M/S Nesco Ltd vs Commissioners Of Central Excise

[ Arising out of OIA-COMMR-A-/169&170/VDR-I/2012 dtd 19.3.2012 passed by Commissioners of Central Excise, Customs and Service Tax-VADODARA-I ]

1. M/s Nesco Ltd - Appellant(s) 2. Shri Rajesh Upadhyay

Vs

Commissioners of Central Excise, Customs and Service Tax-VADODARA-I - Respondent (s)

Represented by :

For Assessee : Shri Vinay Kansara, Advocate For Revenue : Shri T K Sikdar, Authorised Representative

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

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

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial)

Date of Hearing / Decision : 16/10/2015

ORDER No. A/11666-11667/2015 dtd16/10/2015

Per : Mr.P.K. Das,

The relevant facts of the case, in brief, are that M/s Nesco Ltd (the appellant company) was engaged in the manufacture of Shot Blasting Machine and Dust Collector machine classifiable under Chapter 84 of the Schedule to the Central Excise Tariff Act 1985. During the audit by the Central Excise Office in the month of May 2008, it was noticed that during the period 2005-06 to 2007-08, the appellant company cleared the semi finished goods to their sister unit without discharging duty. They have cleared the inputs as such to their sister unit without reversal of the Cenvat Credit as required in the Cenvat Credit Rules 2004. After detection by the audit party, the appellant company paid the entire amount of duty on clearance of semi-finished goods and reversed the Cenvat Credit on inputs during the period from 2005-2006 to June, 2009 time to time.

2. A show cause notice dtd 23.3.2010 was issued proposing demand of duty of Rs 8,70,596/- and the Cenvat amount of Rs 15,13,014/- alongwith interest and to impose penalty of equal amount of duty and Cenvat Credit and to appropriate the amount as deposited by them. It is also proposed to impose penalty on Manager (Finance) of the appellant company. The Adjudicating Authority confirmed the demand of Central Excise duty of Rs 8,70,596/- and Cenvat Credit of Rs 15,13,014/- alongwith interest and also imposed penalty of equal amount of duty and Cenvat Credit under Section 11AC of the Central Excise Act 1944. It has also appropriated the entire amount of duty and Cenvat Credit alongwith interest as paid by the appellant. A penalty of Rs 25,000/- was imposed on the Appellant No 2 under Rule 26(1) of the Central Excise Rule 2002. By the impugned Order, the Commissioner (Appeals) upheld the adjudication order.

3. The Learned Advocate on behalf of the appellants submits that the appellant company transferred the goods to their sister unit and paid the duty and reversed the Cenvat Credit, prior to issue of show cause notice and therefore imposition of penalty and demand of interest cannot be sustained. He further submits that it is the case of Revenue neutrality in so far as the amount demanded on the appellant company would be taken Cenvat Credit by the sister unit. In this context, he submits that during the material period, the sister unit paid from PLA more than amount as demanded. He relied upon the following decisions:

a) Daman Ganga Board Mills Pvt Ltd vs.CE, Daman  2012.276.ELT.532 (Tri.Ahmd)

b) Standard Grease Specialties Pvt ltd Vs. CC, Vapi  2014.303.ELT.434 (Tri.Ahmd)

c) CCE&C, Surart Vs, Gujarat Glass Pvt Ltd  2013.290.ELT.538 (Guj.)

4. The Learned Authorised Representative on behalf of the Revenue reiterates the finding of the Commissioner (Appeals). He submits that the issue of Revenue neutrality would not be applicable in every case. He submits that in the present case the Cenvat Credit Rules particularly provides to reverse the credit on clearance of the input as such. It is further submitted that the appellant had not paid the duty on the semi finished goods, which was detected by the audit party. It is a clear case of suppression of fact and the imposition of penalty under section 11AC is warranted. It is submitted that the appellant was habitual offender in so far as cleared the goods without payment of duty for two years continuously. He relied upon the decision of the Tribunal in the case of Hero Honda Motors Ltd vs CCE, Meeret - 2011.273.ELT.89 (Tri. Del.) and in the case of CCE Chandigarh Vs Baba Asia Ltd  2011.267.ELT.115 (Tri. Del.).

5. After hearing both the sides and on perusal of the records, I find that the Learned Advocate is not contesting the demand of duty, which they have already paid. The main contention of the Learned Advocate is that have paid duty and reversed the Credit, before issue of the show cause notice and the entire transaction is inter-unit stock transfer and therefore, the demand of interest and imposition of penalty cannot be sustained. It is also contended that the goods were transferred under the cover delivery challans and duly recorded in their register. Thus, it is not the case of clandestine removal of the goods.

6. I find that the appellants removed the semi-finished goods continuously for about three years without payment of duty and the input was cleared as such without reversal of credit in violation of the Central Excise Rule 2002 and the Cenvat Credit Rules 2004. There is no dispute that the appellant was liable to pay duty and reverse credit at the time of clearance of semi-finished goods and therefore, the demand of interest is justified. The demand of interest cannot be waived on the ground of the Revenue neutrality.

7. I find force in the submission of the Learned Advocate in respect of imposition of penalty. The decisions relied upon by the Learned Advocate are in the context of limitation and it was held that Revenue neutrality would be a factor for deciding the issue. In the case of Standard Greaves Specialties Pvt Ltd (supra), as relied upon by the Learned Advocate, the Tribunal upheld the penalty under Rule 15 of the Cenvat Credit Rules 2004 in the identical situation. It is revealed from the Adjudication order that the appellant submitted the statement showing month-wise details of payment of duty from Cenvat account and PLA in respect of both the units during the material period. It is also recorded that the sister unit had paid more duty from the PLA than the Cenvat account. The appellant claimed that there is no suppression of the fact with intent to evade any payment of duty as it is a case of Revenue neutrality. The Adjudicating Authority observed that there is some merits in the argument of the appellant. Hence, the imposition of penalty under Section 11AC is not warranted. However, considering the facts and circumstances of the case, penalty is imposable for contravention of the Rules, for continuous period of three years. Penalty on the Appellant No 2, employee of the appellant company cannot be sustained.

8. In view of the above discussions, the impugned order is modified to the extent that the demand of duty alongwith the interest is upheld and the penalty is reduced to Rs 25,000/- on the appellant-company. The appeal filed by the Appellant No 2 is allowed. The appeal filed by the appellant is disposed of in the above terms.

(Dictated and pronounced in the Court)

(P.K. Das) Member (Judicial)

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