M/S. Habasit Lakoka Pvt. Ltd vs Cce, Coimbatore

(Arising out of Order-in-Appeal No. 166/2013 dated 30.04.2013, passed by the Commissioner of Central Excise (Appeals), Coimbatore).

For approval and signature

Honble Shri R. PERIASAMI, Technical Member

M/s. Habasit lakoka Pvt. Ltd. : Appellant

Vs.

CCE, Coimbatore : Respondent

Appearance

Shri S. Kandasamy, Consultant, for the appellant Shri K.P. Muralidharan, AC (AR), for the respondent

CORAM

Honble Shri R. PERIASAMI, Technical Member

Date of Hearing/Decision: 17.03.2015

FINAL ORDER No. 40441 / 2015

Appellant filed this appeal against the Commissioners Order dated 30.04.2013.

2. Appellants are manufacturers of Transmission & Conveyor Belts, registered with Central Excise and they have Unit-I and Unit-II located in the same town and availing cenvat credit on inputs and on capital goods. A show cause notice dated 07.03.2012 was issued to the appellants Unit-II demanding interest of Rs.93,577/- on the credit amount of Rs. 90,46,709/- availed and reversed on the inputs cleared as such to Unit-I during the period 2008-09 to 2010-22. The adjudicating authority confirmed the demand of interest under Rule 14 of CCR,04 and also imposed a penalty of Rs.5000/- under Rule 15 of CCR,04 and held that the appellants have wrongly availed the cenvat credit as these goods were not inputs for manufacture of final products of Unit-II. On appeal, the Commissioner (Appeals) upheld the demand and penalty and rejected the appeal of the appellant.

3. Heard both sides.

4. The Ld. Consultant for the appellant reiterated the grounds of appeal and submits that both the Unit-I and Unit-II belongs to the same appellant and they have a common PAN Number and common profit and loss account. The entire inputs were received in their factory and consumed by Unit-I. They duly followed the procedures prescribed under Cenvat Credit Rules, for clearance of inputs a such to other unit. In their case, the inputs were not cleared outside the factory but cleared only to their own Unit-II on reversal of credit equivalent to duty under valid invoices and they have not traded any inputs. There is no violation of any of the provisions of CCR and hence interest is not payable. He submits that the interest was demanded only on 07.03.2012 for the clearance made from 2008-09 to 2010-11 and it is hit by limitation and there is no suppression of facts. He relied upon the following case laws in support of his contention.

1. Kwality Ice Cream Company Vs. UOI 2012 (281) ELT 507

2. Sona Koyo Steering Systems Ltd. Vs. CCE, Delhi 2013 (296) ELT 481 (Tri.-Del.)

3. Kesarwani Zarda Bhandar Vs. CCE, Allahabad 2007 (219) ELT 606 (Tri-Del.)

5. On the other hand, the Ld. AR reiterated the findings of the Commissioner (Appeals) and submits that the inputs received by the appellant are not inputs intended for manufacture of the final products of Unit-II. They have wrongly taken the credit on inputs and transferred the same to Unit-I by reversing the same. Therefore, interest was rightly demanded as they are not eligible for input credit.

6. I have carefully considered the submissions of both sides. The issue involved in this case is limited to the demand of interest on the credit availed on the inputs and reversed the same when inputs cleared as such from Unit-II to Unit-I. The department never disputed the fact that the appellants have Unit-I and Unit-II belong to the same company and they followed the procedure stipulated under CCR and reversed the entire credit availed on the inputs cleared as such to their own Unit-I under valid documents. I find the appellants not contravened any provisions of CCR. The clearance of inputs amounts to inter-unit transfer of inputs and it is not the case of the department that appellants Unit-II has utilized the credit. The decision of the Tribunals Principle Bench in the case of Kesarwani Zarda Bhandar (supra) and in the case of Sona Koyo Steering Systems Ltd. (supra) are squarely applicable to the facts of the present case. The relevant portion of the above DB decision is reproduced as under:-

6.?In this case there is no dispute about the receipt of the inputs and capital goods, in question, by the appellant unit. The only objection of the department is that the goods, in question, had been imported by the Gurgaon unit/Corporate office of the appellant company and the same have been transferred to the appellant unit at Rewari under endorsed bills of entry, while the endorsed bill of entry is not valid duty paying document. We find that issue involved in this case stands decided in the favour of the appellant by the Apex Court in its judgment in the case of UOI v. Marmagoa Steel Ltd. (supra) which has been followed by this Tribunal in the case of Bando India (P) Ltd. v. C.C.E., Delhi-III (supra). Moreover, in this case both the units - the unit at Dharuhera which has taken the Cenvat credit and the Gurgaon unit whose address appears in the bills of entry, under which the inputs and capital goods had been imported - belong to the same company and it is a case of transfer of inputs and capital goods by one unit of a company to another unit. The credit has, therefore, been correctly taken. We are, therefore, of the view that impugned order is not sustainable. The same is set aside. The appeal as well as stay application is allowed.

Further, the Honble High Court of Delhi in the case of Kwality Ice Cream Company (supra) also held that demand of interest raised after three years is hit by limitation. By respectfully following the above decision, I hold that the appellants are not liable for demand of interest and also not liable for penalty. Accordingly, demand of interest and imposition of penalty are liable to be set aside. The impugned order is set aside and the appeal is allowed.

(Operative part of the Order pronounced in the Open Court on 17.03.2015)

(R. PERIASAMI) TECHNICAL MEMBER BB

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