M/S Mukat Pipes Ltd vs C.C.E. & S.T. Chandigarh-Ii

Excise Appeal No.E/54914/2014 & E/58540/2013-Ex[SM] [Arising out of Order-In-Appeal No. JAL-EXCUS-000-APP-065-14-15 dated: 02.06.2014 passed by Commissioner (Appeals) Chandigarh-II]

For approval and signature: 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 Mukat Pipes Ltd. ...Appellant Vs. C.C.E. & S.T.  Chandigarh-II Respondent

Appearance:

Mr. Vikrant Kackria, (Advocate) for the Appellant Mr. G R Singh, DR for the Respondent

CORAM:

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

Date of Hearing. 15.09.2015

FINAL ORDER NO. 544242-54243 /2015___ Per S. K. Mohanty:

Brief facts of the case are as follows:-

1.1 `The appellant is engaged in the manufacture of M.S. Pipes, falling under Chapter 73 of the Central Excise Tariff Act, 1985. The MS Pipes manufactured by the appellant are removed from the factory on payment of Central Excise duty. The appellant also undertakes the activity of job work of manufacture of the said final product out of the input i.e. C.R. Coils supplied by the Principal Manufacturer. On receipt of C.R. Coils from the supplier, the appellant avails cenvat credit of Central Excise duty indicated in the invoices issued by them. The appellant also avails cenvat credit on the said C.R. Coils procured from the domestic market. With regard to manufacture of M.S. Pipes on job work basis, the appellant avails the duty exemption as provided under Notification No. 6/2006-CE dated 1.3.2006. With regard to the M.S. pipes removed from the factory to the independent buyers, the appellant pays appropriate Central Excise duty, by utilizing the cenvat credit available in the books of accounts.

1.2 Since the appellant avails the benefit of Notification dated 1.3.2006 for supply of goods without payment of duty to the job worker, it had exercised the option for payment of an amount equal to 5% of the value of exempted goods cleared to the job work under Rule 6(3)(I) of the Cenvat Credit Rules 2004. Option of the appellant to pay the said amount was disputed by the Central Excise Department on the ground that the H.R. Coils supplied by the Principal Manufacturer through its suppliers are exclusively meant for manufacture of the M.S. Pipes, which were cleared to the principal manufacturer without payment of Central Excise duty. According to the Department, since the inputs supplied by the principal manufacturer are exclusively meant for manufacturing of the goods, the appellant is liable to pay the cenvat credit taken on those inputs in terms of explanation-II appended to Rule 6 of the Cenvat Credit Rules, 2004. The dispute was adjudicated by the Department in confirming the cenvat demand of Rs.34,44,023/- along with equal amount of penalty. In appeal, the Commissioner (Appeals) has upheld the adjudged demand. Hence this present appeal is before the Tribunal.

2. At the outset, Sh. Vikrant Kackria, the Ld. Advocate appearing for the appellant submits that the Show Cause proceedings initiated by the Central Excise Department is barred by limitation of time. According to him, the period of dispute is from November 2010 to March 2011; whereas, the SCN was issued in 6.9.2012. According to the Ld. Advocate, since the issue involves interpretation of Rule 6 of the Cenvat Credit Rules, 2004, the allegation of fraud, collusion, mis-statement etc. cannot be leveled against the appellant. He further submits that the officers of the audit wing of the Department, who visited the factory of the appellant in the month of August, 2011, have also expressed doubt with regard to the issue of reversal of cenvat credit in the situation involved in the present case, and accordingly, referred the matter to the Preventive Wing for necessary investigation. Thus, according to the Ld. Advocate, since the Department was in doubt about applicability of the statutory provisions contained in Rule 6 ibid, the extended period of limitation cannot be invoked.

2.1 With regard to the merits of the case, the submissions of the Ld. Advocate are that particulars of C.R. Coils supplied by the principal manufacturer as well as procured by the appellant from the open market are entered in the Cenvat register. That as and when the same are issued for manufacture of the final product (both dutiable as well as exempted), necessary issue particulars are recorded in the said register. It is his submission that since the inputs from the common account have been issued to the shop-floor for manufacture of dutiable as well as exempted MS Pipes, it is difficult to maintain separate accounts. Thus, the appellant opts to pay the amount as provided in Rule 6(3)(I) of the Cenvat Credit Rules, 2004. The Ld. Advocate also submits that the findings of Lower Authorities with regard to applicability of the explanation-II to the facts and circumstances of the present case is perplexed, inasmuch as, under the accounting principles, there is no requirement of maintenance of records for apportionment of inputs for manufacture of both category of goods (dutiable and exempted).

3. Sh. GR Singh, the Ld. DR appearing for the Revenue reiterates the findings recorded in the impugned order and further submits that since the input H.R. Coils supplied by the principal manufacturer were exclusively used for the manufacture of M.S. Pipes by availing exemption under Notification No. 6/2006-CE dated 1.3.2006, the appellant is liable to reverse the cenvat credit.

4. I have heard the Ld. Counsel for both the sides and perused the records.

5. It is an admitted fact on record that the appellant had paid the amount equal to 5% of value of exempted goods cleared by it on job work basis to the principal manufacturer, in terms of Notification No. 6/2006-CE dated 1.3.2006. Since such option has been exercised by the appellant suo-moto and due intimation regarding such payment has been filed before the Central Excise Department, in my opinion, the extended period of limitation cannot be invoked for confirmation of the demand, in terms of the proviso to section 11A of the Central Excise Act, 1944. Further, the issue regarding applicability of the explanation appended to sub-rule (3) of Rule 6 ibid was debatable, for which the officers of Central Excise Audit Wing have referred the matter to the Preventive Wing of the same Department for conducting necessary investigation. The said fact proves beyond any shadow of doubt that there is no element of mens-rea/ suppression of facts with intent to avail fraudulent credit by the appellant. Therefore, I am of the considered view that the SCN issued on 6.9.2012, seeking confirmation of demand for the period from November 2010 to March 2011, is clearly barred by limitation of time. Accordingly, the impugned order is set aside and the appeal is allowed in favour of the appellant on the ground of limitation alone.

6. However, it is apparent from the face of the record that the appellant is not disputing the payment of Rs.19,49,774/- reversed in its cenvat account, in terms of Rule 6(3)(i) ibid. Thus, the benefit of the extended period of limitation shall not be available on reversal of such amount.

7. The appellant has filed another appeal, which has been listed as appeal no. E/58540/2013. The issue involves refund of Rs. 10,09,175/-, which was deposited at the time of audit. The appellant submits that the proceedings initiated pursuant to the audit report has attained finality vide order dated 12.02.2014, and thus, the said amount is eligible for refund. I am of the view that the appellant is eligible for refund of Rs.10,09,175/-. However, sanction of the said refund amount is subject to verification of the unjust enrichment aspect by the original authority.

8. Both the appeals are disposed of accordingly.

(Dictated and pronounced in open court)

(S.K. Mohanty) Member(Judicial)

Neha

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