M/S. Ums Radio Factory, Unit I & Unit Ii vs Cce, Coimbatore

(Arising out of Order-in-Appeal No. 83 & 84/2005-CE dated 30.03.2005, passed by the Commissioner of Central Excise (Appeals), Coimbatore).

For approval and signature

Honble Shri R. PERIASAMI, Technical Member

M/s. UMS Radio Factory, Unit I & Unit II : Appellants

Vs.

CCE, Coimbatore : Respondent

Appearance

Shri J. Shankararaman, Adv., for the applicant Shri M. Saravanan, Consultant, for the applicant

Shri R. Subramaniyan, AC (AR) for the respondent

CORAM

Honble Shri R. PERIASAMI, Technical Member

Date of Hearing/Decision: 26.03.2015

FINAL ORDER No. 40351-40352 / 2015

The appellants filed miscellaneous applications for change of cause title of the company from UMS Radio factory Limited to UMS Technologies Ltd. They have produced a certificate of incorporation issued by the Registrar of Companies, Coimbatore dated 21.10.2005. Accordingly, change of cause title from UMS Radio Factory Limited to UMS Technologies Limited is allowed. Miscellaneous applications are disposed of. After dispensing miscellaneous applications the appeals are taken up for disposal.

2. Both the appeals are arising out of a common order in appeal and common adjudication order. The brief facts of the case are that the appellants are registered with the Central Excise for manufacture of electronic items such as antenna, booster, stabilizer etc. They have two units ie., unit-I and unit-II both are located in two different premises at Coimbatore. Unit-I imported five machines during the year 1997-1999, two in 1997 and three in 1999. They duly filed intimation under 57(1) before purchase and receipt of the machines on 05.08.97 and 24.08.99 respectively and intimated shifting these machines to their unit-II. They have not availed the capital goods credit. The machines were used in Unit -II for carrying out job work for unit-I till 15.11.97-23.07-99 and 30.08.99 respectively. Subsequently, unit-II returned these five machines to unit-I in July99 and August99 and unit-I took credit amounting to Rs. 29,34,781/- on the CVD paid. These machines were once again shifted to unit-II after reversal of the entire credit. The department issued show cause notice dated 2.9.2004 demanding irregular availment of credit and also proposal for penalty under 123Q and 209A.

3. The adjudicating authority in his order dated 29.12.2004 disallowed the credit and also imposed equivalent penalty on unit-I under Rule 173Q, and imposed penalty of Rs. 6,00,000/- on unit-II. Aggrieved by this order the appellant preferred an appeal and the lower appellate authority in his impugned order rejected the appeal of the first appellant and modified and reduced the penalty from Rs. 6,00,000/- to Rs. 1,00,000/- on the second appellant.

4. Heard both sides.

5. The Ld. Advocate for the appellant submitted a flow chart of sequence of events from the date of importation of the machines till the last transfer to unit-II. He submits that both the unit-I & II are located on the same road. They duly intimated the importation of capital goods to the jurisdictional Asst. Commissioner, Central Excise under Rule 57(T) (1), it was duly acknowledge by the department. He submits that even though they have shifted the said capital goods to unit-II, the unit-I not availed any modvat credit. Only in July,99 when they received the capital goods from unit-II, they availed the credit on 02.08.99 and 30.08.99 and not utilized the credit as they have transferred the capital goods to unit-II in July99 by reversing the entire credit. He submits copy of invoice No.2502013312, which was acknowledged by the jurisdictional Asst. Commissioner. He further submits that they also filed monthly returns for the month of July and August, wherein the details of credit and debit of capital goods was duly stated in the returns. He further submits that both unit-I and unit-II belongs to the appellants company and they have not violated any law. He submits that Rule 57(2)(8) of CER provides for removal of capital goods from the factory either for home consumption or for export on payment of appropriate duty before installation of the capital goods and they have removed the capital goods prior to the installation and reversal of the credit. There was no dispute on unit-II availing the said capital goods credit. Imposition of penalty on unit-II is not sustainable as they have received the capital goods and availed the credit. He relied upon the decision of the Tribunal in the case of Pooja Forge Ltd. Vs. CCE, Faridabad  2006 (196) ETT 18 (Tri.-Del.).

6. The Ld. AR for the department reiterated the findings in the adjudication order and also Para 6.1, 6.5 and 6.5 of the in the impugned order. He submits that the lower authority has clearly dealt the issue that the appellants were never received the capital goods in their factory and availed the credit only on paper. Therefore, he pleaded that the impugned order to be upheld.

7. I have carefully considered both the submissions and the records. The short issue to be decided in this case is wrong availment of modvat credit availed by the first appellant on capital goods received and not used by them and subsequently reversed when cleared to second appellant and whether they violated Rule 57Q and 57(T) of CER. There is no dispute on the fact that both unit-I and unit-II of the appellants having common PAN No., filing common income-tax returns, common profit and loss accounts etc. The adjudicating authority and the lower appellate authority held that unit-I availed credit without receipt of capital goods in their factory. All the intimations find under Rule 57(T) were only created on paper. On perusal of records I find that the appellants duly intimated the Department prior to the importation of capital goods, which is mandatory for availing capital goods credit. They have also intimated that the said capital goods were shifted to unit-II which is on record. The allegation made in the adjudication order and in the impugned order that the appellants have not received the capital goods is not well founded with any supported evidence.

There is no verification report either from the Range Superintendent or from the division authorities concerned after the receipt of the first intimation in 1997 & 1999. Without any investigation and proof of evidence contrary to the intimation and documents on record the adjudicating authority concluded that there is no receipt of capital goods in unit-I. I find that even though the capital goods were imported in the year 1997 and 1999, there is no record on availing credit either by unit I or unit II. The first appellant had availed the credit for the first time when the said capital goods returned from unit-II on 2.8,.99 and on 30.8.99. Even though they have availed the capital goods credit on the above dates, they immediately filed the declaration under Rule 57S(2) on 30.8.99, and intimated to the jurisdictional Asst. Commissioner, which was duly acknowledged by the Asst. Commissioner. I find that the Deputy Commissioner of Central Excise vide letter 7.9.99 intimated the appellant unit 1 acknowledging intimation and directed the Range officer, Coimbatore to verify the correctness of the duty payment under the above mentioned Rule and report this office immediately.

There is no dispute on the fact that the appellants have reversed the entire credit availed by while shifting on 30.08.99 to their unit-II, which is clearly reflected in the invoice dated 31.08.99 and the appellants have paid the duty by reversal of RG23) part2 006 on 31.08.99. It is further supported by RT12 returns filed for the month of August99 wherein both availment of debit of RG23 (c) part 2 has been reflected in the returns. Rule 57Q (8) clearly stipulates removal of capital goods before being installed in the factory on payment of appropriate duty. In the present case, appellants have removed the capital goods from unit-I to unit-II without installing the same and reversed the entire credit. Therefore, reversal of credit is in conformity with Rule 57Q(8) of CER,1944. In the case of Pooja Forge Ltd (supra), on identical issue the DB of the Tribunal has allowed the credit on capital goods where the capital goods were removed from unit-I to unit-II of the appellants own units. Para 4 of the said order is reproduced as under:

4. A perusal of the records makes it clear that capital goods were moved only between the appellants own units and that too for use in the manufacture of the same final products. The case does not involve any disposal or alienation of Modvated capital goods, which would warrant return/denial of modvat credit. There is no justification for denying the credit. Imposition of penalties were also unjustified. In these circumstances, the impugned orders are set aside and appeals are allowed with consequential relief to the appellants.

This Tribunals order was upheld by the Honble High Court of Punjab & Haryana and dismissed the Revenue appeal. Ratio of the above decision is squarely applies to the facts of the present case. By respectfully following the above decision I hold that the appellants followed the procedure correctly in conformity with Rule 57Q, 57(T) and 57(S) and rightly availed and reversed the same at the time of removal of capital goods to their unit-II. Accordingly, the impugned order disallowing credit availed against the first appellant and imposition of equivalent penalty is set aside. Consequently, the penalty on the second appellant does not survive and the same is set aside. Both the appeals are allowed and the impugned order is set aside.

(Order pronounced and dictated in the open Court)

(R. PERIASAMI) TECHNICAL MEMBER

BB

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