M/S Atcom Technologies Ltd vs Commissioner, Central Excise & Service ...

Appeal No.E/1070/2010 [Arising out of OIA No.AKP/392/DMN/NDMN/DENOVO/2009-10, dt.31.03.2010, passed by Commissioner of Central Excise & Customs (Appeals), Vapi]

M/s Atcom Technologies Ltd. Appellants

Vs

Commissioner, Central Excise & Service Tax, Daman Respondents

AND

Appeal No.E/1182/2010 [Arising out of OIA No.AKP/392/DMN/NDMN/DENOVO/2009-10, dt.31.03.2010, passed by Commissioner of Central Excise & Customs (Appeals), Vapi]

Commissioner, Central Excise & Service Tax, Daman Appellant

Vs

Shri Nalin Desai, Chief Manager, M/s Atcom Technologies Ltd. Respondent

Represented by:

For Assessee: Shri J.C. Patel, Advocate For Revenue: Dr. J. Nagori, Addl.Commr.(Authorised Representative)

For approval and signature:

Honble Mr. P.K. Das, Member (Judicial)

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

2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

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

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM:

HONBLE MR. P.K. DAS, MEMBER (JUDICIAL)

Date of Hearing: 25.02.2015 Date of Decision:27.03.2015

Order No. A/10282-10283/2015, dt.27.03.2015

Per: P.K. Das

1. These appeals are arising out of a common order and therefore, both are taken up together for disposal.

2. The relevant facts of the case, in brief, are that the assessee is engaged in the manufacture of Polycarbonate Bottles, Plants & Machineries etc. They received the imported capital goods mainly Insert, Lip, Cavities, Injection Core in the month of May 1997 and May 1998 and used in the manufacture of finished product Polycarbonate, which was exempted from duty by Notification No.4/1997-CE, dt.10.03.1997. The said notification was rescinded and replaced by Notification No.5/1998-CE, dt.02.06.1998. The assessee discontinued the benefit of exemption notification and started paying duty. The assessee availed the CENVAT Credit on the capital goods, which were received and utilized during the month of May 1997 and May 1998. The credit was taken on 17.03.1999.

3. A show cause notice dt.27.02.2004 was issued by the Additional Commissioner of Central Excise & Customs, Daman, proposing to deny the MODVAT Credit on capital goods amounting to Rs.38,57,045.00 wrongly availed and utilized by them and recovered under Rule 57 U (2) and of Central Excise Rules 1944 (present Rule 12 of Central Credit Rules 2002) alongwith interest and penalty. It has also proposed to impose penalty on Shri Nalin Desai, Chief Manager of the assessee under erstwhile Rule 209A of Central Excise Rules 1944. The Adjudicating authority disallowed the CENVAT Credit of Rs.38,57,045.00 alongwith interest and imposed penalty of Rs.38.57 lakhs under Rule 57 U(6) of Central Excise Rules 1944 (present Rule 25 of Central Credit Rules 2002). A penalty of Rs.5 lakhs was also imposed on Shri Nalin Desai, Chief Manager of the assessee company. By the impugned order, the Commissioner (Appeals) dismissed the appeal filed by the assessee and allowed the appeal filed by Shri Nalin Desai. Hence, both the assessee and the Revenue filed these appeals before the Tribunal.

4. Learned Advocate appearing on behalf of the assessee and its Chief Manager submits that the Commissioner (Appeals) passed the order, following the decision of the Larger Bench of the Tribunal in the case of Spenta International Ltd Vs CCE Thane  2007 (216) ELT 133 (Tri-LB). He submits that the said decision would not be applicable in the present case for the reason that in this case, the assessee availed the conditional benefit of exemption Notification No.4/1997-CE. The said notification provides the condition that the exemption will be eligible if no CENVAT Credit has been availed by the manufacturer. It is submitted that the after the Larger Bench decision, Honble High Court and the Tribunal held that the said decision would not be applicable in the case of availment of CENVAT Credit on the basis of conditional notification. He relied upon the following decisions:-

a) CCE Chandigarh Vs S.T. Cottex Exports Pvt.Ltd.

2011 (268) ELT 318 (P&H)

b) Oswal Woolen Mills Ltd Vs CCE Ludhiana 2012 (284) ELT 240 (Tri-Del)

c) CCE Madurai Vs Eastman Spinning Mills Pvt.Ltd.

2011 (271) ELT 256 (Tri-Che.)

d) CCE Bangalore Vs Kailash Auto Builders Ltd 2012 (280) ELT 49 (Kar.)

5. He also contested the demand on the ground of limitation. It is submitted that there is divergent views of the Tribunal on this issue, which was decided by the Larger Bench of the Tribunal in the case of Spenta International Ltd (supra). Therefore, the extended period of limitation would not be invoked. He relied upon the decision of the Tribunal in the case of Soorajmal Baijnath Ind. Pvt.Ltd. Vs CCE Delhi - 2008 (232) ELT 143 (Tri-Del).

6. The appeal filed by the Revenue, the learned Advocate submits that Shri Nalin Desai is an employee of the assessee company. He has no role in the alleged irregularity. It is submitted that during the relevant period, there was confusion of the eligibility of the MODVAT Credit and therefore, the Commissioner (Appeals) has rightly set aside the penalty. It is also submitted that the goods were also not available for confiscation and therefore, penalty under Rule 209A of erstwhile Rules, 1944 cannot be invoked.

7. On the other hand, the learned Authorised Representative for the Revenue submits that this issue is squarely covered by the decision of the Larger Bench Tribunal in the case of Spenta International Ltd (supra). Subsequently the Tribunal, on the identical issue following the decision of the Larger Bench, in the case of CCE Surat Vs Aneri Constructions Ltd  2012 (286) ELT 639 (Tri-Ahmd) allowed the appeal filed by the Revenue. Further, the Tribunal in the case of Global Oil Industries Vs CCE (Appeals) Guntur  2014-TIOL-594-CESTAT-Bang, upheld the demand of reversal of CENVAT Credit, while the penalty was set aside. He further submits that the case laws relied upon by the learned Advocate would not be applicable in the present case. It is submitted that the case of S.T. Cottex Exports Pvt.Ltd (supra), Oswal Woolen Mills Ltd (supra), Eastman Spinning Mills Pvt.Ltd (supra) are related to Notification No.29/2004 in respect of eligibility concessional rate of duty. The decision of Honble Karnataka High Court in the case of CCE Vs Kailash Auto Builders Ltd  2012 (280) ELT 49 (Kar.) credit of capital goods was availed for both exempted and dutiable goods.

8. Regarding the demand being barred by limitation, the learned Authorised Representative submits that it is a clear case of willful mis-statement of facts by the assessee and covered under the proviso to Section 11A (1) of Central Excise Act 1944. He submits that the Tribunal in their earlier remand order had categorically observed mis-declaration on the part of the assessee. So, the decision relied upon by the assessee are not applicable in the present case. The appeal filed by the Revenue, it is submitted that there is no requirement of confiscation of goods for imposition of penalty under Rule 209A of erstwhile Rules.

9. After hearing both the sides and on perusal of the records, I find that the assessee received the capital goods in the factory premises on 12.05.1997 and 12.05.1998. They had utilized the imported capital goods for manufacturing of the final product which was exempted from duty under Notification No.4/1997, dt.01.03.1997. The said notification was rescinded and replaced by Notification No.5/1998-CE, dt.03.06.1998. The appellants started payment of duty. On 17.03.1999, the assessee availed the CENVAT Credit in RG-23 C Part II on the capital goods which were received in May 1997 and May 1998 and also used in the manufacture of the exempted goods.

10. The issue before the Larger Bench of the Tribunal in the case of Spenta International Ltd (supra) was whether the CENVAT Credit eligibility is to be determined with reference to the dutiability of the final product on the date of receipt of the goods or the date of utilization of eligibility 50% credit. The Larger Bench answered the reference by holding that the CENVAT Credit eligibility is to be determined with reference to the dutiability of the final product on the date of receipt of the capital goods. The relevant portion of the decision of Larger Bench in the case of Spenta International Ltd (supra) is reproduced below:-

8. The recent decision of the Tribunal? in CCE v. Precot Mills Ltd., 2007 (212) E.L.T. 483 follows the Surya Roshni decision and the Grasim Industries decision as well as the Sengunthar decision, to hold that the relevant date for determination of availability of Modvat credit is the date of receipt of capital goods in the factory and if on that date no credit was available, it cannot be allowed subsequently. It was held that when the machinery in respect of which the capital goods had been taken, were not used for manufacture of dutiable goods on the date of receipt in the factory, capital goods credit is not available on such machinery.

11. The Tribunal in the case of M/s Aneri Construction Ltd (supra), following the decision of the Larger Bench, allowed the appeal filed by the Revenue. In that case, the assessee received the duty paid Air Compressors in their factory premises on 05.05.2005 and used for providing output service Commercial and Industrial Construction Service which came in the Service Tax net from 16.06.2005. The Tribunal held that the Air Compressors were received for providing output service, which was not under the Service Tax net at the relevant time. Similar view was taken by the Tribunal in the case of M/s Global Oil Industries Ltd (supra). In the present case, it is seen from the records that the assessee received and utilized the capital goods in the manufacture of exempted goods and therefore, the decision of the Larger Bench would be squarely applicable.

12. Learned Advocate contended that the Notification No.4/1997-CE is conditional one as the benefit of Nil rate of duty would be applicable, if no credit of the duty paid on the inputs used in the manufacture of such goods have been availed by the manufacturer under Rule 57A of Central Excise Rules 1944. He strongly relied upon the decision of Honble High Court in the case of S.T. Cottex Exports Pvt.Ltd (supra). In that case, by virtue of Notification No.29/2004-CE, optional 4% duty was payable on the manufactured goods and it cannot be said that the assessee used the capital goods in the manufacture of exempted goods, in such case, the assessee could not claim the benefit of CENVAT Credit under Rule 6(4) of the CENVAT Credit Rules, 2004. The facts in the case of Oswal Woolen Mills Ltd (supra) and Eastman Spinning Mills Ltd (supra) are similar to the decision of S.T. Cottex Exports Pvt.Ltd. In the case of Kailash Auto Builders Ltd (supra), the assessee used the capital goods in the manufacture of both the exempted and dutiable finished goods. So, none of the case laws is supporting the contention of the learned Advocate.

13. The Learned Advocate also submitted that the entire demand is barred by limitation. In this context, it is contended that there is divergent view on the issue of eligibility of MODVAT Credit of capital goods which was decided by the Larger Bench of the Tribunal. On perusal of the impugned order, I find that there was a declaration filed by the assessee that the impugned capital goods would not be used exclusively in the production of final product, which was exempted from payment of whole excise duty leviable thereon. This was a statutory declaration filed by the assessee under the then Rule 57T of the erstwhile Central Excise Rules 1944. But, the fact remains that the appellant used the machinery exclusively in the manufacture of the exempted product. Thus, it is a clear case of mis-declaration of facts. The assessee deliberately declared that the imported capital goods would not be used exclusively in the manufacture of exempted product and then they are eligible to avail CENVAT Credit. Thus, it is a clear case of mis-declaration to evade payment of duty. Hence, the extended period of limitation would be applicable.

14. Regarding the appeal filed by the Revenue, I find that Shri Nalin Desai is an employee of the assessee company. It has already imposed penalty of equal amount of duty on the assessee company. I find that in an identical situation, the Tribunal in the case of Tejas Networks India Ltd Vs CCE Pondichery  2014 (302) ELT 80 (Tri-Mad.) waived the penalty on the employee, which was upheld by the Honble Supreme Court as reported in 2015 ELT (316) A 157. So, the Commissioner (Appeals) rightly set aside penalty on Shri Nalin Desai.

15. In view of the above discussion, I do not find any reason to interfere the order of the Commissioner (Appeals). Accordingly, both the appeals filed by the Assessee and the Revenue are rejected.

(Submissions of both sides recorded in open court on 25.02.2015.

Pronounced in Court on27.03.2015)

(P.K. Das) Member (Judicial)

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