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TMI Blog2025 (5) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... housand Four Hundred and Ninety only) and order to recover from M/s U.K.B Electronics Pvt. Ltd. (DTA Unit), C- 119, Sector-63, Noida, under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A(2)/11A(10) of the Central Excise Act, 1944 along with applicable interest under rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AB/11AA of the Central Excise Act, 1944. Since the confirmed demand of Rs 36,13,490/- has already been deposited by them, I order for appropriation of the same against the confirmed demand as discussed supra. (b) I also confirm the demand of Customs duty, CVD and Addl. Duty (Imports) amounting to Rs 49,60,092/- (Rs. Forty Nine Lakhs Sixty Thousand Ninety Two only) being differential duty on raw materials, i.e. "Housing" imported under the Customs (Imports of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1966 for use in the factory of import, but transferred/shifted to their other units during the period August, 2009 to July, 2011, and order to recover from M/s U.K.B Electronics Pvt. Ltd. (DTA Unit), C-119, Sector-63, Noida, under Section 28(2)/Section 28(10) of the Customs Act, 1962 along with applicable intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y upon Shri Manoj Kumar Tayal, Director of M/s U.K.B Electronics Pvt. Ltd. (100% EOU), C-119, Sector-63, Noida of Rs 1,00,000/- (Rs. One Lakh only) under Section 117 of the Customs Act, 1962 as discussed supra. " Appeal No. E/70499/2020 has been filed by M/s U.K.B Electronics Pvt. Ltd. challenging the impugned order to the extent of demand of the CENVAT credit of Rs.36,13,490/-, appropriation of Rs.36,13,490/-, demand of Customs duty, CVD and Addl. Duty (Imports) of Rs.49,60,092/-, demand of CENVAT credit of Rs.32,761/-, demand of Customs duty, CVD and Addl. Duty (Imports) of Rs.9,04,380/-, demand of interest and imposition of penalties of Rs.86,06,343/- and Rs.9,04,380/-. Appeal No. E/70500/2020 has been filed by Shri Manoj Kumar Tayal, Director of UKB challenging the imposition of penalties of Rs.2,00,000/- under Rule 26 of the Central Excise Rules, 2002 and that of Rs.1,00,000/- under Section 117 of the Customs Act, 1962. Appeals No. C/70100/2021, C/70101/2021 & C/70102/2021 have been filed by the Revenue challenging the impugned order, to the extent that penalty has been confirmed under Section 114A only to the extent of duty amount instead of duty and interest amount. 2.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were initially not provided by UKB and it was only vide letter dated 17.08.2012, UKB provided the details of "Housings" transferred to Pune unit, which inter-alia included transfer of 22000 pcs claimed to be procured from one M/s East West Automation Technologies Pvt. Ltd., Gurgaon and another 9000 pcs of imported "Housings", on which excise duty was deposited and customs duty element was Rs.627/- only. 3. Show Cause Notice SCN dated 01.03.2013 was then issued by the Ld. Commissioner, alleging wrong availment of CENVAT credit of Rs.36,13,490/- on capital goods used exclusively for job-work by taking benefit of Notification No.214/86-CE dated 25.03.1986, as amended, in respect of which no undertaking was submitted by the principal manufacturer and therefore the amount of Rs.36,12,490/- is recoverable from UKB and the amount of credit reversed by UKB is liable to be appropriated. 3.1 The SCN further alleged that UKB has transferred huge quantities of "Housings", the actual quantity of which could not be ascertained and even the claim of UKB that 22000 pcs. transferred under cover of Invoice No.1636 dated 14.05.2010 (2000 pieces) and Invoice No.3232 dated 14.07.2010 (20000 pcs.) we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with interest and penalties and appropriation of amount of credit reversed by UKB. The impugned order also imposes personal penalties on the Director of UKB Shri Manoj Kumar Tayal. However, demand of Rs.1,58,345/- against UKB has been dropped in the impugned order. 8. Aggrieved with the impugned order, UKB and its Director Shri Manoj Kumar Tayal have filed separate appeals challenging the impugned order to the extent it is against them. On the other hand, the revenue has also filed appeals on the ground that quantum of penalty under Section 114A of the Customs Act, 1962 should be equivalent to duty and interest. 9. Ld. Counsel for UKB has submitted that the demand of CENVAT credit on capital goods is not sustainable as goods manufactured on job-work were not exempted goods, benefit of Notification No.214/86 cannot be denied merely on the failure of the raw material supplier, who failed to submit undertaking and even assuming that benefit of Notification No.214/86, is not admissible, then also CENVAT credit cannot be denied and only duty on goods cleared can be demanded which has not been done. As regards, demand on diversion of "Housings", the ld. counsel has submitted that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the job work done by the assessee. 10. The contention of the Department is that the Cenvat facility cannot be availed by the respondent/assessee. The original authority came to hold that even if duty is paid by Unit-I, it is immaterial, since no duty was paid while clearing the goods from Unit-II to Unit-I and, therefore, the credit taken is not in order, which was affirmed by the Commissioner (Appeals). 11. However, on a careful perusal of the decisions relied on by the parties, it is evident that the above view of the Department does not appear to be correct. 12. In the case of Escorts Ltd. v. Commissioner of Central Excise, Delhi [2003 (160) E.L.T. 623 (Tri. - Del.)], the Tribunal, while interpreting Rule 57C of the Central Excise Rules, in the said case, rejected the assessee's claim for Modvat credit of duty on the inputs used in the manufacture of parts, which were cleared without payment of duty to the assessee's other unit under Chapter X procedure and utilised in the manufacture of tractor, which were cleared on payment of duty holding that no duty was paid on the parts at the time of clearance. It held that Rule 57C will apply and no Modvat credit would be admissibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit for payment of duty on his final products at the time of clearance. In such a situation, there can be no objection or dispute by the revenue as regards the admissibility of the credit on the inputs received directly by the job worker and utilised in his factory. The only effect of the above procedure adopted by the principal manufacturer and the job worker would be additional paper work. It is basically to avoid such a situation the procedure under Rule 57F(3) has been enacted. As rightly observed by the earlier decision's the mechanical application of Rule 57C which destroys the basic benefit intended to be extended to the assessee should be avoided. If the interpretation adopted by the revenue is upheld, the benefit otherwise intended to be given will get frustrated apart from leading to discriminatory situation, where the manufacturer has himself processed the inputs and in the other case where he is sending it to the job worker. 3. We are also in agreement with the appellant's contention that Rule 57C debars taking of credit in respect of the inputs used in the manufacture of the final product, if final product is exempted from the whole of duty of excise leviable there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Central Excise v. Sivaramakrishna Forgings Pvt. Ltd. [2015-TIOL-813-HC-MAD-CX = 2015 (322) E.L.T. 697 (Mad.)]. 16. We find on fact that in this case also, the Tribunal was correct in holding that wiring harness was removed without payment of duty under job work procedure to the principal manufacturer and that semi-finished goods removed by the job worker from its unit to the principal, without payment of duty, would not come within the scope of expression "exempted final product" used in Rule 57R(1) equivalent to Rule 6(4) of the Cenvat Credit Rules, 2004. The Tribunal has rightly held that availment of Modvat credit on capital goods to be job work is in order. For the reasons aforesaid, the substantial question of law is answered in favour of the assessee and against the Revenue." After Kyungshin (supra), Hon'ble Madras High Court again in Commissioner of Central Excise, Chennai-II v. SRF Ltd. 2019 (367) E.L.T. 252 (Mad) considered the issue of credit on inputs used for job-worked products, the Hon'ble Court held as under:- "3. The Department proposed to disallow the credit taken on the quantity of inputs, which were used in the manufacture of job ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er v. Hwashin Automotive India Pvt. Ltd. [reported in 2014 (304) E.L.T. A16] and also the decision of the Hon'ble Division Bench of this Court in the case of Commissioner of Central Excise v. Sivaramakrishna Forgings Pvt. Ltd. [reported in 2015 (322) E.L.T. 697). 8. In the light of the fact that the decision of the Larger Bench of the Tribunal stood approved in the decision of the Bombay High Court and that the same was referred to by the Tribunal while passing the impugned order, we find that there is no error in the order passed by the Tribunal." Recently, the Hon'ble Telangana High Court in Commissioner of Customs and Central Excise v. Lokesh Machines Ltd. (2024) 14 Centax 342 (Telangana) held as under:- "11. Both the aforesaid decisions were primarily based upon the Notification No. 217 of 1986 which allowed the clearance of inputs to another factory of the same manufacturer for use in manufacture of final products. Likewise, the Notification No. 214 of 1986 dated 25-3- 1986 also allows clearance of intermediary goods to principal manufacturer for use in manufacture of final products. The reason being under both the situations, the final products would still suffer duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee and against the Revenue." 14. Given the fact that the appeal of the appellant/Revenue was primarily touching upon the applicability of the Notification No. 214 of 1986 and also use of the term "capital goods as such" mentioned in Rule 57AB of the Central Excise Rules, 1944, we are of the considered opinion that the judicial precedents referred to in the preceding paragraphs dealing with if not identical in almost similar circumstances lays to rest the question of law being agitated by the Revenue in this case." 12.2 In view of the aforesaid dicta of law laid down by Hon'ble High Courts, we conclude that the goods manufactured on job- work basis and cleared by availing benefit of Notification No.214/86, as amended, are not exempted goods and therefore Rule 6(4) of the CENVAT Credit Rules, 2004 restricting CENVAT credit on capital goods is not applicable. 12.3 In so far as non-submission of undertaking in terms of Notification No.214/86 by the principal manufacturer is concerned, we find that the said issue has also been decided by this Tribunal in Moon Chemicals vs. CCE 2007 (215) E.L.T. 434 (Tri-Chennai) and G.G. Automotive Gears Ltd. vs. CCE & Service Tax (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase order placed by UKB was for housings and terminals only and the same goods were supplied to UKB. Despite, this certificate on record before the adjudicating authority, neither any enquiry has been made from M/s East West Automation Technologies Pvt. Ltd. nor the contents of the certificate has been disputed by the adjudicating authority. In these facts, we cannot draw any adverse inference on the two invoices in question. 13.2 We also find that apart from the two invoices issued by UKB, there is absolutely no material on record to sustain the case of diversion of imported goods. Merely because UKB failed to give details of utilisation of imported "Housings" in beginning, the same could entail imposition of penalty under appropriate provision but the same cannot form the basis for alleging diversion of goods and demand of duty. Therefore, we conclude that the demand of customs duty of Rs.49,60,092/- cannot be upheld. 14. So far as demand of customs duty of Rs.9,04,380/- is concerned, we find that the same is based on the allegation of transfer of machines imported for 100% EOU unit to other units The details of such machines has been given in paragraphs 7.15 & 7.16 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess, than why the said excess amount can be adjusted towards the short-paid amount of duty. The reasoning given in the impugned order is therefore not tenable. 16. So far as imposition of penalties on UKB and demand of interest is concerned, we find that once the demand of duty is held to be not sustainable, there cannot be demand of interest and imposition of penalty on UKB. As regards, demand of Rs.3,88,149/- confirmed by the present order, we find that penalty under Section 114A can be imposed on the person who is liable to pay duty under sub-section (8) of Section 28. The words and expression 'sub-section (2) of Section 28' has been substituted by the words and expression 'sub-section (8) of Section 28' by Finance Act, 2011 w.e.f. 08.04.2011. In the present case, since removal of machineries may be prior to 08.04.2011 but determination of duty postulated under Section 114A was made only on 10.09.2020, that too under Section 28(2)/Section 28(10) and not under Section 28(8) and therefore, we find that UKB is not the person liable for penalty under Section 114A in respect of demand of duty of Rs.3,88,149/-. In so far as demand of personal penalties on director is concerned, s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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