule 6 of the Cenvat Credit Rules, 2001, which clearly provides that Cenvat credit shall not be allowed on such quantity of inputs is used in the manufacture of exempted goods, except in the circumstances specified in Sub-rule (2). The provisions of Sub-rules (2) and (3) of Rule 6 provides as to how to deal with and account for the inputs and credit of duty in cases where the inputs are used in the manufacture of both dutiable as well as exempted products. It follows from the provisions that if the manufacturer does not fulfil the requirements of either Sub-rule (2) (i.e. maintaining separate accounts) or Sub-rule (3) [i.e. paying 8% of total price of exempted goods, other than exceptions specified in Clause (a) then in terms of Sub-rule (1) the assessee shall not be allowed credit on such quantity which is used in the manufacture of exempted goods. Consequently where the assessee has not paid the amount, the availment of corresponding credit on inputs is incorrect. The recovery of such credit taken is squarely covered by the provisions of Rule 12 (erstwhile Rule 57-1). Necessary action may be taken accordingly."
5. Since in the present case, the Commissioner in his order has ordered for the recovery of the amount of Rs. 5,61,938.00 calculated @ 8% of the price of cokes sold to outside parties without payment of duty in terms of Rule 57CC(1), the same cannot be recovered from the appellants in terms of the ratio of the aforementioned decision of Mumbai Bench of CEGAT. The penalty is also not liable to be imposed on the appellants. Consequently, the impugned order is set aside and the appeal is allowed. It would be open to the respondents to resort to the proceedings for recovery of the corresponding Modvat credit availed on the inputs used in the manufacture of exempted final products as per law.