CX - Allegation of Revenue is that as activity of appellant does not amount to manufacture, therefore, appellant not liable to pay duty - as appellant has paid to Govt what amount is collected from customers as duty, therefore, provisions of sec 11D are not applicable: CESTAT
By TIOL News Service
NEW DELHI, SEPT 02, 2015 : THE appellant is manufacturing laminated polyester films and metallised polyester films and clearing the same on payment of duty.They were also availing Cenvat Credit on inputs. In February 2004, the Apex Court in the case of Metlex Pvt. Ltd. 2004-TIOL-77-SC-CX held that such lamination and metallizing of the film would not amount to manufacture.
Consequently, the Adjudicating Authority held that since duty was not payable, what was collected from the customer should be deposited in terms of s.11D of the CEA, 1944 - the amount, a whopping Rs.8.45crores.Along with it, an equivalent penalty. So also, the credit availed on the inputs used for producing the metallised laminated film is sought to be recovered. Added to this is the allegation that since the final product is not dutiable, on the intermediate product duty is payable. A bouquet of demands was thus raised and confirmed.
Before the CESTAT, the appellant submitted that the allegations levelled cannot survive in the view of the Bombay High Court decision in Ajinkya Enterprises 2012-TIOL-578-HC-MUM-CX where it is inter alia held that payment of duty is to be construed as reversal of CENVAT credit.
The AR supported the order of the lower authority.
The Bench after considering the submissions crystallised the issues involved in the following manner and gave its findings thereon -
1. Whether the amount of Rs.8,45,11,283/- charged and collected is demandable in terms of Section 11D of the Act along with due interest thereon under Section 11D, ibid?
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.
On plain reading of the provision (s.11D of CEA, 1944), 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.
2. Whether Cenvat Credit amounting to Rs.15,68,167/- involved in the metalized Polyester film cleared for export is demandable?
As per the CBEC Circular 283/117/96-CX dated 31.12.1996 it is clarified that MODVAT credit in RG23A part 2 accountcan be utilized against the export of inputs as such under bond in the same manner as it is utilized for final product under the proviso of Rule 57(F)(4). 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.
3. 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?
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.
4. 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 ?
5. 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 ?
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.
6. Whether penalty under rule 13/15 of CCR, 2002 and under Rule 25 of the CER, 2002 read with section 11AC of the CEA, 1944 is imposable?
7. Whether penalty under rule 13/15 of the CCR, 2004 and Rule 26 of the CER, 2002 is imposable on ShriLokNath Prasad, the Director of M/s. LIPL, Shri Om Prakash Gupta, the Director of M/s. LIPL and ShriDipankarGhosh, Manager and Authorized signatory of M/s. LIPL, separately?
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.
The order was set aside and the appeals were allowed with consequential relief.
(See 2015-TIOL-1860-CESTAT-DEL)
