M/S. Jyoti Steel Industries vs Commissioner Of Central Excise, ...

[Arising out of Order-in-Appeal No. SB/111& 112/ Th-II/ 09 dtd. 21/12/2009 passed by the Commissioner (Appeals), Central Excise, Mumbai]

For approval and signature:

Honble Mr Ramesh Nair, Member (Judicial)

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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 : 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? =======================================================

M/s. Jyoti Steel Industries, : Appellants

VS

Commissioner of Central Excise, Thane-II : Respondent

Appearance

Shri S.K. Babaladi, Consultant for the Appellants Shri N.N. Prabhudesai, Superintendent (A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 29/6/2015 Date of decision: 29/6/2015

ORDER NO.

Per : Ramesh Nair

This appeal is directed against Order-in- Appeal No. SB/111& 112/ Th-II/ 09 dtd. 21/12/2009 passed by the Commissioner (Appeals) Central Excise, Mumbai, wherein the Ld. Commissioner (Appeals) confirmed the demand of Rs. 2,96,507/- and imposed penalty of equal amount under Section 11AC of the Central Excise Act, 1944 upholding the Order-in-Original dated 31/4/2008.

2. The fact of the case is that the appellant had availed Cenvat credit in respect of outward transportation. During the audit of the appellants record by the EA 2000 audit, it was pointed out that the credit on outward transportation is not admissible and accordingly appellant debited Cenvat credit for an amount Rs. 2,64,967/-. Subsequently appellant in the month of March 2007 re-credited the same amount in their RG 23 Part-II account with remark that audit query is not acceptable to the assessee. Thereafter CERA has conducted the audit in the month of January 2008 and audit para dated 23/3/2008 was issued wherein it was contended that there is no provisions of suo moto availing of refund of payment of duty. In addition to this amount there was an amount of Rs. 2624/- towards invisible loss of input occurred during the process at the job worker for annealing process. The show cause notice was issued for total amount of Rs. 2,96,507/- wherein allegation was made that the appellant have taken suo moto re-credit, they should have filed refund claim under Section 11B. The adjudicating authority holding that suo moto credit is not allowed, confirmed the demand of Rs. 2,96,507/- and also demanded interest under Section 11AB, penalty of Rs. 10,000/- under the provisions of Rule 15(1) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was also imposed. Aggrieved by the order-in-original dated 31/3/2008 the appellant filed appeal before the Commissioner (Appeals) and the Revenue has also filed appeal for imposition of equal amount of penalty under Section 11AC, as against Rs. 10,000/- imposed by original Authority. Ld. Commissioner rejected the appeal of the appellant and allowed the appeal of the Revenue and accordingly passed following order:

I hereby, confirm the demand amount Rs. 2,96,507/- under Section 11A of Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rules, 2004, and the appellant shall discharged the interest applicable thereon, under the provisions of Rule 14 of Cenvat Credit Rules, 2004, read with Section 11AB of the Central Excise Act, 1944 for the reasons cited supra.

I imposed penalty of Rs. 2,96,507/- upon the appellant under the provisions of Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944, for the reason cited supra.

Aggrieved by the above impugned order dated 21/12/2009, the appellant is before me.

3. Shri S.K. Babaladi, Ld. Consultant for the appellant submits that show cause notice was issued only on the ground that the appellant has taken suo moto credit and there was no dispute in regard to admissibility of the credit of the total amount. As regard the suo moto credit, he submits that it is not case of refund of excise duty paid in excess; therefore refund under Section 11B is not required to be filed. This is a case of availmemt of Cenvat credit which once they have reversed and subsequently re-credited, thus refund claim is not required to file. He placed reliance on this Tribunal judgment in the case of Shri Shree Rubber Plast Vs. Commissioner of Central Excise, Thane-II [order no. A/1077/15/SMB dated 16/4/2015] wherein this Tribunal considered the judgments of Honble Madras High Court in the case of ICMC Corporation Ltd. Vs. CESTAT [2014 (302) ELT 45 (Mad.)] wherein it was held that in case of re-credit of Cenvat suo moto, no refund claim under Section 11B is required to be filed. He further submits that Ld. Commissioner (Appeals) has not considered the fact submitted before him that outward transport is in respect of export and therefore it is admissible. However it is fact on record that transportation is in respect of export of goods and in case of export, the place of removal stands extended up to the port of export and therefore in terms of definition of input service, services used for clearance of goods up to place of removal is admissible input service and credit should be allowed. Therefore considering facts of the present case that the transportation is for export of goods and place of removal is port of export, services used from factory to port of export is admissible.

4. Shri N.N. Prabhudesai, Ld. Superintendent (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that though the show cause notice was issued against suo moto credit taken by the appellant, genesis of the whole case was audit had raised objection and the admissibility of the Cenvat credit in respect of GTA as well as invisible loss occurred at the end of the job worker during job work of appellant goods therefore it cannot be said that Ld. Commissioner has erred in giving findings on the issue of admissibility of the Cenvat credit in respect of GTA Service.

5. I have carefully considered the submissions made by both sides and perused the record.

6. In the present case, issue to be decided by me are (i) Whether appellant is entitle for suo moto re-credit of Cenvat credit which was reversed by them, (ii) Whether Cenvat credit is admissible in respect of GTA for use for export of goods and Cenvat credit in respect of invisible loss occurred in the job work process. As regard the suo moto credit, bench of this Tribunal has already decided in the case of Shri Shree Rubber Plast (supra) following Honble Madras High Court judgment in case of ICMC Corporation Ltd. (supra) that re-credit of Cenvat credit is in order and credit cannot be denied only because the assessee has taken suo moto re-credit. As regard the admissibility of the Cenvat credit of GTA and in respect of invisible loss, as submitted by Ld. Consultant that the entire transportation was used for export of goods and invisible loss is during the process at the job workers end and in both the cases Cenvat credit should be allowed. I find that the lower authority has decided the issue merely on the point of suo moto credit and fact that the GTA in respect of credit was taken is whether for export or otherwise has not been verified. I am of the considered view that if Cenvat credit in respect of service tax paid towards GTA and said GTA used for export of goods, the place of removal stands extended up to the port of export and therefore transportation from factory to port of export is clearly covered by the term up to the place of removal and if it is so, appellant is entitle for Cenvat credit. As regard invisible loss, I am of the view that invisible loss unless and until it is proved that the goods were diverted so far it is invisible loss, Cenvat credit cannot be denied. Invisible loss is process loss on which Cenvat credit is admissible in terms of para 3.7 of Chapter 5 of Supplementary instruction of Central Excise manual which is reproduced below:

3.7 CENVAT credit is also admissible in respect of the amount of inputs contained in any of the waste, refuse or bye product. Similarly, CENV AT is not to be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. The basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products, and whether directly or indirectly.

The Cenvat credit admissible in respect of amount of input contained in waste, refused or by product. Similarly, Cenvat is not to be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. In view of the above provisions the quantity of input which shown as invisible loss has been used in or in relation to the manufacture of final product though the part of manufacturing has taken place at the job workers end. Therefore in view of the above clear instruction, if at all it is found that input used has been lost in the manufacturing process, either with the appellant or with the job worker of the appellant, credit should be allowed. However adjudicating authority has to verify quantum of input lost in the process. In view of the above discussion, since both the lower authority have not verified properly the admissibility of the Cenvat credit on the factual aspect, matter needs remand to the original authority. I, therefore, remand the matter to the original authority to pass afresh denovo adjudication order, keeping in view my above observations. Appeal is allowed by way of remand.

(Operative part pronounced in court)

Ramesh Nair Member (Judicial) sk

8 Appeal No. E/274/10