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2022 (11) TMI 1460
CENVAT Credit - inputs written off or in respect of which provision has been made to write off, whether fully or partially - Extended period of Limitation - interest - penalties - HELD THAT:- The intention for insertion of Rule 3(5B), was to plug those situations, wherein the assessee is availing benefit of Cenvat Credit on the inputs which are not intended to be used and are written off or provisioned for written off in the books of accounts, but still lying in the factory. Rule 3 (5B) is part of the CENVAT Credit scheme, and should be interpreted in a manner to fulfill the basic objective of scheme. On a plain reading of the aforesaid provision, it is clear that the assessee shall be liable to pay the amount of Cenvat credit availed on the inputs, which are either written off fully or partially or any provision for write off fully or partially has been made in the books of accounts. This provision shall only apply in respect, of those goods which are written off the input in the books of accounts of the appellants for the reason that they have been lost, destroyed or become obsolete. It cannot be applied to case where the value of goods for any reason is written down in the books of account.
From the plain reading of the definitions of the term "write off", it can be construed that write off is term used wherein the asset is permanently lost on account of pilferage, obsolescence or otherwise and is required to be removed from the books of accounts. Thus it is quite evident that the impact of “write off”, or “making the provision to write off” an asset (including the inputs) would be reflected as loss or an expense in the book of accounts of the appellant and shall be admissible as deduction while computing the income of the appellant.
Whether the valuation of inventories as per the accounting standards and the accounting policies followed by the appellant would amount to “write off” or “making the provisions to write off”? - HELD THAT:- Admittedly the goods in respect of which demand for reversal of CENVAT credit has been made have been used in the production of the finished goods which are cleared on payment of duty. Further revenue has gone on the basis of monthly inventory valuation without even co-relating the same with the Annual Financial Statements i.e. Balance Sheet and Profit and Loss Account of the Appellant. As per the appellant the entries made in the respect of the slow moving items in inventory are reversed subsequently in the next month will neutralize each other, without having any impact on the total inventory at the closure of financial year. Even the auditors who value the stock at the closure of financial years will point out if any discrepancies exist in the actual physical stock of inventory and inventory records. Without making any reference to such financial statements can anybody conclude in respect of write off of the inputs or finished goods. Not a single case of such reference over the period from 2008 to 2017 has been put forth.
Revenue has relied upon the Board Circular of 2009 to support their case. On perusal of the said circular, it is found that the circular is in respect of inputs contained in work in process. Hence there is no applicability of the said circular to fact of present case.
Extended period of limitation - HELD THAT:- During the period from April 2008 to June 2017 (period of demand), the appellant claim that they had already reversed Cenvat Credit of Rs. 7,05,86,921/- on obsolete inventory. Revenue do not dispute that in case where the appellants have written off the inputs in the books of accounts they have reversed the CENVAT Credit in respect of those inputs which were written off - since the demand made not upheld on merits, the issue in respect of quantification and invocation of the extended period not taken up.
Interest - penalties - HELD THAT:- Since the demand do not survive the demand for interest too fails and no penal consequences will follow.
The impugned order set aside - appeal allowed.
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2022 (11) TMI 1444
Clandestine removal - undervaluation or not/short payment of duty - value shown on the Central Excise Invoices at the time of removal of excisable goods is 'transaction value' or not - price escalation clause - clandestine removal of excisable goods manufactured at their Satara factory in the disguise of goods shown to have been manufactured by KC Goa - Demand on the basis of presumptions - liability to pay CENVAT duty on escalation bills issued.
HELD THAT:- The appellant are not in business of supply of the off the shelf goods or consuming the goods captively or supplying the goods through the any of their related person. Admittedly in all the case the appellant have supplied the goods to their customer against contractual agreement and the goods have been tailor made as per the requirements/ specifications of the Customer. In the present case after analyzing the Contracts impugned order adopts the value as determined by the cost auditor, for the demanding the duty. It is settled preposition in law that in case of the supplies made under the contractual agreement the contract price is the basis for determination of the assessable value as per section 4 of the Central Excise Act, 1944.
During the course of arguments revenue has relied upon the decision of the Hon’ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI VERSUS M/S FIAT INDIA PVT LTD & ANR [2012 (8) TMI 791 - SUPREME COURT]. It is not the case that the appellant was selling the goods at price lower than the cost of production and incurring loss. Even the cost auditor has not concluded that the appellant was selling the goods and earning loss. Hence the ratio of this decision cannot be directly applied to the present case.
Demand on the basis of presumptions - HELD THAT:- Commissioner has in the impugned order nowhere concluded that appellants had in case of any contract received any amount over and above the agreed contractual value. That being so there cannot be any reason for the rejection of the transaction value/ contractual value. Commissioner has in the impugned order referred to 41 contracts against which the supplies were made by the appellant to their customers, but have no where concluded to this effect in a single case. Interestingly it is seen that such a conclusion has not been arrived in the impugned order even in the cases where the supplies were made to the group companies. The demand seem to be made on the basis of the presumptions only contrary to values determined as per the contract/ agreement entered into by the purchaser and seller. The said approach is totally contrary to the concept of transaction value introduced from 2000 - Impugned order seeks to reject the contract value/ transaction value without even showing what was additional commercial consideration flowing from the buyer to seller for the sale of the goods. The impugned order nowhere concludes that appellant has received any amounts over and above the declared transaction value for the payment of duty. The demand thus made contrary to the settled position in law cannot be sustained.
Charge of undervaluation has been made against the appellant on the basis of the cost auditor report who has concluded that appellant was supplying the bought out items bought from various entities - HELD THAT:- The entire analysis done is not as per any prescribed standard of The Institute of Cost and Work Accountant of India and is also not based on the CAS-4, standard prescribed for determining the cost of production - The cost auditor report relied upon being bereft of the analysis of the cost records and the cost statement cannot have much sanctity in law. The costing studies could have been done either contract wise or the project wise, in case of company undertaking turnkey projects, whereas the cost auditor has in general determined the quantum of undervaluation only by referring to the total cost of sales and sales revenue - The cost auditor report do not point to any accounting standard and the accounting policies of the appellant which are the part of Financial Statements of the company. Accordingly the reliance placed on the Cost Audit report in the impugned order, is contrary to the specific direction given by the tribunal while remanding the matter back to original authority.
The show cause notice not only makes the demand by alleging the undervaluation of the manufactured goods by overvaluing the brought out items, it also alleges that appellant has removed the clandestinely removed the bought out items as per the cost auditor report from their premises clandestinely - HELD THAT:- The difference between the selling price and purchase price is claimed to be trading profit by the appellant. The total value of the bought out items as per the show cause notice which have been purchased by the appellant from their sister concern as percentage of the total purchase value of bought out items is in range of 17% to 28% for the three years where the data is free from defect. In the year 2003-04 and 2004-05 the purchases from sister concern exceed the total purchase value of bought out item hence left out from the analysis. Further from the figures as above it is observed that constantly from the year 2000-01 to 2003-04 the purchase value of bought out items have declined - Further as per the terms of contract, appellant were required to produce the invoices/ gate passes of the sub vendor to the purchaser to claim the duty paid against the said supplies and the goods/ the sub vendor facilities were open for inspection by the purchaser before dispatch. The findings recorded in the impugned order go contrary to this extent as provided in the contract. No instance has been pointed out where the purchaser has raised any query for non fulfillment of said conditions.
Alleged clandestine clearance of the goods, by showing them as manufacture of Kay Chandra Goa - It is also the case of the revenue while alleging undervaluation, that the Appellant 1, was overvaluing the value of bought items from M/s Kay Chandra Goa, while issuing the invoices in respect of these goods to the purchaser - HELD THAT:- While alleging the goods to be clandestinely cleared by the Appellant the duty is being demanded on the purchase value of the goods from Goa Unit and not on the sale value indicated in the invoices issued by the appellant. If these goods were the manufactured at Satara unit, then the transaction value between the appellant and its customer at the time and place of clearance as per section 4 of the Central excise Act, 1944 would be the sale price of the impugned goods and CENVAT duty paid on the purchase price would be available as CENVAT Credit to the appellant.
Even if the charge of clandestine clearance of the goods in garb of the goods manufactured at Goa is to be upheld, tribunal has categorically held that the amounts paid at Goa need to be offset against the duty payable by the appellant at Satara. There is no challenge to the above by the revenue and accordingly in our view the amount paid at Goa needs to be offset against the amount payable by the appellant in respect of the goods alleged to be cleared clandestinely. Undisputedly against the impugned order records that an amount of Rs 95,01,741/- has been paid by K C Goa against the clearance of the said goods. A demand of Rs 1,02,69,756/-, has been made and confirmed against the appellant. Thus after offsetting the amount paid in the name of K C Goa registered with Goa Commissionerate during the relevant period an amount of Rs 7,68,015/- is demandable from the appellant 1.
Demand made on the escalation bills - HELD THAT:- The escalation bills are not even finalized till today. On the contrary applicant has produced the letter dated 03.03.2008 from the Commissioner for Cane Development and Director of Sugar Bangalore. Against the escalation bills raised by the appellant as reflecting in Show Cause Notice to M/s Shree Dhanalaxmi SSK for an amount of Rs 1,77,83,308/- having duty component of Rs. 28,45,330/- as per the letter dated 03.03.2008, the escalation amount allowed is Rs. 29,88,940/- having the component of duty and taxes of Rs 7,08,565/-. This clearly establishes that the escalation amount as claimed by the appellant in the escalation bills is not the amount received by them but is the amount which is subsequently determined and agreed to by the purchaser - Undisputedly the appellant is required to pay the duty on the escalation amount received by them along with the interest from the date when the goods against which these escalation bills are raised were cleared by them from the place of clearance as have been held by the Hon’ble Supreme Court in M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [2019 (5) TMI 657 - SUPREME COURT]- the demand made in respect of undetermined escalation amount is pre-matured and needs to be set aside.
Demand on the issue of limitation and penalties on the two appellant - HELD THAT:- The demand made cannot be upheld on the merits of the case except for adjustment which is indicated with regard to escalation price, the issue of limitation and penal action becomes irrelevant and is not discussed further.
Appeal disposed off.
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2022 (11) TMI 1350
Levy of penalty on appellant u/r 26 of CER - Failure to do provisional assessment or to pay the interest accruing on the differential duty paid after price revision - liability of appellant as a General Manager - dispute under Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 already settled - HELD THAT:- On perusal of the Order-in-Original it is noticed that negligence in general is attributed to the conduct of the present Appellant for holding a responsible position of General Manager in M/s. Crompton Greaves Ltd. and it was stated that he had not taken corrective actions to opt for provisional assessment or to pay the interest accruing on the differential duty paid after price revision and such frequent instances clearly reflect failure of duty on the part of the General Manager namely the Appellant.
This being the allegations and having regard to the fact that had the present Appellant preferred to have filed a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019, he would have paid nil penalty in view of the relief available to him under Section 124(i)(b) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules 2019, we are of the considered view that even after failure on the part of the Appellant to avail the benefits of the scheme, no specific allegation against the Appellant has been substantiated so as to confirm penalty of Rupees Ten lakhs imposed on him.
The order passed by the Commissioner of Central Excise, Mumbai-III to the extent of imposing penalty of Rs.10 lakhs on the Appellant Vishwanath Narayan under Rule, 26 of the Central Excise Rules, 2002 is hereby set aside - Appeal allowed.
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2022 (11) TMI 1276
Process amounting to manufacture - conversion of waste oil/ sludge into reclaimed fuel oil/re-refining used oil - HELD THAT:- In the present case, the demand is for the subsequent period whereas on the same issue for the earlier period the case has been decided in favour of the appellant by this Tribunal in ALICID ORGANIC INDUSTRIES LIMITED AND SHRI MANISH C PATEL VERSUS C.C.E. & S.T. -AHMEDABAD-III [2022 (8) TMI 163 - CESTAT AHMEDABAD] wherein it was held that the process of cleaning of waste oil to yield reclaimed fuel oil does not amount to manufacture as defined under Section 2(f) of the Central Excise Act, 1944.
It is clear that except for the different period, the issue is identical which has been settled in the above order - Appeal allowed - decided in favor of appellant.
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2022 (11) TMI 1275
Refund claim - time limitation - availability of credit for the period prior to 01.04.2011 - HELD THAT:- The operating portion of the order passed by this Tribunal on the earlier occasion clearly reveals that the entire Order-in-Appeal passed by the Commissioner (Appeals) was set aside and the matter was remanded back to the original adjudicating authority to adjudicate on the point of limitation as well as availability of credit for the period prior to 01.04.2011 apart from examination of documents like filing of return, verification of entries in the CENVAT Credit accounts etc.
This being facts on record observation of the Commissioner (Appeals), while confirming the rejection of refund order passed by the adjudicating authority, to the extent that Appellant had sought for refund by filing refund application dated 04.07.2018 on the basis of Order-in-Appeal dated 29.05.2017 that was set aside by this Tribunal on 05.12.2017 is not maintainable, appears to be rational and proper.
Appeal dismissed.
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2022 (11) TMI 1225
Valuation of goods - Recovery of short paid duty - packaged drinking water - goods sold to institutional buyers - requirement to pay duty as per Section 4A or in terms of Section 4? - Circular No. 625/16/2002-CX dated 28.02.2002 - HELD THAT:- It is quite evident that the goods in question were not meant for retail sale but were for the consumption of MCD for their various schemes. MCD was an institutional buyer and thereafter no retail sale was ever envisaged.
Commissioner (Appeals) has recorded that the goods were meant for retail sale through the customer only at snack bars owned by ABCTC. There being so, the goods were not being consumed by ABCTC themselves but further sold in retail and as such in terms of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 the goods were required to be sold on the declared and printed MRP only - where the goods were actually sold in retail, Section 4A of the Central Excise Act will become applicable as has been held by Hon’ble Supreme Court in the case of JAYANTI FOOD PROCESSING (P) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAJASTHAN [2007 (8) TMI 3 - SUPREME COURT].
Reliance placed by the Revenue on the case of FEDERATION OF HOTEL AND RESTAURANT ASSOCIATIONS OF INDIA VERSUS UNION OF INDIA AND ORS. [2018 (1) TMI 1221 - SUPREME COURT] also does not help the case as the issue involved in the said case was not with reference to the provisions of Section 4A of the Central Excise Act. In the said decision Hon’ble Supreme Court has held that the sale of packaged mineral water by hotel to their clients is inclusive of the cost of bottle plus the services provided. Accordingly they have held that the sale at price higher than the affixed MRP is not in contravention of the provisions of Legal Metrology Act.
There is no merit in the impugned order - appeal allowed.
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2022 (11) TMI 1144
Wrongful availment of service tax credit - credit availed against the invoices issued by Input Service Distributor - period May, 2016 to March, 2017 - HELD THAT:- The main reason for initiating the current proceedings against the appellant is the Order-in-Original dated 23.12.2016 in appellants own case for the earlier period i.e. March, 2013 to April, 2015 on the same issue - the said case was challenged by appellant itself in M/S G.P. PETROLEUM LTD. VERSUS CCE & ST, RAIGAD [2019 (3) TMI 33 - CESTAT MUMBAI] where it was held that The legality or admissibility of credit can only be question to the ISD by its jurisdictional authority.
In view of the aforesaid decision of the Tribunal, since the basis of the initiation of the current proceedings by the department for the period in issue itself has gone, the current proceedings can’t survive - appeal allowed.
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2022 (11) TMI 1143
Irregular utilization of CENVAT Credit - inputs used in manufacture of capital goods - Joist - MS Channel - MS Joist - TMT Bars - Plate - RS Joist - MS Angles - nexus/pertinence in or in relation to manufacture of the excisable goods - applicability of N/N. 61/2009-CE (NT) dated 07.07.2009 - period March 2008, July 2008 and January 2009 - HELD THAT:- Clause (i) of Rule 2(a)(A) is parimateria with clause (3) of the table annexed to Rule 57Q. Similarly, clause (iii) of Rule 2(a)(A) is parimateria with clause (5) of the table annexed to Rule 57Q. In the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT], the Hon’ble Supreme Court considered the question whether the steel plates and channels used in the fabrication of chimney for DG set would fall within the purview of Sl. No. 5 of the table annexed to Rule 57Q. The Hon’ble Supreme Court observed that the DG set fell under Heading No. 85.02, Chapter 85, of First Schedule to the Central Excise Tariff Act and ipso facto got covered under Sl. No. 3 of the table ibid. The Hon’ble Supreme Court further noted that the chimney attached to the DG set was undisputedly covered by Sl. No. 5 of the table ibid. On this basis, it was held that the chimney was an integral part of the DG set and, therefore, MS channels, plates, etc., used in its fabrication were to be treated as accessories in terms of Sl. No. 5 of the table ibid. This judgement was rendered by applying the “user test”.
The facts of the present case are perfectly analogous to those of Rajasthan Spinning & Weaving Mills Ltd. It is not in dispute that MS angles, plates, etc., were used to fabricate structural support for machinery which was used for manufacturing excisable goods. It is, again, not in dispute that the machinery is squarely covered by clause (i) of Rule 2(a)(A) of the CENVAT Credit Rules, 2004. The immediate question is whether the structural support for the machinery could be treated as ‘capital goods’. Indeed, it should be construed to be an integral part of the machinery and hence to be covered by clause (i) ibid. If that be so, as held by the Hon’ble Supreme Court in the aforesaid case, the plates, angles, etc., used for fabricating structural support will fall within the purview of clause (iii) of Rule 2(a)(A). Therefore, it has to be held that the MS angles, plates and rounds used by the Respondent for fabricating structural support for machinery would qualify to be ‘capital goods’ for the purpose of availing CENVAT credit.
The view of the Tribunal’s Larger Bench in the case of Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)], taken much before the Hon’ble Supreme Court rendered the judgement in the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT], was to the effect that the supporting structure for a machinery could not be considered to be part or accessories of the machinery and, therefore, the steel items used for constructing such supporting structure would not be ‘capital goods’ for the purpose of CENVAT credit. This view of the Larger Bench is no longer valid as it runs contrary to the subsequent ruling of the Apex Court.
The Appeal filed by the Appellant is allowed.
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2022 (11) TMI 1090
Refund of accumulated Credit - transition to GST regime - whether under Transitory Provisions Section 142(3) of CGST Act, refund is not available of the amount of credit, which has been transited to GST Regime under the provisions of the erstwhile Central Excise Act? - principles of natural justice - HELD THAT:- Admittedly, Save and Except taking forward of the credit balance as on 30.06.2017, the appellant have not commenced production or manufacturing activities nor cleared any taxable goods on or after 1.7.2017. Further, debit by the appellant in the electronic ledger (DRC-3) amounts to reversal of credit transferred to GST regime - the appellant is entitled to refund under the provisions of Section 142(3) of CGST Act, which provides that assessee can file refund claim on or after the appointed day, for refund of any amount of credit of duty, etc. paid under the existing law (Central Excise/Service Tax), subject to clearing the bar of unjust enrichment. Further, the bar of limitation has been waived under Section 142 (3).
In the facts of the present case, the appellant is entitled to refund in terms of Section 142(3) read with Section 54 read with Section 49(6) of the CGST Act - in the facts of the present case as the credit has been accumulated due to clearance of excisable goods, during the Excise Law Regime for export, the bar of unjust enrichment is not attracted.
Appeal allowed - decided in favor of appellant.
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2022 (11) TMI 1089
CENVAT Credit - capital goods or structural items of general use? - S.S. Welding Tube - Steel - Tubes - Alloy Steel Pipe - Prime HR Steel Coil - M.S.Wire - M.S.Slate - S.S. Welded tube - H.R. Steel pipe - Link Outer etc. - appellant is manufacturer of sugar & molasses or not - HELD THAT:- Although while rejecting the claim, a finding has been recorded by the authorities below that these parts were used for structural purposes but no evidence for arriving at such a finding has been discussed or produced anywhere by the department. The only case made out by the department is that the items in issue are not covered by the definition of capital goods in terms of Rule 2(a) ibid and are generally used for structures providing support to the capital goods which are excluded from the definition of capital goods. Apart from this bald allegation, no cogent evidence has been put forth by the department to show that these parts have been used for structural purpose and therefore in the absence of any evidence to the contrary, the claim made by the appellant cannot be denied.
Hon’ble High Court of Judicature at Madras in the matter of M/S. INDIA CEMENTS LTD. VERSUS THE CUSTOM, EXCISE AND SERVICE TAX & THE COMMISSIONER OF CENTRAL EXCISE, [2015 (3) TMI 661 - MADRAS HIGH COURT] has held that M.S. Rod, sheet, M.S. Channel/Plate/flat etc used for erection/fabrication of structural support for various machines like crusher, kiln, hooper etc. without which such structural machinery could not be erected and would not function, are eligible for Cenvat Credit. Undoubtedly, as demonstrated by learned counsel, the parts in issue herein have been used for smooth and efficient functioning of the machinery which has been used for manufacturing Sugar and Molasses and therefore there is no reason not to allow the credit in issue to the Appellants.
The appellants are entitled for Cenvat credit of the items in issue - Appeal allowed - decided in favor of appellant.
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2022 (11) TMI 1088
CENVAT Credit - inputs used in the manufacture of prefabricated structure - input services used in Construction of Building, Erection Commissioning & Installation (Erection of Electric Tower From GEB to their factory premises) Architect Services, Real Estate Agent - denial of credit on the ground of no nexus with manufacture of finished goods - period February 2008 to June 2009 - HELD THAT:- This appeal pertains to the period February 2008 to June 2009, the adjudicating authority decided the matter on the basis of old theory of law that services are related to the immovable properties hence Cenvat credit is not admissible. We find that subsequently, the various high courts and tribunals have given decisions in various judgments cited by the learned counsel for the appellant on this issue. The entire finding of the adjudicating authority is based on old theory of law and subsequently, much water was flown on the issue. We are of the view that the adjudicating authority needs to give a fresh look in the entire case in the light of the various judgements given subsequent to the passing of the impugned order.
The adjudication authority in respect of most of the services denied the credit on the ground that there is no nexus between the services with the manufacturing activity of appellant and clearance of the goods or for their business activity. We find that all the services per se are prima facie input services held in various judgments, however, the admissibility of Cenvat credit on these services can be decided on the basis that whether the services were used for the purpose specified in the definition of input service.
Appeal allowed by way of remand.
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2022 (11) TMI 1087
Refund claim of excess Central Excise duty paid - rejection of refund claim on the ground that the effective date as per the sub-section 5 of Section 5A of the Central Excise Act, 1994 would be the day of issue of Notification, irrespective of the facts that whether it was published and offered for sale by the Director of Publicity and Public Relations of the CBEC, or not - principles of unjust enrichment - HELD THAT:- The background of the refund claim is that the appellant though paid excess duty but the rate of duty was revised downward by notification. Only due to the reason that system was not updated, the duty was paid on the higher rate, the appellant though shown the higher duty in the invoices, subsequently, the excess paid duty was adjusted and the same was given reduction in the subsequent updated payment recovered from buyers of the goods. To this effect, the appellant filed refund claim on the ground that the differential duty on account of enhancement rate was not payable by them due to late receipts of the Notification which should come into force from the date of its publication and offer for sale.
Relevant provisions is made under sub-section (5) of Section 5A of Central Excise Act, 1994. From the said provision it is absolutely clear that any Notification issued under sub-section (1) or sub-section (2A) come into force on the date when it is published and offered for sale on the date of issue - it is undisputed fact in the present matter that the Notification were not offered for sale by the Directorate of Publicity and were put on the CBEC website on the next date around 11:45 hours on 13.11.2014 in respect of Notification No. 22/2014 –CE dated 12.12.2014 and on the late evening of 02.12.2014 in respect of Notification No. 24/2012-CE dated 02.12.2014. Therefore, both the Notification will be effective from its publication and refund on this ground is admissible to the Appellant.
Principles of unjust enrichment - HELD THAT:- The ld. Commissioner (Appeals) in impugned order as regard the issue of unjust enrichment held that once the issue on merits is decided against the appellant there is no requirement of going into the aspect of unjust enrichment - Thus this issue has not been considered.
Since in the present matter issue of unjust enrichment not properly considered by the Ld. Commissioner (Appeals), the matter needs to be remanded to the adjudicating authority for passing a fresh order only in respect of unjust enrichment - appeal allowed by way of remand.
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2022 (11) TMI 1071
Wrongful availment of CENVAT Credit - admission of fictitious transportation by using registration number of vehicle of defunct transport firm - retraction of statements relied upon - May, 2012 to September, 2014 - contravention of provisions of Rule 3, 4 and 9 of Cenvat Credit Rules, 2004 - HELD THAT:- The plain reading of sub section (1) of section 9D of Central Excise Act makes it clear that clause (a) and (b) of the said section sets out circumstances in which a statement made and sanctioned by a person before Central Excise Officer of a gazetted rank during the course of inquiry or proceedings under the Act, shall be relevant for the purpose of proving the truth of the facts contained therein.
Any findings solely based upon the statements cannot be confirmed against M/s. Mittal Pigments Pvt Ltd. unless those statements have stood the test of Section 9(D) of Central Excise Act. Apparently and admittedly Shri Amit Gupta was not examined by the Adjudicating Authority. More so, for the reason that Shri Amit Gupta was not even allowed to be cross-examined by the appellant and that Shri Sanjeev Maggu had retracted the statements which had been relied upon by the Original Adjudicating Authority - there are no infirmity in the order of Commissioner (Appeals) while denying the admissibility of these statements.
The departmental investigating agencies as well as the Adjudicating Authorities have not yet started observing compliance of mandatory statutory provisions i.e. section 9D of Central Excise Act, 1944 and section 138 B of Customs Act, 1962 without which the statement recorded at the stage of inquiry / investigation will not be relevant for the purpose of proving the truth of requisite facts during prosecution. It is therefore desired that department may come with certain guidelines so that the efforts of investigating team may not be discarded for the reason of non-compliance of aforesaid provisions.
Appeal of Revenue dismissed.
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2022 (11) TMI 1070
Recovery of CENVAT Credit u/r 6 of the Cenvat Credit Rules 2004 along with interest and penalty - common input services used for rendering Erection, Commissioning and Installation Services provided in Jammu and Kashmir - exempt services or not - non-maintenance of separate records - HELD THAT:- Undisputedly the appellants have used common input services for providing services in State of Jammu & Kashmir and other parts of India. The proviso to sub-clause (2) of Rule 1 of Cenvat Credit Rules states that ‘nothing contained in these rules relating to availment and utilization of credit of service tax shall apply to the State of Jammu and Kashmir’. Again, as per Section 64 of the Finance Act, 1994, the Act extends to the whole of India except the State of Jammu & Kashmir. Thus, there is no levy of service tax on the services provided in Jammu & Kashmir. The Department has construed or rather confused the services rendered in Jammu & Kashmir to be exempted services.
Sub-clause (2) of Rule 6 of Cenvat Credit Rules, 2004 speaks about the situation when the service provider is rendering output services which are chargeable to tax as well as exempted services. The services rendered in Jammu & Kashmir are not chargeable to service tax and therefore, are not taxable services. But this does not make them exempted services also. A service becomes an exempted service when by notification or law, the service tax payable on such service is exempted. Rule 6(2) does not apply to a situation where the service provider renders both taxable services and services which are not subject to service tax. The law is silent in this regard. The Department cannot construe the services provided to Jammu & Kashmir as exempted services and press into application, in such situations, Rule 6 of Cenvat Credit Rules, 2004.
In the present matter appellant already reversed the proportionate Cenvat Credit attributable to the said disputed service. Therefore, the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub-rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand @ 5% / 6%/ 7% cannot be demanded. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services.
The Learned Commissioner had rightly dropped the demand and granted the relief to the respondent. Hence, the Revenue has not made out any grounds before us to interfere with the impugned order.
Appeal of Revenue dismissed.
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2022 (11) TMI 1069
CENVAT Credit - inputs used for repair - appellant had received back forklift trucks in terms of Rule 16 of Central Excise Rules, 2002 - processes undertaken amounted to manufacture or not - HELD THAT:- As a result of the processes undertaken, the goods as received were converted to different capacity and to different model number. They were even cleared to different customers. The adjudicating authority himself observed that the processes undertaken was “incidental and ancillary to the completion of the manufactured products - Any process which is incidental or ancillary to completion of the manufactured products is to be held as the process of manufacture in terms of Section 2(f) - Same view has been held by the Tribunal in various cases - reliance can be placed in the case of M/S. NEW BHARAT FIRE PROTECTION SYSTEM PVT. LTD VERSUS COMMISSIONER OF CENTRAL EXICSE, THANE-I [2016 (11) TMI 1204 - CESTAT MUMBAI] and JINDAL STAINLESS STEELWAY LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD [2016 (6) TMI 760 - CESTAT MUMBAI].
Appeal allowed.
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2022 (11) TMI 1041
Levy of penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 - entire amount of inadmissible credit was deposited by them along with interest prior to issuance of show cause notice - existence of malafide intent or not - HELD THAT:- Undisputedly in the present case the entire amount was paid by the appellant prior to issuance of the show cause notice as has been recorded. As per para 25.1 of the impugned order, it is observed that the assessee/appellant has deposited an amount of Rs.76,88,567/- against the confirmed demand of Rs.73,56,672/- confirmed by the impugned order. This amount was apportioned by the Commissioner in the impugned order. They have also deposited the interest of Rs.12,13,947/-. All the amounts were deposited prior to issuance of show cause notice.
Appellant has already paid the credit even prior to the issuance of the show cause notice. In an issue which is just with regard to quantification of the cenvat credit reversal, no malafide intention can be attributed to the appellant - Commissioner has himself concluded that in the same situation the appellant was acting under a bonafide belief and no malafide intention could have been attributable to them for imposition of penalty under Section 11AC of the Central Excise Act. Then what the Commissioner has held in respect of these demands cannot be sustained.
There are no justification in imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act - appeal allowed.
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2022 (11) TMI 1002
CENVAT Credit - Furnace Oil - non-existence suppliers - fake firms - fake invoices - inadmissible duty paying documents - Rule 9(1)(a) of CENVAT Credit Rules, 2004 - alert notice No.01/2013 dated 30.07.2013 issued confirming that M/s. Sri Kamala Udyog, Rishra has no existence - whether the Appellant can be denied CENVAT Credit of Rs.92,660/- only on the basis of alert circular? - invocation of extended period of limitation.
HELD THAT:- In the present case, the Appellant was a bona fide purchaser of the goods for a price which included duty element on the basis of a valid certificate of registration issued to the manufacturer/supplier by the Superintendent of Central Excise supported with Cenvatable invoice. The Appellant has substantively taken reasonable steps to comply with the provisions of Rule 9(5) - The fact that the assessee made payments by cheque is held to be a proof of his bona fide. Further, the Revenue has failed to establish that the Appellant received any unlawful kickback for executing the alleged purchase.
The buyer can take only those steps which are within his control and can not be expected to verify the records of the supplier to check whether in fact he had paid duty on the goods supplied by him. The only reasonable steps which he can take is to ensure that the supplier is trust-worthy, as the inputs are in fact received and the documents, prima facie, appeared to be genuine - The Circular of the Central Board of Excise and Customs dated 15.12.2003 clarifying that CENVAT Credit should not be denied to a user manufacturer as long as bona fide nature of the consignee’s transaction is not doubted.
Hon’ble Allahabad High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS & SERVICE TAX VERSUS M/S. JUHI ALLOYS LTD., ANIL KUMAR SHUKLA [2014 (1) TMI 1475 - ALLAHABAD HIGH COURT] held that the assessee has taken reasonable steps to ensure that the inputs in respect of which he has taken CENVAT Credit were goods on which appropriate duty of excise was paid. Once, it is demonstrated that reasonable steps had been taken which is a question of fact in each case it would be contrary to the Rule to cast impossible and impractical burden on the assessee.
Extended period of limitation - Show Cause Notice was issued on 27.01.2016 whereas the normal period expired on 08.09.2013 - suppression of facts or not - HELD THAT:- In the present case, the Department has undertaken Audit of the Books of Account for the period 2012-13 to 2014-15 on dated 28.05.2016 i.e., much after the issue of Demand-cum-Show Cause Notice. However, no adverse inference has been drawn against the CENVAT Credit availed. Thus there is no failure and/or willful suppression of any fact of the transaction by the Appellant, having entered and recorded the transaction in its books of accounts. Therefore, no longer period could be invoked - the Appellant have a strong case on limitation too and the Show Cause Notice is barred by limitation.
Existence of supplier M/s. Sri Kamala Udyog - HELD THAT:- Central Excise Registration granted to M/s. Sri Kamla Udyog is bonafidely issued by the departmental authorities. Invoice was issued to the appellant by M/s. Sri Kamla Udyog fulfilling all the requirements of Central Excise Rules - It is further submitted by the Appellant that on the date of the visit of the Central Excise officers, they had recovered 40.73 lakhs from both the dealer i.e. M/s.Sri Kamla Udyog and M/s. Bedanta Petro. Therefore, it further strengthens the Appellant’s contention that M/s. Sri Kamala Udyog existed on 30.07.2013 even.
Thus, the Appellant being a bonafide purchaser of goods for a price which included the duty element and payment made by cheque, having received the inputs at his premise and entered into the statutory records maintained by the Appellant demonstrating transportation of goods from Rishra Road, Hooghly, West Bengal to Chancha Industrial Estate, Baripada, Mayurbhanj, the Appellant has rightly availed CENVAT Credit with the required Cenvatable documents.
Appeal allowed - decided in favor of appellant.
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2022 (11) TMI 1001
Reversal of CENVAT Credit - removal of inputs as such - provision for slow/non-moving inventory made - whether the provisions of Rule 3(5)(B) of CCR, 2004 are attracted in case of making a general provision in the books of account for slow moving/non moving inventory, without reducing the value of such inventory?
HELD THAT:- The appellant have only created a general provision for slow/non-moving inventory and have admittedly not written of the inventory from the inventory or the asset account. In actuality, such provision have been made by appropriation in the profit and loss account, without writing of any amount/value from the asset/inventory account - Rule 3(5B) of CCR is attracted only when the value of the asset and/or inventory is written off fully or partially or wherein any specific provision to write off a fully or partially has been made in the books of account - In the facts of the present case, the appellant have made a general provision, which is not attributable to any particular asset/inventory.
Admittedly, revenue have not been able to identify the details of inventory or asset, for which the general provision has been made. It is further evident that the appellant have demonstrated that such provision has been made year to year by way of increasing or reducing the provision, depending on the usage of inventory as required.
The impugned order is set aside - The ground of limitation raised is left open - appeal allowed.
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2022 (11) TMI 1000
Levy of Equivalent penalty u/s 11AC - entire duty amount and interest thereon has been paid by the appellant prior to issuance of any show cause notice(by own or by being pointed out) - HELD THAT:- Admittedly and undisputedly the entire duty amount and interest thereon has been paid by the appellant prior to issuance of any show cause notice either on their own ascertainment or on being pointed out by the revenue during the course of audit.
In the case where the appellant has paid the entire amount of duty due along with the interest thereon, the central excise officer could not have proceeded to any notice in respect of the payment so made demanding the duty so paid.
Appeal allowed - decided in favor of appellant.
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2022 (11) TMI 946
Levy of penalty u/r 26 of Central Excise Rules, 2002 - fraudulent passing of cenvat Credit by the appellant to Shree Balaji Castings - demand based on confessional statements of the witnesses - HELD THAT:- As regard the invoice issued by the appellant the statements were recorded from Shri. Subhash Chaudhary, Authorized Representative of Shree Balaji Castings and also of Shri. Anshu Agrawal, Partner of Shree Balaji Castings. It is also observed that statement of Shri. Vijay Khurana of M/s Impex World also recorded.
Shri Subhash Chaudhary and Shri. Anshu Agrawal clearly stated that they have received the invoice of M/s Impex world whereas they had not received the goods. It is also observed that details mentioned in the invoices were not capable of transporting the goods for which the cenvat credit was passed on. Therefore, from the discussion and finding which is based on the confessional statements of the witnesses, it is clearly established that the appellant has facilitated by only issuing the invoice without supplying the goods for passing of the fraudulent cenvat credit of Rs 3,93,715/-. Therefore, the appellant was rightly liable for penalty under Rule 26.
However, looking to the amount of cenvat credit passed on by the appellant the penalty of 2 Lacs appears to be very harsh - the penalty is reduced from Rs 2 Lacs to Rs. 1 Lac.
Appeal allowed in part.
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