TaxTMI 
TaxTMI 
2011 (7) TMI 90
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.... engaged in the manufacture of articles of plastic falling under chapter sub-heading no.3923.90 of the schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the „Tariff Act‟). The respondent/assessee in respect of its raw materials being: plastic granules (HDPE, LDPE, Chips); master batches, packing material, etc. used in manufacture of its finished products, availed of Modvat Credit under Rule 57 A of the Central Excise Rules, 1944 (hereinafter referred to as the „Rules‟). Thus, there was a batch of finished goods qua which the respondent/assessee paid duty and sought adjustment of duty paid on inputs (i.e., raw material) by seeking recourse to the Modvat route. There was another batch of finished goods in respect of which the respondent/assessee availed of the benefit of exemption notification no.41/97-CE dated 01.03.1997 (hereinafter referred to as the „exemption notification‟), which prescribed „nil‟ rate of duty for the said finished goods. 2.2 The respondent/assessee was, at the relevant time, operating four manufacturing units and was in possession of three godowns. Out of the four manufacturing ....
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....udication of the question involved, we may briefly advert to the relevant parts of the statement made by each of the officers as recorded in the SCN. It may be noted at this state that the counsel for the respondent/assessee has neither disputed the veracity nor the manner in which it has been paraphrased in the show cause notice. Therefore, for the sake of convenience, the same are extracted hereinafter :- R.K. Chawla, Dy. General Manager (Commercial) "Sh. R.K. Chawla further stated that during the year April, 96 to March, 97, they had consumed 6,73,390 kgs and 8,67,158/- kgs. Of raw materials from IV and RG.23A Pt.I respectively for production of exempted goods valued at Rs.8,36,30,488/- and dutiable goods valued at Rs.6,48,76,868/-. This had happened because more quantity of raw materials were issued from RG.23A Pt.I, for manufacture of exempted goods. He further stated that same Moulding machines were used for the manufacture of both dutiable and exempted goods, and the above ratio between raw material and finished goods issued from Form IV register and RG-23A clearly shows that modvatable inputs were diverted for the manufacture of exempted goods." Sh. Vijay Gupta, Assistant M....
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....s although some of these inputs were also used in the manufacture of exempted category of goods." Vivek Nagpal, Chairman and Managing Director "He also confirmed that there was no segregation of raw materials in respect of which they had availed modvat and those on which they had not availed modvat because of practical difficulties. He also clarified that they maintained Form IV for the raw materials for which no modvat had been availed whereas for modvatable inputs they had maintained RG-23A Pt.I register; and that they had been storing both dutiable and exempted variety of finished products together. Raghunath Sharma, Assistant Accounts Manager "He further deposed that there was no segregation of dutiable/non dutiable raw materials as well as finished goods, though the records were maintained separately for both modvatable and non-modvatable inputs and dutiable and exempted category of finished goods. P.K. Jain, Chief Executive Officer "He further stated that there was no segregation of either dutiable or exempted variety of raw materials and dutiable or exempted finished goods in as much as both were kept together without any demarcation. He further deposed that master....
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....nveyance and any other thing used in the manufacture, production, storage, removal and disposal of the goods in issue ought not to be confiscated under Rule 173 Q (2). 2.9 In so far as Sh. Vivek Nagpal, Chairman and Managing Director and Sh. R.K. Chawla, Dy.GM were concerned, they had been directed to show cause as to why penalty ought not to be imposed on them under Rule 209 A. 3. In response to the aforementioned show cause notice, replies were filed by the noticees in question which included the respondent/assessee. After perusing their reply and hearing their authorized representatives, the Commissioner passed an order-in-original dated 19/21.07.2000. The Commissioner, by virtue of the said order, sustained the submission of the respondent/assessee with regard to the fact that there had been no diversion of raw material /inputs in respect of which modvat credit had been availed of in manufacturing finished goods which were cleared by taking recourse to the exemption notification. Thus, proceedings against the respondent/assessee (noticee no.1) were dropped with a caveat that seized raw material valued at Rs.1,27,400/- be confiscated. Option was, however, given to t....
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....ep separate records of inputs but would also store those inputs separately, on which, it did not intend to claim modvat but was desirous of clearing the finished goods manufactured with the aid of such inputs by taking recourse to the exemption notification. 5.1 Mr. Kumar submitted that clearly this undertaking was breached; a fact which is borne out from the statement of officers of the respondent/assessee recorded by the revenue under section 14 of the CE Act. In this connection, Mr. Kumar drew our attention to the statements of the concerned officers of the respondent/assessee, the relevant portions of which have already been extracted by us hereinabove. 5.2 Mr. Kumar laid emphasis on the statements to show that the inputs on which modvat had been claimed, had been diverted for manufacturing finished goods which were cleared under the exemption notification. Mr. Kumar contended that even though in the orders of the authorities below, there is a reference to the statements made by the officers, both the Commissioner and the Tribunal have failed to take this crucial fact into account to determine as to whether condition no.8 of the exemption notification had been brea....
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....ble, from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said table, subject to any of the conditions specified in the Annexure to this notification, the condition No. of which is mentioned in the corresponding entry in column (5) of the said table. S.No. Chapter or heading No. or sub-heading No. Description of goods Rate Conditions (1). 39.23, 39.24 or 39.26 All goods other than - (i). goods of polyurethances; (ii). Insulated ware; and bags or sacks made out of fabrics (whether or not coated, covered or laminated with any other material) woven from strips or tapes of plastics; and fabrics for making such bags or sacks 8 Condition No. &nbs....
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....erial and physical inventory as well (see Dictionary for Accountants ERIC L. KOHLER 5th Edition Page 271). Therefore, the argument made on behalf of the respondent/assessee that separate inventory could never include separate storage is not an argument which would find favour with us. We are in fact supported by the observations made by the Supreme Court in this regard in the case of Chandrapur Magnet Wires (P) Ltd. wherein, the Supreme Court while observing that the assessee ought to have maintained not only „separate accounts‟ but also „segregated inputs utilized for manufacture of dutiable goods and duty free goods, allowed the assessee‟s appeal on the ground that the assessee had reversed the credit of duty paid on the inputs used in the manufacture of exempted goods by debiting the credit account before removal of such exempted final products. (see observations made in paragraph 7 at page 161). The purpose of the Rule 57CC (9) is thus, in our view, to facilitate those assessees in claiming benefit of exemption notification who do not wish to claim modvat credit. 10. Therefore, in our opinion, the authorities below ought to have understood the ....