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2016 (4) TMI 626 - CESTAT CHENNAI

2016 (4) TMI 626 - CESTAT CHENNAI - 2016 (344) E.L.T. 440 (Tri. - Chennai) - Rejection of of value adopted by appellant and imposition of penalty under Rule 26 & 27 of Central Excise Rules 2002 - valuation adopted for removal of finished goods viz., M.S. Ingots was rejected on the ground that the appellant has not paid duty on CAS-4 value but paid duty on the market value which was slightly on the higher side - Held that:- Rules entitled the recipient manufacturer to avail of benefit of duty pai .....

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facturer and not the duty payable by the said manufacturer. As such, the entire amount of duty, which the Appellant has taken credit, having been paid by the manufacturer/ supplier, who has not subsequently claimed any refund on account of reduction of assessable value of the inputs, the Appellant would be entitled to the entire Cenvat credit. Therefore, the impugned order is liable to be set aside. - When the demand itself is not sustainable as brought out above, the question of payment o .....

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CHOUDHARY, JUDICIAL MEMBER For the Petitioner : Shri J. Shankarraman, Advocate And Shri S. Ravi, Advocate For the Respondent : Ms. Indira Sisupal, AC (AR) ORDER PER P.K. CHOUDHARY There are three appeals filed by the appellants, M/s.Ran India Steels Private Ltd., two by appellant's Unit-II (E/42499/14 &E/41030/2015) and the other appeal filed by their Unit-I (E/40612/2015). The issue involved in appeal Nos.E/42499/14 &E/41030/2015 is rejection of value adopted by appellant and imposi .....

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. The entire M.S ingots manufactured by appellant Unit-II are cleared to their own Unit-I located in the same Nallur Village, Namakkal District for captive consumption in the manufacture of TMT bars. Appellant paid duty by adopting market value of MS ingots and obtained CAS-4 certificate for determining the value of goods cleared to their own inter-unit. The adjudicating authority issued SCN No.7/2013 dt. 7.5.2013 and another SCN No.05/14 AC dt. 12.3.2014 on the charge of passing on the excess c .....

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ation Rules, he directed the jurisdictional range officer to quantify the amount and the amount of duty shall be the penalty imposed under Rule 26. He also imposed penalty of ₹ 5000/- each in both the OIOs under Rule 27 of the CER 2002. Based on the adjudication order, the jurisdictional Range Superintendent in his letter dt.11.8.2014 determined the value as per CAS-4 certificate and quantified the duty of excess credit passed on to the Unit-I of ₹ 3,28,78,965/- and directed the appe .....

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re that the Commissioner of Central Excise, Salem issued a SCN No.27/2013 dt. 7.5.2013 to appellant's Unit-I denying cenvat credit of ₹ 3,28,78,965/- availed by them and also ordered for recovery of the credit by invoking the proviso to Section 11A and also proposing for interest and equivalent penalty under Section 11AC. The adjudicating authority in his OIO No.15/2014-CE dt.31.12.2014 ordered for recovery of ineligible credits availed by unit-I along with interest and also imposed eq .....

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earance but the entire quantity was transferred to unit-I for manufacture of TMT rods & bars. He submits that since there is no sale to any unrelated person they are covered under Rule 8 of Central Excise Valuation Rules and the value has to be adopted as per the CAS-4 formula. Pending receipt of CAS-4 certificate from the Cost Accountant they have paid excise duty on the goods transferred to their Unit-I based on the market value which is higher than 110% of cost of production. He further s .....

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11A for alleging contravention of payment of higher duty. He submits that Section 11A is only for non-payment, misdeclaration or other contraventions. He further submits that adjudicating authority in the first two appeals has simply rejected the value and not quantified or determined the value as per Rule 8 of Central Excise Valuation Rules. Though the adjudicating authority imposed penalty under Rule 26, on the quantum of penalty he directed the penalty amount to be determined based on the re .....

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n Appeal E/40612/2015 wherein appellants have cleared M.S.Ingots from Unit-II to Unit-I and referred to invoice issued by Unit-I available at page 31 of appeal Memo in Appeal E/42499/2014 wherein unit-I paid excise duty on the finished goods viz.TMT bars cleared for DTA. The goods were self-assessed and the department never made an attempt to re-assess value under Rule 8 as there is no short payment and even after determination of value under Rule 8 they have paid excess duty. He submits that fo .....

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on or any arrangement or passing of credit to the other unit. Therefore, on the one hand Revenue alleges that they have paid higher rate of duty, whereas adjudicating authority, considering payment of higher duty, has not passed any order on the consequential refund which is not due to the government. Therefore, imposition of penalty under Rule 26 is not justified as they have not contravened any of the provisions of the rules. He relied on the following citations :- (1) CCE Pondicherry Vs Jeeva .....

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ut for manufacture of finished goods got duty paid invoice. He further submits that it is not the case before transfer of any credit, the goods were received by Unit II under valid central excise invoice and availed input credit. The goods were consumed in the manufacture of finished goods. Therefore, denial of cenvat credit on the ground of passing on the excess credit from Unit II to Unit I is not within the provisions of CCR. He submits that rule 26 cannot be invoked. Rule 26 penalty is impos .....

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i) (4) CCE Mumbai Vs Anand Arc Electrodes Pvt. Ltd.-2010 (252) ELT 411 (Tri.-Mumbai) (5) CCE Rajkot Vs Advance Diesels Engines Pvt. Ltd.-2012 (278) ELT 491 (Tri.-Ahmd.) (6) CCE Vs MDS Switchgear Ltd. -2008 (229) ELT 485 (SC) (7) Cipla Ltd. Vs CCE Pune-III-2011 (273) ELT 391 (Tri.-Mumbai) He submits that appellants have paid higher duty which is not in dispute. Denial of credit to Unit-I is not justified and pleaded to set aside the order and the penalty. 7. On the other hand, Ld.AR submits that .....

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097/-per MT (approx.) whereas what is declared by Unit-II approx. is ₹ 42,000/- per MT and the difference is more than 50% which is substantial. Therefore, he submits that the adjudicating authority has rightly rejected the value under rule 8. He also submits that adjudicating authority brought out clearly the intention of appellant that they have not availed the entire credit available to Unit-II but passed on to Unit-I. Therefore higher value adopted by the appellant is not justified and .....

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nvat credit, he submits that adjudicating authority has rightly denied credit as it was excess credit passed on to Unit-I. 9. In rejoinder, ld. Advocate countered the arguments and reiterated that Rule 26 cannot be invoked in the present case for imposition of equivalent penalty. He further submits that they have never assessed the goods provisionally and submits what was done is they had only paid on provisional basis by adopting higher market value so as to avoid litigation on demand of duty o .....

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ost and they had paid duty on the market value due to delay in obtaining the CAS-4 certificate from the Cost Accountant. The reason for paying duty on the market value is not on account of any malafide intention but due to delayed receipt of CAS-4 certificate only. A perusal of the CAS-4 certificates issued would show that the period for which the certificate was issued and the date of issue of such certificates was much after the clearance and therefore they could not have waited for the certif .....

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to pay duty with mathematical precision at 110% of the cost. In all cases there may be shortage or excess payment. That will be known in the next financial year after getting a Cost Accountant certificate. Merely because there is variation, that too in favour of the Revenue, there cannot be a ground for imposing penalty under Rule 26. 12. Further the self assessment of the appellant has become final. The lower authority has not taken any effort for reassessment. Only after reassessment, the auth .....

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so. They can pass on the cash legally to Unit I instead of credit. Hence the entire basis on which the Department proceeded against the appellant is incorrect. 13. If the Department feels that they will not accept any body paying more duty then the same should have been granted as refund. In the present case, no such order has been passed. No doubt the refund is subject to Section 11B. 14. In the instant case, there is no evasion of duty nor is there any violation of Central Excise Rules/Acts by .....

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upra) The above decisions would apply with greater force in the present case and the orders of the lower authorities are liable to be set aside on this ground also.] 15. Further a perusal of Rule 26 of the Central Excise Rules, 2002 would show that it has no applicability to the appellant . Rule 26(2)(i) applies only where there is no delivery of goods by the manufacturer of inputs. In the present case there is no dispute with regard to the fact that the goods were supplied to Unit I. The goods .....

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Similarly, imposition of penalty under Rule 27 is also not correct. 16. With regard to Appeal No.E/40612/2015, there was no dispute raised by the department during the disputed period about the higher value adopted at the time of clearance from Unit II. Further for the reasons stated supra it cannot be said that there was excess or shortage of payment of duty by the appellant. Hence on this ground alone this appeal has to be allowed. However, in the light of these facts, the credit taken by Uni .....

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tal goods received in the factory on the strength of documents specified in Rule 9 (1) thereof. Rule 9 (1) of the Cenvat Credit Rules, 2004 specifies the documents on which Cenvat credit can be taken and one such document is invoice issued by a manufacturer from his factory or depot or from the premises of the consignment agents or any other premises from where such goods are sold. 18. The invoices on which Cenvat credit was taken were issued by the manufacturer namely, M/s Ran India Steels Pvt. .....

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ce shall necessarily contain the registration number, name of the consignee, description, classification, time and date of removal, mode of transport, vehicle number (if any), rate of duty, quantity and value of goods and the duty payable thereon. The invoices issued by Unit II contain all the particulars as stipulated under Rule 11 (2) of the Central Excise Rules, 2002. As long as amount of duty as indicated in the duty paying documents (i.e. excise invoice) has been paid and as long as inputs/ .....

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, then the duty amount need not have been paid by cash by Unit II. As such, it is not the case of the department that Unit II has deliberately adopted higher assessable value to utilize accumulated Cenvat credit. If that had been the case of the department, then the payment of PLA would not have arisen at all. Neither the provisions of Rule 14 of Cenvat Credit Rules, 2004 nor the provisions of Section 11A of the Act are attracted to deny the credit for the following reasons: (i) Rule 14 ibid dea .....

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confirmed the eligibility of disputed credit based on duty paid invoices/documents; (iv) The SCN has not alleged any of the grounds as contemplated under Section 11A to invoke the said provision and hence the provisions of Section 11A (4) [erstwhile proviso to Section 11A (1) of the Central Excise Act] is not attracted. The assessment of goods and payment of duty on the goods so assessed is a matter between the manufacturer and the Central Excise authorities having jurisdiction over the said ma .....

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Synthetics Ltd Vs CCE, Jaipur (Supra) (ii) Acero Fabrica Vs CCE, Mumbai (Supra) (iii) CCE, Mumbai Vs Anand Arc Electrodes Pvt. Ltd (Supra) In the case of CCE vs. MDS Switchgear Ltd (Supra) the Honble Supreme Court while upholding the Tribunal s order, held that rules entitled the recipient manufacturer to avail of benefit of duty paid by supplier manufacturer and the quantum of duty already determined by jurisdictional officers of supplier unit cannot be contested or challenged by officers in .....

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