Nilkamal Ltd. (the Appellant) was engaged in the manufacture of excisable goods and for the manufacture of these goods, they had purchased some moulds as Capital Goods. Upon receipt of the said moulds in the factory, the Appellant availed 50% of the eligible Cenvat credit on the moulds as Capital Goods and the moulds were put to use for some time in the factory for further manufacturing of excisable goods.
Assessee eligible to avail remaining 50% of Cenvat credit on Capital Goods which were cleared during year of receipt
Assessee eligible to avail remaining 50% of Cenvat credit on Capital Goods which were cleared during same financial year of its receipt
Nilkamal Ltd. Vs. CCE, Bolpur [2015 (1) TMI 588 – CESTAT KOLKATA]
Nilkamal Ltd. (the Appellant) was engaged in the manufacture of excisable goods and for the manufacture of these goods, they had purchased some moulds as Capital Goods. Upon receipt of the said moulds in the factory, the Appellant availed 50% of the eligible Cenvat credit on the moulds as Capital Goods and the moulds were put to use for some time in the factory for further manufacturing of excisable goods. Thereafter, these modules were cleared to other units of the Appellant during the same Financial Year. Accordingly, the Appellant availed the remaining 50% of the Cenvat credit on the said moulds and cleared the said moulds, as such, by debiting the entire amount of Cenvat credit availed on such moulds.
The Department denied the availment of the remaining 50% of the Cenvat credit in the same Financial Year on the ground that once moulds were put to use, the same looses the character as such and their clearance from the factory after some time cannot be called 'as such', under Rule 4(2)(a) of the Cenvat Credit Rules, 2004 (the Credit Rules).Hence the Appellant was not eligible to avail remaining 50% of Cenvat credit at the time of its clearance in the same Financial Year.
Resultantly, a Show Cause Notice dated February 14, 2008 was issued to the Appellant alleging irregular availment of 50% Cenvat credit on moulds amounting to Rs. 3,01,95,614/-, which was further upheld by the Adjudication Authority confirming the demand of recovery of Cenvat credit along with interest and penalty. Being aggrieved the Appellant preferred an appeal before the Hon'ble CESTAT, Kolkata.
The Hon'ble CESTAT, Kolkata relying upon the following case laws:
- Modernova Plastyles Pvt. Ltd. [2008 (232) ELT 29 (Tri-LB)] duly upheld by the Hon'ble Bombay High Court also vide its order dated November 4, 2009;
- CCE, Hyderabad-III Vs. Navodhaya Plastic Industries Ltd. [2013 (298) E.L.T. 541 (Tri.-LB)];
- CCE, Salem Vs. Rogini Mills Ltd. [2011 (264) E.L.T. 367 (Madras)].
and held that the Capital Goods which were put to use and when cleared from the factory, would be eligible to the balance 50% of Cenvat credit available on such Capital Goods on its clearance from the factory in the same financial year.
Our Comments: – It will not be out of place to draw recent comments made by the Hon'ble Justice Raghuram at FAPCCI, Hyderabad on January 17, 2015 that "Something is pathologically, terminally and seriously wrong with our departmental adjudication".
Reversal of Cenvat credit on Returned goods
Returned goods have to be treated as Inputs and the Assessee having shown the issuance of the said Inputs from their RG-1 are deemed to have manufactured final product – Reversal of Cenvat credit cannot be sought
CCE, Jaipur Vs. Amco India Ltd. [2015-TIOL-128-CESTAT-DEL]
Amco India Ltd. (the Assessee) was engaged in the manufacture of Aluminum Foils which were cleared to the customers upon payment of Excise duty. However, some of the goods were rejected by the customers and the same were returned to the Assessee in its factory either under the cover of the invoices issued by customers or under the cover of invoices which were issued by the Assessee himself.
In terms of the Rule 16 of the Central Excise Rules, 2002 (the Excise Rules), the Assessee was entering these goods in their Input receipt register and accordingly was availing Cenvat credit of the same.
However, the Department made an observation that after entering the goods in their Cenvat Account, the Assessee has simply shown the issuance of the said Inputs for further manufacture, without maintaining any records about the same. Investigation was initiated against the Assessee and during the course of investigation, statements of the employees were recorded that only 20% of the returned material is reusable and the balance quantity was cleared by them as scrap.
Later on, the Adjudicating Authority confirmed the demand of duty of Rs.19,60,153/- along with imposition of penalty on the ground that the reprocesses like rewinding, cutting, slitting, re-packing undertaken by the Assessee on the returned goods do not amount to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944 (the Excise Act) and the Assessee cannot pay duty less than the Cenvat credit availed by them on such goods in terms Rule 16(2)of the Excise Rules.
Being aggrieved the Assessee preferred an appeal before the Ld. Commissioner (Appeals).The ld. Commissioner (Appeals)allowed the appeal in favour of the Assessee and held the following:
- Certain processes that were undertaken on the returned goods viz, re-annealing, slitting, edge trimming, lamination, built up-breaking etc., would be the process of manufacture if not incidental/ancillary to manufacture to render the goods marketable.
- The Rule 16 of the Excise Rules does not stipulate requirement of maintenance of any separate records of inputs whether returned after sales or fresh receipts. Inputs have to be treated as inputs and accounted for as prescribed.
- Differential demand on 80% of sales returns cleared as scrap is not sustainable because same is based on presumptions and assumptions as the Adjudicating Authority himself has concluded that the Assessee was not maintaining any separate accounts for the returned goods.
- The goods were returned to factory and Cenvat credit on these returned goods was availed in terms of the provisions of Rule 16 of Excise Rules.
- There is no evidence on records that these goods were removed clandestinely without payment of duty. Therefore, duty demand of Rs. 19,60,153/- on clearance of the said returned goods is not sustainable under law and deserves to be set aside.
Being aggrieved, the Department preferred an appeal before the Hon'ble CESTAT, Delhi.
The Hon'ble CESTAT, Delhi, while upholding the decision of the Ld. Commissioner (Appeals) held that the provision of Rule 16 of the Excise Rules does not require maintenance of any records. The returned goods have to be treated as inputs and the Assessee having shown the issuance of the said inputs from their RG-I are deemed to have manufactured final product. Accordingly, reversal of Cenvat credit cannot be sought.
Our Comments: – The Central Board of Excise and Customs (CBEC) vide Notification No. 21/2014-CE (NT), dated July 11, 2014 (Applicable w.e.f September 1, 2014) ["Notification No. 21"], has amended Rule 4(1) and Rule 4(7) of the Credit Rules to fix a time limit of six months from the date of issuance of any of the documents specified in Rule 9(1) thereof, for availment of the Cenvat credit on Inputs and Input services.
Now, there is an open query from the Trade that what will happen if such final products are received after 6 months of its removal from the factory in view of the amendment brought in Rule 4(1) and Rule 4(7) of the Credit Rules vide Notification No. 21.
Whether the newly added proviso to Rule 4(1) of the Credit Rules, which talks about Inputs, would apply to Cenvat credit taken on finished goods received by the manufacturer in the factory beyond six months of its removal from the factory?
Hope, the Board will provide clarification to the above stated issue.
In the instant case, in the earlier round of proceedings, the Hon'ble CESTAT, Mumbai remanded the matter by an order dated August 11, 2009 and in remand proceedings, the First Appellate Authority enhanced the penalty imposed on John Deere Equipment Pvt. Ltd. (the Appellant) without issuing any Show Cause Notice.
Commissioner (Appeals) cannot enhance penalty without issuing SCN
John Deere Equipment Pvt. Ltd. Vs. CCE, Pune-III [2015-TIOL-55-CESTAT-MUM]
In the instant case, in the earlier round of proceedings, the Hon'ble CESTAT, Mumbai remanded the matter by an order dated August 11, 2009 and in remand proceedings, the First Appellate Authority enhanced the penalty imposed on John Deere Equipment Pvt. Ltd. (the Appellant) without issuing any Show Cause Notice.
Aggrieved from the Order-in-Appeal passed by the first Appellate Authority, the Appellant preferred an appeal to the Hon'ble CESTAT, Mumbai again.
The Hon'ble CESTAT, Mumbai noted that the Adjudicating Authority had imposed penalty on the Appellant under Rule 25 of the Central Excise Rules, 2002. However, the first Appellate Authority had increased this penalty without issuing any Show Cause Notice to the Appellant.
Accordingly, the Hon'ble CESTAT, Mumbai held that in terms of the first proviso of the Section 35A(3) of the Central Excise Act, 1944, it is mandatory to issue a Show Cause Notice and in the absence of any such Show Cause Notice, the Order of the First Appellate Authority is liable to be set aside.
At the same time, since the appeal filed by the Appellant against the order of the Adjudicating Authority needs to be decided, the Hon'ble CESTAT remanded the matter back to the First Appellate Authority to reconsider the issue afresh after following the principles of natural justice.
Exporter can convert shipping bill under one export promotion scheme to another to avail benefit of scheme
Suzlon Energy Ltd. Vs. Commissioner of Customs, Chennai [(2014) 51 taxmann.com 176 (Chennai – CESTAT)]
Suzlon Energy Ltd. (the Appellant) sought conversion of five shipping bills from EPCG Drawback Scheme to EPCG Drawback and Advance Licence/ DEEC Scheme. In terms of the Circular No. 4/2004-Customs, dated January 17, 2004 (the Circular) such conversion can only be allowed when the benefit of export promotion scheme claimed by an exporter has been denied by the DGFT/ Ministry of Commerce/ Customs due to any dispute. In absence of the aforesaid denial, the conversion claimed in the instant case was rejected by the Adjudicating Authority under Section 149 of the Customs Act, 1962 (the Customs Act) read with the Circular. Being aggrieved, the Appellant preferred an appeal before the Hon'ble CESTAT, Chennai.
The Hon'ble CESTAT, Chennai held that in terms of Section 149 of the Customs Act, the conversion is possible on the documents in existence at the time of export. The shipping bills in the instant case were supported by a certificate from the Chartered Engineer, which was endorsed with the export particulars. It was further observed that the export was made in the month of March and the request for the conversion was made in the following month. Hence, the Hon'ble Tribunal allowed the conversion of shipping bills from "EPCG Drawback Scheme" to "EPCG Drawback and Advance Licence" to the Appellant.
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