M/S. Shah Paper Mills Limited vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIA-CS/09-10/DMN/VAPI-I/2012-13 dated 04.05.2012, Passed by Commissioner (Appeals) Central Excise, & S.T., Daman)

M/s. Shah Paper Mills Limited : Appellant (s) Shri Hemant Modi

VERSUS

Commissioner of Central Excise & S.T., Daman : Respondent (s)

Represented by :

For Appellant (s) : Shri Mayur Shroff, Advocate For Respondent (s) : Shr J. Nair, Authorised Representative

For approval and signature :

Mr. H.K. Thakur, Honble Member (Technical)

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. H.K. Thakur, Honble Member (Technical)

Date of Hearing / Decision : 22.06.2015

ORDER No. A/10850-10851/2015 Dated 22.06.2015

Per : Mr. H.K. Thakur;

These appeals have been filed by the appellants against OIA No. OIA-CS/09-10/DMN/VAPI-I/2012-13 dated 04.05.2012 under which OIO No. 01/OA/Adj/SNA-Addl/2011-12 dated 26.04.2011 was upheld. Adjudicating authority vide OIO dated 26.4.2011 disallowed CENVAT credit of Rs. 12,19,605/- to the main appellant M/s. Shah Paper Mills Limited (Unit-3) Vapi and confirmed the demand alongwith interest. Equivalent penalty of Rs. 12,19,605/- was also imposed by the Adjudicating authority upon the main appellant and a penalty of Rs. 4,00,000/- was imposed upon the other appellant Shri Hemant G. Modi, Director of the main appellant, under Rule 15(1) of the Cenvat Credit Rules.

2. Shri Mayur Shroff (Advocate) appearing on behalf of the appellants argued that the main appellant is the manufacturer of, inter-alia, kraft paper from waste paper. That cenvat credit with respect to duty paid on the waste kraft paper received from M/s. Shah Pulp and Paper Mills Limited (SPPML, Vapi), was taken on the basis of proper duty paying documents. That appellant is not at all aware whether the processes of segregation of imported paper scrap amounts to manufacture or not. That the kraft paper obtained by the main appellant was derived from segregation of imported waste paper on which it is alleged that no CVD was paid as per Notification No. 21/2002-Cus dated 01.3.2002. It was his case that it is wrongly held by the first appellate authority that once CVD was not paid then main appellant was not entitled to take CENVAT credit. That the statement of Shri Hemant G. Modi, Director of the main appellant, recorded on 24.8.2009 and 15.3.2010 during investigation clearly convey that 16% CENVAT shown by M/s. SPPML was actually CVD for which credit was taken as such waste kraft paper was not eligible to exemption from CVD under Notification No. 21/2002-Cus dated 01.3.2002. That both CVD and CENVAT were leviable at the rate of 16% ad-velorem. Learned Advocate relied upon the following case laws in support of his argument that CENVAT that credit can not be denied, at the time of taking credit when duty paid nature of the inputs was established:-

(a) CCE, Mumbai-III vs. GKW Limited  [2014 (308) ELT 759 (Tri. Mumbai)]

(b) CCE, Ahmedabad III vs. Nahar Granites  [2014 (305) ELT 9 (Guj.)]

2.1 That in view of the ratio of following case laws the duty payment particulars can not be challenged at the end of input recipients:-

(a) Kerala State Electronic Corporation vs. Collector of Central Excise, Kochi  [1996 (84) ELT 44 (Tribunal)]

(b) Tata Oil Mills Company Limited vs. CCE, Cochin  [1997 (91) ELT 144 (Tribunal)]

(c) CCE & Customs vs. MDS Switchgear Limited  [2008 (229) ELT 485 (SC)] It was also argued by the learned Advocate that for any improper duty paid by M/s. SPPML without appellants knowledge, the appellant can not be denied CENVAT credit and extended period can not be invoked in the present proceedings. He made the Bench go through ground (h) of the appellants grounds of appeal.

3. Shri J. Nair (AR) appearing on behalf of the Revenue argued that segregation of imported scrap does not amount to manufacture hence no CENVAT was required to be shown on the invoices. That main appellant has not taken sufficient precautions to check that input obtained were not required to discharge duty and that extended period is invokable. Learned AR thus strongly defended the orders passed by the first appellate authority.

4. Heard both sides and perused the case records. The issue involved is whether main appellant was eligible to take credit on the basis of cenvatable documents showing payment of duty. It is the case of the Revenue that such waste kraft paper was obtained by segregation of imported scrap and that the process of segregation of waste paper does not amount to manufacture. The crucial fact required to be seen is whether the main appellant should have enquired beyond the cenvatable document showing payment of duty that whether the inputs were due to the result of manufacture or not. It is observed from the case records that an assessee taking cenvat credit is not required to go beyond the cenvatable document to know as to how it has arisen. What input recipient is required to verify is that the supplier of raw material is genuine and proper duty is paid. In the present case, both the conditions are fulfilled. In the case of CCE Ahmedabad-III vs. Nahar Granites (supra) in Para 8 and 9 held as follows:-

8.?In terms of Rules 3 and 4 of the Cenvat Credit Rules, 2004, a manufacturer would be entitled to avail the Cenvat credit in respect of the inputs used for the manufacture of a final product or in providing taxable service of the excise duty specified in First Schedule to the Excise Tariff Act. Insofar as the respondent is concerned, he had purchased the inputs and utilised the same for manufacture of a final product. Such goods were duty paid. Rules 3 and 4 of the Cenvat Credit Rules, 2004, thus would enable him to avail the Cenvat credit. It is a different thing that the supplier of the goods to the respondent paid excise duty on such product under mistaken belief. In law as declared by the Supreme Court in case of Collector of Central Excise, Patna v. Tata Iron and Steel Co. Ltd. (supra), no duty was payable on such product. Strictly speaking therefore, such amount deposited by the original manufacturer would not partake the character of excise duty. However, when the department did not dispute the classification of such manufacturer, accepted the declarations and duties, Cenvat credit on such duty cannot be declined to the purchaser of the goods who otherwise fulfilled all conditions tor availing Cenvat credit thereof.

9.?Case is substantially similar to one before the Supreme Court in case of MDS Switchgear Ltd. (supra). In the said case, the Tribunal while accepting the departments allegation of inflation of the value of intermediate goods to load the assessable value, observed that if the department was of the opinion that the value of the final product was depressed, it could have charged the original manufacturer unit in under-invoicing their product. This was however, not done. Valuation was duly approved and the payment of duty was also accepted. The Tribunal further observed that We find absolutely no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into deposit of duty. There is no legal basis for such presumption. The rules entitled the receipt manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers in charge of recipient unit. 4.1 In the above case law also it is held that even if duty was not required to be paid by the manufacturer still credit can not be denied to the recipient when Revenue did not dispute the classification of such manufacture, accepted the duty so paid. It was also held that duty already determined by the jurisdictional officer of the supplier unit can not be contested or challenged by the officers in the charge of the recipient unit. In the case of CCE & Cus vs. MDS Switchgear Limited (supra) Hon'ble Apex Court has also held that quantum of duty already determined by jurisdictional officers of the supplier unit can not be contested or challenged by officer Incharge of recipient units. Apex Court in Para 7 of this order held as follows:-

7.?The Tribunal has come to the conclusion that in fact there was no loss of revenue. It accepted the appeal by recording the following reasons :

Reasons given by the appellants for the alleged inflation of the value of the intermediate goods are logical. What was required of the Commissioner was to examine the quantum of the loading of the assessable value by the Modvat credit on the earlier inputs. That exercise has nowhere been done. If the department was of the opinion that the value of the final product was depressed, then they could have charged the Jalgaon unit with under-invoicing of their product. That has also not been done. The valuation as given by the Sinnar unit was duly approved by the department and the payment of duty was also duly accepted. We find absolutely no substance in the attempt of the learned Commissioner to convert a part of the duty so paid into deposit of duty. There is no legal basis for such presumption. The rules entitled the receipt manufacturer to avail of the benefit of the duty paid by the supplier manufacturer. A quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers in charge of recipient unit [2000 (38) RLT 179].

5. In the present appeal also duty paid on the waste kraft paper was accepted by the officer Incharge of the supplier unit M/s. SPPML. Appellant was not expected to know beyond the facts that inputs they received are covered under a valid duty paying documents. The ratio laid down in the above case laws relied upon by the main appellant is squarely applicable to the facts and circumstances of this case. On merit appellant was eligible to take CENVAT credit.

6. On the issue of time bar, it is observed that the show cause notice was issued on 05.04.2010 for the period March 2005 to March 2007. No evidence could be brought on record that the main appellant and its Director were aware that inputs received was as a result of an activity not amounting to manufacture. The demand issued is clearly time barred as extended period is not imposable in this case and no penalties can be imposed upon the appellant.

7. In view of the above observations and settled proposition of law, appeals filed by the appellants are allowed.

(Order dictated and pronounced in the Court)

(H.K. Thakur) Member (Technical) .KL

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