| SooperKanoon Citation | sooperkanoon.com/41715 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu |
| Decided On | Feb-06-2006 |
| Judge | P Chacko |
| Reported in | (2006)(107)ECC351 |
| Appellant | Rupa and Co. |
| Respondent | Cce |
Rs. Kgs.
Rs. Rs. Rs.----------------------------------------------------------------------------------------------1.
YARN 92718.500 11954860 92718.500 11954860 10400290 8320232.
FABRICS 540039.690 87364645 568462.800 73297593 63766221 51012983.
FINISHED 717214 166169467 721691.496 93054902 80954356 64763484.
SEMI- 146967.6 23182720 125856.243 16227904 14117682 1129415 FABRICS 17959.970 5417443 18905.200 2437636 2120654 169652 (b) 652(Unit) 329740 1790.119 230818 200803 160064---------------------------------------------------------------------------------------------- GRAND 294418875 1529424.358 197203713 1715560007 13724801---------------------------------------------------------------------------------------------- Later, from the Cenvat credit returns filed by the party, it appeared to the department that they had availed extra credit on 5% of the weight of fabrics, semi-finished goods and finished goods declared above, treating such 5% of the weight as "process loss" of input. The extra credit amounted to Rs. 7,06,433/-, and the same was proposed to be disallowed to the assessee, in a SCN, wherein a penalty was also proposed on the party. The original authority confirmed these proposals. Accordingly, it ordered recovery of Cenvat credit of Rs. 7,06,433/- from the appellants under Rule 12 of the Cenvat Credit Rules, 2002 and imposed on them a penalty equal to the amount under Rule 13 of the said rules The first appellate authority sustained the lower authority's order with the modification that the quantum of penalty stood reduced to Rs. 70,643/-. In the present appeal, the assessee is aggrieved by the denial of the above credit and the imposition of the above penalty.
2. Ld. Counsel for the appellants submitted that the credit of duty paid on inputs not physically contained in fabrics semi-finished goods and finished goods lying in stock as on 1.4.03 had been disallowed to them. He argued that the relevant Rule (9A) required to be construed in a liberal manner inasmuch as the legislative intent was to allow credit on inputs used in or in relation to the manufacture of the final product, whether directly or indirectly, and whether contained in the final product or not. In this connection, he relied on CBEC's Circular No. B-4/7/2000-TRU dt., 3.4.2000, wherein it had been clarified that Cenvat credit was admissible so long as the inputs were used in, or in relation to, the manufacture of final products whether directly or indirectly. It was also pointed out by counsel that, though the assessee had taken into account the process loss of input to the extent of 5% by weight only in respect of fabrics, the lower authorities had proceeded on the premise that such process loss had been reckoned (for the purpose of availment of Cenvat credit) in respect of input contained in semi-finished and finished goods as well. In the event of this error in quantification of credit being rectified, the demand of duty would stand reduced substantially, ld.Counsel submitted.
3. Ld. Counsel also was of the view that the demand was time-barred.
The SCN seeking to recover the credit in question was issued on 8-7-04.
It was under Rule 12 of the CENVAT Credit Rules, 2002, in terms of which provisions of Section 11A were mutatis mutandis applicable to recovery of Cenvat credit wrongly taken/utilized. The 'relevant date' for the purpose of computing the period of limitation required to be determined in terms of Section 11A [3] [ii] [a] [B] inasmuch as the appellants had not filed periodical Cenvat credit returns. Ld.Counsel pointed out that such return for the month of April 2003 should have been filed on or before 10.5.03 in terms of Rule 7(5) of the CENVAT Credit Rules, 2002. Hence 10/5/03 was the 'relevant date' determined in terms of Section 11A [3] [ii] [a] [B]. The SCN was issued beyond one year from this date. Hence the plea of limitation.
4. Ld.SDR, contesting this plea of limitation, submitted that, in the facts of this case, the relevant date, for the purpose of recovery of credit under Rule 12 of the CENVAT Credit Rules, 2002, could only be determined in terms of Section 11A [3] [ii] [a] [A] inasmuch the appellants had actually filed Cenvat credit returns. These returns (for the months of April, May and June 2003) were filed on 17.7.03 along with quarterly return in ER. 1 Form filed under Rule 12 of the Central Excise Rules, 2002. The SCN was issued within one year from 17.7.03 and hence the demand was in time. It was also pointed out by ld.SDR that the party had never raised the plea of limitation earlier. It was argued that they could not raise a mixed question of fact and law at this stage. In this connection, ld.SDR relied on the Tribunal's decision in S.S. Bedi & Sons v. CCE . This argument of ld.SDR was countered by ld.Counsel on the strength of the Tribunal's decisions in the cases of Collector of Central Excise v. Texma Co. Ltd. and Collector of C.Ex.
wherein it had been held that a plea of limitation being a legal plea could be raised for the first time before an appellate authority. Ld.
Counsel, further, relied on the Tribunal's decision in Collector of Central Excise v. Ganesh Sugar Mills Ltd. , wherein it had been held that the ground of limitation being a mixed ground of fact and law could be allowed to be raised for the first time before the Tribunal.
5. Ld.SDR, adverting to the merits of the ease, referred to Rule 9A of the CENVAT Credit Rules, 2002 and submitted that Cenvat credit of duty paid on inputs was admissible under this provision, only to the inputs physically available either in their own form or in the form of in-process or as contained in semi-finished/finished goods as, on the specified date (in this case, 31.3.2003). No part of the credit availed by the party in accordance with this provision of law was denied to them. The credit disallowed to the assessee was only in respect of the quantity of input (to the extent of 5% of the weight of fabrics and semi-finished/finished goods physically present) which was not physically present on 31.3.2003.
6. I have given careful consideration to the submissions. The applicability of Rule 9A of the CENVAT Credit Rules, 2002 is not in question in this case. According to the assessee, in so far fabrics, i.e., in-process inputs present in stock as on 31.3.03 are concerned, that quantity of input which became waste during the course of conversion of yarn to such fabric should also be reckoned as input eligible for Cenvat b2 credit under the said rule, On the other hand, according to the Revenue, only that quantity of input which was physically present in such fabrics lying in stock as on 31.3.03 was cenvatable under the rule. The rule under consideration reads as under: Rule 9A. Transitional provisions for Textile and Textile Articles. - (1) A manufacturer, producer, first stage dealer or second stage dealer of goods falling under Chapter 50 to 63 of the First Schedule to the Tariff Act shall be entitled to avail credit equal to the duty paid on inputs of such finished product, lying in stork or in process or contained in finished products lying in stock as on 31^st day of March, 2003 upon making a written declaration of the description, quantity and value of the stock of inputs (whether lying in stock or in process or contained in finished products lying in stock) and subject to availability of the document evidencing actual payment of duty thereon.
There is no dispute with regard to inputs lying as such in stock as on 31.3.03. The same is the position with regard to the inputs contained in the finished goods lying in stock as on the said date. The controversy is in respect of "in-process materials" viz: fabrics lying in stock as on the said date. The assessee's argument is that not only the actual physical input-content of the fabrics but also the quantity of input lost in the course of conversion of inputs into the fabrics should also be taken into account for Cenvat credit purpose under the above rule. The Revenue is opposed to the proposal to include the input which became waste during the course of the above conversion, for Cenvat purpose. I find much force in this opposition inasmuch as it is clear from the text of the above rule that Cenvat credit was not available to any input not contained in the materials lying in stock as on 31.3.2003. For availing the benefit of Cenvat credit under the above rule, it was incumbent on the assessee to make a written declaration of the description, quantity and value of the stock of inputs (whether lying in stock or in process or contained in semifinished/finished products lying in stock). Such a declaration required to be filed under, Sub-rule (4) Rule 9A ibid on or before 15.6.01 Cenvat credit was admissible only to such quantity and value of the stock of inputs so declared. It is thus clear that the benefit would not be available to input not lying in stock. Insofar as the fabrics (in-process inputs) are concerned, "stock of inputs" means the physical input-content of such fabrics and cannot include any input which became waste in the conversion of yarn into fabrics. This position is amply clear from the text of Rule 9A ibid, which being a transitional provision of law, should be strictly construed.
7. Ld. Counsel has relied on the definition of "input", according to which, any goods used in, or in relation to the manufacture of final product, whether directly or indirectly and whether contained in the final product or not is an input eligible for Cenvat credit. It has been argued that, by virtue of this definition, any input which became waste during the course of conversion of inputs to final products would also be eligible for Cenvat credit and, if that be so, the input which became waste in the conversion of yarns to the fabrics (in-process, inputs) present in stock as on 31.3.2003 must also get the benefit of Cenvat credit. This argument, of course, is acceptable in relation to any period during which the assessee procures inputs on payment of duty and uses the same in or in relation to the manufacture of dutiable final products, whether directly or indirectly and whether contained in the final product or not. The appellants commenced such activity only on 1.4.03. The above argument of ld.Counsel cannot be applied to the stock of inputs, in-process inputs and semi-finished/finished goods present in their factory on 31.3.03. In respect of these materials, the transitional provisions of Rule 9A would strictly apply and, accordingly, Cenvat credit would be available to only those inputs physically present in stock, whether as such or as contained in fabric or as contained in semi-finished/finished goods.
8. For the reasons stated above, 1 hold that the appellants were not entitled to claim Cenvat credit under Rule 9A in respect of any input which was not present in stock as such or as contained in fabrics or as contained in semi-finished/finished goods as on 31.3.03.
9. Ld.Counsel has pointed out, with reference to the declaration dated 23/5/2003 filed by the assessee under Sub-rule (4) of Rule 9A, that they had not claimed or availed Cenvat credit, in relation to semi-finished and finished goods, on any quantity of input in excess of what was physically contained in such semi-finished/finished goods present in stock as on 31.3.03. It was only in respect of fabrics in stock or stock-in-transit as on 31.3.03 that they had taken Cenvat credit on an extra quantity of 5% of actual quantity in physical stock as on 31.3.03. The assessee's grievance is that the lower authorities proceeded on the premise that extra credit had been taken in respect of all the materials viz. fabrics, semi-finished goods and finished goods.
If this is true, the error needs to be rectified at the original level.
10. Coming to the assessee's plea of limitation, I find that hair-splitting arguments have been put forward. The SCN dated 8.7.04 seeking to recover Cenvat credit was issued under Rule 12 of the CENVAT Credit Rules, 2002 read with Section 11A of the Central Excise Act. The applicability of Rule 12 & Section 11A is not in dispute. Both sides have agreed that, for a valid demand under Rule 12, a notice should be issued within a period of one year from the "relevant date". The controversy, in this case, is as to the 'relevant date'. The definition of "relevant date" can be had from Clause (ii) of Sub-section (3) of Section 11A of the Act. This clause reads as under: (a) in the case of excisable goods on which duty of excise has not been levied or paid has been short-lived or short-paid- (A) where under the rules made under this Act a periodical return, showing particulars of the duty paid on the excisable goods removed during the period to which the said return relates, is to be filed by a manufacturer or a producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed; (B) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder; (b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; (c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund.
According to the assessee, the relevant date is 10.5.2003 in terms of "(B)" above. But Revenue would contend that it is 17.7.2003 in terms of "(A)" above. Admittedly, the assessee filed a quarterly return (for the first quarter of the year 2003-04) on 17.7.2003 in terms of Clause (c) of the proviso to Rule 12 of the Central Excise Rules, 2002. Again, it is an admitted fact that, along with the said quarterly return, they also filed Cenvat returns for the three months, April to June 2003.
But, under Rule 7(5) of the CENVAT Credit Rules, 2002, such return for any calendar month should have been submitted within 10 days from the close of such month. Thus, in respect of April, 2003, the Cenvat return should have been filed on or before 10.5.2003. Similarly, the returns for May & June'03 should have been filed on or before 10.6.03 & 10.7.03 respectively. As against this procedural requirement, the assessee chose to file Cenvat returns for April, May and June'03 on 17.7.03 only. It appears from the records that the returns were accepted by the department. The delay of filing these returns stood impliedly condoned.
In the circumstances, the date on which the Cenvat return for April 2003 was filed [17.7.2003] should be adopted as the "relevant date" in terms of Clause (A) above as applied, mutatis mutandis, to the procedure of recovery of Cenvat credit. When reckoned from this date, the SCN dated 8.7.04 is found to have been issued within one year.
Hence the plea of limitation raised by ld.Counsel is liable to be rejected.
11. In the result, it is held that, in respect of the fabrics (in-process inputs) and semi-finished and finished goods which were in stock in the assessee's factory as on 31.3.2003, they were not entitled, under Rule 9A of the CENVAT Credit Rules, 2002, to take Cenvat credit on any quantity of input not contained in such fabric/semi-finished goods/finished goods and that any such credit taken by them was liable to be recovered under Rule 12 of the said Rules read with Section 11A of the Central Excise Act. The party was also liable to be penalized under Rule 13 of the CENVAT Credit Rules, 2002 on the ground of irregular availment of Cenvat credit. However, as the assessee's plea that in respect of semi-finished and finished goods, no credit on any input not contained in such goods in stock as on 31.3.03 was actually taken has not been successfully contested, I am constrained to remand the case to the original authority for requantification of the credit to be disallowed. Consequently, the quantum of penalty also requires to be redetermined. In this connection, however, it is made clear that as the decision of the lower appellate authority to fix the penalty at 10% of the amount of credit disallowed is not under challenge by the department, it would be open to the original authority to follow the same formula while redetermining the quantum of penalty.
12. The impugned order is sustained in principle and the quanta of duty and penalty are set aside to enable the original authority to requantify the duty and penalty in terms of this order, for which limited purpose, the case is hereby remanded. It goes without saying that the assessee shall be given a reasonable opportunity of being heard.