M/S Synpol Products Ltd vs Commissioner, Central Excise & Service ...

Appeal No.E/445/2012 [Arising out of OIA No.145/2012-AHD-II-CE/MM/COMMR-A-/AHD, dt.20/04/2012, passed by Commissioner (Appeals), Central Excise & Customs, Ahmedabad]

M/s Synpol Products Ltd Appellant

Vs

Commissioner, Central Excise & Service Tax, Ahmedabad-II Respondent

Represented by:

For Appellant: Shri P.M. Dave, Advocate For Respondent: Shri G. Jha, Authorised Representative

For approval and signature:

Honble Mr. H.K. Thakur, 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. H.K. THAKUR, MEMBER (TECHNICAL)

Date of Hearing/Decision:08.06.2015

Order No. A/10767 / 2015, Dt.08.06.2015

Per: H.K. Thakur

This appeal has been filed by the Appellant with respect to the OIA No.145/2012-AHD-II-CE/MM/COMMR-A-/AHD, dt.20/04/2012 passed by the First Appellate Authority. The issue involved in the present proceedings is whether the extended period of limitation under proviso to Section 11A of the Central Excise Act, 1944 is applicable and whether the demand within the period of limitation is demandable from the Appellant in view of the doctrine of revenue neutrality.

2. Shri P.M. Dave, learned Advocate appearing on behalf of the Appellant argued that the Appellant had cleared certain Cenvatable inputs under CT-3 certificates to their 100% EOU without reversal of CENVAT Credit. It was his case that the period of demand is from 2005-06 to December 2009. The learned Advocate argued that during the period, the case laws like Lakshmi Synthetic Machinery Mnfrs. Ltd Vs CCE Coimbatore [2005 (184) ELT 109 (Tri-Che.)] and Gharda Chemicals Ltd Vs CCE Pune-II [2006 (196) ELT 325 (Tri-Mum)] were applicable according to which it was held if the inputs are supplied to 100% EOU in terms of CT-3 certificates without payment of duty, then no CENVAT Credit was required to be disallowed under Rule 3 & 4 of the CENVAT Credit Rules, 2004. That only after the Larger Bench judgment of Chennai Bench in the case of Lakshmi Automatic Loom Works Ltd Vs CCE Trichy [2008 (232) ELT 428 (Tri-LB)], it was held that removal of inputs to 100% EOU require reversal of CENVAT Credit taken on the inputs. The learned Advocate did not argue the admissibility of CENVAT Credit on merit in view of the Larger Bench judgment mentioned above, but argued that the extended period cannot be made applicable where the issue is decided by the Larger Bench as per the judgment of Honble Gujarat High Court in the case of CCE & C. Vs Mafatlal Industries Ltd [2010 (256) ELT 536 (Guj.)].

2.1 So far as the demand within the period of limitation is concerned, it was argued by the learned Advocate that due to revenue neutrality, the demand cannot be confirmed even within the period of limitation as the Appellant and its 100% EOU belong to the same group of companies and CENVAT Credit reversed by the Appellant would have been admissible as CENVAT Credit to 100% EOU or refund was admissible to the 100% EOU under Rule 5 of CENVAT Credit Rules, 2004. It was his case that no demand is required to be confirmed within the period of limitation as per the following case laws:-

i) Savita Polymers Ltd Vs CCE Raigad [2009 (240) ELT 616 (Tri-Mum)]

ii) Motif India Pvt.Ltd. Vs CST Ahmedabad Order No.A/10297/2015, dt.20.03.2015

iii) Jayshree Instruments Pvt.Ltd. & Others Vs CCE Ahmedabad-III Order No.A/927-928/WZB/AHD/2012, dt.03.07.2012

2.2 The learned Advocate made the Bench go through the Para 3 of the Order dt.03.07.2012 passed by this Bench in the case of Jayshree Instruments Pvt.Ltd. & Others Vs CCE Ahmedabad-III (supra) to argue that no demand can be confirmed within the period of limitation on revenue neutrality.

3. Shri G. Jha, Authorised Representative appearing on behalf of the Revenue, argued that the extended period in this case is applicable as the Appellant at no stage of the proceedings has mentioned in the invoices that the inputs are cleared as such, to their 100% EOU. On the issue of revenue neutrality, the learned Authorised Representative argued that as per Order of CESTAT Mumbai in the case of Automotive Stampings & Assemblies Ltd Vs CCE, Pune-I [2015-TIOL-836-CESTAT-MUM], revenue neutrality is not applicable on the ground that the recipient of the goods is eligible to CENVAT Credit.

4. As a counter to the arguments made by learned Authorised Representative, the learned Advocate appearing on behalf of the Appellant made the Bench go through Para 5 of the order passed by CESTAT Mumbai in the case of Automotive Stampings & Assemblies Ltd Vs CCE, Pune-I to argue that in that case before CESTAT Mumbai, the extended period was held to be invokable and it was held that the revenue neutrality is not applicable in every situation. It was argued by the learned Advocate that in their case, the extended period is not applicable as they have cleared the inputs under CT-3 certificate with due intimation/approval of the jurisdictional Central Excise officer and that in their case, the revenue neutrality will be applicable as per the order dt.03.07.2012 passed by this Bench in the case of Jayshree Instruments Pvt.Ltd. Vs CCE Ahmedabad-III.

5. Heard both the sides and perused the case records. The issue involved in the present proceedings is whether extended period of five years as per the proviso to Section 11A of Central Excise Act, 1944 is applicable or not. The Appellant was clearing the certain inputs from their DTA unit to their 100% EOU under CT-3 certificate under Form ARE-3, with due approval of the jurisdictional Superintendent of Central Excise. As per the case law of Lakshmi Synthetic Machinery Mnfrs. Ltd Vs CCE Coimbatore (supra), Gharda Chemicals Ltd Vs CCE Pune-II (supra) available during the disputed period, CENVAT Credit was not required to be reversed when the inputs are cleared as such under a CT-3 certificate to a 100% EOU. The Appellant was following the procedure of not reversing the CENVAT Credit under a bonafide belief that such a credit/duty is not required to be reversed/paid. Only after the Larger Bench judgment in the case of Lakshmi Automatic Loom Works Ltd Vs CCE Trichy (supra), delivered on 10.10.2008, it was held that CENVAT Credit taken by a DTA unit will be required to be reversed when the inputs are cleared as such to a 100% EOU. The period involved in the present appeal is from 2005-06 to December 2009 and the show cause notice has been issued on 14.05.2010. It has been held by the jurisdictional Honble High Court in the case of CCE & C. Vs Mafatlal Industries Ltd (supra) that extended period is not applicable in a situation, where the matter is subsequently decided by the Larger Bench of the Tribunal. Para 7 of this judgment is reproduced below:-

7. The Tribunal in? its impugned order has found that on merits the order of Commissioner (Appeals) cannot be upheld in view of the decision of the Supreme Court in the case of Collector of Central Excise v. Solaris Chemtech Ltd. , 2007 (214) E.L.T. 481. The Tribunal however found that the show cause notice had admittedly been issued after the normal period of limitation; that during the relevant period, there was a decision of the Larger Bench of the Tribunal as well as of this High Court in favour of the assessee and was accordingly of the view that as such it cannot be said that there was any suppression or mala fide on the part of the respondent so as to justify invocation of the larger period of limitation. Accordingly, while holding in favour of the revenue on merits, the Tribunal dismissed the appeal on the ground that the demand had been raised beyond the period of limitation.

5.1 In the present appeal also, there were favourable judgments wherein it stood decided during the disputed period that the CENVAT Credit by the DTA unit is not required to be reversed/paid when the inputs are cleared under CT-3 certificate by DTA unit to a 100% EOU.

6. In view of the above observations and settled proposition of law, the demand beyond the period of one year from the date of clearance is not sustainable and is required to be dismissed as time barred.

7. So far as the non-payment of demand within the period of limitation on revenue neutrality is concerned, the learned Authorised Representative relied upon the case law of Automotive Stampings & Assemblies Ltd Vs CCE, Pune-I (supra) to argue that revenue neutrality cannot be accepted in each and every situation. It is observed from Para 5 of this case law that CESTAT Mumbai, after quoting the provisions of Rule 6 of Central Excise Valuation Rules, 2000, has held that there was a suppression with intention to evade duty and that the extended period was clearly applicable. Accordingly, it was held that the demand cannot be dropped on account of revenue neutrality. The learned Advocate appearing on behalf of the Appellant relied upon the order dt.03.07.2012 passed by this Bench in the case of Jayshree Instruments Pvt.Ltd. Vs CCE Ahmedabad-III (supra), wherein following observations were made by this Bench in Para 3 of the order:-

3. We have considered the submissions made by both sides. We find that in this case, the appellant did not include the cost of inputs supplied by the principal even though they availed CENVAT Credit on the same and removed the goods manufactured for the principal manufacturer on payment of duty. We find that the facts involved in this case are similar to the facts in the case of Narmada Chematur Pharmaceuticals Ltd (supra) wherein the availment of CENVAT Credit was questioned. Honble Supreme Court took a view that the situation was revenue neutral and therefore no duty was payable. In the case of Reliance Industries Ltd (supra) also, a similar view was taken and it was held that where the buyers took CENVAT Credit of duty paid by Reliance Industries Ltd (supra), situation was revenue neutral and therefore under-valuation was not sustained. Other decisions cited by the learned Counsel also support this view. As regards the decisions in the case of Jay Yuhshin Ltd (supra), in the case of Reliance Industries Ltd, it was cited and was not followed since the appeal filed by Jay Yuhshin Ltd in the Supreme Court was allowed, setting aside the demand and penalty. The issue involved in the case of Baba Asia Ltd, was entirely different as can be seen from the observation of the Tribunal If the duty was required to be paid on 01.01.008, on account of litigation, the payment was delayed merely because, on that day, the Appellant had some credit available in his account, if sought to be utilized in 2010, certainly in such situation, it cannot be said that the relief would be of a revenue neutral situation. These observations would show that the facts were peculiar to that case and cannot be applied to the present case.

6.1 From the above observations of this Bench, the demand has been held to be not sustainable on account of revenue neutrality by relying upon the judgment in the case of Commissioner, C.Ex. & Cus, Vadodara Vs Narmada Chematur Pharmaceuticals Ltd [2005 (179) ELT 276 (SC)] and Commissioner of C.Ex., Pune Vs Coca Cola India Pvt.Ltd [2007 (213) ELT 490 (SC)]. It is observed from the above case laws decided by the Honble Apex Court that it is not clear whether the extended period was invokable in these cases. It is further observed from the provisions of Rule 9(1)(b) of CENVAT Credit Rules, 2004 that CENVAT Credit is not admissible on a supplementary invoices where non-levy or short levy takes place on account of reason of fraud, collusion, or any willful mis-statement or suppression of facts. In case, the extended period is held to be invokable, then the recipient of the inputs will not be eligible for CENVAT Credit and in such a situation, it will not be the case of revenue neutrality. The case before CESTAT Mumbai in Automotive Stampings & Assemblies Ltd Vs CCE, Pune-I (supra) belonged to a category where the extended period was held to be admissible by CESTAT Mumbai and it was held that revenue neutrality is not applicable. However, in the present case of the Appellant, it has already been held that the extended period is not invocable because of favourable views expressed by CESTAT cases on the issue relied upon by the Appellant. The present case will, therefore, be squarely covered by the order dt.03.07.2012 passed by this Bench in the case of Jayshree Instruments Pvt.Ltd. Vs CCE Ahmedabad-III (supra) and accordingly, it is held that the demand within the period of limitation is not sustainable on revenue neutrality as held by Honble Supreme Court in the case of Commissioner, C.Ex. & Cus, Vadodara Vs Narmada Chematur Pharmaceuticals Ltd (supra) and Commissioner of C.Ex., Pune Vs Coca Cola India Pvt.Ltd (supra). As on merit, the issue has been decided in favour of the Appellant, therefore, the interest and the penalty imposed on the Appellant are also required to be set aside.

7. In view of the above, the appeal filed by the Appellant is allowed with consequential relief, if any.

(Dictated and pronounced in Court)

(H.K. Thakur) Member (Technical)

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