M/s. Mando India Ltd. Versus Commissioner of GST & Central Excise Chennai
Central Excise
2019 (2) TMI 75 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 13-11-2018
Appeal No. E/369/2012 – Final Order No. 42813/2018
Central Excise
Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical)
Shri Raghavan Ramabhadran, Advocate for the Appellant
Shri B. Balamurugan, AC (AR) for the Respondent
ORDER
Per Bench
The appellants are engaged in manufacture of break assembly and shock assembly and are registered with the Central Excise Department. Based on intelligence that the appellants are clearing CENVAT availed inputs without reversing the credit, cleared goods without paying excise duty etc., investigation was conducted. After such investigation, show cause notice was issued inter alia alleging that:-
* The assessee have cleared certain CENVAT availed inputs under delivery challans without reversing the CENVAT credit to the t
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for M/s.Mahindran Renault and issued invoices but failed to pay appropriate excise duty to the tune of Rs. 7,13,683/- during the period from 1.4.2006 to 28.2.2010 as per Annexure A5 to the notice.
2. After due process of law, the adjudicating authority confirmed the demand along with interest and also imposed penalty. Aggrieved, the appellants are now before the Tribunal.
3.0 On behalf of the appellant, ld. counsel Shri Raghavan Ramabhadra made the following submissions:
3.1 Owing to space constraints, the appellants used a portion of Panelpina Warehouse for storing goods / inputs. This was done after obtaining permission from department. The inputs were brought from warehouse as per manufacturing requirements, under GDN and as per Goods Receipt Note (GRN) credit was availed. When the entire quantity brought was not consumed, the same was returned to factory on Returnable Delivery Challan. When required they were retransferred to factory under GDN. The credit was availed only when t
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d order has rejected this submission on the ground that it was an afterthought and new facts could not be entertained at the stage of adjudication of the dispute. The above averment was made throughout the proceedings, and even in the reply to the show cause notice.
3.4 In any case, the storage outside the factory premises was done after obtaining necessary approval under Rule 6A of CCR, 2002/Rule 8 of CCR 2004. When the movement was authorised by the Department themselves, they cannot now turn around and seek reversal of credit.
3.5 In any case, the Appellant submits that the instant case is not one of Revenue Leakage. The present case is one where, had the Appellant reversed the credit under Rule 3(5), the same amount would have been available to them again at the time when the returned inputs are brought back from Panelpina Warehouse to the factory for use in manufacture. This credit would have been eligible and would have been utilised towards excise duty payments. To have follow
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628 (Guj.)] and CCE v. Narayan Polyplast [2005 (179) E.L.T. 20 (S.C.)]. Therefore, the demand for reversal under Rule 3(5) is wholly baseless and merits to be set aside.
3.7 As regards the third issue, it is submitted that the liability to pay differential duty under Rule 16 of the Credit Rules, 2002 does not arise. In some cases, the finished goods are sent back to the Appellant for defects. The Appellant takes credit in terms of Rule 16 of the CER. Where the defects can be rectified, the Appellant repairs the goods, clears the same back to the customer and reverses credit availed, thereby complying with Rule 16. Where goods are not capable of repair, the Appellant disposes them as scrap without executing any process on such goods. In such cases, duty is paid on the value of scrap sold. The Appellant submits that differential duty is not liable to be paid, as duty has been accurately paid on the transaction value of the scrap.
3.8 The second limb of Rule 16(2) prescribes payment of
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testing is wholly mis-placed. The Appellant submits that the Appellant sends out finished goods to its customers for testing of quality parameters under RDC, as the customers usually seek the finished goods on Just-in-time basis. The finished goods are returned to the Appellant the very next day. The Appellant submits that the case of the Department herein is not that no excise duty was paid on the said final products. However, the finished goods are sent out so that the customer may test the said final products, and then place Purchase Orders on the Appellant on the basis of parameters as satisfied by the samples provided by the Appellant. As there is no allegation that the said finished goods were not received back by the Appellant, or that even a part of them escaped duty at the time of clearance for sale, the Appellant submits that the demand is wholly misplaced and must be set aside.
3.11 The demand for excise duty on repair work done for customers is not sustainable as the said
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nt sends out inputs to Job Workers such as M/S Premier for tool grinding, and other processing works. The Appellant submits that the instant case is squarely covered under Rule 4(5)(a) of the Credit Rules, which permit credit-availed inputs to be sent out to a job worker for further processing, testing, repair, re-conditioning, etc. The Department has contested this on the ground that valid excise invoice did not cover the transaction. The Appellant has shown the invoices under which inputs are cleared to the Job workers for carrying out job work, and the return documents under which the Job worker returns the jobbed inputs to the Appellant. Merely because the said documents are addressed as 'RDC' the transaction does not become a clearance liable to excise duty payment. The demand on this count merits to be set aside in entirety.
3.13 The demand for excise duty on goods cleared under RDC during system failure is not tenable. The Appellant submits that the demand for excise duty on go
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one under the cover of appropriate documentation such as Rule 4(5)(a) challans, etc. All the necessary information was gathered by the Department upon verification of the internal records of the appellant which itself shows that due disclosures had been made. The impugned order has invoked extended period on the sole ground that the appellant has voluntarily paid the entire duty. The order does not bring out any case apart from this to prove suppression or mala fide intention on part of the appellant. It is settled law that for invocation of extended period, there ought to be positive act on the part of the appellant. In this regard, reliance is placed on Continental Foundation Jt. Venture v. CCE [2007 (216) E.L.T. 177 (S.C.)]. In the present case, the department having failed to establish the same, extended period is not invokable. Therefore, if at all, the demand ought to be restricted to the normal period, i.e., from 01.02.2010 to 28.02.2010.
4. On behalf of Revenue, ld. AR Shri B.
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inputs are removed as such. Hence the extended period has been rightly invoked.
5. Heard both sides.
6.1 The first issue is with regard to the demand of credit to the tune of Rs. 92,64,820/-. As narrated from the facts and submissions stated above, it can be seen that the appellants were storing inputs in their warehouse at Panelpina. It is not disputed that they had obtained permission from the department for storing the goods in the said warehouse. As per the requirement in the factory, they had removed the inputs from the warehouse to the factory. However, the practice followed by the appellant was that the unused inputs were returned to the warehouse due to space constraints on Returnable Delivery Challan (RDC). Thereafter, whenever the inputs were again required, they are retransferred from the warehouse to the factory under Goods Delivery Note (GDN). Thus, all the retransfer / removal of goods were being done under documents. The only allegation of the department is that at ea
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sent to the warehouse due to space constraints would only add more accounting work. Since there is no revenue loss from such acts of the appellants and is only a procedural infraction, we consider that the demand cannot sustain. The Tribunal in the case of Reliance Industries Ltd. (supra), in a similar situation, held that when there is no revenue loss and the procedure would only add more scriptory work to the assesse, the demand would not sustain. For the discussions made above, we hold that the demand on this score to the tune of Rs. 92,64,820/- requires to be set aside, which we hereby do.
6.2 The differential duty of Rs. 11,90,475/- has been demanded under Rule 16. The appellant undertake repair of rejected goods which are returned by customers. They avail credit in terms of Rule 16 on such rejected goods. Whenever the rejected goods were repaired and sent to customers, such credit was reversed under Rule 16. Whenever the rejected goods were incapable of being repaired, they clea
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ned goods. Therefore, on the question of whether first part of sub-rule or the second part of sub-rule of Rule 16 is applicable, we find on the very same issue has been detail in detail by the Tribunal's coordinate Bench, Mumbai in the case of M/s. Apollo Tyres Ltd. Vs. CCE, Pune – II (supra) allowed the appeal.
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We are in agreement with the above decisions and the same are applicable to the present case as the issues are identical and the duty paid goods are rejected and returned to the factory of the assessee and without doing any processes the said goods were sold by auction to third party 'as is where is basis' and cleared on payment of excise duty on the transaction value as per Section 4 of the Central Excise Act.
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In view of the foregoing discussions and by maintaining this Tribunal's decision in the case of Craftsman Automation (P) Ltd. case, which relied M/s. Apollo Tyres (P) Ltd. case, we hold that in the present case, the s
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der RDC and are received at the appellant's factories that very day or the next day.
50,917/-
Goods returned to customers after repairs
Components supplied to customers are returned to appellant for repair work, under RDC as per Rule 4(5)(a) of the Credit Rules. Appellant carries out repair work and then supplies the repaired commodities to customers under its RDC
4,42,938/-
Goods sent out for job work
Appellant sends out inputs / capital goods for further processing or for tool grinding purposes to job workers and RDC
17,84,883/-
Invoices issued belatedly due to system failure
In some circumstances, there is a system failure while supplying components due to which invoice could not be raised at the time of clearance. In such situations, the appellant clears the goods under RDC and then subsequently raises excise invoice on payment of ED
18,06,561/-
Total
40,85,299/-
6.4 From the above Table, the first demand to the tune of Rs. 50,917/- is in respect of central exc
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sed in the orders passed by authorities below does not throw much light as to the activity of repair/testing undertaken would amount to manufacture or not. Hence, in our view, this issue also requires reconsideration by adjudicating authority. Needless to say that if the activity of repair does not amount to manufacture, the demand would not sustain. This issue is therefore remanded.
6.6 An amount of Rs. 17,84,883/- is seen to be a demand of excise duty raised when the appellant has sent inputs / capital goods for further processing or for tool grinding purposes to job workers under RDC. It is submitted by ld. counsel that the said goods were sent under Rule 4(5)(a) of CENVAT Credit Rules and received within 180 days. The department also has admitted that such goods are cleared under the said provision of law. Interestingly, the demand of excise duty is not on job worked goods and instead the demand of excise duty is on inputs / capital goods which are sent for job work which, in our
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