Jodhpur vs Cce-Jaipur-Ii

[Arising out of Order-in-Appeal No. 208/RM/CE/JPR-II/05-Dated 18.04.2005 passed by Commissioner (Appeals-II), Customs & Central Excise, NCR Building, Statue Circle, Jaipur]

1. Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

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

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

Pawan Polyplst (P) Ltd.,

Jodhpur

Appellant

Vs.

CCE-Jaipur-II Respondent

Appearance: Shri O.P. Aggarwal, Advocate for the appellant.

Shri Yashpal Sharma, DR for the respondent.

Coram: Honble Shri Rakesh Kumar, Member (Technical)

Honble Shri S.K. Mohanty, Member (Judicial)

Final Order No. 51608-51609/2015

Per: Rakesh Kumar

1. The appellant M/s. Pawan Polyplast Pvt. Ltd. (hereinafter referred to as PPPL) are manufacturers of plastic moulded furniture chargeable to Central Excise Duty under Chapter 94 of the Central Excise Tariff and articles of plastic chargeable to Central Excise under chapter 39 of the Tariff. Shri K.K. Maheshwari is the Director of PPPL.

2. On 20/7/2002, the factory PPPL was visited by the Jurisdictional Central Excise Officer and at that time, they found the stock of some defective furniture in respect of which they had taken CENVAT Credit of Rs. 51,160/- under Rule 16 of the Central Excise Rule, 2002 claiming that this furniture had earlier been cleared under invoices on payment of duty and the same had been returned from the distributors as defective goods for being re-made or re-manufactured.

2.1. However, on verification of the defective furniture lying in the stock with the description of the furniture as given in the invoices; it was found that the description was not matching, as the markings on the furniture indicated that the same had been manufactured in 1999 while the factory had started production in February, 2001. At that time, Shri K.K. Maheshwari, Director of the appellant company was called and enquiry was made with him. Shri K.K. Maheshwari at that time accepted that the description of the goods claimed to be returned goods does not match with the description on the invoices and accordingly he reversed the credit of Rs. 51160/-.

3. Thereafter, enquiry was made with Shri G. M. Bhandari, Accounts Manager of M/s. Wim Plast Limited to whom the goods being manufactured by PPPL were being sold and who were acting as distributor. Shri G.M. Bhandari, in his statement dated 20/7/2002 stated that the goods returned to factory of PPPL for re-manufacture have no connectivity with the duty paying documents supplied by them with the returned goods and that he cannot say as to whether the goods returned by them to the factory of PPPL for re-manufacture were those received from PPPL. On the basis of this statement, the Jurisdictional Central Excise Officers were of the view that in past also, the appellant company  PPPL have wrongly taken the CENVAT Credit under Rule 16 of the Central Excise Rules, 2002 in respect of the goods which in their records are shown to have been received as returned/defective goods for being re-made or re-manufactured. The CENVAT Credit demand of Rs. 7,17,879/- is on this basis out of which the amount of Rs. 51,160/- has already been reversed by the appellant company.

4. It was found that the return/defective furniture were being cut into pieces, powdered and then were being used for making plastic moulded furniture which was being cleared to M/s. Wim Plast Limited and in respect of such clearances of moulded furniture made out of return furniture, the appellant company were charging re-moulding charges. The departmental officers were of the view that re-moulding charges is an additional consideration and it should be included in the assessable value. The duty demand of Rs. 1,73,427/- for the period from 1/4/2001 to 31/7/2002 is on this basis.

5. In some cases, the appellant company, PPPL were making plastic moulded furniture for their buyers by using the moulds supplied by them free of charges. At that time, they did not include the amortized cost of mould. The duty demand of Rs. 7464/- is on this basis.

6. It is in view of the above that the Joint Commissioner, Central Excise, Jaipur-I vide order-in-original dated 4/3/2004 confirmed the CENVAT Credit/duty demands of Rs. 7,17,879/, 1,73,427/- and Rs. 7464 along with interest thereon under section 11AB and besides this while imposed penalty of Rs. 8,98,770/- on the appellant company-PPPL under section 11AC of Central Excise Act, 1944, imposed another penalty of Rs. 2 lakh on Shri K.K. Maheshwari, Director of the company under Rule 26 of the Central Excise Rules, 2002.

7. On appeal being filed to Commissioner (appeals) against this order of the Joint Commissioner, the same were dismissed vide order-in-appeal dated 18/4/2005.

8. Against the above order of the Commissioner (appeals) these 2 appeals have been filed by the appellant.

9. Heard both the sides.

10. Shri O.P. Aggarwal, Chartered Accountant, ld. Counsel for the appellant, stated that so far as the inclusion of amortized cost of moulds is concerned he agrees that the amortized cost of the mould is includible. He, however, stated that the amortized cost of mould should be included on the basis of the total number of goods which can be manufactured by using the said mould during its lifetimeand only the proportionate cost should be taken while this has not been done by the department and that if the amortized cost is included by correct formula, the duty demand on this count would come to only Rs. 2936/- as against the duty demand of Rs. 7464/- confirmed. With regard to the denial of CENVAT Credit of Rs. 7,17,879/- in respect of the returned furniture under Rule 16 for being re-made, he stated that the department in this regard relies only on the statement dated 23/7/2002 of Shri G.M. Bhandari, Manager of M/s. Wim Plast Limited their distributor; that Shri K.K. Maheshwari, Director of the appellant company has not been confronted with this statement when his statement was recorded; that the statement of Shri Harinder Kumar Garg, Manager of the appellant company had been recorded on 27/08/2002 and he was also not confronted with the statement dated 23/7/2002 of Shri G.M. Bhandari; that in view of this the statement dated 23/7/2002 of Shri G.M. Bhandari stating that old and used furniture were being returned to the appellant company for being re-made under the guise of defective goods cannot be treated as correct statement, more so, when in course of the adjudication proceedings, Shri G.M. Bhandari had not been cross-examined. He pleaded that just because at the time of officers visit to the factory on 2/7/2002 the description of the returned goods under Rule 16 was not matching with the invoices, it cannot be presumed that this was so during t he previous period also. With regard to the inclusion of re-moulding charges on the assessment value, Shri O.P. Aggarwal, stated that the same is not an additional consideration for the goods sold but is an amount charged for the expenses incurred by the appellant on re-manufacturing and hence re-moulding charges are not includible in the assessment value of the goods. Shri O.P. Aggarwal, thereafter, pleaded that the impugned order is not correct.

11. Shri Yashpal Sharma, the ld. DR, defended the impugned order by reiterating the findings of the Commissioner. With regard to the re-moulding charges, he stated that this is an additional consideration flowing from the customer to the appellant company and hence, it would be includible in the transaction value of the goods. With regard to the CENVAT Credit demand of Rs. 7,17,879/- in respect of the returned goods, Shri Yashpal Sharma, stated that from the statement dated 23/7/2002 of Shri G.M. Bhandari it is clear that in past also, the old and used furniture were being sent back under Rule 16 as defective/returned goods for being re-made/re-manufactured and that this is also clear from the fact that on the date of officers visit to the factory on 20/07/2002, while the appellant had taken CENVAT Credit of Rs. 51,160/- in respect of a consignment of returned/defective goods received from the distributor from being re-made, the description of the goods was not matching at all with the description given in the invoices under which the same were claimed to have been originally cleared. Shri Yashpal Sharma, accordingly pleaded that there is no infirmity in the impugned order.

12. We have considered the submissions from both the sides and perused the records.

13. The first point of dispute is regarding CENVAT Credit of Rs. 7,17,879/- taken by the appellant during period from 1/4/2001 to 31/7/2002. This CENVAT Credit had been taken under Rule 16 of the Central Excise Rules, 2002 in respect of the consignments of plastic moulded furniture returned from the distributor for being re-made / re-manufactured on the ground that the same were defective. This amount includes the CENVAT Credit of Rs. 51,160/- in respect of one such consignment which was found by the officers at the time of their visit to the factory on 20/7/2002 and in respect of which the description of the goods was not matching at all with the description given in the invoices under which the goods were claimed have been cleared originally from the factory. While in respect of the consignment of returned goods found by the officers on 20/7/2002, the appellant themselves have conceded that those goods were not those which had earlier been manufacture and cleared by them, as while the furniture as per the markings on it had been manufactured in year 1999, during that period the appellants factory had not come into existence and had not started production.

In view of this the CENVAT Credit duty demand of Rs. 51,160/- has to be upheld. This amount has already been paid by the appellant. As regards the CENVAT Credit demand of the balance amount of Rs. 6,66,719/-, this demand is in respect of the consignment of defective plastic moulded furniture received in past and this CENVAT Credit had been taken under Rule 16 of the Central Excise Rules, 2002. The departments contention based on the statement dated 23/7/2002 of Shri G.M. Bhandari is that in past also, they had received only the old and used furniture and not the goods manufactured by the appellant company and cleared on payment of duty. However, it is seen that this statement of Shri G.M. Bhandari is not corroborated any other evidence and not only this, when the statements of Shri K.K. Maheshwari, Director of the appellant company and of Shri Harinder Kumar Garg, Manager of the appellant company were recorded they were also not confronted with this statement. In view of this we hold that merely on the basis of statement dated 23/07/2002 of Shri G.M. Bhandari, it cannot be presumed that in past also, the appellant had taken CENVAT Credit under Rule 16 of the Central Excise Rules, 2002 in respect of the old and used plastic furniture received by them which had not manufactured and cleared by the appellant on payment of duty.

In view of this, the CENVAT Credit demand of Rs. 6,61,719/- along with interest and equivalent penalty is not sustainable.

14. As regards the dispute regarding including the amortized cost of moulds in the assessable value of the goods, the appellant themselves conceded that the same would be includible. However, the dispute in this regard is over the method of calculation. In our view, the amortized cost must be calculated in accordance with the Boards Circular No. 170/4/96CX dated 23/1/1996, i.e., the cost of the mould divided by the total quantum of production which can be made by using that moulded multiplied by the number of pieces manufactured as cleared. There is no dispute that if the amortized cost is calculated in this manner, out of the duty demand of Rs. 7464/- and the duty demand of Rs. 2936/- can be confirmed. Accordingly, the duty demand of Rs. 2936/- is confirmed and the rest of the demand on this count is set aside.

15. As regards the duty demand of rs. 1,73,427/- for the period from 1/4/2001 to 31/7/2002 on the re-moulding charges being recovered by the appellant, the departments contention is that this is an additional consideration for the goods flowing from the customers to the appellant company and hence the same would be includible in the assessable value. In our view, this contention of the department is not correct and the re-moulding charges are for the expenses incurred for re-processing and re-manufacturing of the goods and the same cannot be treated as consideration for the goods earlier cleared on sale. In view of this, we hold re-moulding charges are not includible in the assessable value and as such the duty demand of Rs. 1,73,427/- along with interest and equivalent penalty is not sustainable.

16. In view of the above discussion, only duty/CENVAT Credit demand of Rs. 54096/- along with interest and equivalent penalty is upheld and the remaining duty/CENVAT Credit demand along with interest and equivalent penalty is set aside. The appeal is partly allowed.

(Rakesh Kumar) (S.K. Mohanty)

Member (Technical) Member (Judicial)

Ritu