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TMI Blog2022 (5) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... ery of interest at appropriate rate from M/s. Saint Gobain Gyproc India Ltd. on the confirmed demand at (a) above under Section 11AB of the Central Excise Act, 1944., read with Rule 14 of the Cenvat Credit Rules, 2004. (c) I impose a penalty of Rs. 13,77,42,794/-( Rupees Thirteen crore seventy seven lakh forty two thousand seven hundred ninety four only) on M/s. Saint Gobain Gyproc India Ltd., and order its recovery from them under the provisions of Section 11 AC of the Central Excise Act, 1944, read with Rule 15(2) of the Cenvat Credit Rules, 2004, and (d) I order confiscation of the capital goods valued at Rs. 76,28,11,644/- on which Cenvat credit of Rs.13,05,24,5061- is wrongly availed in contravention of the provisions of the Cenvat Credit Rules, 2004, under Rule 15 (1) of the Cenvat Credit Rules, 2004. However, I impose a fine of Rs.5,00,00,000/- (Rupees Five crore only) in lieu of confiscation and M/s Saint Gobain Gyproc India Ltd shall have the option to redeem the said goods on payment of the said fine. (e) If M/s. Saint Gobain Gyproc India Ltd., pay the Central Excise duty as confirmed against Sr. No. (a) above along with entire interest as ordered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Jointing Compound under Tariff Item (TI) 6809 9000, whereas the same is correctly classifiable under TI 2520 2010 and chargeable to nil rate of duty. 2.4 The show cause notice was adjudicated as per the impugned order referred in para 1, above. Aggrieved appellant have filed this appeal. 3.1 We have heard Shri Gajendra Jain with Ms. Payal Nahar, Advocates for the appellant and Shri Anantha Krishnan, Commissioner, Authorized representative for the revenue. 3.2 Arguing for the appellant learned counsel submits: * The appellants had obtained central excise registration in April 2005 for manufacturing gypsum plaster, gypsum plaster board and Jointing Compound. This shows that the appellants always intended to use the capital goods in the manufacture of dutiable goods. Also, Gypsum Plaster Board was conditionally exempted and therefore, non fulfillment of condition would lead to charging full duty on Gypsum Plaster Board. The capital goods at the time of receipt were capable of being used in the manufacture dutiable goods. In fact, March 2006 onwards, the appellants indeed used the capital goods in manufacture of dutiable goods i.e., Gypsum Plaster Board and Jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not pertain exclusively to the gypsum plaster (exempted) division but also pertained to the gypsum plaster board and jointing compound division. Therefore, the said input services cannot be said to be exclusively used in the manufacture of exempted goods and credit cannot be denied in terms of Rule 6(5) of CCR, 2004. * Decision of Surya Roshni Ltd. - 2003 (155) ELT 481 (T) is not applicable in the present case. * Without prejudice to the above submissions, the payment of excise duty at the time of clearance of Jointing Compound by the appellants should be treated as the reversal of disputed credit. Excise duty already paid has to be adjusted against the cenvat credit demand. * The entire demand raised in the show cause notice is for the period beyond the normal period of limitation of one year prior to the date of show cause notice. They entertained bonafide belief that they have correctly taken cenvat credit on the capital goods and input services in dispute, since jointing compound was always chargeable to duty and the capital goods and input services in question were also used in relation to manufacture of jointing compound and were not exclusively used in manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actured at all at the relevant time. It indicated that the assessee had availed said Cenvat credit on 2nd March, 2006, when "Gypsum plaster board" became chargeable to Central Excise duty @ 8%. As per intelligence the assessee has also availed the Cenvat credit of Service Tax paid on various input services like Consultancy services, Labour/ Manpower supply services, Security services etc., which were received and utilized by them for erection and installation of capital goods plant, which in turn were used in the manufacture of their finished goods i.e. "Gypsum plaster board" and "Gypsum plaster", which were exempted from payment of Central Excise duty at the relevant time of availment of such services. (49) In order to work out the intelligence, visits to the assessee's factory were undertaken, relevant records and statements of concerned persons were recorded mainly to examine whether the intelligence was correct, and whether the credit availed by the assessee was in order or otherwise. (50) From the first of the statements of Shri. Raut, Manager, Indirect Taxes, of the assessee's factory the facts that have come to fore which are most relevant to the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve also availed Cenvat credit of Service Tax paid on input services, which were utilized by them at the time of erection and installation of the said capital goods plants, received in the factory from January 2005 to February 2006 and used in the manufacture of their finished goods i.e. "Gypsum Plaster" and "Gypsum Plaster Board" which were chargeable to nil rate of duty/exempted from payment of duty at the relevant time of availment of such services. (53) This factual position about the receipt of the capital goods, dutiability of their three products and date of availment of Cenvat credit has not been disputed by the assessee, but the availment of the Cenvat credit has been claimed to be in consonance with the provisions of law. The notice has disputed this credit as wrongly taken and has alleged that the entitlement of Cenvat credit of duty paid on capital goods is subject to the dutiability of the finished goods manufactured by using the said capital goods, at the time of receipt of the said capital goods in the factory, on the basis of Rule 6(4) of the Cenvat Credit Rules, 2004, hence it is essential to firstly see what is the exact provision under the said Rule. (54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. The assessee had decided to clear the "Gypsum plaster board" at "Nil" rate of duty only availing the benefit of the notification. iv. The moment "Gypsum Plaster Board" became chargeable to duty @ 8%, by virtue of Notification No 5 /2006 dated 1-3-2006 as amended, the assessee, on 2nd of March 2006, availed 50% Cenvat credit of the duty paid on capital goods, which were received in the factory from January 2005 to February 2006, for the manufacturing of "Gypsum plaster board" and 'Gypsum Plaster", which were exempted from payment of Central Excise duty/chargeable to nil rate of duty at the time of receipt of capital goods and similarly, on 31st of March 2006, they have also availed Cenvat credit of Service Tax paid on input services utilized by them at the time of erection and installation of the said capital goods plant. (56) Since the exemption granted by the said notification is not based upon the value or quantity of clearances made in any financial year, hence at the time of receipt of goods in question the assessee was not complying with the substantial requirement of the Rule 6 (4) ibid discussed above and therefore not eligible to avail the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Roshani Ltd. reported in 2003(155) E.L.T. 481 (Tri.Del.), where facts were exactly identical to the present case, and wherein it is clearly held by Hon'ble Tribunal that: (a) "Eligibility to be determined at the time when goods received by the manufacturer - Subsequent becoming of the goods as dutiable or the manufacturer putting the capital goods to other use would not revive the question of admissibility of Modvat credit - Machine, when received, used in manufacture of exempted products - Credit not admissible - Rules 57Q, 57R(1) and 57T(2) of the erstwhile Central Excise Rules, 1944. The classification list may contain details of goods which are liable to pay duty. But it cannot be claimed therefrom that the machine was also meant to be used in the production of final goods chargeable to duty. The declaration mentioned in Rule 57T(2) ibid to the effect that the capital goods in question shall not be used exclusively for production of an exempted final product has not been brought on record." (b) "When the impugned machine was received, it has been used in the manufacture of bulbs which were exempted from the payment of whole of the duty of excise leviable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has cited a number of case laws, mainly, of M/s Bhaskar Industries and M/s Arvind Mills supra to support their case. However, the two case laws can be distinguished from the present case inasmuch as in the two cases, either in the second/third phase of the installation thereof or indirectly, the capital goods in question were used in manufacture of dutiable final goods, whereas in present case, when the goods were received, their products "Gypsum Plaster" was chargeable to nil tariff rate, "Gypsum Plaster Board" was fully exempted under a exemption notification and the other product "Jointing Compound" was not being manufactured at the relevant time and as such the assessee were not satisfying the requirements of eligibility to the Cenvat credit thereon. . (62) The other contest regarding variation of the facts from the case decided by Hon'ble S.C. supra is also attempted by the assessee on mainly two grounds. First, that their plant was capable of manufacturing both exempt and dutiable final products, since exempt goods merely required use of particular raw materials in prescribed proportion and were not anything else than dutiable goods. Second that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Customs, Excise and Gold (Control) Appellate Tribunal to refer the question of law stated in the application arising from the order of the Tribunal for answer by this Court. 2. In brief, the case of the applicant is that the applicant is engaged in the manufacture of various lamps of different wattages and sizes falling under Chapter 85 of the Central Excise Tariff Act, 1985 and is operating under the Modvat credit scheme. The applicant had imported a machine in March 1996 for the manufacture of lamps of different types including GLS glass lamps. The machine being a sophisticated machine, the engineers had set up the machine for a particular operation and after initial trial, advised the applicant for long production runs to monitor the performance before the second type could be taken up. The applicant had used the machine for manufacture of both dutiable and exempted final products. At the time of receipt in March 1996 the machine was originally used for manufacture of exempted final products for the reason mentioned above. The applicant had taken Modvat credit of duty paid on the aforesaid machine on 20-6-1997. However at the time of receipt of machine in 1996 itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue that was referred to the Full Bench was whether Cenvat credit eligibility has to be determined with reference to the dutiability of the final product on the date of receipt of the goods from the date of utilisation eligibility of 50% credit. For arriving at a decision on the said issue, the Larger Bench followed Surya Roshini, without even taking note of the fact that the decision in Surya Roshini is still at large before the Madhya Pradesh High Court. In any case, the interpretation to be given to Rule 6, was not even considered by the Larger Bench in Spenta International. Hence, it has no application. 25. Yet another decision relied upon by Mr. A.P. Srinivas, learned Standing Counsel is the one in Commissioner of Central Excise v. Samsung India Electronics Ltd. [2014 (309) E.L.T. 593]. In that case, the Allahabad High Court was concerned with a question whether the Cenvat credit of capital goods taken by the respondents, which are exclusively used in the manufacture of exempted goods, was admissible or not. As seen from the facts out of which the said case arose, there were actually two companies in question. One was Samsung Electronics India Information and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be manufactured were dutiable, despite the same goods becoming exempted goods on the next day, but to deprive the benefit to a person, who manufactures dutiable goods on the basis of the capital goods received in a particular financial year, would not be a proper interpretation to the Rules." 4.4 In view of the decision of the Hon'ble madras High Court, we do not find much merits in the reliance placed by the Commissioner on the decision of tribunal in case of Surya Roshni. Tribunal has in series of decisions referred to by the appellant's counsel held that once the capital goods have been used for manufacture of the dutiable goods the bar of rule 6 (4) will no longer be there and the CENVAT Credit will be admissible to appellant. In the Lakshmi Balaji Bottling Plant [2018-TIOL- 2916-CESTAT-HYD] tribunal has observed as follows: "7. We have examined the arguments on both sides. The facts are not in dispute that plant is capable for manufacture of both dutiable and exempted products. The appellant had intimated his intention to use the machinery (at the time of receipt of the capital goods) to manufacture both exempted and dutiable goods but had used the plant exclusivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery, in question, had been used only for manufacture of fruit pulp based soft drink called MAAZA which is fully exempt from duty. However the appellant had still availed Cenvat credit amounting to Rs. 1,64,08,716/- in respect of these capital goods. According to the appellant, from October 2006 onwards they have started using these machines for manufacture of aerated waters which are dutiable final product and this fact is not disputed by the Department. According to the appellant, they are eligible for capital goods Cenvat credit, as in terms of the provisions of Rule 6(4) of the Cenvat Credit Rules, 2004, the capital goods Cenvat credit is to be denied only when the capital goods have been used exclusively for manufacture of exempted final product, not when the capital goods are used for dutiable as well as exempted final products and in this case the Cenvat credit cannot be denied as from the very beginning, the appellant's intention was to use the capital goods, in question, for manufacture of both, dutiable as well as exempted final product and that notwithstanding the fact that till September 2006, the machinery was used only for manufacture of fruit pulp based soft drinks ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the capital goods, the manufacturer was using the capital goods only for manufacture of fully exempted final product and had no plan or intention to use them for dutiable final products and later on, either the final product becomes dutiable or he changes his plans and starts using the capital goods for manufacture of dutiable final products, the judgment of the Tribunal in the case of CCE, Indore v. Surya Roshni Ltd. (supra) and Spenta International Ltd. v. CCE, Thane (supra) would become applicable. But, if at the time of receipt, the manufacturer had clear intention to use the capital goods for manufacture of dutiable as well as exempted final products, in such a situation just because at the time of receipt, he uses the capital goods for manufacture of exempted final product and subsequently he switches over to the manufacture of dutiable final product, the capital goods Cenvat credit cannot be denied. When at the time of receipt of capital goods, capable of use in manufacture of dutiable as well as exempted final products, there is evidence to show that the manufacturer had intention to use them for manufacture of dutiable as well as exempted final product, the eligibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of both dutiable and exempted products; b) Used for manufacture of dutiable products although for a mere 19 days. Consequently, the demand, interest, penalty and personal penalty are liable to be set aside and we do so." 4.5 Similarly in case of S T Cottex Export P Ltd [2010 (261) ELT 807 (T)] affirmed by the Hon'ble High Court as reported at [2011 (268) ELT 318 (P&H))], tribunal held: "4. I have carefully considered the submissions from both sides and perused the records. Capital goods, in question, had been received during January, 2005 to March, 2005 and at that time the goods manufactured by using those capital goods - cotton yarn had been cleared by a duty exemption under Notification No. 30/2004-C.E. However, from June, 2005 onward the appellants started availing benefit of Notification No. 29/04-C.E. in respect of their clearances for export where there is optional rate of duty of 4% and there is no dispute about the fact that Notification No. 29/04-C.E. and 30/04-C.E. were being availed during the same period simultaneously. In view of this position, it cannot be said that the capital goods in question had been used exclusively for the manufacture of fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohit Industries after referring to Rule 6(4) tribunal observed as follows: "As per the above substituted Rule, it is clear that the bar on availing the credit in respect of capital goods used in manufacture of exempted goods shall apply only if the capital goods are used for two years from the date of installation/commencement of production. As per the facts of the present case, though the appellant received and installed the capital good in their running unit in August, 2015 but before completion of two years, in August, 2017 the capital good was used for manufacture of goods which were cleared on payment of duty, availing the exemption notification 29/2004-CE. Therefore, the capital goods were not used continuously for two years for manufacture of exclusively exempted goods. Since the amendment is by way of substitution, it will be applicable from the retrospective effect. This view is supported by decisions as follows: (a) Zile Singh vs. State of Haryana & Ors.- 2004 (10) TMI 553 (SC) (b) Govt. of India vs. Indian Tobacco Co.- 2005 (8) TMI 113 (SC) = 2005-TIOL-109-SC-CUS" 4.9 Thus it is quite evident that even if at the time of the receipt of the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems as well as of the classification adopted by them for jointing compound. Further, that their factory was audited by the Central Excise department in January & March, 2008, and so the facts relevant for the present SCN were known to the department from January, 2008 onwards. Moreover, that their records were always available for departmental scrutiny. As seen from the detailed findings recorded above it is clear that the assessee had themselves obtained the registration for manufacture showing particular classifications of their three products, received the capital goods cleared on payment of duty and opted for exemption for their main product under a conditional notification. They have themselves classified the other product under a suitable Heading and when the conditionally exempt product became dutiable, chosen to avail credit on capital goods which were already received much earlier and put to use in manufacture of non-dutiable/exempt products as is clear from the investigation and their own submissions now. They either presumed the provisions of the Cenvat credit wrongly and principles of classification also wrongly or projected their acts as unintentional and went ahead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing from it, firstly that they are inclined to accept their initial mis-classification of the jointing compound, and secondly, that they are desperately seeking a classification which will fetch a rate of duty instead of 'nil duty to the product, so that their claim to the credit on the capital goods in question is pedestalled. Hence, their volte face now to call that the product is based on calcium carbonate and not on gypsum is a clear afterthought and an attempt to somehow show that the product was all the time dutiable. The attempt also clearly indicates the intention to somehow project the goods as dutiable so that the Cenvat credit on capital goods is substantiated. Thus, when they were not manufacturer of dutiable goods at material time in terms of Central Excise law, yet they availed the credit on capital goods and services in relation to it, and utilized it, it shows further that the credit was wrong and intentionally taken. In fact for this very reason of utilizing the credit which otherwise would have remained idle, they did the act and to substantiate it carried out misclassification also. Thus, it is clear that the assessee has deliberately made a conscious atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory and so it is wrong to say that as audits were conducted the Department was aware of their activity. The jurisdictional authority's control in liberalized form is also through records and returns filed by the assessee and so their knowledge about the credits availed, classification of the products claimed by the assessee is also incorrect. The case laws cited by them to support their defense in this regard are those where the appellants have been able to establish that the entire facts were known to the Department. However, it is clear from the foregoing discussion that there is sufficient ground to invoke extended period and so the case laws do not cater to their case (75) As regards their contention of genuine bona fide belief that the credit was available to them, there is no suppression, and so they are not liable to any penalty proposed, it is seen that they themselves availed the credit on capital goods used in manufacture of exempt goods, and services, after a huge gap of time and as soon as the exemption was withdrawn and it was decided by them to start paying duty accordingly, presented classification of their particular goods under a heading suite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiable, which were initially cleared as exempted goods, he has been unable to substantiate the decision legally but has ducked the queries by talking about modernity of the capital goods and other irrelevant facts more related to marketing than compliance with the law. The assessee have contested this proposal on the grounds that he has not personally suppressed any facts. and the credit was taken by the company. The submission is correct. Though, this wrongful credit, as observed in the notice, has resulted into revenue-loss to the Government, he can not be held to have actually effected taking of wrongful credit, in a company which notice itself concedes as a multi-national entity, whose decisions are not concentrated in any one hand but are consciously planned by entire management. In any case in the form of statutory penalty the assessee company is penalised and the main purpose of discouraging infractions is sufficiently met by the penalty, I do not consider Shri. Gaganjyot Singh, Vice President, Finance (earlier General Manager Finance) of the assessee liable to proposed penalty under Rule 15 ( 1) of the Cenvat Credit Rules, 2004." 4.12 From the above it is quite evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... happened here." 4.13 In the case of Shree Ramanuj Dyeing and Printing Mills [Final Order No. A/ 10787 /2019 dated 06.05.2019], Ahmedabad bench has in similar circumstances held as follows: "4. We have heard both the sides and perused the records. We find that as regard the submission made by Ld. Counsel on limitation the fact is not under dispute that the appellant in their ER-1 return have been clearly declaring the claim of exemption Notification No. 29/2004-CE as well as 30/2004-CE at the same time they were availing the cenvat credit on the capital goods. It is also observed in the ER-1 return that though the appellant was showing the availment of cenvat credit but were not paying excise duty for the reason that the goods were cleared under exemption notification No. 30/04-CE, therefore, relevant fact that the appellant in one hand availing the exemption notification 30/04-CE and on other hand availing the cenvat credit on capital goods were very much declared in the ER-1 return, therefore, there is no intention coming out from the ER-1 return that the appellant intend to evade any payment of duty, therefore, the entire demand raised for extended period will not susta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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