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2015 (11) TMI 1036 - CESTAT CHENNAI

2015 (11) TMI 1036 - CESTAT CHENNAI - 2016 (343) E.L.T. 230 (Tri. - Chennai) - Job Work - There was no evidence to show that appellants or the principal supplier claimed the benefit of exemption under Notification No.214/86. - No declaration filed by the principal supplier with jurisdictional Central Excise authority under whose jurisdiction the job worker was located. - Revenue contended that Rule 4 (5) (a) of CCR is not applicable on the ground that principal supplier has not availed credit - .....

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ised by the authorities and no verification was done treating that it is only an intimation. - demand is hit by limitation. - Decided in favor of assessee. - Decision on merit - Appellant have received MS scrap as per conversion agreements entered into with the principal manufacturer/supplier and there is no dispute on the fact that appellants are also original manufacturers of MS ingots and billets on their own account and discharging central excise duty on the final products. It is an admi .....

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to whether the duty has been discharged on the final product cleared by the principal manufacturer as per the job work notification. Further, it is pertinent to see that both the appellant and the principal suppliers are duly registered with the Central Excise and following Central Excise procedures. The principal manufacturers duly declared/intimated to the department that raw materials were being sent for conversion under Rule 4 (5) (a) as evident from the correspondences, invoice and DC and o .....

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plier has not availed credit. In the present case, the scrap was directly sent from the port of import to the job worker and the principal supplier has availed credit immediately on receipt of MS ingots and billets from the job worker. There is no restriction on the manufacturer to send raw material directly from the place of import to the job work premises. Therefore, we hold that there is no dispute on the receipt of scrap and clearance of MS ingots/billets to the principal supplier, the quest .....

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nalty imposed on the co-noticees are also liable to be set aside - Decided in favour of assessee. - Appeal Nos.E/102/2009, E/103/2009, E/104/2009 and E/299/2009 - FINAL ORDER No.41501-41504/2015 - Dated:- 16-7-2015 - Shri R. Periasami, Technical Member And Shri P.K. Choudhary, Judicial Member For the Petitioner : Shri S. Venkatachalam, Advocate For the Respondent : Shri K.P.Muralidharan, AC (AR) ORDER Per R. Periasami All the appeals are taken up together as the issues involved are identical in .....

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of records, it was alleged that appellants cleared M.S. billets and M.S. ingots without payment of duty after conversion. The appellants have entered into conversion agreements with M/s.Kanishk Steel Industries Ltd., Gummidipoondi, Kanishik Steel Industries Ltd., Bangalore and M/s.Sonal Vyapar Ltd., Salem. As per the agreement, appellants received MS scrap, H.M.S, L.M.S., Scrap turnings and boring scrap and sponge iron etc. for conversion into M.S. Billets/ingots. It was alleged that after conv .....

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tion 11A(1) on the total quantity of MS billets manufactured and cleared to their principal raw material supplier. Notice was also issued to Shri Arvind Gupta, President of the company, Shri Ashok Bhora, Director of Kanishk Steel Industries Ltd. for imposition of penalty under Rule 25 of Central Excise Rules, 2002. Adjudicating authority in the impugned order confirmed the duty of ₹ 10,99,22,258/- being excise duty payable on the goods manufactured and cleared during the period from Jan .....

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7.1.2009 was issued for the period of December 2007 and the adjudicating authority confirmed the demand ₹ 1,13,27,118/- under Section 11A and imposed equivalent penalty under Section 11AC. 4. Heard both sides. Ld. Advocate appearing for all the three appellants submitted a written synopsis and reiterated the same. He submits that SCN relating to first appeal E/102/09 is hit by limitation as the period involved is from Jan'05 to March'07 whereas SCN dt. 1.9.2008 was served on the a .....

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of Central Excise, Salem I Division, Salem intimating that the goods were being sent under Rule 4 (5)(a) of CCR 2002 to their job worker and also intimating that they were availing Notification No.214/86 dt. 25.3.1986. Appellants have also addressed letters dt. 1.4.2005, 8.8.2005 directly to the jurisdictional AC intimating the receipt of raw materials for conversion under Rule 4(5)(a) of CCR. That end use certificate dt. 21.9.2005 was also obtained from the jurisdictional DC on the consumption .....

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th receipt of the raw material and clearance of the goods were accompanied by valid documents. He submitted copies of both supplier's invoice and delivery challans. In the said invoices, it is clearly mentioned that the goods were sent for conversion under Rule 4(5)(a) of CCR. They have returned the entire goods after conversion and also returned the scrap arising out of manufacture to the respective supplier/manufacturer who has discharged the excise duty on their finished goods manufacture .....

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and billets manufactured as filed in Annexure-I & II. He submits that there is no allegation in the SCN of any diversion of MS ingots and billets. All the three principal manufacturers duly accounted in their Form-4 on the receipt of billets in their account and same were used in the manufacture of final products viz. MS angles, TMT bars and channels etc. and cleared on payment of excise duty. He produced copy of invoices, inward register, ER-1 returns, Central Excise invoices of Kanishk St .....

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the demand and imposed equivalent penalty under Section 11AC. He submits that the principal manufacturer has filed undertaking before the jurisdictional AC, Karaikal. He refers to page 102 of the paper book of this appeal. He further submits that since there is no suppression no penalty can be imposed under Section 11AC. He also submits that penalty on Shri Ashok Bhora is not imposable as there is no allegation or contravention has been made against him. He relied on the following citations both .....

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s CCE Indore 2014 (308) ELT 546 (Tri.-Del.) (8) CCE Bangalore Vs Bharath Fritz Werner Ltd. 2007 (218) ELT 177 (Kar.) 7. Ld. Special Counsel appearing for the main appellant submitted written synopsis along with paper book containing relevant documents. He submits that the Range Superintendent of Central Excise, Mayiladutharai, on scrutiny of ER 1 Returns, sought clarification from the appellant vide his letter dt. 31.8.2006 and again on 23.10.2006 on clearance of billets/ingots manufactured by t .....

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ssued by the appellant under Rule 11 of CER where the MS billets have been cleared to M/s.Kanishk Steel Industries and only the quantity and value is mentioned and there is no conversion charges mentioned in the invoice. The invoice bears the rubber stamp affixed stating that "raw materials sent for conversion under rule 4/5(a)". He further submits that appellant never intimated the department of availing 214/86 notification. The department was on the bonafide belief that appellant had .....

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rd to prove that the supplier of the raw material had supplied raw material to them under the provisions of notification No.214/86-CE. He submits that in the present case no declaration has been filed by supplier of raw material before the ACCE, Karaikal. Filing declaration with other jurisdictional authority cannot be considered as complying the conditions of the notification. He further submits that Rule 4 (5) (a) is ab initio not applicable to the instant case as this Rule only relates to cen .....

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it on the MS scrap. MS scrap were not supplied from the premises of M/s.Kanishk Steels but were directly sent from the port of import by CHA. He relied on copy of invoice at page 4 of the paper book submitted by Revenue wherein the CHA cleared the imported MS scrap with the endorsement "sent for conversion to M/s.OPG Metals (P) Ltd., Mayiladuthurai under Rule 4(5)(a) directly from CFS to appellant's unit. It is clearly showed that the principal manufacturer has not received the inputs .....

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4 (5) (a) of CCR. Since the principal manufacturer has not complied with the condition of the notification 214/86, Rule 4(5) (a) is ab-initio and not applicable. No monitoring done by the department either at the principal manufacturer's end or at the end of the job worker. Therefore he submits that extended period has been rightly invoked as there is clear cut suppression of facts. Appellants relying on letters addressed to the AC, Salem is only an intimation. Mere filing of ER-1 returns i .....

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7 (93) ELT 373 (Tribunal) (4) International Engg. & Mfg. Services P. Ltd. Vs CCE Jaipur 2001 (135) ELT 551 (Tri.-Del.) (5) Non-Ferroous Industries Vs CCE Cclcutta 2002 (150) ELT 99 (Tri.-Kolkata) (6) CCE New Delhi Vs Hari Chand Shri Gopal 2010 (260) ELT 3 (SC) (7) CCE Coimbatore Vs Universal Radiators Ltd. 2011 (273) ELT 20 (SC) (8) Merchantile and Industrial Dev. Co.Ltd.Vs CCE Ahmedabad 2014 (313) ELT 553 (Tri.-Ahmd.) (9) Sun Pharmaceuticals Industries Vs CCE Jammu 2013 (289) ELT 449 (Tri.- .....

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er submits that wrong quoting of Rule cannot disentitle the benefit of notification. He relied the letter dt. 10.11.04 addressed to ACCE Salem at page 85 of the paper book and also Board's circular No.306/22/97-CX. dt. 20.3.1997 wherein it has been clarified that principal manufacturer can get the job work done on the inputs under Rule 57F (4) and in such case duty has to be discharged by the manufacturer and not by the job worker. He also submits that citations relied by the department are .....

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denied and rule 4(5) (a) is not applicable to the instant case, excise duty cannot be fastened on the supplier of raw material. 10. We have carefully considered the submissions of both sides and the various annexures submitted by both special counsel for the Revenue and the advocate for the respondent. 11. The issue in the present appeal relates to demand of excise duty on the goods manufactured by the appellants under job work Notification No.214/86-CE. In the impugned order, the adjudicating a .....

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uthority in the order dealt the issue in detail while demanding duty on the MS ingots and billets on the ground that in terms of Notification No.214/86 no declaration has been filed before the jurisdictional Central Excise Authorities under whose jurisdiction the job worker was located. Once the condition of notification No.214/86 is not complied, duty has been demanded on the appellant. Revenue heavily relied on the conditions of the notification No.214/86 which has not been complied. On the ot .....

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about sending of Heavy Melting Scrap for conversion into MG Ingots to M/s.SAIKRIPA VYAPAR PVT. LTD. (appellant herein) and letter dt. 15.11.2004 of the appellant to the jurisdictional ACCE, Karaikal Letter intimating receipt of raw material from M/s.Sonal Vyapar Ltd. and sending it back after conversion within 180 days to the supplier. Appellants also relied on letter dt. 1.4.2005 and letter dt. 8.8.2005 addressed to the jurisdictional ACCE, Karaikal. On perusal of the letters, we find that appe .....

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herein below :- "Sub: Job Work Intimation Under Notification No.214/86 dt. 25.3.86 and Rule 4/5(a) for the year 2004-05 We are purchasing Heavy Melting Steel Scrap from abroad. We want to send these materials under Sub Rule 5(a0 of Rule 4 of Cenvat Rules, 2002 for conversion to M/s.SAIKRIPA VYAPAR PVT. LTD., Komal Road, Maruthur Village, Mayiladuthurai Tk. We undertake to bring finished product and wastage from job worker to our factory within 180 days. Accordingly, we have made an agreeme .....

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. Further, we find that jurisdictional authorities issued end-use certificate dt. 22.12.2005 wherein the DCCE, Karaikal certified that MS scrap received from Radice Ispat (India) Ltd. were fully utilized in the manufacture of MS ingots and billets. We find that appellants were filing ER-1 return. On perusal of copy of ER-1 returns, wherein they have declared clearance of MS ingots for conversion. We also find that the appellants unit was audited by the internal audit as well as CERA audit and pe .....

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of clearance of goods without payment of duty on scrutiny of returns by the jurisdictional Range Superintendent on 31.8.2006 and immediately after detection, show cause notice was issued under Section 11AC. Revenue strongly relied on this letter dt. 31.8.2006 and contended that there was no intimation and there is clearance of the goods without payment duty and contended that demand is not hit by limitation. 15. On perusal of records, dt. 10.11.2004 and 15.11.2004 and subsequent letters, we are .....

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he goods were "sent for conversion under Rule4 (5) (a)". We find that appellants have informed the concerned jurisdictional authorities at every stage about their carrying out the job work and receipt of MS scrap and conversion into billets and ingots as per conversion agreements to the principal suppliers. Therefore, we are of the considered opinion that appellant has not suppressed any facts particularly to the fact that the said letters were duly received by the jurisdictional autho .....

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rsion and return to the principal manufactures are clearly known to the department and there was suppression of facts by the appellant. In this regard, we rely Hon ble Supreme Courts decision in the case of Continental Foundation Jt. Venture Vs CCE Chandigarh-I - 2007 (216) ELT 177 (SC) wherein the Hon'ble Apex Court held that mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. The relevant paragraph of Supreme Court or .....

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on by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. 11. Factual position goes to show the Revenue relied on the circular dated 23-5-1997 and dated 19-12-1997. The .....

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f duty as the same was to be reimbursed by the buyer. In fact such a plea was clearly taken. The factual scenario clearly goes to show that there was scope for entertaining doubt, and taking a particular stand which rules out application of Section 11A of the Act. 12. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word wilful, .....

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the adjudicating authorities were not justified in raising the demand and CEGAT was not justified in dismissing the appeals." The ratio of the above Apex Court's decision is squarely applicable to the present case. By respectfully following the Supreme Court decision (supra), we hold that demand is hit by limitation. 16. On merits of the case, on perusal of records and findings of OIO, we find that the adjudicating authority has denied the exemption notification No.214/86-CE. There is .....

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ndustries. Vyapar, Salem, Ispat Radice (India) Ltd. in the respective central excise jurisdiction. On perusal of the challans and invoices, we find that the invoice bears the clear endorsement sent for conversion under Rule 4 (5) (a). The revenue s main plea is that the main condition of the notification stipulates filing of undertaking by the principal manufacturer before the jurisdictional central excise authorities where the job worker is located and the same has not been complied by them a .....

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any declaration. In the said declaration where the principal supplier had clearly intimated the sending of raw materials for job work under notification No.214/86. Further, appellants also in their letter dated 15.11.2004 addressed to the jurisdictional ACCE, Karaikal informed the job work. We find that no SCN has been issued or any investigation carried out with the principal suppliers of raw materials as to whether the duty has been discharged on the final product cleared by the principal man .....

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d to send raw material as such or for further processing under Rule 4 (5) (a). The rule includes the term removal of raw materials for further processing" and the department is not disputing that the goods are not returned by the appellant after conversion. The appellant also produced copies of Form-4 evidencing receipt of MS ingots/billets by the principal manufacturer. All these facts conform that appellant being a job worker received MS scrap as per the conversion agreement duly convert .....

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Revenue relied on Supreme Court judgement in the case of CCE New Delhi Vs Hari Chand Shri Gopal (supra) wherein the apex court has set out the guidelines for availing the exemption notification No.121/94-CE under Chapter X procedure. In the present case, the principal supplier filed declaration/intimation as per Notfn 214/86before ACCE, Salem instead of filing with the jurisdictional ACCE Karaikal. Therefore, it is not the case of non-compliance. It is also in the present case, it is revealed th .....

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denied and duty cannot be demanded on the job worker. In this regard, we rely this Tribunal decision in the case of Aggarwal Rolling Mills Vs CCE New Delhi (supra). The relevant paras 20 & 21 are reproduced as under :- "20. Furthermore, if an assessee firm was a small? scale manufacturer and therefore, governed by the SSI Notification and at the same time some items manufactured by it were entitled to benefit of some other notification the same could not be denied unless it was specifi .....

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cludes certain headings and excludes others. Therefore, generalisation is not possible. In the circumstances, the benefit under Notification 214/86 could not be denied to the appellants from the period it came into force and they had opted for the same subject to the fulfilment of conditions and the procedure prescribed therein. The duty liability, if any, which may arise in case of non-fulfilment of the conditions prescribed in para 2 would lie on the supplier(s) of the raw material or semi-fin .....

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emand of duty on the ground that the condition laid down in para (2) of Notification No. 214/86 was not complied with by the appellants. The goods specified under the Notification were exempted from payment of duty of excise, where such goods were manufactured in a factory as a job work and utilized in relation to the manufacture of final products on which duty of excise was leviable. The exempted goods and the final products were specified respectively in Col. 1 & Col. 2 of the Table annexe .....

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he Revenue has no case that the work undertaken by the appellants did not fall within the scope of the expression job work under Explanation-I to the Notification. Their only case is that the condition laid down in para (2) of the Notification was not complied with by the appellants. The appellants have claimed that the Sodium Silicate Solution returned after job work to their customer was removed by the latter on payment of duty for home consumption from their factory. This claim has not been c .....

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tion. The appellants have resisted the demand of duty on the ground that it was for the raw material-supplier to comply with the said condition. It is their further case that the department could have recovered duty on the subject goods from M/s. Vijay Detergent Products (P) Ltd. on the ground of non-fulfillment of the said condition. We find that the Tribunals decision in Aggarwal Rolling Mills (supra) supports this case of the appellants. No binding decision to the contrary was cited by the D .....

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