TMI Blog2020 (1) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... by the supplier of the capital goods. Further, it is not disputed that the machinery in question although being used for manufacture of cotton yarn and cotton fabrics is also capable for manufacturing PV yarn, as certified by the manufacturers / supplier of the machinery. Further, the fact of export is not disputed of the cotton yarn /fabrics, which were removed from the factory without payment of duty and were exported. Even if the capital goods have been partially used for manufacture of dutiable goods or on payment of duty or have been exported (which amounts to removal of goods on payment of duty), the appellant is entitled to cenvat credit on the capital goods in question. The special procedure for removal of dutiable goods under Rule 19 of Cenvat Credit Rules read with Notification No. 42/2001-CE is not applicable for removal of exempt goods for export. As the said Rule, read with notification are only for the purpose of safeguarding the interest of Revenue. Further, Rule 6(4) of Cenvat Credit Rules as substituted w.e.f. 01.04.2016, provides that no cenvat credit shall be allowed on capital goods used exclusively in the manufacture of exempted goods for a period of tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brief facts of the case are that the appellant is engaged inter-alia, in the manufacture of Polyester Viscose yarn, Cotton yarn, Cotton shirting and Denim fabric, falling under Chapters 52, 55 60 of the First Schedule to the CETA. Appellant has seven spinning mills in its factory and a separate plant for manufacture of cotton shirting/ denim fabric, which is in operation since March, 2012. Cotton shirting/Denim fabric is cleared in the domestic market, partly on payment of excise duty, and partly without payment of duty, availing exemption under Notification No.30/2004-CE. 3. In Mill Nos. 1, 2, 3, 4 and 5 only PV yarn is manufactured, which is cleared both on payment of duty and exported under the claim of rebate. There is no dispute with regard to these mills. In October 2013, appellant installed various capital goods in Mill No. 6, for manufacture and captive use of cotton yarn in cotton/ denim fabric. 4. Mills No. 7 was installed by the appellant in February, 2015 for manufacturing cotton yarn, which was cleared partly on payment of duty. Cotton yarn manufactured in both mill Nos. 6 and 7 was cleared without payment of duty under Notification No. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat goes through air jet loose. Further, cotton yarn with PV yarn cotton blended yarn with polyester, viscose yarn, synthetic yarn and denim fabric manufactured from the said capital goods were exclusively used in the same registered premises of the appellant. Capital goods are used in manufacture of various qualities of yarn as well as denim fabric, which were cleared on payment of duty. In the registered premises, cotton yarn is also manufactured by the appellant capital goods in question is being used in the nature of intermediate goods and various yarn as well as denim fabric manufactured from the said intermediate goods alone can be termed as final product. Hence, they are eligible to cenvat credit on the capital goods in question used in manufacture of intermediate goods which have been further used in the manufacture of dutiable output. 7. Revenue further summoned Shri Durgesh Bangar, Director of the assessee who in his statement inter-alia stated that they were exporting PV yarn by availing the cenvat credit facility on input and they were not exporting cotton yarn and denim fabric, but they were clearing the said goods in domestic market. They were availing ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signments of cotton yarn without payment of duty and without exemption of ARE-1 under Notification No. 30/2004. He also submitted fifteen bills or invoices. In respect of cotton yarn, they were clearing the same under exemption without payment of duty. However, they have cleared five consignments of cotton yarn in DTA on payment of duty to M/s Sai Leela Synthetic Pvt. Limited, Bhilwara. 10. Further statement of Prakash Bohra, CEO was recorded on 28.01.2016. He inter alia stated that he was working with the appellant company since February, 2012. He looks after all the works of the company and is head of the spinning division including purchase of raw material, production efficiency and sale of goods etc. He stated that the said unit is engaged in manufacture of cotton yarn, PV yarn and denim fabric. The unit was established in 2009. In 2013, open end mill bearing No. 6 was installed. Further, in 2015, one cotton spinning mill bearing No. 7 and one yarn dyeing house was created. Further, in 2015, expansion of the fibre die house was done. He also provided the details of cenvat credit availed by the appellant company for the period 2011-12 to 2015-16 (upto September, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parts mentioned in the annexed chart as per technical specification, which means for machinery used for manufacture of cotton yarn. The committee of four members was constituted and vide a report dated 13.01.2017 opined that the machine/ parts mentioned in the annexed list are used for cotton yarn manufacturing / spinning . 13. Further, it appeared to Revenue that the transaction shown by the appellant company the removal of cotton yarn on payment of duty to M/s Sai Leela Synthetics Pvt. Limited, is a shame transaction created only for the purpose of availing cenvat credit on capital goods. Further, enquiries was made from the machine supplier M/s Laxmi Machine Works Limited, Coimbatore who confirmed that the machinery in question are designed for manufacturing of synthetic blended cotton yarn with PV yarn cotton blended yarn with polyester and cotton yarn of different qualities. Therefore, cenvat credit of ₹ 1,13,57,316/- as per Annexure-A to the show cause notice availed by the appellant was pertaining to the machine/ parts used exclusively for manufacture of cotton yarn. Further, as per list provided by the CEO of the appellant, who submitted the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under Notification No. 30/2004-CE and they have not cleared any such goods on payment of duty, whereas they have availed cenvat credit of ₹ 1,16,75,442/- in respect of capital goods and parts used for manufacture of cotton yarn during the period September, 2013 to September, 2015. 16. Thus, it appeared that the total cenvat credit on capital goods amounting to ₹ 4,50,73,264/- (₹ 1,16,75,442/- +₹ 3,33,97,822/-) during the period March, 2012 to September, 2015 appear to be not admissible and wrongly availed in respect of capital goods and parts thereof used in Mill No. 6 and 7 and the denim fabric mill. 17. Further, on scrutiny of invoices it appeared that appellant have availed cenvat credit of ₹ 1,12,19,926/- on 128 invoices, Annexure-D to show cause notice pertaining to capital goods, however, these invoices were issued in the name of other units of Kanchan Group such as Kanchan India Limited at Mandal, Distt- Bhilwara having registration No. AABCK0452CXM001 and also another unit having registration No. AA3CK0452CEM003. As per rule 9(2) of Cenvat Credit Rules, no credit shall be taken unless all the particulars as prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11 AC of the Central Excise Act. (v) Penalty was also proposed on the director. 19. The appellant contested the show cause notice by filing reply dated 23.10.2017 wherein they contended that under the facts and circumstances their company have made some clearances on payment of duty to M/s Sai Leela Synthetics Pvt. Limited. It cannot be said that capital goods were exclusively used in the manufacture of exempted goods. Further, clearance for export without payment of duty is equivalent to dutiable clearance. Further, contended that Rule 6(4) of Cenvat Credit Rules does not envisage that the manufacture and clearance of dutiable goods should be substantial as compared to exempt goods for availing of cenvat credit on capital goods. Therefore, even in case of a single consignment is cleared on payment of duty then also the capital goods in question are eligible for taking of cenvat credit, and thus Rule 6(4) will not be applicable were capital goods will be used in manufacture of dutiable goods during their economic lifetime. The appellant relied upon the five invoices where cotton yarn was sold to M/s Sai Leela Synthetics Pvt. Limited on payment of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cross-examination was as follows:- 13.1 On 12.09.2017, Shri Nand Lal Jalan, Director of M/s.Sai Leela Synthetics Private Limited, Bhilwara appeared for cross examination and he was examined by Shri Keshav Maloo, Consultant on behalf of the assessee. During cross examination following questions were asked for: Questions by the department from Shri Nand Lal Jalan: Question 1: When the letter of cross examination was rejected by him Ans.: It was received approximately 4-5 days ago. Question 2: Whether any person from M/s. Kanchan India Limited as contacted him during this period? Ans.: Yes, Shri Rajesh Bansal working in M/s. Kanchan India Limited contacted him during this period and got him met with Shri Keshav Maloo, Consultant. Question3: when he was departmental witness, then why he admitted to meet Shri Keshav maloo. Ans. Shri Nand Lal Jalan could not reply. Shri Kishav Maloo, Consultant of the noticee asked the following question during cross examination: Question 1: Shri Keshav Maloo stated that the cross examination is for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own clearances of cotton yarn to M/s Sai Leela Synthetics Pvt. Limited, he clearly stated that they have never purchased cotton yarn as the same was not used/ input in their product. This statement was tendered on 16.02.2016 and there was no retraction thereafter. Moreover, Shri Nand Lal Jalan at the time of cross-examination on 12.09.2017 in the adjudication, again confirmed his statement on 16.02.2016 as true. Shri Nand Lal Jalan also stated that Shri Rajesh Bansal, General Manager of KIL had contacted him and taken him to their Consultant Shri Keshav Maloo before the cross-examination, but still he has stood by his statement in cross-examination and it was only on subsequent persuasion that Shri Nand Lal Jalan has written the letter dated 03.10.2017, which has got no evidentiary value. It was also observed that the letter dated 03.10.2017 is evidently written by Shri Nand Lal Jalan only under influence of the officer and Consultant of KIL. 24. So far the claim of export is concerned, as to export of four consignments of cotton yarn, learned Commissioner observed that goods can be cleared for export under Rule 19 of Central Excise Rules without payment of duty subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. 25. Further, the Commissioner held that the claim of clearance of cotton yarn on payment of duty to M/s Sai Leela Synthetics Pvt. Limited is a sham transaction. Accordingly, confirmed the disallowance of ₹ 4,73,61,570/- with order for recovery under Rule 14 of Cenvat Credit Rule, read with Section 11A(10) of Central Excise Act and Section 174 of CGST Act, 2017. Further, interest was demanded and penalty being 50% of the disallowance amount was imposed under Rule 25 (1)(d) of Central Excise Rules read with Section 11AC and further penalty of ₹ 42,88,439/- was imposed under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act. Further, on the other appellant Shri Durgesh Banger and Shri Prakash Bohra, penalty of ₹ 10 lakh each under Rule 26 of Central Excise Rules, 2002 was imposed. 26. Being aggrieved, the appellants are before this Tribunal. 27. Heard the parties and perused the records. 28. Learned Counsel for the appellant made the following submissions:- 28.1 Cenvat credit availed on the capital goods used in the manufacture of dutiable cotton/ denim fabric . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout payment of duty. Therefore, the present case is covered by the provisions of Rule 6(6)(v) of the Credit Rules, hence, the provisions of Rule 6(4) of the Credit Rules are not attracted. The factum of export of cotton yarn has not been disputed in the impugned order or in the SCN, therefore, Rule 6(4) of the Credit Rules has no application, in light of the provisions of Rule 6(6)(v) of the Credit Rules. In the case of Repro India Ltd. v. Union of India, 2009 (235) ELT 614 (Bom.), the Hon ble Bombay High Court held in favour of the assessee, observing that if exempted final product is exported it calls for a special relaxation/dispensation to make the goods of the country internationally competitive; further, the intention is not to export taxes but only to export the goods; Rule 6(6)(v) has been consciously and expressly enacted with the objective to ensure that duty is not levied on inputs going in the export products and that considering the conscious and express provisions contained in Rule 6(6)(v) for export goods, to deny permission to export the goods would be incorrect and that this will completely nullify and frustrate Rule 6(6)(v). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to export of goods on the ground that the Appellant did not execute a Bond/ LUT, as required under Rule 19 of the Excise Rules, read with Notification No. 42/2001-CE (NT) dated 26.06.2001. It is submitted that Condition (iv) of Notification No. 42/2001-CE (NT), clearly provides that export of excisable goods which are chargeable to nil rate of duty or are wholly exempt from payment of duty shall not be allowed under this notification. The said notification mandates submission of bond/LUT for export of dutiable goods to ensure that the goods are exported and not diverted elsewhere, in order to safeguard the Govt. revenue. However, this safeguard is not required in cases where goods are chargeable to nil rate of duty or are wholly exempted from payment of duty, as there is no risk to the Govt. revenue. This does not however, mean that export of such goods is not allowed or the goods, when exported, lose the character of export goods. Para (iv) of the notification expressly provides that in cases where the goods are chargeable to nil rate of duty or are wholly exempted from payment of duty, the conditions/procedure provided under Notification No. 42/2001-CE(NT) are not applicable, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... version into de-natured spirit, which was cleared on payment of excise duty. In light of the above, Cenvat credit cannot be denied to the Appellant on the capital goods which were admittedly used in manufacture of intermediate product, further used in manufacture of dutiable final product. Reliance in this regard is placed on CBEC Circular No. 664/55/2002-CX., dated 25.09.2002, which clarified that the Cenvat credit should not be denied on the capital goods used in the manufacture of intermediate goods exempt from payment of duty which are used captively in the manufacture of finished goods chargeable to duty . (emphasis supplied) The finding of the Ld. Commissioner is in consonance with the stand of the Appellant as well. Appellant has always contended that they intended to use the subject capital goods for the manufacture of dutiable as well as exempted goods, which is clearly reflected from the evidence available on record, as stated above. It is submitted that the intention to use has been held to be a decisive factor and Cenvat credit cannot be denied on the ground that the capital goods were initially used to manufacture exempted good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s humbly submitted that receipt of capital goods by the Appellant under the said 128 invoices is not disputed, rather it is supported by the findings of the Ld. Commissioner recorded at Para 6.9 in the impugned OIO. The fact of receipt is further corroborated by copies of LR/ GR issued from the transport agencies in which the address of the Appellant is conspicuously mentioned, along with the invoices. Further, the proviso to Rule 9 (2) of the Credit Rules prescribes that if a document does not contain all the particulars but contains the particulars mentioned in the proviso, then, credit may be allowed if the Deputy/ Assistant Commissioner is satisfied that the goods have been received and accounted for. Proviso to Rule 9(2) clearly provides that only the name and address of the factory/ warehouse/ premises of first stage or second stage dealer is required, and not that of the recipient. Hence, the Appellant is entitled to the exception carved under proviso to Rule 9(2). Without prejudice to the above, the Appellant had also obtained and submitted the rectified invoices, however, the same have been rejected by the Ld. Commissioner on the specious ground that the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Durgesh Bangar Shri Prakash Bohra, under Rule 26(1) of the Excise Rules. B.1 The penalties imposed on Shri Durgesh Bangar (Director) Shri Prakash Bohra (Chief Executive Officer), under Rule 26 of the Excise Rules, are not sustainable, since the demand is not legally sustainable; further no evidence has been disclosed by the department to prove that the individuals concerned dealt with the goods which are liable for confiscation, with knowledge about their liability to confiscation. No such finding of fact or evidence has been brought on record by the Department. For this reason alone, the penalty on the individuals is not sustainable. Reliance is placed on the decisions of Shri Manohar Singh Rana v. CCE, Indore, 2017 (5) TMI 871- CESTAT New Delhi and Z.U. Alvi v. CCE, Bhopal, 2000 (117) ELT 69. B.2 Similarly, the penalties imposed under Rule 15A of the Credit Rules are also not sustainable and are liable to be set aside. 29. Learned Authorised Representative for the Revenue reiterates the findings in the impugned order. 30. Having considered the rival contentions, we find that the receipt and installation of the capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two years from the date of commencement of commercial production. In other words, even if the capital goods are exclusively used in the manufacture of exempted goods, still the statute by substituting Rule 6(4) have provided cenvat credit after expiry of two years from the date of commencement of commercial production. We further find that the appellant fulfils the criteria for availing cenvat credit on capital goods under Rule 3 read with Rule 9(1) of Cenvat Credit Rules, 2004. We further hold that under the facts and circumstances, the provision of Rule 6(4) of Cenvat Credit Rules are not attracted, as Rule 6(6)(v) provides that the provision of sub rule (4) shall not be applicable in case the excisable goods removed without payment of duty, are cleared for export under bond in terms of provisions of Central Excise Rules, 2002. This Tribunal in somewhat similar circumstances, in the case of Sangam India Ltd., vs. CC ST, Udaipur -2018 (1) TMI 1012-CESTAT NEW DELHI has held that one of the circumstances given in Rule 6(6)(v) clearance for export under bond in terms of the provisions of Central Excise Rules, 2002, it is pertinent to note that Rule 6(6)(v) have made Rule (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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