Avery Dennison India Pvt. Ltd vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/85960/15

(Arising out of Order-in-Original No.PUN-EXCUS-004-COM-10/14-15 dated 24/03/2015 passed by Commissioner of Central Excise & Service Tax, Pune-IV)

For approval and signature:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S. S. Garg, Member (Judicial)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

Avery Dennison India Pvt. Ltd., Appellant Vs. Commissioner of Central Excise, Respondent Pune-IV

Appearance:

Shri.Puneet Bansal, Advocate for appellant Shri.V.K.Agarwal, Addl. Comm. (AR), for respondent

CORAM:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S.S. Garg, Member (Judicial)

Date of Hearing : 03/07/2015 Date of Decision : 03/07/2015

ORDER NO

Per: SS Garg

1. This appeal is directed against Order-in-Original No.PUN-EXCUS-004-COM-10/14-15 dated 24/03/2015 passed by Commissioner of Central Excise & Service Tax, Pune-IV, vide which the learned Commissioner as an adjudicating authority has rejected the application filed by the appellant for grant of permission to remove the goods for further processing under Rule 16C of the Central Excise Rules, 2002 for financial year 2015-16.

2. The brief facts of the case are that M/s.Avery Dennison (India) Pvt. Ltd., the appellant is engaged in the manufacture of jumbo roll of self adhesive paper falling under Tariff 39 & 48 of the CETA, 1985 at its Pune unit. It has got permission of the jurisdictional Commissioner of Central Excise, Pune, to remove the goods from the factory of manufacturer without payment of excise duty from Pune unit to Bangalore unit from the financial year 2011-12 till 2014-15. The appellant has alleged that they had strictly adhered to the procedures and compliances in relation to clearance of goods to Bangalore unit in terms of the provisions of Rule 16C of the Rules and the said permission was renewed by the department on year to year basis. The latest permission granted to the appellant was valid upto 31/03/2015. It is further alleged that for the year 2015-16, the appellant filed application for extension of existing Rules 16C permission on 15/12/2014.

3. The respondent vide impugned order has rejected the appellants application dated 15/12/2014 seeking further extension of the permission under Rule 16C of the Central Excise Rules, 2002 mainly on the ground that the appellants case cannot be considered to be falling under the category of deserving case as is prescribed under Boards Circular No.844/02/2007-Cx dated 31/01/2007. Secondly, the respondent in the impugned order has given a finding that the appellant has violated the prescribed procedure and conditions of Rule 16C as well as Rule 12AA of the Rules. Now the appellant has challenged the impugned order before us.

4. The learned Counsel for the appellant submitted that Rule 16C provides that the jurisdictional Commissioner of the Central Excise may permit the manufacturer to remove the goods from the factory of manufacturer to any other premises without payment of excise duty for carrying out processes not amounting to manufacture. After the processing, the goods needs to be sent back to the factory for further clearance on payment of excise duty or cleared from the processing unit on payment of excise duty. The relevant Rule 16C is extracted below:

Rule 16C  Special procedure for removal of excisable goods for carrying out certain processes  The Commissioner of Central Excise may by special order and subject to such conditions as may be specified by him permit a manufacturer to remove excisable goods manufactured in his factory, without payment of duty, for carrying out tests or any other process not amounting to manufacture to any other premises whether or not registered and after carrying out such tests or any such other process may allow 

a) bringing back such goods to the said factory without payment of duty for subsequent clearance for home consumption or export as the case may be or

b) removal of such goods from the said other premises for home consumption on payment of duty leviable thereon or without payment of duty for export as the case may be.

5. The learned Counsel for the appellant further submitted that the jurisdictional Commissioner at the time of grant of initial permission vide letter dated 14/09/2011 had specified the detailed conditions for removal and accountal of goods by the appellant and the appellant has strictly followed the procedure mentioned in the said letter which includes maintenance of proper records of dispatch, receipt and inventory of goods both at the Pune unit as well as Bangalore unit, clearance of goods on payment of applicable excise duty from the Bangalore unit, clearance of waste/scrap from Bangalore unit on payment of excise duty, etc. 5.1 The learned Counsel further submitted that the impugned order dated 24/03/2015 has failed to point out even a single instance, where the appellant has violated the procedure laid down in Rule 16C or Rule 12AA of the Rules. He also submitted that in case of any violation of Rule 16C or Rule 12AA, the department could have issued a show-cause notice to the appellant but the fact is that no show-cause notice was ever issued against the appellant in relation to any violation of Rule 16C or Rule 12AA of the Rules.

5.2 The learned Counsel further submitted that Rule 16C is a beneficial piece of legislation which permits a manufacturer to remove excisable goods manufactured in his factory without payment of duty for carrying out test or any other process not amounting to manufacture. The said discretion must be exercised by the department to benefit the assessee and facilitate trade and manufacturer of goods. In support of his contention he placed reliance on the following decision, wherein it was held that the administrative discretion must be used judiciously and not arbitrarily:

a) Bengal Rolling Mills Ltd., Vs. CEGAT  2004 (168) ELT 441 (Cal)

b) Sharda Steel Rolling Mills Vs. CCE, Delhi  2008 (228) ELT 312 (Tri-Del) 5.3 He also submitted that by following the procedure under Rule 16C , the appellant has in fact paid more duty to the Pune Commissionerate. Had the permission under Rule 16C not being accorded to the appellant then the appellant would be liable to pay duty under Rule 8, i.e., cost of material plus 10%. However, the appellant has paid much more duty on the said goods as the duty is paid on transaction value resulting in payment of higher duty to the tune of approximately Rs.1.76 crore for the period April 2014 to December 2014.

6. On the other hand, the learned Additional Commissioner (AR) appearing for the respondent has tried to support the impugned order.

7. He submitted that the procedure as envisaged under Rule 16C of the Rule granting permission to remove the goods without payment of excise duty is a special procedure and can only be granted in deserving cases. In this case, the learned Commissioner has not found the appellants case as deserving for extension of permission under Rule 16C for the year 2015-2016. On being specifically asked by the Bench as to whether the appellant has violated any of the conditions or procedure prescribed in Rule 16C during the past years or any prejudice caused to the Revenue, in case permission 16C is granted, he replied in negative. Further more, it is pertinent to mention that while passing the impugned order, the learned Commissioner allowed a grace period of three months beyond 31/03/2015 for which the appellant could continue to operate under Rule 16C subject to the conditions and procedures prescribed vide letter dated 14/09/2011 of Deputy Commissioner, Central Excise, Pune with an added stipulation that compliance to conditions and prescribed procedure would be checked in for the month of April, May and June 2015 by surprise visit by the Range Superintendent by making a visit to the factory at Pune once in every month. The Bench directed the AR to find out whether any violation was committed by the appellant during these three months period. The learned AR after getting feed back from the Pune Commissionerate submitted that during the grace period the department did not find any violation committed by the appellant.

8. We have considered the submissions made by both sides and have perused the records of the case. On perusal of the records, we find that the appellant has been granted the permission under Rule 16C of the Rules to remove the goods without payment of duty for carrying out certain processes not amounting to manufacture from the financial year 2011-12 till 2014-15. The only ground for refusal to grant permission for the year 2015-16 as mentioned in the impugned order is that the appellants case was not found to be a deserving case for grant of extension. Further the impugned order does not mention any specific reasons as to how the appellant is not found deserving for grant of permission under Rule 16C of the Rules. Revenue has also failed to prove that the appellant has committed any violation of the terms and conditions and procedure prescribed by the learned Commissioner while granting the permission. In view of these circumstances, we hold that denial of permission under Rule 16C is not legally sustainable.

8.1 In view of the facts and circumstances, we are of the considered view that the present appeal deserves to be allowed by quashing and setting aside the impugned order dated 24/03/2015. Consequently, we allow the appeal of the appellant. We further direct the Commissioner, Pune to grant the permission to the appellant under Rule 16C of the Rules for the financial year 2015-2016 by keeping in view commercial necessity of the appellant and benevolent nature of Rule 16C of the Central Excise Rules, 2002. 9 Appeal allowed.

(Pronounced in Court)

(P.K. Jain) Member (Technical) (S.S. Garg) Member (Judicial)

pj

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