TMI Blog2020 (10) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... ive credit balance in cenvat register of VAL was increasing from month to month. Further, it is evident from record that the parties suo motu changed the basis of valuation to the tender price of NALCO for calcined alumina (under International Competitive Bidding). Revenue Neutrality - HELD THAT:- The situation is wholly revenue neutral as BALCO is clearing their finished product on payment of duty, and whatever duty is charged by VAL is available to BALCO as cenvat credit. Suppression of facts or not - penalty - extended period of limitation - HELD THAT:- Upon enquiry and investigation by Revenue, disputing the method of valuation of calcined alumina by VAL, on being so advised agreed to the valuation as suggested by Revenue and suo motu deposited the differential duty alongwith interest much prior to issue of show cause notice. VAL also bonafide issued supplementary invoice to BALCO in December, 2009. Thus, we find that the issue is wholly interpretational in nature, and there is no element of fraud, suppression or intention to evade payment of duty. Reliance placed by Revenue on the show cause notice of VAL is erroneous and misconceived. We further find that the allega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant was not able to use the bauxite fully from its captive mines. Accordingly, the appellant decided to get Calcined Alumina manufactured on job work basis from VAL by using the bauxite extracted from its captive mines. This was found to be better and more cost effective method, than importing the deficit requirement of Calcined Alumina. Accordingly, M/s Balco entered into agreement for conversion with VAL, providing for supply of bauxite by M/s Balco and conversion to alumina at the plant of VAL at Lanjigarh, on job work basis. It was further provided that M/s Balco shall make arrangement for supply of bauxite to VAL from its mines located at different places. VAL shall convert bauxite to alumina using consumables, power and steam required for conversion to alumina as per the specifications agreed. M/s Balco shall lift alumina from VAL plant at Lanjigarh, as per the monthly mutually agreed schedule, alumina to be delivered by VAL ex-plant. The agreement also provided for payment of conversion charges for which VAL shall raise invoice on M/s Balco. Further, provided - inadmissible /vatable taxes like VAT, entry tax etc. paid by VAL on consumables and others used in job wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Govt. Owned company NALCO. C. Removal to BALCO, Korba of said goods obtained by job working on BALCO s input (Bauxite) under conversion agreement referred as Conversion Sale . -do- 10. In case of goods removed by job worker (VAL), the provision for valuation w.e.f. 01.04.2007 is as follows:- Notification No. 9/2007-CE (NT) dt. 01.03.2007 Rule 10A. Where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer) then, (i) in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer; (ii) in a case where the goods are not sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, but are transferred to some other place from where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate the proposed demand from the amount of ₹ 66,64,19,436/- already deposited towards differential duty liability on the alumina removed during the period August, 2007 to August, 2010, alongwith proposal to impose penalty under Section 11AC read with Rule 25 of Central Excise Rules, 2002. Penalty was also proposed on four officers of M/s VAL under Rule 26. 14. Pursuant to raising of supplementary invoice on M/s Balco, M/s VAL had intimated the Department regarding payment of differential duty through supplementary invoices, on clearances by way of job work. 15. On 20.12.2010, M/s VAL filed an application before the Settlement Commission at Kolkata for settlement of the aforementioned show cause notice inter-alia stating as follows:- 4.1 In the application for settlement, the applicants (VAL) submitted mainly the following- (a) Alumina manufactured by the applicants was disposed off/ removed by (i) clearance to Balco on conversion of bauxite received from them, on job work basis, (ii) direct sale to Balco as per sale orders, (iii) stock transfer to the applicant (VAL) s own unit at Jahrsuguda. (b) in respect of clearances to BALCO, duty was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of duty resulted in gain to the Government to this extent. (n) Payment of differential duty was not with any malafide intention but based on bona fide belief that valuation for removals to their own unit would be under Rule 8 of the Valuation Rules. (o) Their bona fide belief was, however, incorrect in view of the decision in the case of Ispat Industries vs. CCE, Raigad -2007 (209) ELT 185 and subsequent decisions. The applicants adopted this method, as the extra duty paid by debiting the cost of production was available as credit to its other unit. (p) The entire exercise was revenue neutral, inasmuch as the duty paid was available as credit to BALCO. In support, they relied on the following cases laws- (i) Amco Batteries Ltd. vs. CCE-2003 (153) ELT 7 (SC) (ii) International auto Ltd. vs. CCE-2005 (183) ELT 239 (SC) (iii) CCE vs. Narayan Polyplast Ltd. 2005 (179) ELT 20 (SC) (iv) CCE vs. Narmada Chermatur Pharma-2005 (179) ELT 276 (SC) (v) CCE vs. Textile Corporation -2008 (231) ELT 195 (SC) (vi) CCE vs. Hamshedpur Beverages-2007 (214) ELT 321 (SC) (vii) CCE vs. Coca Cola India (Pvt.) Ltd., -2007 (213 ELT 490 (SC). (q) The applicants could ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 17. It was further observed by the Commission that there were no bonafide reasons for discharging duty on the basis of LME prices of Alumina, or on spot tender price of NALCO. Apparently, VAL was clearing the goods at less price to BALCO, it appears for taxation benefit of Vedanta Group, profit has been generated in BALCO by adopting supply of Alumina at low price from BALCO. The plea of neutrality is not available to them as VAL and BALCO are different legal persons. It was further held that plea of bonafide is not acceptable. 18. With reference to issue of supplementary invoices by VAL to enable Balco take credit of the differential duty so paid during and after investigation, the Commission observed that since the issue is not before it, it need not go into it. 19. The Commission further noted that VAL has made true and full disclosure of their duty liability and co-operated fully and the entire amount of duty liability has been deposited with interest thereon, and accordingly the Settlement Commission settles the dispute on the following basis:- Central Excise Duty: The Central Excise Duty in this case is settled at ₹ 66,64,436/-. This amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebit entry No. 2750, 2751 and 4929 all dated 20.12.2009 and intimated their Range Superintendent vide letter dated 21.12.2009, that as advised the clearances by them on job work fall under Rule 10A(iii) of Central Excise Valuation Rules, 2007, and duty has to be discharged on the basis of principles laid down in the case of Ujjagar Prints read with Board Circular. It was also stated by VAL that duty involved is Revenue neutral as the same is available as cenvat credit in the hand of Balco. M/s VAL has taken decision to remit the duty based on cost of production + 10% as in the case of clearance to their own unit at Jharsuguda by way of stock transfer. Further, mentioning the facts at the end of VAL, referring to the show cause notice issued to M/s VAL alongwith the final order of Settlement Commission dated 23.09.2011. It was also observed in the show cause notice that VAL has deposited penalty as imposed by the Settlement Commission consequent to the final order. Subsequently, the Range officer of Balco have received the relied upon documents from the jurisdictional officer of VAL upon requisition. 21. Further, alleging collusion between Balco and VAL in the payment of differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mines which they consumed in part in production themselves and cleared a part of the ore to VAL, under job work arrangement. Thus, VAL has no appropriate comparable price to value job work calcined alumina for paying appropriate excise duty. Thus, the parties bonafide linked the transaction price of calcined alumina to the price of aluminium as per LME, which is widely accepted. Further, stated that from December, 2008 onwards the excise duty was paid by VAL on the basis of calcined alumina spot tender price, as per NALCO (Government company) which was based on International Competitive Bidding method. Thus, in view of the reasonable method of valuation adopted for clearance under the job work arrangement, no malafide can be alleged. It was further pointed out that there is no loss of Revenue, the situation is wholly revenue neutral. Reliance was placed on the Ruling of the Apex Court in the case of Amco Batteries Ltd. vs. CCE-2003 (153) ELT 7 (SC). Further, taking of credit by Balco is within the scope of Rule 9(1)(b) of Cenvat Credit Rules, which restricts taking of credit only in case of wilful mis-statement or suppression of facts or fraud. Under the admitted fact that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst VAL for committing fraud, collusion or willful misstatement and suppression of facts to evade payment of duty. In this manner, the Impugned Order simply placed reliance on the settlement proceedings in the matter of VAL to deny CENVAT Credit to the Appellant. 26. Being aggrieved by the Impugned Order, the Appellants filed the instant appeals before this Tribunal. The synopsis of the submission of the Appellant are as follows- 26.1 Rule 9(1)(b) of Credit Rules is not applicable as the issue at hand is not of a sale transaction . Relevant part of Rule 9(1)(b) of the Credit Rules reads as follows: (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be on the basis of any of the following documents, namely:- (a) (b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules,2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for establishing mens rea on the part of VAL. The present Show cause notice dated 06.05.2013 and the Impugned Order have neither alleged nor undertaken any independent investigation against VAL to establish mens rea on its part. It is settled law that charge has to be established from the Show cause notice in question, and cannot be borrowed from another proceedings. In the absence of the same, the entire proceedings initiated vide Show cause notice dated 06.05.2013and the findings arrived in the Impugned Order stand vitiated. Hence, CENVAT Credit under Rule 9(1)(b) of the Credit Rules could not have been denied to the Appellant at all. 26.4 In any case, allegation of suppression against VAL does not stand adjudicated by the proceedings of the Settlement Commission. It is settled principle of law that settlement of a matter does not tantamount to adjudication of the matter and thereby the Settlement Commission s Order dated 23.09.2011 cannot be regarded as an Order wherein charges levied by Show Cause notice dated 11.10.2010 against VAL stand confirmed. Reliance is placed on Ashwani Tobacco Cp Pvt Ltd vs UOI 2010 (251) ELT 162 (Del). It is settled law that settlement is differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the Settlement Commission s Order dated 23.09.2011 to deny CENVAT Credit to the Appellant is absolutely incorrect on the face of it. 26.7 Lastly, the Settlement Commission by invoking its powers under section 32F of the Central Excise Act 1944 settled the issue by accepting the duty liability and imposing penalty to arrive at a fair settlement. Payment of penalty in terms of section 32F of the Excise Act, cannot be equated with imposition of penalty under section 11AC of the Central Excise Act. Hence, the argument of the Revenue that mens rea under section 11AC stands established against VAL is absolutely incorrect in law. Given all of the above, the Impugned Order is incorrect in law. The issue at hand is revenue neutral. Hence, the allegation of suppression is incorrect. 26.8 The Appellant submits that restriction under Rule 9(1)(b) is not applicable in the absence of intention to evade duty. In the present case, there could be no intention to evade payment of duty for the simple reason that the amount paid by VAL as duty was available as cenvat credit at the Appellant s end. It is submitted that suppression cannot be alleged in Revenue Neutral situations. The iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umina was on job-work basis and the Appellant merely paid processing charges and excise duty. Therefore, there being no sale, the question of generation of profits by the Appellant does not arise. This clearly goes to show that the Impugned Order has been passed without application of mind, and on this ground itself, the Impugned Order is liable to be set aside. Benefit of Notification no. 214/86-CE is available at a later stage. Hence, denial of CENVAT Credit does not stand to reason 26.11 That VAL in any case, being a job worker was entitled to avail benefit of Notification No.214/1986. It is settled law, benefit of exemption Notification 214/1986-CE, if not claimed earlier, can be claimed at a later stage, as held in Neo Sacks Ltd. Vs CCE 2004 (177) ELT 206, Share Medical Care vs UOI 2007 (209) ELT 321(SC). That VAL is still entitled to claim the benefit of this Notification. Pursuant thereto, the entire issue of payment of additional duty by VAL and availment of CENVAT Credit by the Appellant, will simply not arise at all. The Impugned Order has failed to recognize and deal with this argument of the Appellant. Show Cause notice dated 06.05.2013issued to the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Impugned Order has not shown any evidence of suppression, positive act of evasion etc. at the end of Appellant for the purpose of invoking extended period of limitation, in issuing the Show cause notice. It is submitted that Revenue authorities have to establish mens rea, positive act of evasion etc. on the part of the Appellant for the purpose of issuing the Show cause notice on the basis of extended period of limitation. In the absence of any evidence or reasoning to this effect, the Impugned Order is completely incorrect in law for invoking the extended period of limitation, and the penalty provisions against the Appellant. Reliance is placed on the decision in the matters of Tamil Nadu Housing Board vs CCE 1994 (74) ELT 9 (SC), CCE vs Chempar Drugs Liniments 1989 (40) ELT 276 (SC), CCE vs HMM limited 1995 (76) ELT 497(SC). He prayed that the Impugned Order is liable to be set aside and appeal of the Appellants may kindly be allowed. 27. Learned Senior Counsel further urges that the impugned order has been passed in a mechanical way, without application of mind. There is no independent finding recorded. The impugned order is fully based on presumptions and assumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is considering the merit of the case and they will decide the matter accordingly. 28.2 Learned AR further refers to statement of Shri G. Rajendran, Vice President, Indirect Taxes and the extract of which is as follows:- Q. No.13 Please explain the reason on the basis of which you have availed cenvat credit amounting to ₹ 24,65,79,458/- whereas rule 9(1)(b) of Cenvat Credit Rules, 2004 debar for availment of cenvat credit in those cases where there is suppression of facts, mis-statement, fraud, contravention of rule with intent to evade payment of duty as discussed and alleged in Show Cause Notice No. V(28)15/Adjn/11A/70/2010 dated 11.10.2010 issued by Commissioner, Central Excise, Bhubaneswar-I and held in the Final Order No. F-282/CE/11-SC(KB) dated 23.09.2011 passed by Settlement Commission in respect of appeal filed by M/s Vedanta Aluminium Ltd., Lanjigarh. Ans. While availing and utilising the credit against supplementary invoices in December, 2009, we were not aware about any show cause notice and order as mentioned above. Q. No. 15. Please go through the show cause notice No. V(28)15/Adjn/11A/70/2010 dated 11.10.2010 issued by Commissioner, Central Excise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium Co. Ltd. (iv) Sterlite Paper Ltd., (v) Sterlite Energy Ltd. ^ a number of Companies From the web page of Twin Star Holding Ltd., Vedanta Resources Pvt. Ltd., Sterlite Industries (India) Ltd., and Bharat Aluminium Company Ltd., the following information were gathered- (i) Twin Star Holding Ltd., is the parent company of SIIL It holds more than 50% equity in SIIL (ii) Vedanta Resources (P) Ltd., owns 59.9% in SIIL (iii) Vedanta Resources (P) Ltd., owns 70.5% of share of VAL whereas SIIL owns 29.5% share of VAL (v) SIIL owns 51% share in BALCO (vi) SIIL is the promoter of VAL and its Annual Report 2008-2009 contains information/ performance of VAL BALCO The relationship as reflected in the Notes of Balance Sheet and the Holding of Shares placed in the web page of various Companies, it is seen that Balco is a fellow subsidiary of VAL. The ultimate holding company i.e. Vedanta Resources (P) ltd., has control over its subsidiary companies through the ownership of shares. The holding of shares, directly or indirectly, give the parent company the necessary votes to determine the composition of board of subsidiaries and so exercise control. Both VAL Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anged the basis of valuation to the tender price of NALCO for calcined alumina (under International Competitive Bidding). We further find that the situation is wholly revenue neutral as BALCO is clearing their finished product on payment of duty, and whatever duty is charged by VAL is available to BALCO as cenvat credit. We further find that upon enquiry and investigation by Revenue, disputing the method of valuation of calcined alumina by VAL, on being so advised agreed to the valuation as suggested by Revenue and suo motu deposited the differential duty alongwith interest much prior to issue of show cause notice. VAL also bonafide issued supplementary invoice to BALCO in December, 2009. Thus, we find that the issue is wholly interpretational in nature, and there is no element of fraud, suppression or intention to evade payment of duty. Reliance placed by Revenue on the show cause notice of VAL is erroneous and misconceived. We further find that the allegation by Revenue are bald and unsubstantiated. Only for the reason that VAL instead of contesting the show cause notice went for settlement before the Settlement Commission, no adverse inference can be drawn against the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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