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TMI Blog2024 (12) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... dehyde resin powder such as, Strong Bond P-101G, Strong Bond P-102P, Strong Bond P-105E and Strong Bond P-202G falling under Chapter 39 of the First Schedule to the Central Excise Tariff Act, 1985, at its factory at Rampur in South 24 Parganas District. 2.2 The appellant's sister concern, Aarem Chemicals Private Limited set up its manufacturing facilities in June, 2007 at Rampur adjoining the factory of the appellant, manufactured various grades of free flowing dried urea formaldehyde resin powder by using the liquid resin manufactured by the appellant. The liquid resin required by the Aarem Chemicals for the manufacture of resin powder was purchased by it from the appellant. The appellant supplied the liquid resin through pipeline by it from the appellant. The appellant supplied the liquid resin through pipeline directly from its factory to Aarem Chemical's factory. 2.3 Aarem Chemicals obtained central excise registration on November 5, 2007 and started production from December, 2007. Prior to Aarem Chemical obtaining central excise registration and also thereafter, the appellant used the Aarem Chemical's manufacturing facilities to manufacture resin powder from the liquid resin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance, in accordance with the provisions of the Customs Act, Bills of entry for ex-bond clearance for home consumption for the required quantity were filled by the Aarem Chemicals and in the bills of entry in accordance with the Circular No.179/13/96-CX dated February 29, 1996 issued by the Government of India, Ministry of Finance, the Aarem Chemicals made endorsement in favour of the appellant. 2.9 The said bills of entry for ex-bond clearance for home consumption were duly assessed by the proper Customs Officers and the duties assessed were thereafter duty paid. After the duties were paid, the quantity covered by the respective bills of entry for ex-bond clearance for home consumption were unloaded into tankers from the said Customs Bonded Storage Tanks through pipelines and these tankers carried the goods to the appellant's factory and were unloaded into the tanks in the factory and were then utilised at the factory in manufacture of final products. As stated above, on each bill of entry endorsement about transfer of the entire quantity to the appellant was duly made by the Aarem Chemicals and each such bills of entry were also duly signed by the Customs Authorities. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld and used bags including bags borrowed from the appellant and carrying its markings. The said quantity of 1,55,050 kgs of Strong Bond 101G was seized and is subject matter of a separate show cause notice dated November 4, 2008, issued to Aarem Chemicals, which has since been adjudicated. 2.13 On 05.11.2007 the afore-mentioned Aarem Chemicals Pvt. Ltd. obtained central excise registration and both the appellant and the aforesaid sister concern had units at Rampur, Budge Budge Trunk Road and at Hide Road. In 2011 the appellant was merged into Aarem Chemicals Pvt. Ltd through a reverse merger process. 2.14 During the period 2004-05 to 2008-09, the appellant had been engaged in the business of manufacture of formaldehyde, various grades of resin powders, various grades of liquid urea formaldehyde resin including urea formaldehyde resin intermediates such as strong bond M1, strong bond M2, strong bondM3 etc. as also various grades of dried urea formaldehyde resins powder at its aforesaid factory at Rampur. Strong bond M1, strong bond M2 and strong bond M3 used to be frequently stock transferred to the appellant's Hide Road premises and also sold to the aforesaid sister concern, Aare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Central Excise confirmed the demands of central excise duty aggregating to Rs. 3,14,66,034/- under Section 11A together with interest under Section 11AB of the Central Excise Act, 1944 and equivalent penalty under Section 11AC thereof read with Rule 25 of the Central Excise Rules, 2002 and Rule 15(2) of the Cenvat Credit Rules, 2004 while passing the impugned Order-in-Original dated 31.03.2010. 2.18 Against the said order, the appellants are before us. 3. The ld.Counsel for the appellants submits that urea formaldehyde resin intermediates such as strong bond M1, strong bond M2 and strong bond M3 had not been sold to any third party but partly stock transferred to the appellant's Hide Road unit and the rest sold to its sister unit since the said intermediates had very short span of life and required further processing. The appellant had acted on the basis of costing certificates prepared by its Chartered Accountant, though not on CAS-4 method, while the Department had sought to dispute the input costs for Formaldehyde and Melamine and the conversion cost adopted for M3. 3.1 He further submits that before confirming the impugned demands the Commissioner failed to apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method adopted by the appellant while paying Central Excise duty on sale to the sister concern. Demand on account of such sales for Rs.52,28,055/- out of Rs.2,46,30,772/- is unsustainable. 3.6 It is his further contention that the longer period of limitation could not have been invoked in a situation of revenue neutrality nor demand sustained as per the principles laid down in the following decisions - (i) Nirlon Ltd. vs. CCE, 2015 (320) ELT 22 (SC) (ii) Mahindra & Mahindra Ltd. v. CCE, 2019 (368) ELT 105 (Tri-Mumbai) - appeal dismissed thereagainst in CCE v. Mahindra & Mahindra Ltd., 2019 (368) ELT A41 (SC) (iii) Anglo French Textile v. CCE, 2018 (360) ELT 1016 (Tri-Chennai) - appeal dismissed thereagainst in CCE v. Anglo French Textile, 2018 (360) ELT A301 (SC). 3.7 In respect of duty demand of Rs.1,15,616/-, he submits that it had made payment of the full amount to the concerned suppliers of Methanol and rightly claimed Cenvat credit of duties shown in the invoices/bills of entry. Short receipt of the quantities was wholly attributable to evaporation loss/handling loss, given that methanol was a highly volatile substance. In the cases, short receipt is very minimum bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been misplaced. Apart from that, in the SCN there was no allegation that the goods covered by the bill of entry no. 334545 were not received by the appellant in its factory and/or were not used the same by it in or in relation to manufacture of the final product. In such circumstances, there is no warrant to dispute the availment of credit, as held in Commissioner of C.Ex., Vapi v. Mehta HWA FUH Plastics Pvt. Ltd., 2012 (285) ELT 253 (Tri-Ahmd). 3.12 In respect of duty demand of Rs.34,88,103/- and as regards the denial of cenvat availed on the basis of 19 endorsed invoices and 1 endorsed bill of entry, the Commissioner failed to appreciate that phenol and methanol used to be purchased/imported by Aarem Chemicals Pvt. Ltd. and endorsed to the present appellant for the purpose of manufacturing liquid resin. Thus, there can be no revenue loss. Even otherwise, it cannot be stated that an endorsed invoice or an endorsed bill of entry is not a specified document within the meaning of Rule 9(1) of the Cenvat Credit Rules. This issue is also covered by the appellant's own case being Appeal Nos. E/83/2009 and E/84/2009 (supra). 3.13 As regards the duty demand of Rs.14,04,491/- and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al difference is of a negligible quantity of 5.53 MT which, inter alia, is explainable with reference to difference in weighment, accounting anomaly, production loss etc. 3.17 It is trite law that the onus to establish clandestine removal with cogent evidences lies on the Department, as held by the Hon'ble Calcutta High Court in CCE v. Sai Sulphonate Pvt. Ltd., 2022 (380) ELT 441 (Cal). In the present case, there is no evidence on record to sustain the charge of clandestine removal. 3.18 In relation to invocation of longer period of limitation, it is submitted that the SCN and consequently the demand confirmed by the impugned order are barred by limitation. In the SCN, while invoking the period of limitation as per the provisions of the proviso to section 11A(1) of the Act, there was no allegations that the appellant had "willfully" suppressed any fact with intent to evade payment of duty, a sine qua non for invoking the proviso to section 11A(1) of the Act. By the following decision this position of law is now settled - (i) Cosmic Die Chemicals vs. CCE, 1995 ELT 721 (SC). (ii) Unreported decision of the Hon'ble Calcutta High Court dated 18.03.2019 in CCE vs. Andrew Yule Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited. 8. The Revenue is disputing the value adopted by the appellant as of the goods are cleared to sister unit, it is to be valued in terms of 8 of the Valuation Rules i.e. as per CAS-4 method (cost + 10% of profit). In this case, the costing Certificate has been issued by the Chartered Accountant, the CAS-4 value was not available and the appellant paid the duty thereon. The appellant has disputed that the duty has been demanded in terms of Rule 8 of the Valuation Rules, which is not applicable to the facts and circumstances as the goods were sending to their own unit in relation to stock transfer and a part in relation to sale to their sister concern. To support his contention, he relies on the Tribunal's decision in the case of Indian Oil Corporation Limited (supra), wherein this Tribunal has held as under : "5. We observe that SRGO manufactured by IOCL Haldia refinery has not been sold to any independent buyers. In fact the Appellant stated that it is not a marketable product and no duty is payable. However, they have agreed to pay duty only to avoid litigation as the entire exercise is revenue neutral. They stated that rule 8 of the Valuation Rules is not applicable in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 11 is adopted when the situation is not covered by any of the other methods of valuation prescribed from Rule 4 to 10A. We find that the method of valuation adopted by the Appellant under Rule 11 of the Valuation Rules is the appropriate method in this case because the situation of part sale to related person and part captive consumption is not covered by any of the other Rules in the Valuation Rules 2000. Even if CAS-4 is arrived at and the goods are valued as per Rule 8 of the Valuation Rules, there is no loss of revenue because of the duty paid will be available as credit and the entire exercise would be revenue neutral. In support of their argument on revenue neutrality the Appellant cited the following decisions: (1) CCE, Pune v. Coco-Cola India (P) Ltd. 2007 (213) ELT 490 (SC) (ii) CCE&C, Vadodara II v. Indeos ABS Ltd. 2010 (254) ELT 628 (Guj.), which is affirmed by the Hon'ble Supreme Court Commissioner v. Indeos ABS Ltd. 2011 (267) ELT A155 (S.C)." We do agree with the contentions of the ld.Counsel for the appellant as the appellant is clearing the goods for sale to their sister unit and clearing a some part of the goods for captive consumption to their own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Oil are being transported through pipeline. If any goods are transported through pipeline or by other means of transports, if they are not solid, there is every chance of loss of quantity of the goods by way of evaporation. Therefore, as held by the Hon'ble High Court of Bombay in the appellant's own case (supra) transit loss can be allowed. I also find that in this case the transit loss is varying between 0.01 and 0.72% which is admissible in the facts and circumstances of the case. Therefore, I hold that there may be variation in the transportation of the quantity of the goods accordingly, transit loss is allowable. Hence, I hold that the appellant is entitled for input credit as shown in the invoices. Accordingly, the impugned order is set aside and the appeal and stay application are allowed with consequential relief, if any. Therefore, the demand confirmed in the impugned order amounting to Rs.1,15,616/- is also not sustainable and hence, set aside. 12. In respect of demand of Rs.2,50,647/-, it is contention of the appellant that both the raw materials, Xtrazyme Hatchery and Enzyme Extra Clean Pond, have been used for research and development purposes and the cenvat cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the cenvat credit, which was taken on the basis of endorsed invoices/Xerox copies/endorsed bills of entry. We find that the appellant's sister unit, M/s Aarem Chemicals Private Limited has imported the goods and endorsed the bills of entry and issued invoices in favour of the appellant and the appellant has taken the cenvat credit thereon. We find that the similar issue came up before the Hon'ble Allahabad High Court in the case of Uni Cast Private Limited (supra), wherein the Hon'ble High Court has observed as under : "21. From the aforesaid, it is clear that credit would be given on an invoice bill, which indicates payment of duty on such inputs. In the instant case, the invoice bill was produced, which evidenced payment of excise duty on the inputs received by the applicant. The said bill was endorsed by the manufacturer. The mere fact that the certificate issued by the manufacturer did not give the details of payment of duty was immaterial. The amended Rules provided payment of duty and inputs to be indicated in the invoice, which existed as per the invoice supplied by the supplier. The fact that the invoice did not indicate the name of the appellant was only a proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try. 11. Now in the present case, as far as Bills of Entry dated 30th May, 1994 and 31st May, 1994 are concerned, Bills of Entry were produced by the assessee which indicate that M/s. Essar Gujarat Limited had paid duty at the time of import and, therefore, the assessee was Excise Appeal Nos.83 & 84 of 2009 7 entitled to take MODVAT Credit for the duty paid on the imported goods. However, when we come to the 3rd Bill of Entry dated 6th June, 1994, only the above Certificate at Page No. 42 of the Paper Book was relied upon and the triplicate copy of the Bill of Entry was not produced. In the circumstances, in our view, the respondent had wrongly availed of MODVAT Credit of Rs. 1,78,582/- on the quantity of 212.659 MT scrap referred to in the above Chart. 12. In the circumstances, the Civil Appeal filed by the Department to that extent succeeds. The appeal is partly allowed with no order as to costs." Further, this issue has been examined by this Tribunal in the case of Mehta HWA FUH Plastics Private Limited (supra), wherein this Tribunal has held as under : "6. Before I proceed further, it would be appropriate to consider the decisions relied upon by the ld. AR in his submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (81) RLT 331 (Bom.) wherein it was held that credit is admissible on the basis of endorsed copies of invoice if inputs have been received and used. He has also relied upon the decision of Hon'ble High Court of Madhya Pradesh in the case of Kataria Wires Ltd. - 2009 (241) E.L.T. 31 (M.P.) wherein it was held that the credit is admissible on the basis of certified copy of invoices. In view of the detailed order passed by the ld. Commissioner which has taken note of several decisions while coming to the conclusion and which has also come to the conclusion that goods have been received and used in the manufacture and duty has been paid, I find that there is nothing legally or factually wrong with the impugned order. Accordingly, appeal filed by the Revenue has no merits and is rejected." As it is not disputed by the Revenue that the appellant has not received the goods against the endorsed Bills of Entry/Xerox copies of the Bills of Entry/endorsed Invoices and the same has been used in the manufacture of final product and there is no allegation of diversion of the said goods pertaining in the above documents, relying on the above decisions, we hold that the cenvat credit cannot be de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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