M/S. Rail Coach Factory vs Commissioner Of Central Excise

[Arising out of Order-in-Original No. 54-58/CE/JAL/2005 dated 6.6.2005 and Order-in-Appeal No 129/CE/APPL/JAL/2006 dated 27.7.2006 passed by the Commissioner of Central Excise (Appeals I), Chandigarh)]

For approval and signature:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

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. Rail Coach Factory Appellants

Vs.

Commissioner of Central Excise Respondent

Jalandhar

And

Commissioner of Central Excise Appellants

Jalandhar

Vs.

M/s. Rail Coach Factory Respondent

Appearance:

Shri Rajesh Mahna and Shri Randhir Bhatia, Advocates for the Appellants

Shri S Nunthuk, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Mr. B Ravichandran, Member (Technical)

Date of Hearing /decision: 24.09.2015

FINAL ORDER NO. 53072 -53074 /2015-EX(DB)

Per B Ravichandran:

The assessee as well as Revenue are in appeal against the order in original dated 6.6.05. The assessee are engaged in the manufacture of railway coaches liable to Central Excise duty. During the course of this manufacture they produce slitted /sheared strips and captively used them in the manufacture of coaches which are exempted from payment of duty. The Revenue proceeded against the assessee on two grounds.

A. The process of slitting /shearing resulted in manufacture of intermediate product CR sheets classifiable under 7209 30 and 7211 51 Since these sheets are captively used in the manufacture of final product which are exempted from payment of duty exemption for captively consumed goods available under notification No. 89/95-CE cannot be extended to these CR sheets.

B. During the course of manufacture of railway coaches, the assessee generated melting scrap and claimed exemption under notification No. 89/95 CE. Since the assessee exported the railway coaches and such exported coaches are not exempted, they are liable to pay duty on the scrap generated during the manufacture of Railway coaches. The proceeding initiated were concluded by an order-in-original dated 6.6.2005.

2. Learned Commissioner dropped the demand pertaining to duty on cutting and slitting of HR /CR coils, but confirmed the demand pertaining to duty on scrap. A penalty of Rs.25 lakh was also imposed on the assessee under section 11AC of the Central Excise Act, 1944. Aggrieved by the duty demand on scrap and penalty, the assessee is in appeal.

3. Revenue also filed an appeal praying for penalty equal to duty in terms of section 11AC. Both these appeals are taken up together for decision.

4. The assessee in their appeal contested the duty demand on the scrap generated during the period from 1.10.97 to 30.6.2004. It was contended that during the whole of impugned period, they have cleared one time 72 number of bogies to Vietnam under bond. The scrap generated during the production of these bogies are not eligible for benefit of notification No. 89/95 CE. Duty on such scrap has already been paid by the assessee. Same was the subject matter of another adjudication proceedings by Additional Commissioner vide order-in-original dated 8.3.02. Now, the demand confirmed by the impugned order is totally untenable. The original authority mixed up the issues of duty liability on slitting CR sheets, captive consumption of CR sheets, scrap generated during the manufacture of railway coaches and the applicability of captive consumption of CR sheets and exemption under Notification No. 89/95 CE for waste and scrap of iron and steel. While dropping the demand of HR /CR coils, the adjudicating authority did not examine and properly appreciate the facts relating to duty liability of scrap. Except the one instance of export of 72 bogies to Vietnam, the assessee did not have any further export or dutiable clearance. Hence, the question of denying exemption of whole of waste and scrap generated during the whole impugned period is totally unsustainable.

5. During the course of argument, the learned Counsel for the assessee categorically stated that Revenue authority has taken the total value of scrap generated and cleared during the while of impugned period which is totally incorrect and against the provisions of notification No. 89/95 CE. The denial of exemption for waste and scrap in respect of those scrap attributable to non-exempted clearance of final product (railway bogies) has already been settled by the adjudication order of Additional Commissioner and duty stands discharged by the assessee.

6. Learned AR reiterated the findings of the original authority and stated that export goods cannot be considered as exempted goods and hence, the conditions of notification No. 89/95-CE has not been fulfilled. Accordingly, he reiterated that the demand has been rightly confirmed on waste and scrap generated by the assessee.

7. We have heard both the sides and examined the appeal records.

8. We find that the original authority in para 29 of his order stated that Range Superintendent informed that as per records during the period 4/97 to 3/05 the assessee cleared one time 72 bogies for export to Vietnam under bond. The original authority concluded that the assessees are engaged in the manufacture of goods which were not exempted and hence exemption under Notification No. 89/95 is not admissible to them. We find that such summary finding by the adjudicating authority to deny the exemption available to waste and scrap for the whole 8 years period on the ground of one time export of 72 bogies by the assessee is legally untenable. It is nobodys case that even a single time clearance of dutiable item will disentitle the exemption on scrap for all time. Apparently, this is the effect of original order as the demand on scrap was confirmed for the whole impugned period denying the exemption. Such denial of exemption is not supported by legal provision when the assessee have all along manufactured and cleared railway coaches on exemption for home consumption except for one consignment of export. There is no other finding to the effect that the assessee has been clearing non-exempted goods so as to deny the exemption available to waste and scrap. We also find that in a separate proceedings the duty on waste and scrap attributable to coaches exported out of India have been confirmed and the amount has already been paid by the assessee. We find that the original authority in that order categorically found that the assessee are liable to pay Central Excise duty of Rs.5,81,185/- on waste and scrap arising from the manufacture of 72 bogies cleared by them under bond without payment of duty to Vietnam. He also noted that the said duty stand paid by the assessee on 25.5.2002. In this background, we find the confirmation of demand by the present impugned order on the waste and scrape on this ground again is untenable and requires to be set aside. Considering the above discussions and findings, we allow the appeal of the assessee. As the appeal of the assessee has been allowed, the Revenue appeal for enhancement of the penalty is also disposed of.

( operative part of the order pronounced in the open court )

( Ashok Jindal ) Member(Judicial)

( B Ravichandran )

Member(Technical)

ss

2