TMI Blog2018 (8) TMI 1669X X X X Extracts X X X X X X X X Extracts X X X X ..... been included in the export price declared by the appellants. There also appears to be no dispute that the assemblage of goods at the point of export was an omnium gatherum gathered of both self-manufactured and bought out items, all duty paid by the respective manufacturers, which was intended to constitute a complete sugar plant in Vietnam. The show cause notice dated 29.3.1996 at para 2.0, also narrates that the disputed bought out goods were “used only for receipt and export, as such”. The taxes cannot be exported; that it is not the intention or policy of the Government otherwise; that in such cases where the manufacturer procures some of the parts from other manufacturers and removes them along with the remaining self-manufactured goods, the clearances for all practical purposes has to be treated as effected from factory gate. The undeniable fact is that the earlier order of this Bench, in the appellant’s own case [2003 (5) TMI 166 - CEGAT, CHENNAI] had concluded, “that bought out items both inputs and capital goods in question cannot be considered as eligible capital goods for availing MODVAT credit …..”. The remand directions given by the Tribunal in that order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl. No. SCN Ref/ Date Period covered Amount O-in-O Ref. 1. 24/96 dated 29.3.1996 July 1994 to January 1996 67,67,684 15/97 dated 26.5.1997 2. Nil/97 dated 3.3.1997 Aug. 1996 to Jan. 1997 18,81,113 19/97 dated 30.6.1997 2.1 The Commissioner had dropped the proceedings on the following findings:- (a) The extended period was not invocable as the department had already issued two notices on the very same issue for the period June 1994 to August 1994 and later the credit was held to be eligible to the appellant as per the order passed by Commissioner (Appeals) in Order-in-Appeal No. 8/96 dated 12.1.1996. (b) The Government s intention is to export goods and not taxes. (c) The bought out inputs and capital goods are eligible for credit when these are intended to be used in the manufacture of the final product which is sugar plant in CDK condition. (d) The Board s Circular 283/117/96-CX dated 31.12.1996 allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on installation becomes immovable property and not goods. The Tribunal set aside the orders dropping the demand and the matter was remanded to the original authority for the limited purpose of computing and confirming the amount of irregularly availed MODVAT credit including imposition of appropriate penalty. 2.4 The appellants filed Civil Appeal No. 5509 5510/2003 before the Hon ble Supreme Court against the said order of Tribunal. An interim stay was passed in the matter and the appeals were disposed by the Hon ble Supreme Court on 3.9.2013 as reported in 2013 (295) ELT 353 (SC). The Hon ble Supreme Court upheld the order passed by Tribunal. The relevant portion is reproduced as under:- 24. It is also not in dispute that the appellant had purchased some machinery from others and such machinery had not even been unpacked by it and in the exact condition it had been transported along with the machinery manufactured by it to Vietnam. Thus, the appellant did not use the purchased machinery in its premises or in its factory and therefore, necessary condition incorporated in the Rules for availing credit of the MODVAT had not been complied with. To avail the MODVAT credit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, remanded the matter to adjudicating authority with specific directions. Pursuant to such order of remand by the Tribunal, the Commissioner passed the Order-in-Original which are now impugned in these appeals. Out of the 22 show cause notices (2 + 20), only 9 Orders-in-Original are taken up for disposal by this common order. 3. On behalf of the appellants, ld. counsel Shri C. Manickam assisted by ld. consultant Shri D. Senthil Nathan appeared and argued the matter. His submissions are summarized as under:- i) Appellants had entered into contract with the Union of Sugarcane and Sugar Enterprises for the construction of a complete sugar plant in Vietnam. For the supply of complete plant, as a turnkey project, the appellants manufacture the core sugar machineries and on payment of applicable central excise duties, procure parts and components from domestic manufacturers. It is not possible to supply the sugar plant as a whole, therefore, all the core machineries manufactured by the appellants and also the bought out central excise duty paid items were exported vide many shipments. In this case, M/s.KCP had bought out certain items which are in the nature of inputs / capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice for the subsequent period. Moreover, the doctrine of res judicata mandates that a same dispute should not be repeatedly initiated on the same party. v) However, M/s.KCP Limited was again issued a Show Cause Notice No.24/96 dated 29.3.1996 for the period July 1994 to Jan 1996 covering the periods already dealt under the earlier show cause notices, which itself is not legally sustainable in terms of the ratio of the Hon ble Supreme Court in the case of M/s.Nizam Sugar factory reported in 2006 (197) ELT 465 (SC). Further, another demand was issued vide Show Cause Notice No.Nil/97 dated 03.03.97 covering the period from August 1996 to January 1997. Both these demands were dropped by the then Commissioner of Central Excise vide Order-in-Original No.15/97 dated 08.06.1997 19/97 dated 30.06.1997 both on merits well as on limitation. vi) The respondent department reviewed the said dropping of proceedings vide O-in-O No.15/97 19/97 vide Review Order No.64-R/98 dated 03.03.98 by relying upon two judgments of the Hon ble Supreme Court in the case of M/s.Mittal Engineering (1996 (88) ELT 622 SC) and M/s. Quality Steel Tubes (1995 (75) ELT 17 (SC) on the issue of immov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as mentioned in the Rules, which qualify as inputs and capital goods. Rule 57 (F)(1)(ii) / 57(S)(1)(ii) of the erstwhile Central Excise Rules, 1944, specifically deals with two dimensions of manufacturing and export of goods. As a conscious measure, the Government has encouraged availment of MODVAT Credit even the goods were removed as such with a deeming fiction as if the goods were manufactured . Al the bought out items were brought into the factory. This aspect of deeming legal fiction has not been appreciated properly by the Tribunal during the earlier stages whereas the original adjudicating authority had clearly appreciated and mentioned this aspect in the Order-in-Original No.15 19/97, which had not been countered or disputed by the Respondent Department at any point of time later. x) Time bar aspect and the wrong invocation of the extended period of limitation was never mentioned in the points indicated in the review order and consequently, the Tribunal and the Hon‟ble Supreme Court also did not make any categorical observation or held any decision in this regard. xi) The Appellant was issued with the first show cause notice No.Nil/95 dated 01.01.95, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either there was any plea in this regard before the Tribunal nor there was decision by the Apex Court on that aspect. Therefore, subscribing to the view advanced by the Appellant, it is not possible at this stage after the order of the Tribunal merged with the order of the Apex Court. Accordingly, time bar plea is rejected (Para 7.5) There was no prayer regarding the extended period of limitation by the Department. Regarding the observation, that there was no decision by the Hon ble Apex Court, it is submitted that the Apex Court merely upheld the Tribunal order and did not go into the aspect of limitation. The Tribunal s order discussed about the merits of the case but did not go into the aspect of limitation as the departmental appeal did not carry any prayer on limitation. Therefore, the doctrine of merger does not apply for the issue of limitation and the appellant cannot be penalized for the failure of the respondent department to raise the point at the appropriate forum. However, the impugned Order-in-Original dated 29.03.2017 had discussed about the time bar aspect and held that reading Para 6.1 and 6.2 with Para 7.0 (c) and (d), it becomes clear that the department had ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific prayer on the issue of time bar aspect which was decided by the Commissioner in his order in favour of the appellant and therefore, the issue had attained finality on that count. xvii) This is further substantiated by the fact that the order of Tribunal in 2003 which is nothing but de novo Order specifically mentioned that the case was remanded for computing and confirming the amount of irregularly availed credit including imposition of appropriate penalty, after giving an effective opportunity of hearing to the appellants, in accordance with law. The appeals are thus allowed by remand . Therefore, it is submitted that the issue of limitation is still open and the Tribunal is requested to specifically discuss and decide on this aspect considering the findings of the order No.15/97 19/97 on the issue of limitation. This plea of the appellant, if accepted, would amount to revision of the quantification of demands to the extent of ₹ 4,12,953/- only and the remaining amount of ₹ 63,54,731/- (out of ₹ 67,67,884/-) being the demands covered under the extended period of limitation may be set aside. xviii) This is the third round of litigation before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the enormity and logistical requirements needed for execution of the erection of a sugar plant abroad, the said bought out items are required to be brought into the factory and therefore, they are definitely in the nature of inputs/capital goods as per the Notifications issued under Rule 57A of Central Excise Rules, 1944. xxii) The crux of the Hon ble Supreme Court s decision considering the exported goods as non-levy of excise duty, is not only erroneous because it considered non-payment as non-levy. The factum of exports being exempted and not non-levied had been conveniently ignored all along. Secondly, the finding that there is non-payment of duty on the said plant erected in Vietnam and therefore, there would not be any question with regard to getting credit on the duty paid on inputs, and that the above stated reason is quite sufficient for denying any MODVAT credit to the appellant, is not related to the facts of the case and the Tribunal being the last fact finding authority is requested to make a finding in this regard. xxiii) Therefore, it is the submission of the appellant that this Hon ble Supreme Court judgment can utmost be termed as an isolated observa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch order of Tribunal is a denovo order is without basis and not in accordance with any provisions of law. This Tribunal order was maintained by the Hon ble Supreme Court as the Civil Appeals filed by appellants were dismissed. The Tribunal order therefore has merged with the Hon ble Supreme Court s order and the appellant cannot now contend that the Tribunal failed to appreciate the law correctly or that the issue on limitation was not addressed. 4.1 The Tribunal as well as Hon ble Supreme Court has considered the issue on merits in detail. The bought out items were neither used nor required to be used in the factory of appellant for the manufacture of final product. These were exported in the same condition, as received. Therefore, did not conform to definition of inputs under Rule 57A of erstwhile Central Excise Rules, 1944. Even after subsequent amendments and introduction of the new CENVAT Credit Rules, 2002/2004, the scenario has not changed. The Commissioner has discussed this in detail in para 4.3 of the impugned order. 4.2 Appellants are not eligible to avail credit on traded goods in the erstwhile MODVAT regime or the changed CENVAT credit scheme. Similarly certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail to understand the logic or basis of such an argument. The operative potion of the Tribunal Final Order reported in 2003 (161) ELT 589 has been already reproduced by us. It is clear from such order that the Tribunal had given a reasoned decision that appellant is not eligible for credit. Only for limited purpose of quantification and imposing penalty, the matter was remanded. The appellants preferred appeal before the Hon ble Supreme Court against such Final Order, and vide judgment reported in 2013 (295) ELT 353 (SC), the Hon ble Supreme Court had maintained the decision of the Tribunal. The relevant portion of the Hon ble Supreme Court s judgment is reproduced as under:- 3. The appellant-assessee entered into a contract with M/s Vina Sugars, Vietnam for supply and installation of a sugar plant at Vietnam with a capacity of 1250 TCD (Tons crushed per day). For the said purpose, the appellant had manufactured certain machines in its own factory which were to form part of the sugar plant and certain machinery, including electric cables etc., which were necessary for the plant were purchased by the appellant from other dealers-manufacturers and the said machines-equipments-ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant in a container and the said parts i.e. the parts purchased by the appellant had been exported in the same condition i.e. even without opening the packages or testing them. Thus, the role of the appellant was merely like a trader who had purchased certain goods including parts of machinery, cables, etc., from dealers in our country and thereafter exported the same in the exact condition in special containers along with the machinery manufactured by it. 8. The department was also of the view that the parts of machinery which had been exported by the appellant could not have been said to be in Completely Knocked Down condition because the parts manufactured by the appellant and the parts purchased by the appellant from other dealers in the country had never been assembled in the appellant s factory and they were exported in the same condition as stated hereinabove and it was also pertinent to note that the parts so purchased were packed in such a way so as to keep the parts in good condition even after it is transported from India to Vietnam by sea. 9. The department was also of the view that the parts so purchased by the appellant could not have been treated even as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and which had been transported to Vietnam by sea was part of the inputs. In the circumstance, without considering whether the plant set up in Vietnam was movable or immovable, the respondent authorities ought to have given the benefit of the MODVAT credit to the appellant. 16. According to the learned counsel for the appellant, the whole sugar machinery was cleared from the factory in unassembled or dis-assembled condition. In view thereof, it was not open to the respondent Authorities to contend that parts of machinery which had been purchased by the appellant from other manufacturers would not form part of the inputs. 17. To substantiate his submissions, the learned counsel had cited several judgments. 18. The learned Additional Solicitor General appearing for the Revenue had repeated all submissions made before the Tribunal and therefore, I do not repeat the same here. 19. Upon hearing the learned counsel appearing for both sides and upon perusal of the relevant facts and legal position, we are of the view that the Tribunal had rightly come to the conclusion that the appellant was not entitled to the MODVAT credit as prayed for. 20. We find much sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished product. Admittedly, in this case the appellant was not able to identify the machinery for which the goods in question had been used. In the absence of such identification, it was not possible for the assessing authorities to come to a decision as to whether MODVAT credit would be given in respect of the goods in question. Looking to the above legal position, in our view, the impugned orders passed by the Tribunal cannot be said to be incorrect. 24. It is also not in dispute that the appellant had purchased some machinery from others and such machinery had not even been unpacked by it and in the exact condition it had been transported along with the machinery manufactured by it to Vietnam. Thus, the appellant did not use the purchased machinery in its premises or in its factory and therefore, necessary condition incorporated in the Rules for availing credit of the MODVAT had not been complied with. To avail the MODVAT credit, the input on which excise duty is paid must be used in the manufacture of the final product in the factory of the assessee. The machinery purchased by the appellant had not even been tested or was not even unwrapped in the factory of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to input as well as capital goods is to be ascertained in accordance with law for right application of law. We are not able to see from record whether the goods are capital goods or input since the appellant is held to be trader of the bought out items by the Apex Court in para 25 of the reported judgment. 7.2 CBE C while permitting filing of appeal had observed that the appellant was a merchant exporter as is apparent from para 2 of the reported decision of the Tribunal. Be that as it may, if the bought out goods have entered into statutory record as is pleaded by learned counsel either as input or capital goods that needs verification to segregate and ascertain value of each type of goods and MODVAT credit availed on each such category of goods can be ascertained for proper application of law in Rule 57F and 57I as well as Rule 57S and 57U of MODVAT Rules. Since the exercise expected by Tribunal from Revenue while passing final order as reported above was to apply Rule 57A, 57F and 57I and Rule 57Q, 57S as well as 57U of the Central Excise Rules, 1944 to the given case, it would be fair for Revenue to segregate the credit recorded under Rule 57F and Rule 57S of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt before Tribunal. But we are helpless when neither there was any plea in this regard before the Tribunal nor there was decision by the Apex Court on that aspect. Therefore subscribing to the view advanced by the appellant is not possible at this stage after the order of Tribunal merged in the order of Apex Court. Accordingly, time bar plea is rejected. 7.6 Appellant lastly pleaded that it is entitled to rebate. But such plea fails when the inputs were not used in manufacture but were exported as traded goods and even unpacking the same but dispatched as was received from suppliers. Appellant also pleaded that the appellant being found to be merchant exporter by the CBE C in its review direction, the authority below in the course of readjudication may consider the benefit available to appellant in that regard. We do not consider any such benefit shall be available which was not the claim of appellant till today. 7.7 Since plea of purchase of capital goods came before us we make it clear that the goods were only conceived by appellant as capital goods without being installed by the appellant in its factory nor used in manufacture since those were not even unpacked as ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court s judgment in appeal as reported in 2013 (295) ELT 353 (SC) and hence can be considered only as a denovo order. However, on perusal of the Supreme Court s judgment, we find that the Supreme Court had taken note of the arguments made by Senior Advocate for the appellant in paragraphs 9 to 17 therein. The argument of the ld. counsel that appellant had filed appeal only against denovo order in the Supreme Court is also not supported by facts. Para 1 of the Supreme Court s judgment (supra) it clearly indicates that the appeal has been filed Being aggrieved by the Final Order No. 301 302/2003 dated 2.5.2003 (2003 (161) ELT 569 (Tri Chennai) the instant two civil appeals have been filed by the appellant-assessee . In para 11, the Hon ble Apex Court has observed that The ld. Senior Advocate appearing for the appellant had submitted that the impugned orders passed by CEGAT are bad in law as the CEGAT did not appreciate the facts and law correctly . 6.6 Indubitably, the appellants have exported the entire Sugar Plant to Vietnam with core machineries manufactured by the appellant along with other bought out duty paid items brought into the factory; thereafter bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal goods in question cannot be considered as eligible capital goods for availing MODVAT credit .. . The remand directions given by the Tribunal in that order dated 2.5.2003 was only for computing and confirming the amount of irregularly availed MODVAT credit . etc. based on the above conclusion reached by them. This decision has been upheld by the Hon ble Supreme Court reported in 2013 (295) ELT 353 (SC). On the subsequent occasion, when the same matter came up to this Tribunal, vide Final Order dated 21.9.2015, the Tribunal had once again gone into this issue and inter alia held that the matter has reached finality by the decision of the Hon ble Supreme Court. Judicial propriety requires us to follow the Hon ble Apex Court view in the appellant s own case as reported in 2013 (295) ELT 353 (SC). Such conduct is enjoined on us by the principle of stare decisis namely, to stand for things decided . Hence as a lower court, we are definitely required to follow the precedent on an issue, when it is already decided by Apex Court, as it has been in this case. 8. Viewed in this light, we find no grounds to interfere in the impugned orders. The appeals filed by assessee are di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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