Shri B.K. Goyal, Md vs C.C.E. Delhi-Ii

[Arising out of Order-in-Appeal No. 04-05/CE/D-II/19 dated 15.01.2013 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Delhi-II].

For approval and signature:

Honble Shri Ashok Jindal, 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?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

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

M/s. Capital Transformer Pvt. Ltd.

Shri B.K. Goyal, MD .Appellants

Vs.

C.C.E. Delhi-II .Respondent

Appearance:

Shri Prabhat Kumar & Shri R.P. Singh, Advocates for the Appellants

Shri R.K. Mishra, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing: 01.04.2015

FINAL ORDER NO. 51394-51395/2015-EX(SM)

Per Ashok Jindal:

The facts leading to these appeals and stay applications are, in brief, as under.

1.1 The appellants are manufacturers of transformers. Beside this, they also undertake repair of the transformers returned to them by their customers for this purpose. The appellant had cleared certain number of transformers on payment of duty. However, during the period from August 2001 to February 2002 some of the transformers were returned by their customers for repairs, but the return of the transformers was not under the original invoices. The appellant, however, took Cenvat credit of Rs. 5,31,031/- under Rule 16 of Central Excise Rules in respect of these transformers on the basis of triplicate copy of the invoice available with them, as according to them each transformer could be linked to the invoice under which it had been cleared on the basis of its CT number embossed on it. One objection of the department is that this availment of credit of Rs. 5,31,031/- under Rule 16, in respect of the transformers returned without the original invoices under which the same had been cleared, is irregular.

1.2 In course of scrutiny of the ER-1 return for 2001-2002 the departmental officers found that while the figures of non-excisable goods cleared during that year was Rs. 59,57,159/-, in their balance sheet they have shown the sale value of such goods as Rs. 84,11,772/- and accordingly the department has demanded duty @ 16% on the differential amount of Rs. 24,54,613/-.

1.3 After issue of show cause notice, the Jurisdictional Joint Commissioner vide order-in-original dated 6/12/07 confirmed the Cenvat credit demand of Rs. 5,31,031/- and duty demand of Rs. 3,92,578/- alongwith interest and imposed penalty of equal amount on the appellant. Beside this he also imposed penalty of Rs. 2,00,000/- on Shri B.K. Goyal, Director of the appellant company. On appeals to Commissioner (Appeals), this order of the Joint Commissioner was upheld vide order-in-appeal dated 02/2/10. The appellants filed appeals to Tribunal against the Commissioner (Appeals)s order and the Tribunal vide final order dated 23/7/12 remanded the matter to Commissioner (Appeals) for denovo decision. In denovo proceedings the Commissioner (Appeals) again upheld the Joint Commissioners order vide order-in-appeal dated 15/1/13 against which these appeals have been filed alongwith stay applications.

2. Heard both the sides in respect of stay applications.

3. Shri Prabhat Kumar & Shri R.P. Singh, Advocate, the learned Counsel representing both the appellants, pleaded that the department does not dispute the return of defective transformers for repairs, that the only objection of the department is that in absence of original copies of the invoices under which the goods had been cleared, the Cenvat credit cannot be availed by the appellant, that this plea is incorrect, as though the transformers had not been returned under original invoices, but had been returned under challans, the transformers returned could be linked to the triplicate copies of the invoices on the basis of CT number, that the appellants, therefore, have correctly taken the Cenvat credit on the basis of triplicate copies, that in this regard he relies upon the Mysore Commissionerates Trade notice No. 21/2004 dated 11/05/2004 and also the judgment of the Tribunal in the case of BAPL Industries Ltd. vs. CCE, Coimbatore reported in 2006 (198) E.L.T. 587 (Tri. Chennai), that as regards the duty demand of Rs. 3,92,576/-, the same is in respect of certain non Cenvat credit availed parts used by the appellant in repair of transformers, that whenever for repair of transformers, the appellant used any Cenvat credit availed parts, at the time of clearance of the repaired transformer, an amount equal to the Cenvat credit availed in respect of that part is paid and the same is reflected in the ER-1 return, that when the part used in repair of transformer is not non-Cenvat credit availed part, no amount is paid, that the sale of all the parts used in repairs, whether Cenvat credit availed or not are reflected in the balance sheet, that the difference between the ER-1 return figure of sale of such parts and the balance sheet figure of sale of such parts is only for the reason that the parts used in repair in respect of which no Cenvat credit has been availed and for this reason no amount was paid at the time of their clearance with repaired transformer are not reflected in the ER-1 returns, that in view of this, the duty demand of Rs. 3,92,578/- is without any basis and there is no justification for penalty on the appellant company or its Director.

Shri B.K. Goyal, that the appellant have strong prima facie case in their favour and hence the pre-deposit of Cenvat credit demand, interest and penalty may be waived for hearing of the appeals and recovery thereof may be stayed till the disposal of the appeals.

4. Shri R.K. Mishra, the learned DR opposed the stay applications by reiterating the findings of the Commissioner (Appeals) and pleaded that as regards the availment of Cenvat credit in respect of the transformers returned for repair, the appellant were not in a position to produce even the duplicate or triplicate copies bearing the CT numbers and hence the Cenvat credit of Rs. 5,31,031/- has been correctly denied, that as regards the duty demand of Rs. 3,92,578/-, since the activity of repair of transformer amounts to manufacture, the duty has to be paid on all the parts whether Cenvat credit availed or not non-Cenvat credit availed and hence this demand has been correctly upheld, that the appellant do not have prima facie case in their favour and hence this is not the case for waiver from the requirement of pre-deposit.

5. I have carefully considered the submissions from both the sides and perused the record.

6. The first point of dispute is regarding Cenvat credit of Rs. 5,31,031/- in respect of demand under Rule 16 of the Central Excise Rules in respect of transformers returned to the appellant for repairs. There is no dispute that these transformers have not been returned under the original or duplicate copy of the invoice had been returned only under challans. The appellants plea is that even though the transformers have not been received under original or duplicate copy of the invoices, the same can be linked with the invoices under which the same had been cleared on the basis of CT numbers embossed on the Transformers and since the appellant had triplicate copy of the invoices containing CT number with them, they have linked the transformers returned to them with the triplicate copies of the invoices on the basis of CT numbers. However, the objection of the department is that the CT numbers as recorded in the RG-23A register in respect of the returned transformers do not match with the CT numbers as mentioned in the respective invoices on the basis of which the credit had been taken. I find that whatever credit has been taken by the appellant the same has been reversed at the time of the clearance of the repaired goods. Moreover, no credit was taken of the ports used in repair. Therefore, the credit cant be denied. In these circumstances, I hold that the appellant has correctly taken the credit.

7. As regards the duty demand of Rs. 3,92,578/-, the basis of this demand, as mentioned in the show cause notice is reproduced below :-

Scrutiny of the sale figures of non-excisable goods for the year 2001-2002 has revealed that the said party cleared these goods of a value of Rs. 59,57,159/-, whereas they have shown in their records the value of these goods as Rs. 84,11,772/-.

Thus there appears a difference of Rs. 24,54,613/- as per details given in Annexure D. On being asked the said party could not produce the relevant records like ER-1 returns, Sale Tax Returns and Balance Sheet of the corresponding year. During scrutiny of the records it was observed that the said party had another unit at B-40, Jhilmil Industrial Area, Delhi, but the said party could not produce any records/data for the same. Therefore the Central Excise duty amounting to Rs. 3,92,578/- on a value of Rs. 24,53,613/- is demandable from the party as they failed to account for as value of excisable goods and have contravened the provisions of Rule 4,6,8,10,11 and 12 of Central Excise (No. 2) Rules, 2001 and the same to recoverable under Section 11 (1) of Central Excise Act, 1944 alongwith interest at applicable under Section 11AB of the Central Excise Act, 1944.

7.1 When the show cause notice itself mentions, the goods in respect of which duty has been demanded, as non-excisable goods, I fail to understand as to on what basis the duty had been demanded, when the difference between ER-1 return figure and balance sheet figure is on account of the sale of non-excisable goods. On going through the impugned order, I find that the appellant have declared total the figure of 59,57,159/- in the ER-1 returns for 2001-2002 in respect of the Cenvat credit availed inputs used in the manufactured of transformers, in respect of which at the time of clearance of the transformers, they have paid the amount equal to the Cenvat credit availed. Whenever they used non-Cenvat credit availed inputs for repair, there is no reversal of Cenvat credit, but still these parts having been sold are reflected in the balance sheet. I find that no finding has been given by the Commissioner (Appeals) on this plea and he has simply confirmed the demand stating that the repair activity being excisable, the duty should have been paid on this amount also, while this is not the allegation in the show cause notice. Moreover in any case, the finding that repair of transformers amounts to manufacture is totally wrong finding in respect of clearance of repaired transformers no duty can be demanded, only Cenvat credit on cenvated parts used in repairs is required to be reversed. In view of this, I hold that the duty demand of Rs. 3,92,578/- is not sustainable.

8. In view of the above discussion and taking into account overall facts and circumstances of the case, I hold that the Cenvat Credit cannot be denied and the demand of duty is not sustainable. Consequently, appeal is allowed.

(Dictated and pronounced in the open court)

(Ashok Jindal) Member (Judicial)

Bhanu

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E/56866 & 56867/2013-EX(SM)