Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Usha Ispat Industries Ltd on 17 November, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. E/1981/03 (Arising out of Order-in-Original No. 16/CEX/2002 dated 26.7.2002 passed by Commissioner of Central Excise, Pune-II) For approval and signature: Hon'ble Mr. P.G. Chacko, Member (Judicial) and Hon'ble Mr. K.K. Agarwal, 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 :
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?
====================================================== Commissioner of Central Excise, Pune-II Appellant Vs. Usha Ispat Industries Ltd. Respondent Appearance: Shri S.S. Katiyar, Authorised Representative (SDR), for appellant Written submissions filed on behalf of respondent CORAM: Hon'ble Mr. P.G. Chacko, Member (Judicial) and Hon'ble Mr. K.K. Agarwal, Member (Technical) Date of Hearing: 17.11.2008 Date of Decision: 17.11.2008 ORDER NO................................. Per: P.G. Chacko
The respondents were engaged in the manufacture of pig iron during the material period. The process of manufacture involved reduction of iron ore by coke in a blast furnace, which required feeding of iron ore particles of specific size. As substantial quantity of iron ore fines were left behind in the process, the respondents wanted to set up a sinter plant for conversion of iron ore fines to agglomerated iron ore which could be used in the blast furnace for the production of the final product (pig iron). For the purpose of setting up this plant, they imported machinery and other capital goods, which were received in their factory during the period from December 1996 to January 1997. They did not initially take CENVAT credit on the capital goods, as the relevant rule, which was then in force, did not permit them to do so, as the capital goods were yet to be installed in their factory. However, with the amendment of CENVAT Rules (substitution of Rules 57A to 57U of the Central Excise Rules, 1944 with Rules 57AA to 57AK with effect from 1.4.2000), the respondents took 50% of the CENVAT credit of CVD paid on the capital goods in May 2000 in terms of Rule 57AC(2)(c) of the Central Excise Rules, 1944, amounting to Rs.34,58,876/-. The balance 50% was availed in April 2001 in terms of Rule 57AC(2)(b). Due to some dispute between the respondents and the company to which the project of installing the sinter plant was entrusted, the capital goods could not be actually used for the manufacture of agglomerated iron ore. Later on, the department issued show-cause notice dated 9.4.2002 alleging (a) that the availment of balance credit of Rs.34,58,876/- in 2001-02 was irregular inasmuch as the capital goods had not been put to use in the year of taking such credit, and (b) that the entire credit was taken irregularly, as the capital goods had been used exclusively for the manufacture of exempted product (agglomerated iron ore). On this basis, the notice proposed to recover the entire credit from the respondents under Rule 12 read with the proviso to Section 11A(1) of the Central Excise Act, to levy interest on the amount under Section 11AB of the Act and to impose penalties under Section 11AC of the Act as well as Rule 25 of the Central Excise Rules, 2001. These proposals were contested on merits as well as on the ground of limitation. In adjudication of the dispute, the Commissioner held (a) that 50% of the credit taken in the year 2001-02 was not admissible to the respondents on account of non-fulfillment of the requirement, under Rule 57AC(b), of having to put the capital goods to use in the manufacture of final product, and (b) that the demand of Rs.34,58,876/- from the respondents for the year 2000-01 was time-barred. The learned Commissioner did not go into the question whether the capital goods were eligible for CENVAT credit. In holding that a part of the demand was time-barred, he held that there was no suppression of facts by the party. In the result, the following order was passed:-
"ORDER
1. I confirm the duty amount of Rs.3458876/- (Rupees thirty four lakhs fifty eight thousand eight hundred and seventy six only) under Section 11A(2) of the Central Excise Act, 1944.
2. The assessee should also pay interest under Section 11AB of the Central Excise Act, 1944 for the delayed payment of duty.
3. I impose a penalty of Rs.3458876 /- (Rupees thirty four lakhs fifty eight thousand eight hundred and seventy six only) under Section 11AC of the Central Excise Act, 1944."
2. In the present appeal, the department is aggrieved by the dropping of a part of the demand of duty. Reiterating the grounds of this appeal, the learned SDR submitted that one of the substantive allegations raised in the show-cause notice was that the capital goods were to be installed solely for exclusive use in the manufacture of agglomerated iron ore which attracted nil rate of duty and, therefore, it was not open to the respondents to avail CENVAT credit of the duty paid thereon. It was pointed out that this case of the Revenue was not considered by the adjudicating authority. Without considering the same, the learned Commissioner proceeded to examine the question whether any part of the demand of duty was barred by limitation or not. It was also pointed out by the learned SDR that the finding of the Commissioner that there was no suppression of facts by the respondents with intention to evade payment of duty was contradictory to his own decision to impose penalty on the party under Section 11AC and to levy interest on duty under Section 11AB of the Act.
3. There was no representation for the respondents, whose written submissions were available on record. We have perused the submissions of the respondents.
4. As rightly pointed out by the learned SDR, it was the case of the Revenue that the capital goods which were intended to be used in the manufacture of agglomerated iron ore (chargeable to nil rate of duty), were not CENVATable. The adjudicating authority sidestepped this question and proceeded to examine the limitation issue insofar as the 50% of CENVAT credit taken in May 2000 was concerned. As regards the balance credit availed by the party on 1.4.2001, the authority held that the condition laid down under Section 57AC(2)(b) was not complied with and, therefore, the credit was not admissible. The learned Commissioner ought to have, at the outset, examined the basic issue as to whether the capital goods which were allegedly meant for exclusive use for the manufacture of exempted products, were eligible for CENVAT credit at all. In other words, the case of the Revenue on merits was not considered and, instead, the claim of the assessee that the demand was time-barred was examined. Clearly, this procedure was not permissible in law. The appellant has made out a case for remand of the matter to the adjudicating authority.
5. In the result, after setting aside the impugned order, we direct the Commissioner to pass fresh order of adjudication on all relevant issues, in accordance with law. Needless to say that the party should be given a reasonable opportunity of being heard. The appeal stands allowed by way of remand.
(Pronounced in Court) (K.K. Agarwal) Member (Technical) (P.G. Chacko) Member (Judicial) tvu 1 5