Maharashtra Metal Inds vs Commissioner Of Central Excise, ...

(Arising out Order-in-Original No. 22/CEX/2005 dated 31.03.2005 passed by the Commissioner of Central Excise, Aurangabad)

For approval and signature: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S.S.Garg, Member (Judicial)

1. Whether Press Reporters 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? : Yes 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

Maharashtra Metal Inds. Appellant

Vs.

Commissioner of Central Excise, Aurangabad Respondent

Appearance:

Ms. Manasi Patil, Advocate for the appellant Shri Sanjay Hasija, Supdt. (AR) for the respondent

CORAM:

Honble Shri P.K. Jain, Member (Technical) Honble Shri S. S. Garg, Member (Judicial)

Date of hearing : 08.09.2015 Date of decision : 15.09.2015

O R D E R No:..

Per: P.K. Jain:

The brief facts of the case are that the appellants are engaged in manufacturing of corrugated galvanised sheet from plain galvanised sheet. A demand notice was issued to the appellant for payment of duty on the corrugated galvanised sheets. Appellants were not paying the duty on the ground that the activity does not amount to manufacture. The case was adjudicated. The Commissioner confirmed the demand. Aggrieved by the said order, appellants filed appeal before this Tribunal. This tribunal took the view that the activity of the appellant amounts to manufacture. However, since the activity of the appellant amounts to manufacture, they would be entitled to modvat credit on the inputs. Further, the appellants would be entitled to cum duty benefit and accordingly this Tribunal remanded to the Commissioner for determination of the above two aspects after considering the material to be produced by appellant.

Consequent to the said direction of the Tribunal, impugned order has been passed wherein after extending the benefit of cum duty, the duty amount gets reduced to `46,22,322/-. Further, the Commissioner found that the appellant would be eligible for modvat credit of `43,59,689/-. Thus the effective duty required to be paid by the appellant would be `2,62,633/-. Commissioner in the impugned order confirmed the said amount of `2,62,633/-. Further interest under Section 11A was confirmed and a penalty of `1 lakh was imposed upon the assessee under Rule 173Q of the Central Excise Rules, 1944. Aggrieved by the said order, the appellant are before us.

2. Ld. counsel for the appellant submitted that they are not disputing the duty liability. In fact, immediately within few weeks of passing of the second order, they have deposited the amount of `2,62,633/- on 31.05.2005. However, they are disputing the interest liability and penalty imposed. Ld. counsel submitted that the period involved in the present case is April 1997 to August 1997 and the show-cause notice was issued on 13.10.1997 i.e. normal period. It was submitted that penalty is imposed under Section 11AA and in view of the decision of the Hon'ble Bombay High Court in the case of Blue Star Ltd. 2010 (250) ELT 197 (Bom), no interest is payable. According to the ld. counsel, the Tribunal has set aside the order of the Commissioner and therefore, the order passed initially no more exists and it is only the impugned order dated 31.03.2005 wherein duty has been determined and since they have paid the duty within three months of the order, no interest is chargeable. Ld. counsel drew the attention of the Tribunal to the second para 17 of the said order of the Hon'ble High Court.

2.1. As far as the penalty is concerned, ld. counsel submitted that as early as 1973 in the case of Sri Durga Hardware Stores Hon'ble High Court of Andhra Pradesh has taken the view that corrugation improves the utility of the raw material and by this process they do not lose their essential character. Ld. counsel also submitted that the judgement of the Hon'ble Supreme Court in Gujarat Steel Tubes Ltd. 1989 (42) ELT 513 (SC) wherein the Hon'ble Supreme Court has taken the view that galvanisation does not bring in new commodity into existence. He further submitted that thereafter number of judgments of the Punjab & Haryana High Court and this Tribunal has held holding that corrugation amounts to manufacture. However, the Hon'ble Supreme Court in the case of Vardhaman Industries Ltd. 2008 (224) ELT 342 (SC) has kept the issue open and remanded the matter for denovo consideration. Thus the issue whether activity amounts to manufacture or not has not reached finality and hence no penalty is imposable.

3. Ld. AR on the other hand, submitted that the Explanation 1 to Section 11A makes it very clear that where the duty determined to be payable is reduced the date of such determination shall be the date on which the amount of duty is first determined to be payable. Ld. AR submitted that in this present case the duty is payable was first determined by the first adjudication order of the Commissioner. This order of the Commissioner has been upheld by the Tribunal and this Tribunal has not set aside the said order but the matter was sent back to the Commissioner only for extending the benefit of cum duty as also examining the documents relating to the modvat credit and redetermining the quantum of duty payable. Ld. AR further submitted that in view of the said position, the order of the Commissioner was not set aside and the reasoning followed in the case of Blue Star Ltd. (supra) in second para 17 quoted by the counsel is not applicable. On the other hand, the first para 17 of the said judgment of the Hon'ble High Court makes it very clear that in the facts and circumstances of the present case, interest would be payable with reference to first adjudication order and not with reference to the present impugned order i.e. second order. As far as the imposition of penalty is concerned, it was submitted that the first two case laws quoted are not relevant as these do not pertain to the Central Excise Law but to other laws. The concept of manufacture with reference to the Central Excise Tariff particularly, the new Tariff which was introduced in 1986 is not discussed in the first two case laws. It was further submitted that Tribunal and other authorities have been taking consistent view that the corrugation amounts to manufacture and therefore, the appellant was required to pay the duty which he has not done and hence the penalty under Section 173Q has been correctly imposed. It was also submitted that no case law has been submitted which takes the view that corrugation does not amount to manufacture.

4. We have considered the submission made by both sides. We find that section 11A at the relevant time was as under:-

11AA. Interest on delayed payment of duty. (1) Subject to the provisions contained in Section 11AB, where a person chargeable with duty determined under sub-section (2) of Section 11A, fails to pay such duty within three months from the date of determination, he shall pay, in addition to the duty, interest at such rate not below ten per cent and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty :

Provided that where a person chargeable with duty determined under sub-section (2) of Section 11A before the date on which the Finance Bill, 1995 receives the assent of the President, fails to pay such duty within three months, from such date, then, such person shall be liable to pay interest under this section from the date immediately after three months from such date, till the date of payment of such duty.

Explanation 1. Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the Court, the date of such determination shall be the date on which an amount of duty is first determined to be payable.

Explanation 2.  Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the Court, the date of such determination shall be,-

(a) for the amount of duty first determined to be payable, the date on which the duty is so determined;

(b) for the amount of increased duty, the date of order by which the increased amount of duty is first determined to be payable;

(c) for the amount of further increase of duty, the date of order on which the duty is so further increased.

(2)?The provisions of sub-section (1) shall not apply to cases where the duty becomes payable on and after the date on which the Finance Bill, 2001 receives the assent of the President.

To our mind, Explanation 1 is relevant as in the present case duty as been reduced.

4.1. The Tribunal in the said remand order directed as under:-

 5. Once it is held that the corrugation amounts to manufacture, the appellant would be entitled to take Modvat credit of the duty paid on the inputs used in the manufacture of these goods (see Bharat Wagon & Engg. v. CCE - 2001 (131) E.L.T. 681 (Tri.) = 2001 (44) RLT 557 and other such decisions), subject to the requirement contained in rule relating to modvat credit of evidence being produced on payment of duty on inputs which it utilised in the manufacture of the final product. These decisions are clear, that the procedural requirements such as filing of declaration would not in the way of taking credit in situation such as this where the manufacturer did not initially pay duty liability arising as a result of departmental interpretation. The matter will have to be remanded.

6. The other? contention that duty has been demanded on the sale price of the corrugated sheets and that value has been recalculated by arriving at the cum-duty price assessable value by deducting the duty element also has to be accepted. The matter has to be remanded to the Commissioner for determination of these two aspects for passing orders in accordance with law after considering the materials which the Counsel for the appellants undertakes to produce within two months from the receipt of this order.

4.2. We also note that para 17 of the Bombay High Courts judgement in the case of Blue Star Ltd. (supra) reads as under:-

17.?Section 11AA has two explanations. By virtue of the first explanation, if duty payable is reduced, then the date of determination of reduction shall be date on which the amount of duty is first determined to be payable. In other words interest would be payable on the duty as reduced not from the date of such reduction of duty but from the date of the first order. That is because even if the duty is reduced there is still an order of determination but a reduced amount. By Explanation 2 where duty payable is increased or further increased two situations are set out. For the amount of duty first determined to be payable it is the date on which the duty was first determined and in so far as the increase of duty is concerned, the date on which the increased amount of duty is payable. So also in the case of further increase the date of the order on which the amount is further increased. The Explanation, therefore, gives the intent of the Legislature. The intent of the Legislature appears to be that in a case of increase of duty, the increased tax becomes payable not from the original date, but from the date on which it is increased and in the case of reduction it relates back to the first date.

17.?What is the effect of setting aside the original order and remanding the matter for de novo consideration. Setting aside an order would mean that there is no order and a party is relegated to fresh adjudication. The stage of an adjudication cannot be said to be a determination. An adjudication will culminate in an order. That order would be the determination and/or ascertainment of duty. The relevant date for commencement of time the interest would be from the date the duty is determined if not paid within three months. Once there be an order, setting aside the entire order of determination there is no ascertained duty payable. In the instant case, therefore, though there was original order passed on 14th June, 1993 that was set aside on 14th July, 2000. The matter was before the A.O., for fresh determination on which an order came to be passed on 22nd March, 2002 and consequently the duty came to be ascertained on 22nd March, 2002. Duty was paid on 17th July, 2002. Once the duty was ascertained on 22nd March, 2002 no interest could have been demanded under sub-section (1) of Section 11AA in view of sub-section (2) as inserted in Section 11AA on 11th May, 2001.

4.3. It is very clear from the Tribunals order that duty liability was upheld. The order of the Commissioner was not set aside, the matter was sent back only for redetermination keeping in view the cum duty benefit and extending the benefit of modvat credit. In view of the said factual position and keeping in view the Explanation 1 of the Section 11AA as also the observation of the Hon'ble Bombay High Court in first para 17 quoted above, we are of the view that the appellant is required to pay interest under Section 11AA on the redetermined duty of `2,62,633/- with reference to the date of passing of the first order and not with reference to the passing of impugned order till the date of payment of the said amount.

5. As far as the question of penalty under Section 173Q is concerned, we have gone through the judgment quoted by the ld. counsel for the appellant. The question before the Hon'ble High Court of Andhra Pradesh in the case of Sri Durga Hardware Stores (supra) was whether the corrugated sheets are iron and steel item or not. The issue was not whether the corrugation amounts to manufacture. We therefore, do not find any relevance of the said judgment of the Hon'ble High Court of Andhra Pradesh in the present facts and circumstances. Similarly, the case relating to Gujarat Steel Tubes Ltd. (supra) is in different context where the issue was relating to Central Sales Tax Act and the question was galvanisation brings a new commodity into existence. As far as the question whether corrugated steel sheets amounts to manufacture or not it has been consistent stand of the Tribunal as also the P&H High Court that the said activity amounts to manufacture. Appellant has not been able to produce any judgment taking a contrary view. The fact that the issue has been remanded by the Hon'ble Supreme Court in the case of Vardhaman Industries Ltd. (supra) is in different context and in any case the Hon'ble Supreme Court has not said that the corrugation will not amount to manufacture. Moreover, we find that the said judgment is of 2008 while the dispute in this case pertains to the period of 1997. No judgement passed during 1996 or 1997 has been produced to support the contention.

5.1. In view of the said position, in our view the penalty under Rule 173Q is imposable. However, keeping in view the duty amount and also the nature of dispute, we reduce the penalty from `1 lakh to `20,000/- (Rupees Twenty Thousand Only). Barring the above modification, the appeal filed is dismissed.

(Pronounced in Court on .)

(S. S. Garg) (P.K. Jain) Member (Judicial) Member (Technical)

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