Shri Dipankar Ghosh, Manager vs C.C.E. Noida

[Arising out of Order-in-Appeal No. 44/Comm/Noida/2008 dated 07.11.2008 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Noida].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

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. Lamicoat International Pvt. Ltd.

Shri Lok Nath Prasad Gupta, Director

Shri Om Prakash Gupta, Director

Shri Dipankar Ghosh, Manager .Appellants

Vs.

C.C.E. Noida .Respondent

.

Appearance:

Shri Amit Jain & Shri Vipul Aggarwal, Advocate for the Appellant

Shri Pramod Kumar, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

Date of Hearing: 21.07.2015

FINAL ORDER NO. 52462-52465/2015-EX(DB)

Per Ashok Jindal:

The appellants are in appeals against the various demands confirmed against them and penalties imposed on them. The period involved is December 2002 to October 2007.

2. The facts of the case are that the appellants company is manufacturing laminated polyester films and metalized polyester films and clearing the same on payment of duty, the appellant was availing Cenvat Credit on inputs and also paying duty on polythene films as intermediate product. In February 2004, the Honble Apex Court in the case of Metlex Pvt. Ltd. Vs. CCE New Delhi-2004 (165) ELT 129 (SC) held that such lamination and metalizing of the film would not amount to manufacture. As consequent to such decision, the Adjudicating Authority held that duty already paid on laminated film and metalized film was not duty as no duty was payable. Appellant collected a sum of Rs. 8,45,11,283/- from the customer and that should be deposited in terms of Section 11D of the Central Excise Act 1944. Equivalent amount of penalty was also imposed on that account. It was also held that since metalized laminated films are not dutiable, therefore, credit taken on inputs is required to be reversed. As during the relevant period, the appellant used granules to manufacture polythene films which in turn, was used for manufacture of laminated polyester films on which they were paying duty and consequently intermediate product held to be exempted in terms of notification no. 67/95.

Consequent to the decision of the Honble Apex Court, the final product was not dutiable, therefore, the appellant is required to pay a sum of Rs.75,80,380/- towards duty on the said polyester and polythene film. The appellant exported certain consignment of metalized film and since such export contain polyester polythene films which were intermediate product on which no duty was paid. Therefore, appellant is required to pay a sum of Rs.15,68,167/-. It was also found that certain inputs have been clandestinely removed, therefore, appellant is required to pay duty toward them i.e. on laminated film duty of Rs.14,70,682/- and credit was denied on laminated rolls and metalized polythene film of duty of Rs.3,90,734/-. Various show cause notices were issued to the appellant. Adjudication took place and demand of Rs.8,45,11,283/- was confirmed on account of utilizing of metalized polyester film and laminated film on which duty has been collected under section 11D of the Act. Rs.15,68,167/- were denied on account of that the input used in metalized polyester film cleared for export, Rs.75,80,380/- were demanded on polythene film manufactured and captively consumed.

The demands of Rs.14,70,682/- and Rs. 3,90,734/- were confirmed on account of clandestine removal of laminated films / metalized polyester film along with interest and various penalties were imposed on the main appellant and co-appellants. Aggrieved from the said order, the appellants are before us.

3. The Ld. Counsel for the appellant submits that the case of the Revenue is that as per the decision of the Honble Apex Court in the case of Metlex Pvt. Ltd. (Supra), their activity does not amount to manufacture. If that be the case, the appellant has cleared all the goods on payment of duty. Therefore, whatever duty has been collected by the appellant from the buyers have already been paid. Consequently, the duty cannot be demanded under section 11 D of the Act. Moreover, he submits that during the relevant time the provisions of section 11D are not applicable to the facts of this case, as per the provision of section 11D during the relevant time as per the said provision if the appellant is liable to pay duty under the act and the appellant has collected the duty in excess of the duty payable than the appellant is required to credit the amount so collected to the Central Government. Admittedly in this case the final product of the appellant is not dutiable and appellant is not liable to pay duty, therefore, provision of section 11D are not applicable. He further submits that if this be presumed then the appellant is not entitled to take Cenvat Credit on the inputs and the same have been cleared as such, in that case also, whatever duty has been paid shall amount to reversal of Cenvat Credit and no demand is sustainable against the appellant. To support this contention he relied on the decision in the case of Ajinkya Enterprises Vs. CCE Pune-2013 (294) ELT 203 (Bombay).

4. For denial of credit on inputs used in manufacture of metalized films, he submits that as per the CBEC circular no.283/117/96-CX dated 31.12.1996 the appellant is entitled to take Cenvat Credit on inputs which has been exported as such. Therefore, they are not required to reverse Cenvat Credit. If demand is on polythene films manufactured and captively consumed, it is the submission of the Ld. Counsel that the appellant has paid duty on the final product. Therefore, the same amounts to payment of duty on polythene films and captively consumed. For the demand of Rs.14,70,682/- and Rs. 3,90,784/- the Ld. Counsel for the appellants drew our attention to the impugned order wherein the Ld. Commissioner has observed that the inputs have been procured clandestinely and same has been cleared clandestinely. If that is so, the inputs has been procured clandestinely question of availment of credit does not arise, consequently, the question of reversal of Cenvat Credit also does not arise. He also submits that the demand pertains to this account is for the period 25.03.2003 to 12.08.2004 whereas the search was conducted in the premises of the appellant on 13.08.2004 and this fact were known to the department. Thereafter, a show cause notice was issued on 10.02.2005 for the said period. Further, also another investigation was conducted on 16.10.2005 for which show cause notice was issued on 11.08.2005 and further a search took place on 19.11.2007 and thereafter, a show cause notice dated 30.11.2007 was issued by invoking extended period of limitation the demand in question on account of clandestinely removed goods. As earlier show cause notice were issued to the appellant, therefore, subsequent show cause notices is not sustainable to demand duty on these clandestinely removed goods by invoking extended period of limitation. Therefore, he prayed that impugned order be set aside.

5. On the other hand Ld. AR reiterated the findings of the impugned order and drew our attention that appellant themselves have admitted the clandestine removal of the goods to the tune of Rs.18,61,416/-. Therefore, that amount is payable by the appellant.

6. Heard the parties. Considered the submission.

7. Although the Ld. Counsel for the appellant argued that there activity amounts to manufacture but we are not going into the said issue whether the activity undertaken by the appellant amounts to manufacture or not to decide the issue in hand. From the facts of the case the following issue emerges:

i. Whether the amount of Rs.8,45,11,283/- charged and collected by M/s. LIPL as Central excise duty from their buyers on the clearances of metalized polyester film and Laminated films (PLP in rolls) is demandable from them in terms of Section 11D of the Act along with due interest thereon under Section 11D, ibid.

ii. Whether Cenvat Credit amounting to Rs.15,68,167/- involved in the metalized Polyester film cleared for export is demandable from M/s. LIPL in terms of Rule 12/14 of the Cenvat Credit Rules 2002/2004 read with Section 11A(i), ibid, along with due interest thereon under Section 11AB ibid whether M/s. LIPL is liable to pay penalty in this regard in terms of Section 11AC ibid.

iii. Whether Excise duty amounting to Rs.75,80,380,/- involved on the Polyethylene film manufactured and consumed captively for processing of lamination without payment of duty, is demandable from M/s. LIPL in terms of Section 11A(i) ibid, along with due interest thereon under section 11AB ibid and whether M/s. LIPL is liable to pay penalty in this regard in terms of Section 11AC ibid.

iv. Whether Cenvat Credit amounting to Rs.14,70,682/- involved in the laminated film cleared clandestinely without payment of Cenvat Credit involved thereon is demandable from M/s. LIPL in terms of Rule 12/14 of the Cenvat Credit Rules 2002/2004 read with section 11A(i), ibid along with due interest thereon under section 11AB ibid and whether M/s. LIPL is liable to pay penalty in this regard under Section 11AC ibid.

v. Whether Cenvat Credit amounting to Rs.3,90,734/- involved in the processed goods viz. laminates in rolls (PLP in rolls) and Metalized polyester film cleared clandestinely is demandable from M/s. LIPL under Rule 14 of Cenvat Credit Rules 2004 read with Section 11A(i) ibid alongwith due interest thereon under section 11AB ibid and whether M/s. LIPL is liable to pay penalty in this regard in terms of Section 11AC ibid.

vi. Whether penalty under rule 13/15 of Cenvat Credit rules 2002 and under Rule 25 of the Central Excise Rules 2002 read with section 11AC of the Central Excise Act 1944 is imposable upon M/s. LIPL for contravention of various provisions of Central Excise Act, and;

vii. Whether penalty under rule 13/15 of the Cenvat Credit Rules 2004 and Rule 26 of the Central Excise Rules 2002 is imposable on Shri Lok Nath Prasad, the Director of M/s. LIPL, Shri Om Prakash Gupta, the Director of M/s. LIPL and Shri Dipankar Ghosh, Manager and Authorized signatory of M/s. LIPL, separately.

8. We are dealing with each issue separately:

i. To deal with the first issue we find that the contention of the appellant is that they have cleared these metalized / laminated films on payment of duty. That fact has been recorded by the Adjudicating Authority in the impugned order in para 65.14 where he has recorded that in defense it is pointed out that they have not collected any amount from their customers instead they have collected duty of excise and deposited the same to the Government Account. Further, in para 65.15 it is recorded by the Ld. Commissioner that I find that amount collected by M/s. LIPL against the above said clearances has not been collected and is required to credited to the Central Government in terms of provision of section 11D of the Act. In para 65.16 he further recorded that it is further noticed that M/s. LIPL has utilized Cenvat Credit so availed towards making payment of amount charged from their customers as Central Excise Duty.

When the findings of the Ld. Commissioner in the impugned order is clear that the appellant has made a payment of Central Excise duty which have been recovered from the customers. Therefore, the question of demanding the amount under section 11D of the Act does not arise. Further, we find that during the relevant period section 11D was as under:

Section 11D. Duties of excise collected from the buyer to be deposited with the Central Government-1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, [every person who is liable to pay duty under this Act or the rules made thereunder, and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods] in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.

On plain reading of the said provision, it is very much clear that every person who is liable to pay duty under this act or rules made thereunder has collected any amount in excess of duty assessed or determined is required to pay to the Central Government amount so collected. As per the show cause notice, the allegation of the Revenue is that as the activity of the appellant does not amount to manufacture therefore, the appellant is not liable to pay duty. Therefore, the provisions of section 11D of the Act are not applicable to the facts of this case. Although the appellant has paid to the Central Government what amount is collected from the customers as duty, therefore, the demand under section 11D of the Act is not sustainable. Consequently, interest is also not payable.

ii. Now we come to the second issue where demand on Cenvat Credit on the input used in metalized polyester film cleared for export has been confirmed. As per the CBEC Circular No. 345/2/2000 TRU dated 29.08.2000 which explains that in the exact procedure that the manufacturer can export goods under bond without payment of duty. This is a facility that is available to the manufacturer under the excise procedure and in such case appropriate duty on goods i.e. payable is nil, therefore, there is no bar for the manufacturer to remove inputs or capital goods for exports undergone. It is further seen that as per the CBEC Circular 283/117/96-CX dated 31.12.1996 it has clarified that MODVAT credit in RG 23A part 2 account against the export of inputs as such under bond can be utilized in the same manner as it is utilized for final product under the proviso of Rule 57(F)(4). Therefore, it falls from that such input should be allowed to be exported under bond without any reversal of credit. Admittedly, in this case as per the Revenue, the appellant has exported the inputs as such. Therefore, as per the CBEC Circular cited here in above, the appellant is entitled to avail Cenvat Credit thereon. Therefore, the question of reversal of the same does not arise. With these terms, the demand on this account is set aside.

iii. Issue no. 3 is whether demand on polythene film manufactured and captively consumed can be confirmed against the appellant or not. Definitely the appellant is required to pay duty on captively processed goods which are liable for duty. But we should not forget the fact that the final product which does not amount to manufacture has been cleared by the appellant on payment of duty. Therefore, the said payment of duty shall amount to payment of duty on captively consumed product i.e. polythene film. In these terms, the demand of Rs.75,80,380/- is not sustainable. Accordingly same is set aside.

iv. With regard to issue no. 4 & 5 which are taken up together we find that in para 70.1 of the impugned order which is reproduced here as under:

In support of the allegation raised in the notice regarding clandestine removal of the goods by M/s. LIPL and demand of Cenvat Credit involved in these goods, as discussed against above said issue, it is further came into notice that M/s. LIPL used the raw material purchased clandestinely in the production of finished goods and later on cleared such goods clandestinely and without payment of duty. This is supported by the fact that M/s. LIPL were getting payment against such clearances in cash.

We observed that the Ld. Counsel himself has noticed that the appellant used the raw material purchased clandestinely in the production of finished goods. When an input has been procured clandestinely, definitely Cenvat Credit on the said input has not been availed by the appellant. Therefore, the question of reversal of same does not arise when there is no credit taken. In these terms, the demand of Rs.14,70,682/- and Rs.3,90,734/- are also not sustainable. Therefore, demand is set aside.

v. Issue no. 6&7 are consequential to the issue no.1-5 for imposition of penalty. As the demands sought to be confirmed by the way of impugned order have already been set aside here in above, therefore, the penalties on the appellants are not imposable.

9. In these terms, we set aside the demand of duty interest and penalty on main appellant and penalties on the co-appellants.

10. Consequently, the impugned order is set aside. Appeals are allowed with consequential relief if any.

0

(Dictated and pronounced in the open court)

(B. Ravichandran) (Ashok Jindal) Member (Technical) Member (Judicial)

Bhanu

2

E/450-453/2009-EX(DB)