Custom, Excise & Service Tax Tribunal
Hare Krishna Boxes Pvt Ltd vs Commissioner Of Central Excise, ... on 30 December, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. E/994-995/05 & E/1078-79/08 & E/1040/07 (Arising out of Order-in-Original No. 25/Commr/03-04 dated 17.12.2004 and No.06-08/Bel-III/R-III/Commr/SLM/2008-09 dated 31.7.2008 passed by Commissioner of Central Excise & Customs, Belapur and Order-in-Appeal No. AT/151/Bel/2007 dated 12.04.2007 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone II.) For approval and signature: Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. S.K. Gaule, 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 : Yes 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?
====================================================== Hare Krishna Boxes Pvt Ltd Appellants Ajay Aggarwal Vs. Commissioner of Central Excise, Belapur Respondent Appearance:
S/Shri M.H. Patil, Sachin Chitnis and Miss Aparna.H. Advocates, for appellants Shri W.L. Hangshing, Jt CDR), for respondent CORAM:
Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. S.K. Gaule, Member (Technical) Date of Hearing: 30.12.2010 Date of Decision:30.12.2010 ORDER NO
1. M/s Hare Krishna Boxes Pvt Ltd (hereinafter referred to as the assessee) claimed SSI benefit during the period from 1.4.2001 to 31.7.2007 and hence did not pay duty of excise on their product (printed corrugated boxes). During the said period, they had not only cleared the goods to domestic industries but also cleared to merchant-exporters who used the goods as packing material for vegetables and fruits which were exported. The value of clearances of the corrugated boxes cleared to the merchant-exporters were not taken into account by the assessee in computing the aggregate value of clearances for purposes of the relevant SSI exemption notifications. Their aggregate value of clearances for home consumption for each financial year remained below the limits prescribed under the relevant SSI notification. Hence no payment of duty on the goods cleared for home consumption. The department issued show-cause notices to the assessee alleging inter alia that the corrugated boxes cleared to merchant-exporters during the material period were also liable to be accounted as clearances for home consumption and hence to be included in the aggregate value of clearances for home consumption in the context of determining whether the SSI benefit could be claimed for such period. The show-cause notices alleged that the assessee was not entitled to exclude the clearances of corrugated boxes to the merchant-exporters, from the aggregate value of clearances for home consumption for purposes of the SSI notifications inasmuch as the goods cleared to the merchant-exporters were not directly exported from the assessees factory. The show-cause notices further alleged that no correlation had been established between the goods actually exported by the merchant-exporters and the corrugated boxes cleared from the assessees factory. On this basis, the show-cause notices sought to recover duty of excise from the assessee in respect of their clearances of corrugated boxes for the periods 1.4.2001 to 31.12.2002, 1.4.2003 to 31.3.2004, 1.4.2004 to 31.03.2006, 1.4.2006 to 30.9.2006 and 1.10.2006 to 31.7.2007. The first and second appeals are against the Commissioners order passed in adjudication of the first and second show-cause notices respectively. The third appeal is directed against the order passed by the Commissioner in adjudication of the remaining three show-cause notices. The learned Commissioner confirmed the demands of duty against the assessee by denying them SSI benefit for the relevant periods. He also imposed penalties on the assessee under Section 11AC of the Central Excise Act. Separate penalties were imposed, in two cases, by the Commissioner on Ajay Aggarwal, one of the Directors of the company. The remaining appeals are by Ajay Aggarwal aggrieved by the penalties.
2. After examining the records and hearing both sides, we have found a striking parallel between the facts of this case and those of Vadapalani Press vs Commissioner of Central Excise, Chennai 2007 (217) ELT 248 (Tri-Chennai), which decision was followed by this Bench in the case of Merry vs CCE, Mumbai II 2008 (226) ELT 422 (Tri-Mum) and by a Co-ordinate Bench in the case of Amar Packaging Industries vs CCE, Rajkot 2009 (247) ELT 574 (Tri-Ahd). This very Bench considered a similar case and allowed SSI benefit to the party by following Vadapalani Press (supra) in the case of Universal Packaging vs Commissioner of Central Excise, Mumbai V (appeal Nos E/1285-1286/07) vide 2010-TIOL-1532-CESTAT-MUM. The learned counsel has prayed for allowing the appeals by following the cited case law. In the context of dealing with the scope of export, the learned counsel has also claimed support from CCE vs Bally Jute Co 1989 (44) ELT 510 (T) and Collector of Central Excise vs Kamarhatty Co Ltd 1991 (55) ELT 618 (T).
3. The learned Jt CDR submits that the simplified procedure prescribed by the Board for export of goods manufactured by exempted units has to be strictly construed and followed. It is submitted that the assessee, in the instant case, did not duly follow the procedure inasmuch as the corrugated boxes which were excluded from the computation of aggregate value of clearances for purposes of SSI notification on the ground that such boxes were cleared for export were not directly exported from their factory. In this connection, the Jt CDR has particularly referred to para 4.1.2 of Part III of Chapter 7 of Central Excise Manual of Supplementary Instructions, wherein it was laid down that H-Forms or equivalent Sales Tax Forms could be used as proof of export by exempted units and it was further clarified thus: It is clarified that this facility is available only in respect of the exempted units which undertake exports themselves or through merchant-exporters directly from the unit itself. The learned Jt CDR has heavily relied on this clarification of the Board and has submitted that, since the packing materials which were excluded from computation of the aggregate value of clearances of specified excisable goods for home consumption were not directly exported from the assessees factory, they were not entitled to use H-Forms or equivalent Sales Tax Forms as proof of export in the context of claiming exclusion of the above clearance from the computation of aggregate value of clearances of excisable goods for home consumption. In this context, it is further submitted that the decision of the Tribunal in the case of Vadapalani Press (supra) and other cases cited by the learned counsel is liable to be distinguished. The learned Jt CDR has further referred to a recent decision of the Honble Supreme Court in Commissioner of Central Excise, New Delhi vs Hari Chand Shri Gopal 2010 (260) ELT 3 (SC), wherein the mandatory requirement of a manufacturer having to follow Chapter X procedure was underlined by the apex court. The learned Jt CDR has particularly referred to the facts of the case and also to the observations of the apex court contained in para 34 of its judgment. According to the learned Jt CDR, the instant case is an appropriate case for this Bench to take a fresh look at the issue and refer the same to a Larger Bench.
4. We have given careful consideration to the submissions. Essential facts of the case are not in dispute. The assessee was operating, during the period of dispute, as an unregistered declarant unit as permitted by the law then in force. They availed SSI benefit under the relevant notifications and hence did not pay duty of excise on the corrugated boxes (specified goods) cleared for home consumption in the domestic market. During those periods, SSI units with the aggregate value of clearances below 1 crore/1.50 crores were entitled to avail full exemption under the relevant SSI notifications. In determining the aggregate value of clearances, they did not take into account corrugated boxes which were cleared to merchant-exporters for being used as packing material for vegetables and fruits which were exported out of the country. In this context, they produced Sales Tax Forms (G-I Forms upto 1.4.2005 and H-Forms from 1.4.2005) as proof of export of the corrugated boxes cleared to merchant-exporters. These facts are not in dispute. On these facts, the question arises as to whether the assessee should be required to include the clearances made to merchant-exporters also in the computation of aggregate value of clearances of specified goods for home consumption. In other words, the question is whether such clearances are liable to be reckoned as clearances for home consumption. Precisely this issue was considered by a co-ordinate Bench of this Tribunal in the case of Vadapalani Press (supra), wherein para 4.1.2, Chapter 7 of the Central Excise Manual of Supplementary Instructions was also considered alongwith certain circulars of the CBEC and it was held that the assessee in that case was entitled to reckon clearances of the subject goods (packing materials) to merchant-exporters as clearances for export and hence to exclude the same from computation of aggregate value of clearances of specified goods for home consumption under the relevant SSI exemption notifications. The decision rendered in Vadapalani Presss case was not challenged by the department. On the other hand, it was consistently followed by this Tribunal in similar cases such as Amar Packaging (supra) and Universal Packaging (supra). Nobody has claimed that any of the decisions was reversed by the competent appellate court. This very Bench followed the ratio of Vadapalani Expresss case in final order No. A-336-337/2010 dated 9.9.2010 in the case of Universal Packaging (supra) and the said final order also appears to have been accepted by the Revenue. The department has no case that the facts of the present case are materially different from those of Amar Packaging (supra) or Universal Packaging (supra). In this scenario, it is our considered view that the Revenue is precluded from taking a different stand. The show-cause notice in question and also the adjudicating authority in the present case heavily relied on para 4.1.2, Chapter 7 of Central Excise Manual of Supplementary Instructions for alleging that the benefit of using sales tax forms under the Central Sales Tax Rules as a proof of export in the context of excluding the clearances for export from computation of the aggregate value of clearances of excisable goods for home consumption was not admissible to the assessee. The very clarification of the Board was construed by this Tribunal in the case of Vadapalani Press (supra). The relevant provisions of the Central Sales Tax Rules were also examined in that context. The view taken by the Tribunal in the said case was that a manufacturer of packing material claiming SSI benefit in respect of clearances thereof for home consumption was entitled to use H-Form as a proof of export in respect of the materials cleared to merchant-exporters for being used for packing other goods for export, in the context of claiming exclusion of such clearance from computation of aggregate value of clearances of specified goods for home consumption under the relevant SSI notification. It is pertinent to note that the interpretation rendered by the Tribunal in respect of the CBECs instructions has not so far been challenged by the Revenue. It has, therefore, to be presumed that the interpretation given in the case of Vadapalani Press stands accepted by the Revenue. If that be the case, the Boards instructions which were issued in the context of simplifying the procedure for similar exempted units have to be applied to the facts of the instant case as well. The contra interpretation given by the Jt CDR is flying in the face of the view apparently taken by the Board and hence not acceptable. We, therefore, are inclined to follow the view taken in Vadapalani Press (supra), and to allow these appeals. For the sake of brevity, we reproduce hereunder paras 5 and 6 of the judgment in Vadapalani Press:
5.After? giving careful consideration to the submissions, we have found substance in the claim of the appellants that CBEC themselves had accepted Form-H certificates as proof of export vide Circulars No. 212/46/96-CX dt. 20-5-1996 and No. 648/39/2002-CX. dated 25-7-2002 and para 4.1.2, Chapter 7 of the Central Excise Manual of Supplementary Instructions 2003-04. Para 4.1.2 ibid reads as under :-
In the case of export through merchant-exporter the document prescribed by Sales Tax Department will be accepted as the proof of export. Sales made by manufacturer of the goods to the merchant-exporter which ultimately are exported are exempt from Central Sales Tax. The Sales Tax Department issues booklet to the merchant-exporters containing serially numbered H-Forms/ST-XXII form or equivalent Sales Tax form. After the goods have been exported by the merchant-exporters, the latter issues these forms to the manufacturers of the goods. The merchant-exporters in turn have to account all these serially numbered forms to the Sales Tax Department by furnishing a proof that the goods have been exported out. These proofs are in the form of presentation of the Shipping Bill duly completed by the customs, bill of landing, foreign exchange remittance certificates etc. The liability of the manufacturers to the Central Sales Tax gets discharged only when they submit these forms to the Sales Tax Department. It is, therefore, seen that indirectly exports get accounted for through the issue of H-form or ST-XXII Form. Thus, photocopy of H-form or ST-XXII Form or any other equivalent Sales Tax form duly attested and stamped by the manufacturer or his authorised agent will be accepted for purpose of proof of export. It is clarified that this facility is available only in respect of the exempted units which undertake exports themselves or through merchant exporters directly from the unit itself. The facility is not available for the supplies made to any other domestic manufacturer who may or may not export its finished products. The clarification in the italicized sentences of para 4.1.2 were taken from the Boards circular dated 25-7-2002 ibid and ld. SDR has laid emphasis on the same and has argued that a Form-H certificate would not be accepted as proof of merchant-exporter directly from the SSI unit itself. In this case, it was pointed out by SDR, the exports were made by the appellants buyers from the latters premises and not from the formers and, therefore, the appellants would not be entitled to employ the Form-H certificates as proof of export of the cartons supplied to their buyers. We are not inclined to accept this contention inasmuch as the Boards clarification as to the manner of exportation has to be understood conjointly with the relevant provisions of the Central Sales Tax (Registration and Turnover) Rules, 1957. Rule 10(a) of the CST (R&T) Rules, 1957 reads as under :
A dealer may, in support of his claim that he is not liable to pay tax under this Act in respect of any sale of goods on the ground that the sale of such goods is a sale in the course of export of these goods out of the Territory of India within the meaning of sub-section (3) of Section 5, furnish to the prescribed authority a certificate in Form H duly filled, and signed by the Exporter along with the evidence of export of such goods. It is not in dispute that the appellants obtained certificates in Form H from M/s. A.V. Thomas Co. and other similar customers and used the same before the Sales Tax authorities for exemption from payment of sales tax on the cartons sold to such customers. The Revenue has no case that the appellants did not obtain such exemption from payment of sales tax. This would mean that the Revenue has accepted the fact that the sale of printed cartons by the appellants to the said customers was a sale in the course of export of the goods out of India. The above rule contemplated export of the goods by the purchaser. By no stretch of imagination can it be said that the above rule contemplated retention of possession of the goods by the dealer (appellants in the present case) for its direct exportation from their own premises by the buyer (M/s. A.V. Thomas Co. or other similar customer in this case). If the very physical export of the goods sold by the appellants to their customers is required to be made from the appellants premises, why should the appellants be required to gather proof of export (in the form of Form-H certificate) from their customer ? We have perused a specimen Form-H certificate issued by M/s. A.V. Thomas Co. to the appellants. This document (No. 107 dated 3-1-2005) certified as under :-
Certified that the goods the Particulars whereof have been specified in items (1) and (2) of the Schedule below supplied in pursuance of my/our Purchase Order No. (ANNEXURE ENCLOSED) Purchased from you as per bill/cash memo/Challan No. (ANNEXURE ENCLOSED) dated (ANNEXURE ENCLOSED) for Rs. 88,64,004.15 have been utilized by me/us in the packing of the goods exported by me/us outside the territory of India, as per the details given in item (3) to (6) of the said schedule. The Schedule to the above certificate described the goods as boxes/packing materials and also provided export details including the particulars of the relevant Air Waybills in proof of export of goods across the Indian customs frontiers. It was submitted by learned counsel that all the Form-H certificates produced by the appellants had indicated that the goods covered therein were used by the buyers in the packing of goods exported by them. The details regarding exports which were required to be mentioned in the Schedule to each certificate were furnished in a tabular statement annexed to the document. Such a document was liable to be accepted as proof of export by the appellants customer, of the cartons supplied by the appellants. It would not cease to be proof of export by mere reason of the fact that the exportation was done by the customer from his own premises and not directly from the appellants factory. Therefore, we are of the view that the interpretation given by learned SDR to the Boards Circular No. 648/39/2002 would not be consistent with the provisions of law governing issuance of Form-H certificate. It is not the case of the Revenue that the cartons supplied by the appellants to A.V. Thomas Co. and other similar customers were not exported. It is, however, pointed out that the cartons were not exported as such, but were only used as packing material for goods exported by the customers. We find that, in the case of M/s. Radhey Paper Udyog (supra), there was an identical factual situation. In that case, corrugated boxes supplied by the said party (SSI unit) were used by their buyer for packing shoes, which were exported. The Tribunal held that such clearances of corrugated boxes by the SSI unit were not to be included in the aggregate value of clearances by the unit for the purpose of claiming the benefit of SSI exemption. The Revenue has no case that the Tribunals decision in Radhey Paper Udyog dated 27-1-2005 was not accepted. Earlier decision to the same effect, of the learned Single Member in the case of International Corrugators (supra) was also, apparently, accepted by the Revenue.
?6.In Circular No. 212/96-CX., dated 20-5-1996, the Board simplified the export procedure for SSI units. Where the export of goods cleared from SSI unit was effected through a merchant-exporter, the certificate in Form-H issued by the latter was accepted as proof of export and it was provided that, in case clearances from SSI unit for home consumption plus clearance for export, where proof of export was not furnished within 6 months, exceeded exemption limit, they should take Central Excise registration and follow the regular A.R. 4/A.R. 5 procedure. Where proof of export was furnished within 6 months, the clearances made for export were not to be added to clearances for home consumption. Circular No. 648/39/2002-CX. affirmed the position and further clarified that the above facility was available only in respect of exempted units which undertook exports themselves or through merchant-exporters. Ld. SDR argued that, for the above benefit, the SSI unit must be an exempted unit, i.e. unregistered unit, and the export must be made either directly or through merchant-exporter. Neither of the Notifications speaks of registration of SSI unit. In the SSI scheme, a manufacturing unit is said to be exempted unit for a given financial year if it has enjoyed SSI exemption in the previous year. If, by excluding the clearances made by such a unit for export from the computation of aggregate value of clearances in a given financial year, it is within exemption limits, it is an exempted unit. In this sense, the appellants remained an exempted unit, thereby satisfying the first condition proposed by SDR. Circular No. 648/39/2002-CX. specifically refers to goods manufactured and cleared by SSI unit for packing of other goods for export. This circular deals with Form-H procedure as applicable to SSI unit selling goods to a merchant-exporter. This would mean that it is open to the merchant-exporter to use packing materials supplied by the SSI unit for packing his own goods for export. By this activity, he does not turn manufacturer-exporter. In other words, M/s. A.V. Thomas Co. and other customers of the appellants who used the printed cartons supplied by the appellants for packing their own goods for export cannot be called manufacturer-exporters insofar as the cartons are concerned. They can only be called merchant-exporters of the cartons. Thus both the conditions proposed by learned SDR were satisfied by the appellants. Hence, by ld. SDRs yardstick also, the appellants must be held to have established their case for acceptance of Form-H certificates as proof of export in respect of the printed cartons supplied by them to M/s. A.V. Thomas Co. and other similar customers during the period of dispute. It is ordered accordingly.
5. Having found striking parallel between this case and the case of Vadapalani Express and other similar cases cited by the learned counsel, we follow the ratio of the above decision and hold that the assessee in the present has established that the corrugated boxes were not cleared for home consumption but cleared for export in terms of Rule 19 (1) of the Central Excise Rules and, therefore, such clearances are not liable to be reckoned as part of aggregate clearances for home consumption for the purposes of SSI notification for any of the financial years comprised for the period of dispute in this case.
6. Before parting with this case, we have to say something in connection with the reliance placed by the learned Jt CDR on the apex courts judgment in Hari Chand Shri Gopals case. In that case, the question considered by the Court was whether the respondent was entitled to exemption under Notification No. 121/94-CE in respect of the goods cleared by them for home consumption. The department alleged that the benefit would not be available to the party inasmuch as they had not followed Chapter X procedure as required under the above notification. Before the apex court, the party pleaded substantial compliance. This plea was rejected. In para 34 of the judgment relied on by the Jt CDR, their Lordships observed to the effect that the object and purpose of the procedure laid down in Chapter X procedure and the Central Excise Rules, 1944 were not to be overlooked. In another part of its order, the apex court noted that the case on hand was distinguishable from that of Thermax Pvt Ltd vs Collector 1992 (61) ELT 352 (SC). The learned Jt CDR has today submitted that the Tribunals decision in the case of Vadapalani Press and other similar cases does not reflect the correct law as it was based on the apex courts decision in the case of Thermax Pvt Ltd (supra), which has been held to be inapplicable in the case of Hari Chand Shri Gopal. In the case of Hari Chand Shri Gopal, the apex court noted the facts of Thermax Pvt Ltd and found the same to be distinguishable. Their Lordships were considering the question whether the goods cleared by the assessee were actually used for the intended purpose. It was held that it was incumbent upon the assessee to follow Chapter X procedure so as to ensure the user of the goods by the consumer industry. We do not see any parallel between the present case and the case of Hari Chand Shri Gopal. There is no quarrel about the need to ensure accomplishment of the intended purpose. In the instant case, it has never been the argument of the learned Jt CDR that the corrugated boxes which were excluded from the computation of aggregate value of clearances were not ultimately exported. The only case of the Revenue appears to be that the sales tax forms produced by the assessee did not adequately prove the factum of export. In other words, there is no proper correlation between the exports made by the merchant-exporters and the clearances made by the assessee. According to the learned Jt CDR, had the goods been directly exported from the assessees factory, no such correlation would have been called for. These arguments are specious. The fact remains that the procedure was simplified by the Board in para 4.1.2 of Chapter 7 of the Central Excise Manual of Instructions and that the procedure so simplified stands interpreted and applied by this Tribunal in the case of Vadapalani Press (supra) and similar other cases and further that this interpretation has never been called in question. Hence the Boards instructions as interpreted by this Tribunal have got to be given effect to. We have found the present case to be an appropriate case for giving effect to these instructions. Hence the view taken by us in the foregoing paragraphs.
8. In the result, the impugned orders are set aside and these appeals are allowed.
(Pronounced in Court) (S.K. Gaule) Member (Technical) (P.G. Chacko) Member (Judicial) rk 1 15