M/S Kalpena Industries vs Commissioner, Central Excise & Service ...

Appeal No.E/1323-1326/2011-SM [Arising out of OIO No.18/MP/Vapi/2011, dt.25.08.2011, passed by Commissioner (Appeals), Central Excise & Customs, Vapi]

1. M/s Kalpena Industries, 2. Shri Narendra Surana, 3. Shri Prakash Sahoo, 4. Shri Manoj Jain Appellants

Vs

Commissioner, Central Excise & Service Tax, Vapi Respondent

Represented by:

For Appellant: Shri Rahul Gajera, Advocate For Respondent: Shri L. Patra, Authorised Representative

For approval and signature:

Honble Mr. H.K. Thakur, Member (Technical)

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. H.K. THAKUR, MEMBER (TECHNICAL)

Date of Hearing/Decision:23.07.2015

Order No.A/ 11098-11101/2015 dt.23.07.2015

Per: H.K. Thakur

These appeals have been directed against OIO No.18/MP/VAPI/2011, d.25.08.2011 issued on 02.09.2011. Appeal No.E/1323/2011 has been filed by the main Appellant M/s Kalpena Industries Ltd, Silvassa. The other appeals are filed by Shri Narendra Surana, M.D., Shri Prakash Sahu, Assistant Manager-cum-Authorised Signatory and Shri Manoj Jain, Commercial Head & Company Secretary-cum-Authorised Signatory of the main Appellant with respect to penalties imposed upon them.

2. Shri Rahul Gajera (Advocate) appearing on behalf of the Appellants submitted that the case is with respect to storage of duty paid inputs by the main Appellant in a godown situated away from the factory. That the officers of Central Excise visited the factory premises of the Appellant on 03.02.2010/04.02.2010 and conducted verification of the stock lying in the factory including stock lying in the nearby premises outside the declared godown. That 52,075.00 kgs of various inputs, valued at Rs.30,71,202.00 were found to have been stored in godown situated outside the factory without obtaining necessary permission from the jurisdictional Central Excise Assistant Commissioner/Deputy Commissioner under CENVAT Credit Rules and without reversal of CENVAT Credit originally taken on the inputs. That the same were seized by the officers and provisionally released to the Appellants on execution of Bank Guarantee of Rs.7,67,800.00. That after detailed investigation, a show cause notice dt.02.08.2010 was issued which was confirmed by the Adjudicating authority under Order-in-Original, dt.25.08.2011. That Adjudicating authority has confiscated the inputs seized by the officers and a redemption fine of Rs.6,67,800.00 was imposed which was recovered by enforcing the Bank Guarantee. That CENVAT Credit of Rs.4,44,626.00 pertaining to the seized inputs was also confirmed, alongwith interest and equivalent penalty was also imposed upon the main Appellant.

2.1 Learned Advocate argued that before storage of inputs in the adjoining godown, a letter dt.18.07.2007 was written by the main Appellant to the Assistant Commissioner, Silvassa regarding storage of inputs outside the factory and sought permission under Rule 8 of CENVAT Credit Rules 2004. That no response came from the Department and, therefore, they issued another reminder dt.01.04.2008 to the Assistant Commissioner, Silvassa. That as no permission was granted by the Department, therefore, they went ahead and stored the goods in the godown situated outside the factory. That the entire inputs after provisional release were used in the manufacture of finished goods, therefore, no violation of CENVAT Credit Rules has been made by the Appellant and CENVAT Credit disallowed and penalties imposed are required to be set aside. He relied upon the case law of Sanchit Polymers Vs CCE & C, Daman [2009 (241) ELT 240 (Tri-Ahmd)] to argue that under similar circumstances, it has been held that confiscation of inputs was not justified and penalties imposed were set aside.

3. Shri L. Patra, (AR) appearing on behalf of the Revenue argued that it is not disputed by the Appellants that the inputs were cleared without getting necessary permission from the Department under Rule 8 of CENVAT Credit Rules 2004. He made the Bench go through Para 60 of the Order-in-Original, dt.25.08.2011 and argued that no records were maintained by the Appellant at their godown situated outside the factory, whereas in their letter dt.18.07.2007, main Appellant specifically mentioned that proper records will be maintained at the factory and at the place of storage outside their factory. It was also his case that no documents were prepared by the Appellant for movement of inputs from their factory to the temporary storage godown. It was also argued that in the original letter dt.18.07.2007, no address of the storage place outside the factory was provided. That in the reminder dt.01.04.2008, only addresses were given and one of the addresses belonged to another factory of the Appellant mentioned by Adjudicating authority in Para 63.2 of Order-in-Original, dt.25.08.2011. That photocopy of the letter of intimation provided by the Appellant does not bear the signature of any officer of Department, therefore, the same cannot be treated as authentic delivery of intimations.

4. Heard both sides and perused the case records. The issue involved in the present proceedings is whether certain rejected inputs removed by the Appellant from their factory, on which CENVAT Credit under Rule CENVAT Credit Rules 2004 is taken, are liable to confiscation under Rule 15(1) of the CENVAT Credit Rules 2004. It is the case of the Appellant that they intimated the Department by letters dt.18.07.2007 and 01.04.2008 for granting permission under Rule 8 of CENVAT Credit Rules 2004. It is not disputed by the Appellant that inputs on which CENVAT Credit was taken, were removed from the factory premises without necessary permission required under Rule 8 of CENVAT Credit Rules 2004. It is also observed from the case records and arguments made by either sides that delivery of the letter written by the Appellant has been questioned by the Department. Further, it is observed from the photocopy of the letter dt.18.07.2007 that main Appellant gave an undertaking that they will be maintaining proper records both in the factory as well as at the place of storage of inputs outside the factory.

It has been clearly brought out by the Adjudicating authority in Para 60 of the Order-in-Original that no documents were prepared by the Appellant for clearances of inputs from their factory to the godown situated outside the factory. It is also observed from Para 60.2 of the Order-in-Original that no records/documents/registers were being maintained by the Appellant at the said godown as per the undertaking given by the Appellant in their letter dt.18.07.2007. No ultimatum appear to have been given by the Appellant to the Department that in case the permission is not granted, then they will start moving the inputs from the factory premises to such godown situated outside the factory. Irrespective of the arguments taken by the Appellant, the fact remains that such inputs were cleared without necessary permission and without reversal of appropriate amount of CENVAT Credit as undertaken by the Appellant. As per the provisions of CENVAT Credit Rules 2004, when the inputs are cleared as such from the factory premises, then equivalent amount of CENVAT Credit is required to be reversed. By not doing so, the Appellant has contravened the provisions of CENVAT Credit Rules 2004 and by virtue of the provisions contained in Rule 15(1) of CENVAT Credit Rules 2004, such inputs are liable to confiscation.

Accordingly, the order of confiscation made by the Adjudicating authority is proper and cannot be faulted with. However, it is observed that a redemption fine of Rs.6,67,,800.00 has been imposed by way of enforcing the Bank Guarantee executed by the Appellant at the time of provisional release of the seized inputs. Total CENVAT Credit on the goods stored outside the factory premises has been calculated to Rs.4,44,626.00. Keeping in mind the CENVAT Credit involved in the proceedings, it is observed that the redemption fine imposed is excessive. In the interest of justice, redemption fine imposed by the Adjudicating authority is reduced to Rs.1 lakh (Rupees One Lakh only).

5. So far as denial of CENVAT Credit of Rs.4,44,626.00, alongwith interest and equivalent amount of penalty is concerned, it is the case of the Appellants that seized inputs have been used in the manufacture of the finished goods further cleared on payment of duty. However, learned Advocate appearing on behalf of the Appellant could not produce documentary evidence as to how these goods were disposed of. This aspect is, therefore, required to be verified by the Adjudicating authority that the inputs stored outside the factory premises, released on redemption, were actually used in the manufacture of finished goods by the Appellant or were cleared as such after discharge of appropriate amount of duty. In case, the entire quantity of inputs were used in the manufacture of finished goods or cleared as such on payment of duty, then the question of imposing penalty under Section 11AC of Central Excise Act, 1944 read with Rule 15 of CENVAT Credit Rules will not arise, except for payment of interest on CENVAT involved from the date of clearance of inputs from the factory till they are used in the manufacture of finished goods or cleared as such on discharge of appropriate amount of duty.

6. So far as imposition of penalties upon other Appellants is concerned, it is observed that these penalties have been imposed under Rule 26 of CENVAT Credit Rules 2004 and not under CENVAT Credit Rules 2002. Penalties upon the other Appellants for violating CENVAT Credit Rules 2004, can only be imposed under the penal provisions of CENVAT Credit Rules 2004 and not under Rule 26 of Central Excise Rules, 2002. Appeals filed by the other Appellants are accordingly allowed.

7. Appeals filed by the Appellants are allowed to the extent indicated hereinabove.

(Dictated and pronounced in Court)

(H.K. Thakur) Member (Technical)

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