M/S. Man Structural Pvt. Ltd vs C.C.E. & S.T. Jaipur-I

[Arising out of Order-in-Original No. 191 (RDN)CE/JPR-I/2012 dated 27.11.2012 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Jaipur].

For approval and signature:

Honble Shri Ashok Jindal, 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 Structural Pvt. Ltd. .Appellants

Vs.

C.C.E. & S.T. Jaipur-I .Respondent

Appearance:

Shri Bipin Garg, Advocates for the Appellant

Ms. Ranjana Jha, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing: 06.05.2015

FINAL ORDER NO. 51668/2015-EX(SM)

Per Ashok Jindal:

The appellant is in appeal against the impugned order imposing penalty under Section 11AC of the Central Excise Rules 1944 read with Rule 6(3)(b) of the Cenvat Credit Rules 2004.

2. The facts of the case are that the appellant is manufacturer of tower materials and parts of wind mills. The appellant cleared wind mill on nill rate of duty by claiming exemption under notification No. 6/2006-CE dated 01.03.2006 during the period Oct 2008 to March 2009. The appellant is also availing Cenvat Credit on input / input services and is not maintaining separate account for inputs for manufacturing dutiable as well as exempted final product and also not paying amount equal to 10% of the value of the exempted goods at the time of clearance. An audit took place at the premises of the appellant. Audit pointed out the discrepancies and immediately on pointing out by the audit the appellant paid 10% of the value of exempted goods along with interest. Thereafter, a show cause notice was issued on 29.09.2010 by invoking extended period of limitation for appropriation of the amount already paid by the appellant along with interest and also imposition of penalty under section 11AC of the Act read with Rule 15 of the Cenvat Credit Rules 2004. Both the lower authorities imposed a penalty on the appellant. By way of this appeal appellant is challenging imposition of penalty on the appellant. The Ld. Counsel for the appellant submits that the appellants are filing their ER-1 returns showing their clearance of exempted goods and they have intimidated to the department that for clearance of parts of wind mill they are availing exemption under notification no.6/2006-CE and clearing the goods without payment of duty. Therefore, extended period of limitation is not invokable. Moreover, it is submitted that as per Cenvat Credit Rules 2004 Rule 6(3) says that if appellant is not maintaining account of inputs / input services which are being used in the manufacturing of dutiable as well as exempted final product The appellant is required to pay 10% of the goods. Therefore penalty is not imposable on the appellant. TO support his contention he relied on the decision of Honble High Court of P&H in the case of Sangrur Agro Ltd. Vs. CCE Ludhiana-2010 (254) ELT 25 (P&H), in the case of Eastern Medikit Ltd. Vs. CCE Gurgaon-2009 (242) ELT 51 (Tri-Del), in the case of Terna SSKK Ltd. Vs. CCE Aurangabad-2007 (209) ELT 194 (Tri-Bom). For limitation he relied on the decision in the case of Subhash Khandelwal & Sons Vs. CCE Jaipur-2011 (24) STR 461 (Tri-Del).

3. On the other hand Ld. AR drew my attention to the para 5 of show cause notice wherein it has been alleged that appellant has placed the fact of availment of Cenvat Credit which was used in manufacturing of both dutiable as well as exempted final product. Merely writing letter that they are claiming exemption does not mean that appellant is not maintaining separate account for inputs and also availing Cenvat Credit on the inputs for manufacturing of dutiable as well as exempted goods. Therefore, penalty is rightly imposed on the appellant being suppressed the facts. She further submits that Rule 6 is clear that if appellant is manufacturing dutiable as well as exempted final product then either they are required to maintain separate account for input / input services or required to pay 10% of the value of exempted goods at the time of clearance. These facts have been suppressed by the appellant. Therefore, penalty is rightly imposed. To support his contention she relied on the decision in the case of CCE Vs. Gujarat Narmada Fertilizers Co. Ltd.-2009 (240) ELT 661 (SC).

4. Heard the parties. Considered the submission.

5. In this case short issue before me is that whether in the facts and circumstances of the case penalty is imposable on the appellant or not. Admittedly, appellant is not maintaining separate account for input / input services which were being used for manufacturing of dutiable as well as exempted final product. It is also clear from the facts on record that at the time of availment of Cenvat Credit, it was not known to the appellant whether they will be clearing final product without payment of duty or not. Therefore, the allegation of suppression in these set of facts cannot be alleged against the appellant. As that is not known at the time of availment of Cenvat Credit whether these inputs will go in manufacturing of exempted goods. Further, on the legal aspect I find that the issue came up before the Honble High Court of P&H in the case of Sangrur Agro Ltd. (Supra) wherein Honble High court has held that the case is related to reversal of amount under section 6(3)(b) of Cenvat Credit Rules 2004 penalty under section 11 AC is not imposable as the said provision are not applicable. Consequently, penalty under Rule 15 of the Cenvat Credit Rules 2004 is also not imposable. Further, in the case of Eastern Medikit Ltd. (Supra) this Tribunal has examined the issue and observed in para 3 as under:

I have carefully considered the submissions from both the sides and perused the records. The appellant have taken Cenvat Credit in respect of common inputs which were used in manufacture of dutiable as well as exempted finished products and it is also not in dispute that separate record and separate inventory of the inputs used in the manufacture of dutiable and exempted finished products had not maintained. Though the appellant plead that they have not taken Cenvat Credit in respect of inputs going into the manufacture of exempted finished products, I find that documents in this regard had been not produced before the Commissioner (A) and as such, they have not even disputed their liability to pay an amount equal to 8% of the value of the exempted finished products at the time of their clearances. It is only imposition of penalty under Section 11 AC which has been disputed. According to the Deptt., they are liable for penalty equal to this amount as per the provisions of Section11AC. The question now arises as to whether the provisions Section 11AC are applicable to all for non-payment of the amount due under Rule 6(3)(b) of Cenvat Credit Rules.

The Tribunal in the case of CCE Vs. Sangrur Agro Ltd. (supra) has held that the provisions of Section 11 AC are not applicable in respect of short payment or non-payment of the amount due under Rule 6(3)(b) of the Cenvat Credit Rules. The Tribunal in the case of CCE Vs. Sangrur Agro Ltd. (Supra) has held that the provisions of Section 11 AC are not applicable in respect of short payment or non-payment of the amount due under Rule 6(3)(b0 of the Cenvat Credit Rules. As per Explanation-1 to Rule 6(3), amount mentioned in clause (a) & (b) of sub-rule 3 of Rule 6 shall be paid by the manufacture by debiting the Cenvat Credit or otherwise and as per Explanation-II if a manufacturer fails to pay the said amount, it shall be recovered along with interest in the same manner as provided in Rule 12 for recovery of wrongly taken Cenvat Credit. Rule 12 of the Cenvat Credit Rules provide that where the Cenvat Credit has been taken or utilized wrongly or erroneously refunded the provisions of the Section 11A or 11B shall apply mutatis mutandis for such recovery. Neither Explanation-II to Rule 693) refers to Rule 13 for imposition of penalty if the manufacturer does not pay the amount due under this sub-rule nor Rule 13 provides for penalty in this regard.

In view of these circumstances, following the Tribunals judgment in the case of Sangrur Agro Ltd. (Supra), I hold that no penalty is imposable on the appellant under Section 11 AC and as such the impugned order upholding the penalty on the Appellant under section 11AC is not sustainable. The impugned order, therefore, is set aside and the appeal is allowed

6. Thereafter arrived at the conclusion that penalty on the appellant is not imposable. Further, I have examined the case laws relied upon by the Ld. AR also. In that case also the Honble Apex court came to the conclusion that Cenvat Credit cannot be availed by the assessee but also held that in these set of facts penalty is not imposable. Therefore, following precedent case laws and factual matrix of the case I hold that penalty on the appellant is not imposable although payment of 10% of the value of exempted goods along with interest is not in dispute before me.

7. In these terms appeal is disposed off.

(Dictated and pronounced in the open court.)

(Ashok Jindal) Member (Judicial)

Bhanu

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E/55975/2013-EX(SM)