2019 (2) TMI 75 - AT - Central Excise

Tribunal partially grants appeal on duty demands, remands for reconsideration

M/s. Mando India Ltd. Versus Commissioner of GST & Central Excise Chennai

The Tribunal partly allowed the appeal by setting aside demands related to warehouse storage, differential duty on scrap, job work, and system failures. ... Reversal of credit - re-transfer of goods from the warehouse to the factory under Goods Delivery Note (GDN) - only allegation of the department is that at each retransfer, the appellant ought to have reversed the credit - Held that:- It is brought out from evidence that the appellants have availed credit only when the entire quantity of inputs as per the invoice were used for manufacture. Even though part of inputs were returned, they did not avail credit on such inputs. Thus, though they have retransferred the unused inputs to their warehouse, there is no excess credit availed than that is relatable to the invoice corresponding to the procurement of inputs. When the inputs are brought to the factory since credit is not availed, there is no requirement of reversal of credit as under 3(5) of CENVAT Credit Rules, 2004. The credit is availed only when entire quantity of inputs as per an invoice is used for manufacture - demand do not sustain. CENVAT credit - rejected goods - rejected goods were repaired and sent to customers - Demand of differential duty u/r 16 of CER - Held that:- The said issue has been decided in the case of Tube Investments of India Ltd. Vs. Commissioner of Central Excise, Chennai [2017 (10) TMI 1320 - CESTAT CHENNAI], where it was held that From the reading of the Rule 7 (4) of CENTRAL EXCISE RULES, 2002 it is seen that interest is payable only when any amount is payable consequent to the order for final assessment. When no amount is to be paid consequent to the order of final assessment, sub-rule 4 is not attracted at all - demand do not sustain. Demand to the tune of ₹ 50,917/- is in respect of central excise duty when the goods have been supplied by appellant to customers for periodical sample testing - Held that:- The appellants are duty bound to discharge the duty when the goods are cleared from the factory for testing. The appellant contends that they have discharged duty whenever finished product was cleared. However, this requires verification - matter on remand. An amount of ₹ 4,42,938/- is the demand of excise duty in respect of components supplied to customers and which are returned to appellant for repair work under RDC as per Rule 4(5)(a) of CENVAT Credit Rules - Held that:- It is brought out from the facts that the appellants are carrying out repair work and such process of repair work does not amount to manufacture. The facts discussed in the orders passed by authorities below does not throw much light as to the activity of repair/testing undertaken would amount to manufacture or not - the issue requires reconsideration - matter on remand. An amount of ₹ 17,84,883/- is seen to be a demand of excise duty raised when the appellant has sent inputs / capital goods for further processing or for tool grinding purposes to job workers under RDC - Held that:- Interestingly, the demand of excise duty is not on job worked goods and instead the demand of excise duty is on inputs / capital goods which are sent for job work which, in our view, is incorrect and cannot sustain - demand set aside. An amount of ₹ 18,06,561/- is raised alleging that there is delay in issuing invoices - Held that:- In fact, there was no delay in payment of central excise duty and duty was paid when goods were cleared. There was delay in raising the invoices only. This has occurred only due to some technical fault in system to raise invoices for which the assessee cannot be burdened with demand of excise duty. It is not the case of department that duty was not paid when goods were cleared - demand set aside. Appeal allowed in part and part matter on remand. Issues Involved:1. Demand for reversal of CENVAT credit on inputs stored in a warehouse and returned to the factory.2. Demand for differential duty on rejected goods cleared as scrap.3. Demand for excise duty on goods sent for testing, repairs, job work, and during system failures.4. Invocation of the extended period for demand.Issue-wise Detailed Analysis:1. Demand for Reversal of CENVAT Credit on Inputs Stored in Warehouse and Returned to Factory:The appellants stored inputs in a warehouse due to space constraints, with departmental permission. They transferred unused inputs back to the warehouse and re-transferred them to the factory as needed. The department alleged that credit should have been reversed each time inputs were returned to the warehouse. The appellants argued that they availed credit only when the entire quantity under an invoice was used for manufacturing, and thus, Rule 3(5) of the CENVAT Credit Rules, 2004, was not applicable. The Tribunal agreed, noting that the appellants did not take excess credit and reversing credit each time would only add unnecessary scriptory work without revenue loss. The demand of Rs. 92,64,820/- was set aside as it was considered a procedural infraction without revenue loss.2. Demand for Differential Duty on Rejected Goods Cleared as Scrap:The appellants received rejected goods from customers, took CENVAT credit, and either repaired and returned them or cleared them as scrap. The department demanded the difference between the credit availed and the duty paid on scrap value. The Tribunal referred to previous decisions (e.g., Tube Investments of India Ltd., Apollo Tyres Ltd.) and held that the appellants correctly discharged excise duty on the transaction value of the scrap. The demand of Rs. 11,90,475/- was set aside.3. Demand for Excise Duty on Goods Sent for Testing, Repairs, Job Work, and During System Failures:- Goods Sent for Testing: The appellants sent goods to customers for testing under Returnable Delivery Challan (RDC) and received them back. The Tribunal remanded this issue for verification to check if excise duty was paid when goods were removed from the factory. If not, the demand of Rs. 50,917/- would be upheld.- Goods Returned After Repairs: The appellants carried out repairs on goods returned by customers and sent them back under RDC. The Tribunal remanded this issue for reconsideration to determine if the repair process amounted to manufacture. If not, the demand of Rs. 4,42,938/- would not sustain.- Goods Sent for Job Work: The appellants sent inputs/capital goods for job work under Rule 4(5)(a) of the CENVAT Credit Rules and received them back within 180 days. The Tribunal found the demand of Rs. 17,84,883/- incorrect and set it aside.- Invoices Issued Belatedly Due to System Failure: The appellants cleared goods under RDC during system failures and raised excise invoices later. The Tribunal noted that duty was paid when goods were cleared, and the delay in raising invoices was due to technical faults. The demand of Rs. 18,06,561/- was set aside.4. Invocation of Extended Period for Demand:The Tribunal noted that the appellants had obtained departmental permission for storing goods in the warehouse and followed proper documentation. The extended period was invoked solely because the appellants voluntarily paid the duty. The Tribunal held that there was no suppression or mala fide intention, and the extended period was not invokable. The demand should be restricted to the normal period from 01.02.2010 to 28.02.2010.Conclusion:The appeal was partly allowed by setting aside the demands related to warehouse storage, differential duty on scrap, job work, and system failures. The issues of goods sent for testing and repairs were remanded for reconsideration. The appellants were eligible for consequential benefits as per law.