2018 (9) TMI 641 - AT - Central Excise

Key Issues Resolved in Appellants' Favor with Penalties Set Aside

The appellants accepted the demands in issues I, II, III, and V without contesting on merits. The demand in issue IV was set aside as Rule 8 does not ... CENVAT Credit - inputs/input services/capital goods - manufacture of spirally welded steel pipes for Water Supply Projects and Gas Projects - N/N. 06/2006-CE dated 01.03.2006 - Time limitation. Under-valuation of pipes manufactured on job work basis - Held that:- Appellant is correct in his assertion that the issue is fully covered by the decision of CESTAT Chennai in M/s. Bhavani Enterprises and Ors. [2018 (2) TMI 139 - CESTAT CHENNAI], where it was held that Rule 8 of the Central Excise Valuation Rules will not be applicable in respect of the job work activities done by the appellants therein. - the demand of ₹ 40,70,960/- with interest, cannot be sustained and is, therefore, set aside. Ineligible credit availed on HR Coils - Held that:- HR Coils were used only in manufacture of water pipes which were not in the exempted or non-dutiable category. In fact, from the facts on hand, from para 3.4 of the Show Cause Notice, it is evident that the appellants were being supplied HR Coils with size 10 X 1250 MM. by M/s. Koya Ltd. along with duty paid invoices and they also themselves procured HR Coils with sizes 11 X 1147 MM and 14.2 X 1553.4 MM. All these HR Coils were exclusively used in manufacture of exempted pipes and were not used in any other duty paid pipes - the availment of CENVAT Credit will be barred by Sub-rule (1) of Rule 6 of the Rules - credit availed is required to be reversed - the appellant has to be given adjustment of the amount already reversed as above. For this limited purpose of re-quantification of demand on this issue, after giving adjustment of the amount already reversed by the appellant, we remand the matter to the adjudicating authority. Time Limitation - Held that:- There is no positive evidence to show suppression of facts with intention to evade payment of duty attracting the ingredients for invocation of extended period. In such event, the demand for the extended period with respect to the issues which are not contested on merits requires to be set aside as being time barred - the appellant is liable to pay the duty demand falling under the normal period. Penalties also set aside. Appeal allowed by way of remand. Issues Involved:1. Non-reversal of appropriate amount on the Cenvated coating material used in exempted products for the year 2009-10.2. Non-reversal of appropriate amount on the Cenvated raw materials, filler wire, and other consumables for the year 2009-10.3. Undervaluation of the pipes manufactured on a job work basis by not properly adopting the value of the material both for duty payment and for 10% reversal for the year 2006-07.4. Differential duty in accordance with valuation in terms of Rule 10(A)(iii) of the Valuation Rules for the period from 2007-08 to 2009-10 in respect of goods manufactured on a job work basis and cleared to the project customers.5. Differential duty in accordance with valuation in terms of Rule 10(A)(i) of the Valuation Rules for the period from 2007-08 to 2009-10 in respect of goods manufactured on a job work basis and cleared to M/s. Madras Steel Tubes.6. Ineligible credit availed on inputs exclusively used in the exempted final products for the year 2010-11.Detailed Analysis:Issue I: Non-reversal of appropriate amount on the Cenvated coating material used in exempted products for the year 2009-10The appellants did not contest this liability on merits and accepted the demand of Rs. 19,88,929/-.Issue II: Non-reversal of appropriate amount on the Cenvated raw materials, filler wire, and other consumables for the year 2009-10Similarly, the appellants accepted the demand of Rs. 7,66,415/- on this issue without contesting it on merits.Issue III: Undervaluation of the pipes manufactured on a job work basis by not properly adopting the value of the material both for duty payment and for 10% reversal for the year 2006-07The appellants did not contest this liability on merits and accepted the demand of Rs. 7,28,676/-.Issue IV: Differential duty in accordance with valuation in terms of Rule 10(A)(iii) of the Valuation Rules for the period from 2007-08 to 2009-10 in respect of goods manufactured on a job work basis and cleared to the project customersThe appellants contested this issue, arguing that Rule 8 of the Central Excise Valuation Rules does not apply to job work activities. They relied on the decision in M/s. Bhavani Enterprises and Ors. Vs. C.C.E., Pondicherry, where it was held that Rule 8 is not applicable for job work activities. The Tribunal agreed with the appellants, citing the same decision, and set aside the demand of Rs. 40,70,960/- with interest.Issue V: Differential duty in accordance with valuation in terms of Rule 10(A)(i) of the Valuation Rules for the period from 2007-08 to 2009-10 in respect of goods manufactured on a job work basis and cleared to M/s. Madras Steel TubesThe appellants accepted the demand of Rs. 1,38,985/- without contesting it on merits.Issue VI: Ineligible credit availed on inputs exclusively used in the exempted final products for the year 2010-11The appellants contested this issue, arguing that they could opt not to maintain separate accounts as per Sub-rule (3) of Rule 6 of the CENVAT Credit Rules. They also argued that the demand was time-barred since the Show Cause Notice was issued on 07.03.2011 for the period 2006-07 to 2010-11. The Tribunal found that the HR Coils were used exclusively in the manufacture of exempted pipes, and thus, the appellants should not have availed the credit ab initio. However, the Tribunal allowed for the adjustment of the amount already reversed by the appellants and remanded the matter to the adjudicating authority for re-quantification.Limitation and Penalties:The Tribunal found no positive evidence of suppression of facts with intent to evade payment of duty. Therefore, the demands for the extended period were set aside as time-barred, and the penalties imposed were also set aside. The appellants were held liable to pay the duty demand falling under the normal period.Conclusion:1. No interference was made with respect to the demands in issues I, II, III, and V conceded by the appellant on merits. However, the demands for the extended period were set aside along with the penalties imposed for the normal period.2. The demand in issue IV was set aside on merits.3. The demand in issue VI was upheld for the normal period only, but the penalties were set aside.4. For the purpose of quantification, the matter was remanded to the adjudicating authority.The appeal was partly allowed in the above terms.