TaxTMI 
TaxTMI 
2010 (3) TMI 52
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....ch the goods of the petitioner company as mentioned in the annexure to the Mahazar for the value of Rs.5,97,71,601/- were seized and kept in the specified place of the petitioner company on condition that they would be produced as and when called upon by the adjudicating officer, Central Excise and that the goods should not be disposed of or dealt with in any other manner. 2. The petitioner company is engaged in the manufacture of multiplexers used in the telecom industry at its factory at Puducherry. It is stated that the petitioner company imports various components like, resistors, capacitors, ICs., diodes, oscillators, heat sinks, PCBs. etc. and the petitioner has also procured other items locally like, cable assembly and chassis. On all the components, the petitioner avails CENVAT credit. The components are used for manufacture of populated PCBs. and thereafter sent on reversal of credit under rule 3(5) of the CENVAT Credit Rules, 2004 to its contract manufacturers. 3. It is stated that as per rule 3(5) of the said CENVAT Credit Rules, the Indian contract manufacturer, on receipt of components avails credit and sends to the petitioner company on payment of excise duty wh....
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....r the manufacture which is the issue to be decided in the adjudication process, that the burden of proving that there is violation of law is on the authority, that the impugned Mahazar is violative of Article 19(1)(g) of the Constitution of India and the seizure is in violation of Article 265 of the Constitution, since it is an illegal method of collection of tax without authority of law, that the petitioner has cleared the inputs on reversal of credit as per Rule 3(5) of the CENVAT Credit Rules, that the petitioner company has not gained anything by availing the credit as it reversed the credit on the components while clearing them to the contract manufacturers and that if the components are not released it would cause disruption in the manufacturing process of the petitioner, apart from raising other grounds as well. 7. In the counter affidavit filed on behalf of the respondents while denying various allegations raised by the petitioner company in the writ petition, it is stated that the verification was initiated based on intelligence by which it was revealed that the petitioner company has availed excise credit to the tune of Rs.1.94 crores against various bills of entry, an....
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....he manufacture of final product, in the presence of the manufacturer. In the present case, since the components referred to above, could not be used in the petitioner unit at Puducherry for manufacture and therefore, it should be treated as a trade. 11. It is stated that inasmuch as the Bangalore unit was closed, the accumulation of credit on account of receipt of inputs in that record, would only result in unintended cash refund of ineligible credit. It is stated in the counter affidavit that the department has no objection to release the seized components subject to the condition that the petitioner should execute a bank guarantee to safeguard the revenue. It is also stated that the department is not acceptable to the request that the goods can be released on undertaking that the petitioner would keep CENVAT credit to the extent of Rs.5,97,71,601/- as unutilized on the ground that there is no guarantee to safeguard the interest of the revenue. 12. As correctly submitted by Mr.S.Udhayakumar, learned counsel for the respondents, in Rule 2(k) of the CENVAT Credit Rules, 2004 which is as follows: (i) all goods, except light diesel oil, high speed diesel oil and motor s....
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....up to January, 2005, hence, the CENVAT Credit Rules, 2004 also apply to those cases. 41. In short, an item would fall within the category of inputs as defined only on compliance with all the three parts of the definition clause. 42. The question which still remains to be answered is: whether an assessee would be entitled to claim CENVAT credit in cases where it sells electricity outside the factory to the joint ventures, vendors or gies it to the grid for distribution? 43. In CCE v. Rajasthan State Chemical Works [(1991) 4 SCC 473: (1991) 55 ELT 444] the test laid down by this Court is whether the process and the use are integrally connected. As stated above, electricity generation is more of a process having its own economics. Applying the said test, we hold that when the electricity generation is a captive arrangement and the requirement is for carrying out the manufacturing activity, the electricity generation also forms part of the manufacturing activity and the input used in that electricity generation is an input used in the manufacture of final product. However, to the extent the excess electricity is cleared to the grid for distribution or to the joint ventures, ve....
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.... released pending adjudication as a matter of right. 14. Subsequent to the impugned Mahazar issued, there are various communications between the petitioner and the department which show that the department has been requesting the petitioner to produce various records for the purpose of finalization of adjudication process and it is seen that in the last letter of the petitioner company dated 5.2.2010 the petitioner forwarded certain records as required by the respondent department viz., CT-3 copies for the year 2008-09 (10 Nos.) and CT-Register for the year 2008-09, and therefore, the adjudication process appears to have already commenced. The department relies upon the statement of Mr.A.Shiju, Manager Manufacturing of the petitioner company given before the Superintendent of Central Excise, HPU, Puducherry in the form of question and answer, and the relevant portion of the said statement is as follows: Q5: Why were they transferred from your Bangalore unit? Ans: As the Bangalore unit which has the facility to manufacture assembled PCB boards is in the process of closure the components were transferred to our Puducherry unit as per the management instructions. Q6: How a....
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....d as stated above for the release of goods, however, differing with each other as to the terms on which the release could be made. 18. Rule 15 of the CENVAT Credit Rules, 2004 enables the authority to impose penalty apart from confiscation after adjudication process by following the principles of natural justice, which is explained in the said rule as follows: Rule 15. Confiscation and penalty. (1) If any person, takes CENVAT credit in respect of input or capital goods, wrongly or in contravention of any of the provisions of these rules in respect of any input or capital goods, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed, or two thousand rupees whichever is greater. (2) In a case, where the CENVAT credit in respect of input or capital goods has been taken or utlised wrongly on account of fraud, willful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Excise Act or the rules made thereunder with intention to evade payment of duty, then, the manufacturer shall also be li....
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....ating authority under section 110A of the Customs Act enabling him to make provisional condition with security and the said provision is as follows: Section 110A. Provisional release of goods, documents and thinks seized pending adjudication. Any goods, documents or things seized under section 110, may, pending the order of the adjudicating officer, be released to the owner on taking a bond from him in the proper form with such security and conditions as the Commissioner of Customs may require. 22. Learned senior counsel appearing for the petitioner, while attempting to justify the stand of the petitioner that the CENVAT credit to the extent of the value of goods seized can be kept unutilized for the purpose of releasing the goods pending adjudication, would rely upon the judgment of a Division Bench of Karnataka High Court in Union of India & Ors. V. Vikrant Tyres Ltd. [1999(35 RLT 427 (Kar.)]. That was the judgment delivered in contempt proceedings. When the High Court directed for pre-deposit of duty pending hearing and disposal of appeal, that is, to pay 50% by cash and to make application to CEGAT for the balance 50% for consideration, the respondent in the contempt proc....
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....venue of the State. Inasmuch as the respondent department has expressed its inability that it is not possible to keep unutilized certain amount in the CENVAT credit account of the petitioner which is a running account, it is not for this Court to impose such impracticable condition to be accepted by the respondent department. 25. By calling upon the petitioner unit to furnish bank guarantee for the amount of value of the goods seized, for the purpose of releasing the goods, it does not mean that it amounts to a final decision or final adjudication and a doubt about the genuineness of the petitioner's repaying capacity. While deciding such an issue, the paramount importance is to protect the interest of the revenue. 26. In these circumstances, without expressing any opinion about the merit of the matter that is involved in this case, which has to be ultimately decided in the adjudication process, and by taking note of the interest of the revenue, I am of the considered view that instead of going into the validity or otherwise of the impugned Mahazar, the respondents should be directed, as admitted by them in the counter affidavit, to release the seized components on the petiti....