M/S Rhombus Pharma (P) Ltd vs Commissioner, Central Excise & Service ...

Appeal No.E/773/2007-DB; E/Others/10620/2015; E/CO/126/2007 [Arising out of OIO-10/COMMR/2007, dt.20.04.2007, passed by Commissioner of Central Excise & Service Tax, Ahmedabad-III]

M/s Rhombus Pharma (P) Ltd Appellant Vs Commissioner, Central Excise & Service Tax, Ahmedabad-III Respondent

AND

Appeal No.E/872/2007-DB

Commissioner, Central Excise & Service Tax, Ahmedabad-III Appellant Vs M/s Rhombus Pharma (P) Ltd Respondent

Represented by:

For Assessee: Shri D.K. Trivedi, Advocate For Revenue: Dr. J. Nagori, Authorised Representative

For approval and signature:

Honble Mr. P.K. Das, Member (Judicial) Honble Mr. P.M. Saleem, Member (Technical)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

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

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM:

HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) HONBLE MR. P.M. SALEEM, MEMBER (TECHNICAL)

Date of Hearing/Decision: 08.10.2015

Order No. A/11396-11397/2015, dt.08.10.2015

Per: P.K. Das

The Assessee was engaged in the manufacture of Medicines on their own account as well as on behalf of the loan licensee. They availed SSI exemption benefit under Notification No.8/2001, 8/2002 and 8/2003 upto Rs.100 lakhs, on the clearance of the goods on their own account and paid duty in respect of clearance of the goods bearing brand name of the loan licensee. According to the Revenue, the Appellant is eligible to avail the exemption benefit in respect of the clearance of the goods bearing the brand name of the loan licensee as the factory is situated in rural area.

2. A Show Cause Notice dt.18.01.2007 was issued, proposing demand of duty along with interest and to impose penalty for the period from 2001-02 to 2005-06 on the ground that by clubbing clearance value of the goods being brand name of loan licencee would exceed Rs.100 lakhs. By the impugned order, the Adjudicating authority dropped the proceedings as the Show Cause Notice d.18.01.2007 is barred by limitation and upheld the demand on merit. Hence, the Assessee filed the appeal against the impugned order to the extent the demand of duty upheld. They also filed application for direction on merit. Revenue also filed appeal on the ground that the demand of duty should not be dropped on limitation.

3. After hearing both the sides and on perusal of the records, we find that the Adjudicating authority, had observed on limitation as under:-

30. M/s Rhombus Pharma has submitted that there is no suppression of facts on their part and therefore, the demand is time barred. As far as the question of location of factory in a rural area is concerned, it was known to the Department also. While applying for registration, the location, name of the village/city, taluka, and district were provided to the Department. Moreover, they have filed their ER-1 returns showing the clearances of both branded and un-branded goods. Moreover, if their intention had been to evade duty, they would not have paid duty on the branded goods which are actually exempted. There was no malafide on their part and if at all there was any shortfall in payment of duty, it was due to a difference in interpretation.

31. I agree with these submissions of the noticee. The Department clearly knew about the location of the factory. The information as to whether it falls in a rural area is open to the public and anybody has access to this information. It was open to the Departmental officers to verify about this fact. Moreover, on going through the ER-1 returns filed by the noticee, it is seen that the clearances of the branded goods (on loan licence) and the clearances of the noticees own manufactured goods are separately given. By simply adding the two, the Department could have found what were the total clearances from the unit. The basis of the show cause notice does not contain any information which was in the exclusive possession of the noticee and not the Department. Therefore, it cannot be said that any facts were suppressed from the Department. Therefore, it cannot be said that any facts were suppressed from the Department. In view of the above facts, I am of the opinion that the extended period under Section 11A of Central Excise Act, 1944 cannot be invoked in this case and the entire demand is time barred.

4. We find that the Tribunal on the identical situation, in the case of Pharmanza (India) Vs CCE Vadodara  2009 (237) ELT 488 (Tri-Ahmd) held that extended period of limitation cannot be invoked. It is observed that the Assessees plea that duty paid on branded goods is much more than the duty now being demanded and would revenue neutralize, and the entire demand requires to be verified.

5. In the present case, the learned Advocate submits that in reply to the Show Cause Notice, they demonstrated that they have paid the duty on branded goods much more than the duty demanded. For the purpose of proper appreciation of the case, the relevant portion of the order of the Tribunal in the case of Pharmanza (India) (supra) is reproduced below:-

2.?Revenue contended that as the factory was located in rural area, such branded goods were also entitled to exemption. If that be so, their value is required to be taken into consideration, while arriving at the total clearances in a financial year. When the same is taken into consideration, total clearances exceeded and the appellants are liable to pay the duty on the same.

3.?Learned advocate has assailed the impugned orders on limitation as also on merit. As regards limitation, he submits that the reasoning adopted by Commissioner that the appellants has suppressed the fact that their factory was located in rural area, cannot be upheld inasmuch as the said fact is not capable of being suppressed. Revenue was very well aware of location of their factory and as such, it cannot be said that there was any suppression on their part. Arguing on merit, learned advocate has drawn our attention to the earlier order passed by the Tribunal in case of M/s. Kline Chemicals P. Ltd. (Order No. A/1460/WZB/AHD/2008, dt. 29-7-08), [2009 (237) E.L.T. 405 (T)] wherein after taking note of the Larger Bench decision of the Tribunal in case of CCE, Coimbatore v. M/s. Marutham Textiles (P) Ltd., 2003 (153) E.L.T. 219 (Tri.-LB), it was held that the duty paid on the clearances, which the Revenue has contended to be exempted, should be considered as deposit and said duty is required to be adjusted against the duty now being demanded from the appellant.

4.?By following the ratio of above decision, we agree with the learned advocate. Admittedly, the branded goods have been cleared on payment of duty, which according to Revenue should not have the paid duty. As such, duty already paid on such branded goods is required to be adjusted against the duty now being demanded from the appellant. It is the appellants contention that the duty paid on the branded goods is much more than the duty now being demanded and would neutralize the entire demand, and is required to be verified. For the said purpose, we remand the matter to the original adjudicating authority. We also find favour with the appellants plea of limitation, we direct the Commissioner that such re-quantification exercise is to be done only for the period within limitation.

6. The learned Authorised Representative for the Revenue reiterates the findings of the Adjudicating authority on merit. He submits that the extended period of limitation would be invoked as they have not declared that their factory situated in rural area. He relied upon the following decisions:-

i) Pasupati Spinning & Weaving Mills Ltd Vs CCE Chandigarh 2015 218 ELT 623

ii) Dewas Metal Sections Ltd Vs CCE, Indore 2015 (319) ELT 104 (Tri-Del)

7. In the case of Pasupati Spinning & Weaving Mills Ltd (supra), the Hon'ble Supreme Court dismissed the appeal filed by the Assessee on the ground that they have not declared that they cleared the sewing thread manufactured in the form of hanks in the declaration and RT 12 return being vital documents submitted by the Assessee. In the case of Dewas Metal Sections Ltd (supra), the Tribunal dismissed the appeal filed by the Assessee on the ground that cost of extra raw material was not disclosed in the return and the extended period of limitation would be invoked. In the present case, the Appellant had disclosed the location of the factory, clearance of goods on payment of duty separately in the ER-1 return. In any event, the Appellant cleared the goods bearing brand name of the loan licensee and declared in their ER-1 return. So, the Department was aware of the location of the factory in the rural area. Thus, there is no suppression of facts with intent to evade payment of duty. We also find that the decision of the Tribunal in the case of Pharmanza (India) (supra) is squarely applicable in the present case.

8. In view of the above discussion, the demand of duty for the extended period of limitation cannot be sustained and the Adjudicating authority rightly dropped the demand for the extended period of limitation. The demand of duty with interest for the normal period of limitation is upheld. The learned Advocate contended that they have paid much more duty against the demand, and therefore, the demand of duty for the normal period of limitation would require requantification. Accordingly, we direct the Adjudicating authority to requantify the demand for the normal period of limitation as contended by the Assessee. The appeal filed by the Revenue is rejected. The appeal filed by the Assessee is disposed of in the above terms. The cross objection and the miscellaneous application filed by the Assessee are also disposed of.

(Dictated & Pronounced in Court)

(P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial)

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