M/S. Man Industries (India) Ltd vs C.C.E. Indore

[Arising out of Order-In-Original No. 03/COMMR/CEX/IND/06 dated: 07.01.2006 passed by Commissioner of Central Excise & Customs-Indore]

For approval and signature:

Hon'ble Mr. Rakesh Kumar, Member (Technical)

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

1 Whether Press Reporters may be allowed to see 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 of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. Man Industries (India) Ltd. ...Appellant

Vs.

C.C.E. Indore Respondent

Appearance:

Mr. Manish Saharan, Advocate for the Appellants

Mr. R. K. Grover, DR for the Respondent

CORAM:

Hon'ble Mr. Rakesh Kumar, Member (Technical)

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

Date of Hearing/decision.04.03.2015

FINAL ORDER NO. 50605 /2015-Ex(Br)

Per Rakesh Kumar (for the Bench):

The appellant manufacture sub merged arc welded pipes (SAW pipes) of base metal chargeable to central excise duty under heading 7308 of the Central Excise Tariff. They were availing of the Cenvat Credit of the excise duty paid on the inputs and capital goods, used in or in relation to, manufacture of their final products. The period of dispute in this case is 2002. During this period, the appellant in terms of their contract with M/s Gujarat Water Supply and Sewerage Board (hereinafter referred to as GWSSB) supplied cement coated pipes and epoxy coated pipes to them. However, for cement coating, they had no facility and the duty paid pipes were being cleared to job workers for cement coating from where the same were being supplied to the GWSSB. The Department was of the view that the cost of cement coating and epoxy coating should be included in the assessable value of the Saw pipes, issued a SCN dated 12.07.2005 for demand of differential duty on the value of the coating which was Rs. 75,24,832/-. The Show Cause Notice beside demanding the above duty under proviso to section 11A(1) of the Central Excise Act, 1944 also demanded interest on this duty under section 11AB and sought imposition of penalty on them under section 11AC. Beside this, the SCN also sought recovery of duty of Rs. 23,66,195/- on the freight charges not shown in the central excise invoices and recovered from the buyers and also cenvat credit demand of Rs. 1,12,061/- in respect of some inputs, which according to the Department were not admissible.

1.1 The SCN was adjudicated by the Commissioner of Central Excise, Indore, who vide order in original dated 10.11.2006 dropped the Cenvat credit demand of Rs. 1,12,061/- and also the duty demand of Rs. 23,66,195/- on the transport charges. However, with regard to duty demand of Rs. 75,24,832/- on the coating charges, the duty demand of only Rs. 10,82,514/- was confirmed along with interest and the rest of the duty demand was dropped. Beside this, penalty of Rs. 1,00,000/- was imposed on the appellant company under Rule 25 of the central excise rule 2002. Against this order of the Commissioner, this appeal has been filed.

2. Heard both the sides.

3. Shri Manish Saharan, Advocate the Ld. Counsel for the appellant, pleaded that the duty demand of Rs. 10,82,514/- confirmed by the Commissioner is in respect of the cost of the epoxy coating which, according to the department had been done in the appellants factory, that the Commissioner, as is clear from his findings in para 13.3 of the impugned order, has confirmed this demand, observing that the appellant before the issue of the SCN has admitted the duty liability on charges for coating being done inside the factory and had disputed only the duty liability on the coating charges being done outside the factory on job work basis, that there is no evidence that any coating work was being done inside the appellants factory, that the Commissioner in giving his finding in para 13.3 of the impugned order that the certain coating was being done inside the appellants factory, had not discussed the evidence on the basis of which this conclusion has been drawn by him, and that in any case, the duty demand confirmed is time barred, as while the period of dispute is 2002, the SCN had been issued on 12.07.2005 and there is no evidence to invoke longer limitation period under proviso to section 11A(1) of the Central Excise Act, 1944. He, therefore, pleaded that the impugned order confirming the duty demand of Rs. 10,82,514/- along with interest and imposition of penalty of Rs. One lakh on the appellant company is not sustainable.

4. Shri R K Grover, Ld. DR, defended the impugned order by reiterating the findings of the Commissioner in the impugned order and pointed out to the statement dated 16.10.2002 of Sh. Krishan Gopal Mantri, General Manager (Commercial) of the appellant company, wherein, on being asked, as to whether the appellant company has availed Cenvat Credit on inputs used in manufacture of coated pipes cleared to GWSSB and to what extent he stated that the appellant company has availed Cenvat Credit on the inputs used in the manufacture of coated pipes to the extent of actual material consumed in the coating activities. He also pointed out to the statement dated 23.09.2002 of Shri CB Pathak, Assistant General Manager (Marketing), wherein he has stated that there coating facilities are only a year old and their major contracts for supply of coated pipes were with GWSSB in domestic sector. He, therefore, pleaded that the epoxy coating was being done in the appellants factory and duty demand has been confirmed by the Commissioner only on the cost of that coating. On the issue of limitation, he pleaded that the appellant never informed to the Department that certain epoxy coating of the pipes is being undertaken by the appellant themselves in their factory, and that they are availing of Cenvat Credit in respect of the coating material. Therefore, he pleaded that the longer limitation period under proviso to section 11A(1) has been correctly invoked and penalty has been correctly imposed on the appellant company under Rule 25 of the Central Excise Rule, 2002. He, accordingly, pleaded that there is no infirmity in the impugned order.

5. Shri Manish Saharan, in rejoinder, pointed out to the statement dated 16.10.2002 of Sh. Krishan Gopal Mantri, wherein in reply to question No. 4 as to whether duty paid by the appellant company includes the duty payable on the internal epoxy lining work got done by the appellant company through M/s Vipul Colour Coating, at the land temporarily arranged by the appellant company, he stated that the duty paid by the appellant is inclusive of the duty on internal epoxy lining work done by the M/s Vipul Colour Coating. Sh. Saharan accordingly, pleaded that from this it is clear that the epoxy coating done through M/s Vipul Colour Coating was being done outside the factory.

5.1 He therefore, pleaded that the value of epoxy coating is not includable in the assessable value of the pipes.

6. We have considered the submissions from both the sides and perused the records. The appellant manufacture SAW pipes. The dispute is only in respect of the pipes supplied to GWSSB, which as per the contract were to be cement coated/ epoxy coated pipes. The cement coating had been got done by the appellant on job work basis through some job workers and the duty demand in respect of the value of cement coating has been dropped by the Commissioner himself and as such there is no dispute in respect of the same. The dispute is only in respect of the value of epoxy coating which, according to the Commissioners findings in para 13.3 of the impugned order had been done inside the factory. However, according to the appellant the epoxy coating had also been done through M/s Vipul Colour Coating outside the factory and hence, the value of this coating is not includible in the assessable value. However, on this point we find that Sh. K. G. Mantri, General Manager (Commercial) of the appellant company is his statement dated 16.02.2002 on being specifically asked, has stated that Cenvat Credit of the material used for coating was being availed by them. In our view if this is so, the value of the epoxy coating would be includable in the assessable value of the pipes, irrespective of whether the coating is done inside the factory or outside the factory. However, the Commissioner in the impugned order has not gone into this point for which, in our view, this matter would have to be remanded. As regards, the extended limitation period under proviso to section 11A(1), we are of the view that the appellant at no point of time, had informed the Department about the epoxy coating of the pipes and, whether they were availing the Cenvat Credit in respect of the coating material. If the appellant had availed cenvat credit in respect of the coating material and did not include the value of the coating in the assessable value of the pipes and this fact was not specifically intimated to the Department, it would amount to suppression of the relevant facts from the Department and extended period under proviso to section 11A(1) would be invokable.

8. In view of this, we set aside the impugned order and remand the matter to the Commissioner for de novo adjudication keeping in view above observations. In de novo proceedings, the Commissioner must check from records as to whether the statement of Sh. Mantri that cenvat credit in respect of the inputs for epoxy coating had been taken by the appellant is correct and if this is true, the value of the epoxy coating would be includible in the assessable value of the SAW pipes. The appeal stands disposed of as above.

(Dictated and pronounced in open court)

(Rakesh Kumar)

Member (Technical)

(S.K. Mohanty)

Member(Judicial)

Neha

Page | 1