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TMI Blog2008 (2) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... -. He also confirmed Central Excise duty amounting to Rs. 5,16,548/- under proviso to Section 11A(1) of the Central Excise Act, 1944 on the goods cleared after slitting. He also imposed mandatory penalty of Rs. 12,86,674/- on the appellants under Section 11AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. He also ordered the appellants to pay the interest at appropriate rate on the amount confirmed for recovery in terms of provisions of Section 11AB of the Central Excise Act, 1944. 3.1. Excise Appeal No.687 of 2006 has been filed by M/s Siddhartha Tubes Limited, Sarangpur, against the order-in-original No. 96/Commr/CEX/IND/05 dated 28.11.2005 passed by the Commissioner, Central Excise, Indore. 3.2. The Commissioner, vide impugned order, has disallowed the cenvat credit taken and availed amounting to Rs. 71,09,312/- and ordered its recovery under Section 11A of the Central Excise Act, 1944 read with Rule 12 of the Cenvat Credit Rules, 2001 (now Cenvat Credit Rules, 2002) alongwith interest. He also directed the appellants to pay interest in terms of Section 11AB of the Central Excise Act, 1944. He, however, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Rs. 51,65,671/- 9. The Deputy Commissioner, Central Excise issued show cause notice dt. 1.10.2002 to Unit No. II alleging that on scrutiny of ER-1 for the months of September, 2001 and December, 2001, it is noticed that Unit No. II had taken Cenvat Credit of Rs. 71,09,312/- in terms of Rule 7(1) (b) of Cenvat Credit Rules, 2001 on the strength of the supplementary invoices issued by Unit No. I for the differential duty paid on account of under-valuation of goods, as pointed out by the Department. Differential duty of Rs. 51,65,671/- was paid in September, 2001 vide three supplementary invoices referred to above and differential duty of Rs. 19,43,641/- was paid in December, 2001 vide supplementary invoice No. 1550 dated 23.12.2001. It is alleged that the under-valuation was done by Unit No. I, which resulted in short payment of the Central excise duty by reason of wilful mis-statement and suppression of facts. 10. It was further alleged that as per clause (b) of sub rule (1) of rule 7 of Cenvat Credit Rules, 2001, the Cenvat Credit can be taken on the basis of the supplementary invoice except where additional amount of duty became rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal consideration on which no Central Excise duty was paid. During the period 1.3.2001 to 22.8.2001, the Unit No. I charged extra amount under the head. Other Addition". However, on pointing out, the Unit No. I debited the excise duty amounting to Rs. 51,65,671/- on the charges under the head "Other addition and on Freight". It was further noticed that freight was calculated @ Rs. 250/- PMT for the receipt of HR Coils at Shajapur Unit (i.e. Unit No.I) whereas the freight paid was @ Rs. 275/- per MT upto Shajapur Unit (i.e. Unit No. I) and not Rs. 250/- PMT. The duty short paid on the differential freight work out to Rs. 7,70,126/-. It was also noticed that the Unit No. I had cleared 129.590 MT H.R./C.R. Coil, 273.220 MT H. R. Slits, 309.77 MT H.R. Sheets after slitting but paid the duty equal to the amount of credit taken, without including the cost of slitting. The cost of slitting was informed to be on an average Rs. 72/- PMT. Accordingly, the differential duty of Rs. 5,16,548/- was calculated on this count and demanded from Unit No. I. 13. It was alleged that the appellants had knowingly not complied with the procedure laid down under C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods at the rate applicable to such goods on the date of such removal on the value determined under Section 4 of Central Excise Act, 1944 Para (1C) read as under:- (1C) When inputs or capital goods, on which credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under section 4 of the said Central Excise Act, and such removal shall be made under the cover of an invoice referred to in rule 52A. 17. Since 1.7.2001, the Central Excise Rules 1944 were abolished and Cenvat Credit Rules, 2001were introduced. As per Rule 3(4), on the clearance of inputs as such, the manufacturer was liable to pay an amount equal to the duty of Excise which is leviable on such goods at the rate applicable on the date of removal and on the value determined under section 4 or Section 4A of Central Excise Act, 1944 Para 4 of rule 3 reads as under:- Para 4 When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable in the form of the transaction value of inputs sold to an unrelated buyer (if the sale price to the unrelated buyer varies over a period of time, the value nearest to the time of removal should be adopted). Problems will, however, arise where the assessee does not sell the inputs/ capital goods to any independent buyer and the only removal of such input/ capital goods, outside the factory, is in the nature of transfer to a sister unit. In such a case proviso to Rule 9 will apply and provisions of Rule 8 of the valuation rules would have to be invoked. However, this would require determination of the 'cost of production or manufacture', which would not be possible since the said inputs/ capital goods have been received by the assessee from outside and have not been produced or manufactured in his factory. Recourse will, therefore, have to be taken to the residuary Rule 11 of the valuation rules and the value determined using reasonable means consistent with the principles and general provisions of the valuation rules and sub-section (1) of Section 4 of the Act. In that case, it would be reasonable to adopt the value shown in the invoice on the basis of which cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board clarifications, which created confusion both in the Trade and the Department regarding the correct legal position in this respect. 22. In such a scenario, it will be preposterous to charge the Unit No. I that they wilfully misstated or suppressed the facts with intention to evade payment of duty. In any case, whatever duty paid on H.R.Coils at Unit No. I was available as credit to the Unit No. II, which was captively using the H.R.Coils for the manufacture of M.S. Pipes. Therefore, the exercise is revenue neutral. The five member bench of the Tribunal in the case of Jay Yuhshin Ltd., vs. CCE, New Delhi reported in 2000 (119) ELT 718 (Tribunal- LB) has held that with reference to the modvat scheme, it has to be shown that the revenue-neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee's manufactured goods so as to establish that there is no intention to evade duty. In this case, the credit of the duty paid by the Unit No. I is available to the Unit No. II of the assessee. Hence, there is no intention to evade duty and the charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale and in the case of stock transfer, prohibition under Rule 7(1)(b) of the Cenvat Credit Rules is not applicable even if presuming that the additional amount of duty becomes recoverable from one unit on account of fraud, suppression of fact etc. They relied upon the decision of the Tribunal in the case of Karnataka Soaps and Detergents Ltd. vs. CCE, Mysore, Bangalore reported in 2005 (192) ELT 892 (Tri. Bangalore) in this connection. They maintained before us that they have stock transferred the goods from Unit No. I to Unit No. II. If that be so, the ratio of the case law in the case of Karnataka Soaps and Detergents Ltd., cited supra is squarely applicable to the present case and the Department's case falls flat. Be that as it may, we have already held that the charge of wilful misstatement or suppression of facts etc., with intention to evade payment of duty is not sustainable against the Unit No. I. Hence, the instant case is not hit by the exception provided in Rule 7 (1)(b) of the Cenvat Credit Rules. Therefore, the differential duty of Rs. 71,09,312/- paid by the Unit No. I on four supplementary invoices (although not payable in the light of the B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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