Makjai Laboratories Ltd vs Commissioner Of Central Excise, Pune Ii

(Arising out Order-in-Appeal No. PII/PAP/250/2009 dated 18.12.2009 passed by the Commissioner of Central Excise (Appeals), Pune II)

For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial)

1. Whether Press Reporters may be allowed to see No the 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 Yes of the Order?

4. Whether Order is to be circulated to the Departmental Yes authorities?

Makjai Laboratories Ltd. Appellant

Vs.

Commissioner of Central Excise, Pune II Respondent

Appearance:

Shri V.B. Gaikwad, Advocate for the appellant Shri V.K. Shastri, AC (AR) for the respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial)

Date of hearing : 18.03.2015 Date of decision : 18.03.2015

O R D E R No:..

This appeal is directed against Order-in-Appeal No. PII/PAP/250/2009 dated 18.12.2009.

2. Heard both sides and perused the record.

3. The issue involved in this case is regarding the reversal of differential amount of Cenvat credit availed on the capital goods which was received and subsequently removed from the factory of the appellant.

4. It is the case of the revenue that the appellant had availed excess Cenvat credit of `7,27,013/-, on the capital goods while clearing the capital goods back to the original manufacturer; reversed an amount of `4,53,200/- by valuing the said capital goods at a lower price claiming ineligible depreciation as these goods were not used in relation to manufacturing of any excisable goods. Both the lower authorities have confirmed that the appellant is liable to reverse the differential Cenvat credit along with interest. The first appellate authority has set aside the penalties imposed by the Adjudicating Authority.

5. Ld. counsel at the outset would submit that he is contesting the issue on limitation. It is his submission that the capital goods when they were removed in the month of July 2007 the appellant had informed the department as to the clearance of the capital goods in the ER1 return which has been received by the departmental authorities and is not being disputed. He would also draw my attention to the finding of the first appellate authority as to there being no clandestine removal for setting aside the penalties imposed by the Adjudicating Authority. He is relying on the decision of the Tribunal in National Flask Ind. Ltd. 2009 (90) RLT 808 and Siyaram Metal P. Ltd. 2009 (90) RLT 823 for the proposition that once penalty has been set aside on the ground that there was no clandestine removal, the demand also automatically fails.

6. Ld. Departmental Representative, on the other hand, submits that the appellant never forwarded the invoice along with returns and the lower authorities could not have imagined that the capital goods are removed as such. It is his submission that when this error was pointed out at the time of audit, the appellant himself reversed the Cenvat credit. Hence the extended period invoked by the show-cause notice and confirmed by the lower authorities is correct.

7. On a specific query from the bench as to whether Revenue has filed any appeal against the setting aside of the penalty, he fairly submits that Revenue has not filed any appeal against penalty.

8. After considering the submission made by both sides and perusal of the records, I find the issue is of reversal of the differential amount of Cenvat credit availed on the capital goods when removed as such is hit by limitation. On perusal of the ER1 for the month in July 2007 (as at page 42), I find that the appellant had clearly indicated as Credit utilised when inputs or capital goods are removed as such; I find that at page 43, of the same ER1 appellant had indicated During the month, invoices bearing Sr.no. 141 to 225 were issued. On perusal of the invoices, under which the capital goods were removed, I find that the capital goods were removed under invoice nos. 181 to 185. This factual matrix has been appreciated by the first appellate authority in his Order-in-Appeal when he set aside the penalties imposed by the Adjudicating Authority under the provisions of Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 by recording as under:-

Further, it is not the case of clandestine removal, in as much the capital goods were cleared under Central Excise invoices on payment of duty and the fact of the clearances was reflected in the monthly returns. This above finding is undisputed by the revenue. If there is no clandestine removal, the question of invoking the extended period and confirming the said demand cannot arise.

9. I find that the ratio of the judgment of the Tribunal in National Flask Ind. Ltd. (supra) would be applicable in this case. In our considered view, I find that the ratio of the judgment of the Tribunal in CCE vs. Digvijay Polytex P. Ltd. 2009 (238) ELT 447 would be more appropriate. I reproduce the said ratio.

However, the show-cause notice issued proposing demand for differential duty had been issued in February 2006 whereas the short reversal of credit/short payment of duty had occurred on removal of capital goods in September, 2004. In view of the fact that the respondents had intimated particulars of payment of duty on removal of the capital goods in their monthly return for September 2004, the allegation of suppression of fact cannot be held to have been substantiated. Therefore, the demand is barred by limitation. In the circumstances, I do not find any reason to interfere with the impugned order. The appeal is dismissed.

10. In view of the facts and circumstances of this case, I find the demand confirmed against the appellant is barred by limitation and liable to be set aside and I do so.

11. Impugned order is set aside to the extent it is appealed against and the appeal is allowed with consequential relief, if any.

(Pronounced in Court)

(M.V. Ravindran) Member (Judicial)

//SR

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