CX - Notfn 3/2001 - Condition no 41 mandated that manufacturer should not have taken credit of duty paid on chassis - Assessee did not reverse Modvat Credit at time of removal of goods or after removal - Tribunal should not have interfered in O-in-O denying exemption - Revenue appeal allowed: HC
By TIOL News Service
MUMBAI, APR 09, 2015: THE notification and the entry number in question in this Revenue appeal is as detailed below.
Sl. No. 229 of notification 3/2001-CE read -
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Sl.no.
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Ch. No./heading no.orSH no
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Description of goods
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Rate under first schedule
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Rate under second schedule
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Condition no.
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229
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87
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(i) Motor vehicles principally designed for the transport of more than six persons, excluding the driver, including station wagons;
(ii) Motor vehicles for the transport of goods (other than those specially designed for the transport of compressed or liquiefied gases), falling under heading No. 87.04; and
(iii) three wheeled motor vehicles
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Nil
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Nil
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41
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Condition 41 of the Notification reads -
| 41. If manufactured out of chassis falling under heading No. 87.06 on which duty of excise has been paid and no credit of duty paid on such chassis and other inputs used in the manufacture of such vehicle has been taken under rule 57AB or rule 57AK of the Central excise Rules, 1944; |
The Respondent has manufacturing units at Andheri, Mumbai and at Silvassa. There is another unit in Mumbai itself and the Assessee is engaged in manufacture of motor vehicles and parts and accessories of motor vehicles falling under Chapter No. 87. On the basis of intelligence that the Assessee was evading CE duty by way of clandestine removal of excisable goods, search operations were carried out at the above premises by the officers of the DGCEI, Mumbai.
This investigation revealed that the Assessee was engaged in building body on the chassis of motor vehicles and that it was not paying duty on bus/tempo travelers manufactured by availing exemption under Notification No. 3/2001-C.E.. However, the Assessee availed Modvat Credit on glass and paints during the year 2000-01 and, therefore, they contravened the condition no. 41 (supra) inasmuch as they were not entitled for the exemption. Incidentally, the Modvat credit lying in their account lapsed on 1st April 2002 on surrender of licence and no efforts were made to reverse the same.
ASCN demanding Central Excise Duty of Rs.16,48,780/- by denying the benefit of exemption notification 3/2001-CE came to be issued and the same was confirmed by the lower authority.
The Tribunal held that the issue stands concluded by the Judgments of the Supreme Court in the case of Chandrapur Magnet Wires Pvt. Ltd. - 2002-TIOL-41-SC-CX and Orisa Extrusion Ltd. 2002-TIOL-368-CESTAT-DEL-LB. Inasmuch as the conclusion was that the duty part of the credit in the RG-23A Register (of Rs.36,246/-) was not utilized since the same lapsed due to the Assessee no longer being under the Excise net; that the question of reversal was, therefore, only an exercise in accounting; that the benefit of the Notification cannot be denied.
The correctness of this conclusion made by the CESTAT on 27.07.2004 is assailed by the Revenue before the High Court.
The Revenue appeal was admitted on 10th January 2006.
The matter was heard recently.
The counsel for the Revenue submitted that the language of the Exemption Notification being plain and clear, it being conditional, the Tribunal should have given effect to it; that there was no question of going into the contention as to whether the credit was merely availed and not taken; that all the decisions relied upon by the Tribunal were distinguishable on facts.
The respondent while supporting the order of the Tribunal placed reliance on the decisions in Commissioner of Central Excise, Mumbai I vs. Bombay Dyeing and Manufacturing Co. Ltd. - 2007-TIOL-141-SC-CX, Commissioner of Central Excise and S. T. LTU, Bangalore vs. Bill Forge Pvt. Ltd. - 2011-TIOL-799-HC-KAR-CX and Commissioner of Central Excise vs. Ashima Dyecot Ltd. - 2008-TIOL-659-HC-AHM-CX.
The High Court after considering the submissions made by both sides distinguished the decisions cited by the respondent and inter alia observed -
15. To our mind, this was a clear distinguishing feature from the cases and decisions relied upon by the Tribunal. The order-in-original concluded and to our mind rightly that this was an admitted position of a clandestine removal. There was no payment of excise duty by the manufacturer on excisable goods. The payment was not made by claiming exemption and entitlement under Notification No. 3/2001-C.E. which is a conditional exemption. This is a case of admitted Modvat Credit taken on glasses used in the manufacture of buses and tempo travelers. The Assessee did not reverse the Modvat Credit at the time of removal of goods or after removal. No efforts were made by the Assessee to reverse the same. In the circumstances, when there is an admitted position emerging from the record, we are of the view that the Tribunal erred in law in reversing such a conclusion in the order-in-original.
19. In the case at hand, however, the undisputed position is otherwise. The Assessee admits taking of credit and contrary to the condition No. 41 of the Exemption Notification, which enables it to claim or remove the goods at nil duty. Knowing fully well, the Assessee could not have availed of the benefit of such exemption Notification. The activity or process in this case amounts to manufacture is undisputed. That the goods have been removed without payment of duty is the conclusion reached in the order-in-original. Such a conclusion, which was not perverse and neither vitiated in law should not have been interfered with by the Tribunal. The Tribunal's reasoning and relying upon these decisions, which we have noted above, is erroneous to say the least. We do not see as to how such Judgments and decisions rendered by the Hon'ble Supreme Court, other High Courts or the Tribunal could have been relied upon. The reversal of the order passed by the Commissioner being vitiated as above, we have no alternative but to allow this Appeal.
The appeal was allowed by answering the substantial question of law in favour of the Revenue and against the Assessee.
Nonetheless, the High Court held that in the facts and circumstances of the case, without creating any precedent, the direction to pay penalty of the sum of Rs.16,48,780/- is deleted.
The Revenue appeal was allowed to the said extent.
In passing: Perhaps, this is not the last that we hear of this case…
(See 2015-TIOL-851-HC-MUM-CX)
