M/S. Sujata Chemicals vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIA-SRP/308/VDR-II/2012 dated 15.09.2012, Passed by Commissioner (Appeals) Central Excise, & S.T., Vadodara)

M/s. Sujata Chemicals : Appellant (s)

VERSUS

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

Represented by :

For Appellant (s) : Ms. Harpinder Sandhu, Advocate For Respondent (s) : Shri L. Tendupatra, 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 : 10.06.2015

ORDER No. A/10788 / 2015 Dated 10.06.2015

Per : Mr. H.K. Thakur;

This appeal has been filed with respect to OIA No. SRP/308/VDR-II/2012 dated 15.09.2012.

2. Ms. Harpinder Sandhu (Advocate) on behalf of the appellant argued that appellant is sending Caustic Potash Flakes for job work to two job workers namely M/s. Atlas Pallet Industries and M/s. Vinayak Chemicals for conversion into Potash Pallets. That during conversion of Caustic Potash Flakes into Potash Pallets there is a processing loss of around 10% which is not received back by the appellant. It was her case that the processing loss of 10% is genuine and no CENVAT credit pertaining to processing loss is recoverable from the appellant. She relied upon the case law of Voltamp Transformer Limited vs. CCE, Vadodara  [2014 (302) ELT 586 (Tri. Ahmd.). It was also the case of the appellant that correspondence under letter dated 11.4.2007 was exchanged between the job worker M/s. Vinayak Chemicals and the appellant to the extent that there will be a processing loss of 10%. With respect to imposition of penalty, it was argued by the Advocate appearing on behalf of the appellant that the inputs were cleared for job work under challans and everything was within the knowledge of the department, therefore, penalty cannot be imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

3. Shri Lalatendu Patra (AR) appearing on behalf of the Revenue argued that appellant is sending Caustic Potash Flakes to two job workers for conversion in Potash Pallets. It was argued that in the case of job worker M/s. Atlas Pallet Industries, 100% yield is sent back whereas only in the case of M/s. Vinayak Chemicals there is a processing loss of 10%. He made the Bench go through Para 9 of the Order-in-Appeal dated 15.09.2012 passed by the first appellate authority to argue that there can not be a processing loss in the case of one job worker and 100% yield of Potash Pallets in the case of other job worker. It was also strongly argued by the learned AR that no documentary proof such as Chartered Engineers certificate or any Scientific literature has been produced by the appellant to suggest that there is a processing loss of 10% when Caustic Potash Flakes are converted into Caustic Potash Pallets. On the imposition of penalties, it was argued that the case was detected during the course of audit and penalty has been correctly upheld by the first appellate authority.

4. Heard both sides and perused the case records. The issue involved in the present proceedings is whether cenvat credit on certain inputs, sent by the appellant to the job workers under Rule 4(5) (a) of the Cenvat Credit Rules, 2004, is admissible to the appellant or not. Appellant is sending Caustic Potash Flakes for purification to the two job workers M/s. Vinayak Chemicals and M/s. Atlas Pallet Industries. In the case of job worker M/s. Atlas Pallet Industries, 100% yield of Potash Pallets is the result whereas in the case of M/s. Vinayak Chemicals, a processing loss of 10% is claimed in the yield. Appellant has relied upon the case law of Voltmap Transformers Limited vs. CCE, Vadodara (supra), passed by this Bench wherein it is held that 2% waste and scrap generated at the job workers premises will not result into denial of CENVAT credit. It is observed from the case law relied upon by the appellant that there was no dispute regarding generation of waste and scrap in that case before CESTAT. In the present case, the processing loss of 10% is claimed by the appellant with respect to only M/s. Vinayak Chemicals when no such processing loss is taking place in the case of another job worker M/s. Atlas Pallet Industries for the same process. This aspect has been discussed by the first appellate authority in Para 29 of the Order-in-Appeal dated 15.9.2012. The appellant has not produced any Scientific Literature or certificate from a Chartered Engineer to support their claim that in the process of conversion of Caustic Potash Flakes into Potash Pallets there is a loss of 10% as claimed by the appellant. In the absence of any such documentary evidence, there is no reason to interfere with the order passed by the first appellate authority and the same is required to be upheld in so far as denial of CENVAT credit and interest is concerned.

5. So far as imposition of penalty upon the appellant is concerned, it is observed from the case records that appellant was sending the inputs through challans under Rule 4 (5)(a) of the Cenvat Credit Rules, 2004, therefore the activities undertaken by the appellant and job-workers of the appellant and the processes being carried out with yield were known to the department. As per procedure contained in Rule 4(5)(a) of the Cenvat Credit Rules, if inputs are not received back in the factory within a period of 180 days then CENVAT credit is required to be reversed. In view of the factual matrix of this case, it can not be said that there was any suppression/ mis-statement on the part of the appellant with intent to evade payment of duty. Accordingly, it is held that penalty imposed upon the appellant under Rule 15 (2) of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944 is required to be set-aside.

6. In view of the above observations, appeal filed by the appellant is allowed only to the extent of imposition of penalty as per Para 5 above.

(Order dictated and pronounced in the Court)

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

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