M/S Vvf Limited vs Commissioner, Central Excise & Service ...

Appeal No.E/729/2008 [Arising out of OIA No.KKS/115/Daman/2008, dt.12.02.2008, passed by Commissioner (Appeals), Central Excise & Service Tax, Vapi]

M/s VVF Limited Appellant

Vs

Commissioner, Central Excise & Service Tax, Daman Respondent

Represented by:

For Appellant: Shri Vishal Agarwal, Ms.Dimple Gohil - Advocates For Respondent: Shri Alok Srivastava, Authorised Representative

For approval and signature:

Honble Mr. P.K. Das, Member (Judicial)

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)

Date of Hearing/Decision:27.03.2015

Order No. A/10292 / 2015, dt.27.03.2015

Per: P.K. Das

1. The relevant facts of the case, in brief, are that the appellants were engaged in the manufacture of Toilet Soaps, Shampoo, Shaving Cream, Lotion, Stearic Acid, Hydrogenated Oils etc classifiable under Chapter 15, 34, 38 and 33 of the Central Excise Tariff Act, 1985. They received the Fatty Acids, Soap Noodles from their sister unit at Mumbai for use in the manufacture of their final product. It was found that their sister unit failed to pay the duty on the cost of escalation. As per Order dt.25.11.2005, the sister unit paid the differential duty of Rs.10,36,468.00 and raised the supplementary invoice to the appellant. The appellant availed CENVAT Credit of Rs.10,36,468.00 on the basis of the supplementary invoices dt.16.01.2006 and 19.01.2006 issued by the sister unit. A Show Cause Notice dt.16.01.2007 was issued, proposing to disallow the CENVAT Credit availed on the basis of supplementary invoices in contravention of the provisions of Rule 9(b) of CENVAT Credit Rules, 2004 alongwith interest and to impose penalty. The Adjudicating Authority confirmed the demand of CENVAT Credit of Rs.10,36,468.00 alongwith interest and imposed penalty of equal amount of CENVAT Credit. The Commissioner (Appeals) upheld the Adjudication order.

2. The learned Advocate on behalf of the Appellant submits that it is a case of stock transfer and there is no sale. Therefore, Rule 9(b) of said Rules cannot be invoked. In this context, the learned Advocate drew the attention of the Bench to the relevant portion of the Adjudication order. He strongly relied upon the decision of Honble Karnataka High Court in the case of M/s Karnataka Soaps & Detergents Ltd Vs Commissioner of Central Excise, Mysore  2010 (258) ELT 62 (Kar.).

3. On the other hand, the learned Authorised Representative for the Revenue submits that in the instant case, the sister unit at Mumbai sold the goods to the Appellant and the said decision would not be applicable in the present case. He relied upon the decision of the Tribunal in the case of Commissioner of Central Excise & Customs, Daman Vs M/s Mangalam Drugs & Organics Ltd  2007 (208) ELT 95 (Tri-Mum.). In that case, the Tribunal allowed the appeal of the Revenue as there was suppression of facts, while issuing the supplementary invoices. He also submits that there is no indication that it is case of stock transfer.

4. After hearing both the sides and on perusal of the records, I find from the Adjudication order that the Appellant availed CENVAT Credit of Rs.10,36,468.00 on the basis of supplementary invoices issued by their sister unit at Mumbai. Commissioner of Central Excise, Mumbai has passed an order dt.25.11.2005 to their sister unit at Mumbai demanding differential duty of Rs.10,36,468.00 as the Mumbai unit failed to correctly determine the assessable value in respect of the goods declared to their sister unit (i.e. the Appellant herein). It was observed that since mis-declaration of the amount was admitted by the Mumbai unit, the extended period of limitation would be invoked. But, Mumbai unit paid duty and issued supplementary invoice to the sister unit.

5. The main contention of the learned Advocate is that it is a case of transfer of the goods from one unit to another and therefore, there cannot be sale.

The learned Authorised Representative for the Revenue submits that the Appellant had not taken any categorical stand that there is no sale. On perusal of the impugned order, it is evident that the Appellant received the goods from their sister unit. Revenue has not disputed this fact. Thus, it is obvious that there cannot be sale in inter unit stock transfer of the same Company. Honble Karnataka High Court in the case of M/s Karnataka Soaps & Detergents Ltd (supra) in the context of Rule 7(1)(b) of CENVAT Credit Rules, 2002 pari materia to Rule 9(1)(b) of the CENVAT Credit Rules, 2004 observed that the credit availed on the basis of supplementary invoices in respect of differential duty paid on internal stock transfer of the goods, bar on availment of credit under Rule 7 cannot be invoked as there was no sale. The relevant portion of the said decision is reproduced below:

37.?The revenue has contented that tribunal was in error in holding prohibition under Rule 7(1)(b) will not be applicable to the facts of the case. Per contra Sri. Shivdas would vehemently contend that department/revenue cannot deprive the assessee of taking Cenvat credit of the additional duty paid. When admittedly there is no sale and it was only a stock transfer and hence assessee would not be hit by exclusion clause under Rule 7(1)(b). In order to consider this rival contention Rule 7(l)(b) is required to be extracted. It reads as under :

Rule 7.?Documents and Accounts - (1) The Cenvat credit shall be taken by the manufacturer on the basis of any of the following documents namely : -

(c) xxxxx

(d) A supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provision of Central Excise Rules, 2002 from his factory or from his depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by or on behalf of the said manufacturer or importer, in case additional amount of excise duties or additional duty of customs leviable under Section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty become recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short-levy by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any provisions of the Act or of the Customs Act, 1962 or the rules made thereunder with intent to evade payment of duty.

In order to apply the embargo provided under above rule and deprive the assessee of availing Cenvat credit there should be sale. The documents referred to in Rule 7(1)(b) are illustrative in nature which would demonstrate that duty has been paid or evidencing paying of duty.

6. In the present case, I find that the Department has not disputed the transaction between the Appellant and its sister unit. It is noted that the differential duty was paid for price of escalation, which was paid by sister unit. Hence, the decision of Honble Karnataka High Court in the case of Karnataka Soaps & Detergents Ltd (supra) would be applicable in the present case. As the decision of Honble High Court is directly on the issue, the decision of Mumbai Tribunal as relied upon by the learned Authorised Representative is not applicable.

7. In view of the above discussion, CENVAT Credit taken by the Appellant on the strength of supplementary invoice issued by their sister unit cannot be denied and demand of duty alongwith interest and penalty cannot be sustained. Accordingly, the impugned order is set aside. The appeal filed by the Appellant is allowed.

(Dictated & Pronounced in Court)

(P.K. Das) Member (Judicial)

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