Vvf Ltd vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/1462/10

(Arising out of Order-in-Appeal No.SB/(19)/19/M-I/2010 dated 30/04/2010 passed by Commissioner of Central Excise (Appeals), Mumbai)

For approval and signature:

Honble Mr. Raju, Member (Technical)

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 :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

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

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

VVF Ltd., Appellant Vs. Commissioner of Central Excise, Respondent Mumbai

Appearance: Shri.A.V.Naik, Advocate for appellant Shri. N N Prabhudesai, Supdt. (AR) for respondent

CORAM: Honble Mr. Raju, Member (Technical)

Date of Hearing : 18/08/2015 Date of Decision : 18/08/2015

ORDER NO

Per: Raju

1. M/s.VVF Ltd., the appellant have units in Kutch as well as in Sion, Mumbai. The appellant unit in Sion, Mumbai received certain material from Kutch unit under Notification No.214/86-CE dated 25/03/1986. Part of this material was not returned to the Kutch unit and consumed by the Sion unit. A show-cause notice was issued to the Sion unit alleging that they have received goods under Notification No.214/86 and not returned the same. The said show-cause notice was confirmed by the Assistant Commissioner and the appeal was filed before the Commissioner (Appeals), who also confirmed the demands. The appellants are in appeal against the said order-in-appeal.

2. Learned Advocate for the appellant argued that Notification No.214/86-CE dated 25/03/1986 fixed the liability of paying duty on goods not received back only on the supplier of goods. He cited para 2 of the Notification No.21/86-CE dated 25/03/1986 which reads as follows:

The exemption contained in this notification shall be applicable only to the?. said goods in respect of which, -

(i) the supplier of the raw materials or semi-finished goods avails of the credit of duty paid on inputs under rule 57A of the said Rules, and gives an undertaking to the Assistant Collector of Central Excise having jurisdiction over the factory of the job worker that the said goods will be used in or in relation to the manufacture of the final products;

(ii) the said supplier produces evidence that the said goods have been so used; and

(iii) the said supplier undertakes the responsibilities of discharging the liabilities in respect of Central Excise duty leviable on the finished products.

THE TABLE Sl. No. Description of the said goods Description of final products (1) (2) (3)

1. Goods classifiable under any headings of Chapters 28, 29, 30, 32, 33, 34, 35, 36, 37, 38, 39, 40, 48, 70, 72, 73, 74, 75, 76, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95 or 96 (other than those falling under Heading Nos. 36.03 or 37.05) of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986).

Goods classifiable under any headings of Chapters 28, 29, 30, 32, 33, 34, 35, 36, 37, 38, 39, 40, 70, 72, 73, 74, 75, 76, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95 or 96 (other than those falling under Heading Nos. 36.03 or 37.05) of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986).

3. He argued that there was no liability of paying duty on the unit at Sion and duty could have only be demanded from Kutch unit. He further argued that the adjudicating authority in his finding has observed as follows:

In the case of Desh Rolling Mills Vs. CCE, Delhi (2000 (122) ELT 481 (Tribunal) it was held that Notification No.214/86-CE provides for exemption to the goods manufactured in a factory as a job work and used in or in relation to the manufacture of final products on which duty of excise is leviable whether in whole or in part subject to the condition that the supplier of the raw material give an undertaking to the jurisdictional departmental authorities that the goods shall be so used and also produces evidence that the goods have been actually so used.

Accordingly, the matter was taken up with the supplier of the raw material by the Jurisdictional Central Excise authority viz. In charge Central Excise Authority of M/s.VVF Ltd. Gandhidham. M/s.VVF Gandhidham vide their letter dated 04/08/2009 stated to the jurisdictional range superintendent that the challan issued under notification No.214/86 dated 25/03/2006 along with copy of LR, jobwork register showing complete movement of raw material issued under the said challan (i.e 388/31.02.2006, 419/28.02.06, 54/18.05.2006, 376-377/27.01.2006) are with the DRI, Gandhidham and Income Tax (Investigation, Rajkot) and hence they displayed their inability to provide the necessary evidence. As such M/s.VVF Ltd., Sion were persuaded by the Range Supdt. To pay the duty amount with interest. Accordingly, M/s.VVF Ltd. Sion paid the Central Excise duty through e-payment vide GAR-7 Challan No.00010 dated 20/01/2009 amounting to Rs.2,41,505/- vide PLA debit entry No.290/20.01.2009.

3.1 He asserted that the adjudicating authority recognized that the liability was of the Kutch unit but fixed it on them only because they had paid. He also relied on the decision of the Honble Supreme Court in the case of Tata Chemicals Ltd. Vs. CC (P) Jamnagar  2015-TIOL-120-SC-CUS wherein the Honble Supreme Court observed as follows:

Clearly the samples drawn by the Inspector in the present case, have been drawn contrary to the express provisions of IS 436. On this count also, the samples being drawn not in accordance with law, test reports based on the same cannot be looked at.

The Tribunal's judgment has proceeded on the basis that even though the samples were drawn contrary to law, the appellants would be estopped because their representative was present when the samples were drawn and they did not object immediately. This is a completely perverse finding both on fact and law. On fact, it has been more than amply proved that no representative of the appellant was, in fact, present at the time the Customs Inspector took the samples. Shri K.M. Jani who was allegedly present not only stated that he did not represent the Clearing Agent of the appellants in that he was not their employee but also stated that he was not present when the samples were taken. In fact, therefore, there was no representative of the appellants when the samples were taken. In law equally the Tribunal ought to have realized that there can be no estoppel against law. If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of law at all. The Customs Authorities are not absolved from following the law depending upon the acts of a particular assessee. Something that is illegal cannot convert itself into something legal by the act of a third person. 3.2 He asserted if a particular method is prescribed by law the same has to be followed. In this case the Notification No.214/86 clearly prescribed that liability is to be fixed on the sender of the goods.

3.3 Learned Advocate further argued that there was no determination of duty done and therefore, interest and penalty could not have been recovered. He argued that penalty and interest and could only be recovered after determination of duty under Section 11A and since in this case no demand has been confirmed, no determination of duty was done, interest and penalty could not have been recovered.

3.4 He further argued that the entire situation is in Revenue neutral as if the Kutch unit has paid duty, the same would have been admissible to the credit to the Sion unit. For this purpose he stated that the decision of the Honble High Court of Gujarat in the case of CCE, Vadodara Vs. Indeon ABS Ltd., - 2010 (254) ELT 628 (Guj) which reads as follows:

The aforesaid findings of facts are not disputed. The grievance was that? the aspect of undervaluation has not been considered by the Tribunal at all. Grievance would have merited acceptance if the ultimate exercise would have benefited the Revenue by collection of duty in the coffers of the exchequer. In the facts of the present case, admittedly no such benefit accrues to the exchequer. In the circumstances, if the Tribunal has chosen not to determine an academic issue, it is not possible to state that any legal infirmity exists in the impugned order of the Tribunal.

3.5 The appeal against the said decision of Honble High Court has been dismissed as time barred by the Honble Supreme Court. He also relied on the decision of the Honble Supreme Court in the case of Nirlon Ltd., Vs. CCE, Mumbai  2015-TIOL-96-SC-CX and asserted that in the absence of any malafide and Revenues neutral situation no penalty can be imposed.

4. Learned AR pointed out that there was a clear jurisdiction in demanding duty on the Sion unit with a view of the decision of the Honble Tribunal in the case of Xerox India Ltd., Vs. CCE, Meerut  2011 (270) ELT 0395-(Tri-Del). He highlighted specifically para 88 of the said decision which reads as follows:

88.?It is settled law that when a cause of action in relation to offendable incident or in relation to series of activities which are offendable or the violation of the provisions of law arises within the jurisdiction of different investigating officers or adjudicating officers, every such officer will have jurisdiction to investigate and or adjudicate upon such offence or violation arising in all such territories. Merely because installation was carried out beyond territorial jurisdiction of Meerut Commissionerate once it is established that the major activity of manufacturing in relation to such machines was carried out at Rampur which lies within the jurisdiction of Meerut Commissionerate, it cannot be said that Commissioner at Meerut had no jurisdiction to investigate and adjudicate upon the matter.

4.1 He further argued that once the appellant have paid duty voluntarily no determination is required interest can be recovered in terms of Section 11A (2b). For this purpose, he relied on the decision of the Honble High Court of Madras in the case of Alstom T&D India Ltd., Vs. CESTAT, Chennai  2015 (316) ELT 362 (Mad.). He particularly relied on para 8.1 & 8.2 of the said judgement which reads as follows:

8.1?The second plank of the argument raised by the learned counsel for the appellant is that consequent to introduction of Section 11AA by the Act with effect from 8-4-2011, interest on delayed payment of duty is payable where such payment is made voluntarily or after determination of duty under Section 11A of the Act and inasmuch the provision of Section 11AA of the Act did not read in the same manner as that of Section 11AB of the Act, as it stood during the relevant assessment years, in a case where the assessee had voluntarily made payment, the question of interest on delayed payment of duty does not arise.

8.2?Section 11AA of the Act, as amended by Section 64 of the Finance Act, 2011 (8 of 2011), does not in any way advance the case of the appellant, as we find that the liability to pay interest on delayed payment of duty is clearly envisaged in Section 11A(2B) read with Explanation 2 to the said provision. Such interest was leviable even during the period in question. In fact, the Supreme Court in SKF India Ltd. case, referred supra, observed that there is some ambiguity in the said provisions, which was a cause for amendment brought to Section 11AA of the Act. The relevant portion of the observation made by the Supreme Court is as under :

If the object of the law is to state clearly and?

7. unambiguously the obligations of the person whom the law addresses and to spell out plainly and without any confusion the consequences of failure to discharge the obligations cast by the law, then the four sections of the Act fall miles short of the desired objective. Even as originally cast the provisions were far from very happily framed and worded. Subjected to amendments from time to time those provisions have now become so complicated that in order to discern their meaning it becomes necessary to read them back and forth several times. We see no reason why the two periods for which interest is leviable may not be put together and dealt with in one consolidated provision instead of being split up in Sections 11AA and 11AB. Also, there is much scope to reorganise all the different sub-sections of Section 11A and to present the scheme of that section in a more coherent and readable form.

5. Learned Advocate for the appellant argued that on perusal of the Order-in-original clearly shows that they were persuaded by the Revenue to pay duty and they have not paid they duty voluntarily. He further argued that they clearly submitted in their letter dated 11/12/2007 addressed to the Superintendent, Central Excise that no credit was fall at the Kutch unit and this assertion of there have not taken any credit, the question of demand of duty and interest does not arise.

6. I have gone through the case records and the submissions made by both sides. It is noticed that primary question to be decided is if the jurisdictional authorities at Sion had the jurisdiction to issue show-cause notice in this matter. On perusal of the Notification No.214/86, it is seen that para 2 of the said notification clearly lays down that it shall be the responsibility of the supplier of goods to ensure that the goods are used in the manner specified in the notification. The liability in respect of the goods produced out of, such inputs would be of the recipient of the goods. Thus if only duty has to be demanded on material sent for job work it has to be demanded from the supplier. Similarly, if any duty has to be demanded on products manufactured out of these materials it has to be demanded from the recipient of the goods, i.e. the job-worker. To that extent it is clear that in terms of Notification No.214/86, the liability of payment of duty would fall within the suppler of the goods and not on the recipient. Reliance placed by the learned AR on the decision of Honble Tribunal in the case of Xerox India Ltd. is misplaced, as in that case, the issue involved lack of clear cut demarcation of jurisdiction. In the instant case, the notification No.214/86 clearly determines the liability of the sender and that of the receiver of the goods.

7. In view of the above, I find that the show-cause notice itself issued wrongly to the recipient of the goods instead of the supplier of the goods. Learned AR further argued that since the appellant have paid the duty they have assumed the liability and therefore, they cannot escape the responsibility of paying interest and penalty. Reliance on the decision of the Honble High Court of Madras in the case of Alstom T&D India Ltd., (supra) is misplaced in so far as in that case, the liability of the appellant themselves was no doubt. In this case the liability itself does not exist. In this case, since there was no liability to pay duty, the liability to pay interest and penalty cannot arise.

8. In view of the above, I allow the appeal filed by the appellant.

(Pronounced in Court)

(Raju) Member (Technical)

pj

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