TaxTMI 
TaxTMI 
2011 (11) TMI 255
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.... out by the appellants at their Bhosari unit. 3.1 The process carried out by the appellants up to sulphonation and dilution for the manufacture ion exchange resin is as under: Step 1 Polymerization:- Raw material such as Styrene, Divinyl Benzene, BPO, monomer is polymerized at 80-100° C to get co-polymer beads. The RM quantity varies for 6.4%, 8% and 15% beads. In case of 15% beads, a solvent is added to induce porosity and the same is recovered by distillation. Step 2 Washing:- The co-polymer beads produced in the suspension polymerization kettle are taken to a washer in slurry form. The beads are washed to remove the suspending agent Polyvinyl Alcohol. After washing, the co-polymer beads are dropped in a filter cum drain table to remove excess moisture. Step 3 Step 4 Testing: The dried beads are then analyzed for toluene regain and swelling. Step 5 Sieving: The beads are then sieved to remove coarser and finer material. Particle size analysis after sieving is adjusted by setting up the sieving parameters so that the material is suitable for future processing. These beads after sieving to get required size and after removal of fines and coarse are considered ....
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....suppression of facts by the appellants with an intent to evade payment of duty. 3.2 The appellants replied. However, Commissioner of Central Excise vide order dated 22.06.2000 confirmed the entire demand of duty and imposed equivalent penalty on the appellants. The appellants filed appeal before this Tribunal. Vide order dated 21.11.2000, this Tribunal remanded the matter back to the Commissioner observing that the Commissioner should first determine the question of marketability of gel beads in view of the judgment of the Supreme Court in the case of Ion Exchange India Limited V/s CCE 1999 (112) ELT 746 and thereafter should determine short levy, if necessary. This specific remand direction of this Tribunal, is reproduced as under: "..... We, therefore, are of the view that the Commissioner should first determine this question and thereafter, if necessary; the short levy. We make it clear that in determining the question of marketability, either side is at liberty to rely upon such evidence as it may consider necessary". 3.2.3 The aforesaid order passed by this Tribunal has not been challenged by the department and hence, has become final. 3.4 On remand, once again the....
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....n, the appellants placed reliance on Technical Literature from Encyclopedia Chemical Technology - Kirk Othmer (4th Edition) to show that gel beads are not marketable. Further, the appellants also filed affidavit dated 23.10.2000 of Mr. Kiran Deshpande, Divisional Manager (Research and Development) of the appellants who is M-Tech (Chemical Engineering). He has, inter alia, deposed that the gel beads obtained in raw form have to undergo series of other process for manufacture of ion exchange resins. He has also deposed that every manufacturer of ion exchange resins has own formula and process of making gel beads. The ratio or DVB Catalyst and dispersant will vary from manufacturer to manufacturer. The further process of sulfonation and washing are developed based on the gel beads produced by the proprietary formula and process. This is the reason that all ion exchange resins manufacturers make their own gel beads in their factory for their exclusive use. He further deposed that, based on his experience, all ion exchange resins manufacturers always make their own gel beads for further processing of ion exchange resins and using their own exclusive process. He finally deposed that Gel ....
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....showing sale of similar goods has been produced on record. Not even technical literature has been produced on record. In fact, the' Superintendent of Central Excise, Khopoli Range II vide his letter dated 10.06.98 was of the view that the gel beads in question are "semi-finished goods". In the absence of any evidence produced by the department, it has to be held that the goods in question are not marketable and hence, not excisable. (vii) In the case of Ion Exchange (India) Ltd, (supra), similar dispute traveled up to Supreme Court. The dispute, in that case, was whether the gel beads (intermediate product) were marketable or not. One of the members of the Tribunal held that the goods in question was distinct item as compared to the end product i.e. ion exchange resins (This is the very finding of the Commissioner in the present case) and hence, they were marketable in as much as the affidavit produced by the assessee to the contrary were not acceptable. The other members held that once these beads fell in the Entry 15A(1)(ii), they were marketable. However, on appeal, the Apex court, while setting aside such order, held that the reasoning given by the majority of the members th....
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....unal relied upon the test report of chemical examiner. The Tribunal concluded that once the products were stable, they are capable being brought to the market for sale. This decision of the Tribunal was reversed by 3 judge Bench of the Apex court holding that unless the product is capable of being marketed and is known to those who are in the market as having an identity as a distinct identifiable commodity that the article is subject to excise duty. It was also held that the onus is on the revenue to establish marketability. The apex court rejected the test report of the chemical examiner and held that the same does not establish marketability. (x) In Cadila Laboratories Private Limited 2003 (152) ELT 262 (SC), the assessee was manufacturing drugs. In the manufacture of drugs, certain intermediate products come into existence. The question was whether the intermediate products are marketable and hence, liable to excise duty or not. After noting the law on the subject starting from Union Carbide (1986 (2) SCC 547 and Bhor Industries 1989 (40) ELT 280 (SC), it was held being marketable does not mean that the goods must be actually bought and sold in the market, but the goods must....
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....ven in cases where market enquiry is made it is made in a perfunctory manner. With these concluding observations, appeal of the assessee was allowed. (xiii) In Hindustan Ferrodo 1987 (30) ELT 502, the Tribunal took a view that the intermediate product was marketable. However, said decision came to be overruled by the Supreme Court vide order reported at 1997 (89) ELT 16 (SC). The Supreme Court held that it was not the function of the Tribunal to enter into the arena and make suppositions that are tantamount to the evidence that a Revenue before it has failed to lead. It was further observed that, other than supposition, there was no material on record that suggests that a small scale or medium scale manufacturer of brake linings and clutch facings "would be interested in buying" the said rings or that they are marketable at all. As to the brittleness of the said rings, it was held that it was for the Revenue to demonstrate that the appellants' averment in this behalf was incorrect and not for the Tribunal to assess their brittleness itself. (xiv) Thus, the law on the subject seems to be fairly settled. Once the department has failed to establish marketability of the gel beads....
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....ELT 338 (SC) is also not apply In that case, the assessee was manufacturer of "Vitamin A" and animal feed supplements. During the course of manufacture of Vitamin A, "Vitamin Acetate Crude" and "Vitamin A Palmitate" emerged. The said crude was subject to process of crystallization using methanol and the crystals centrifuged and dried to obtain finished "Vitamin A". In that case, on facts, the tribunal found that the intermediate products were marketable. The Apex Court, re-iterated that question of marketability, being a question of fact, has to be determined in the facts of each case and cannot be strait-jacketed into pigeon holes. Accordingly, on this question of fact, the Supreme Court did not interfere with concurrent findings of fact on the issue of marketability by the Commissioner and this Tribunal. In absence of any evidence on record, the said decision does not advance the case of the Revenue any further. (xvii) Similarly, reliance placed on the decision of the Tribunal in the case of Nestle India Ltd. (Final order No.327-332/2011-EX dated 8.4.2011) reported at is incorrect and not applicable in the facts of the present case. In that case, in the first round, Tribunal v....
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.... in the facts of the present case. There is not an iota of evidence produced on record by the Department. No statements of the officers of the appellants company have been recorded. No invoices showing sale of similar products in the market have been produced on record. No market enquiry has been undertaken. No evidence has been produced to show that similar product was bought or purchased locally or imported by the appellants. No evidence has been produced to show that similar products were being purchased or sold by other manufacturers. No chemical analysis of the product in question has been undertaken. No test report has been obtained. On the other hand, the appellants had produced technical literature in support of their case. The appellants have filed affidavit of Divisional Manager (Research & Development) to prove that the said gel beads are not commercially sold or bought in normal course of trade. In these circumstances, it has to be held that the department has failed to discharge the burden cast upon them and hence, the beads in question being not marketable are not liable to central excise duty. (b) Reliance placed by the commissioner on the SION issued by DGFT to h....
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....rtook the processing on the said beads and returned to the first unit. The other unit was eligible for exemption under Notification No. 214/86-C.E, therefore no duty was payable when the beads were returned to first unit after processing. Hence, the appellants need not have paid duty at all on the beads which are processed inputs. Therefore, question of payment of differential duty does not arise. However, the Commissioner has clearly overlooked this aspect and not given any finding thereto. (ii) 6.2 The Ld. Departmental Representative contended that having paid duty, the appellants cannot, now, say that they ought not to have paid duty. This precise contention has been rejected by the Supreme Court in the case of International Auto Products Private Limited. In that case, the appellants were job worker manufacturing floor plate assembly for TELCO. This floor plate assembly was used by TELCO in the manufacture of excavator. TECLO made available inputs to the appellants for manufacture of assembly on which credit was taken by TELCO. The appellants used Telco's inputs as well as their own inputs for manufacture of assemblies. The assessee cleared the assembly on payment of duty inc....
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....e first distinguishable feature is that this Court in that case was neither concerned with the Modvat scheme, nor with the provisions of Rule 57F(2)(b). Furthermore, the Court was not considering a situation where the question was of the liability of an intermediate product being subjected to excise duty. What was in consideration was the final product, namely, wagons. 7. In this appeal as we have already noted, the final product was the excavator. According to the Modvat scheme, it is the Modvat of such final product which would have to include the cost of the inputs and in respect of which Modvat credit could be taken at the time of clearance of the final product. The Tribunal having misconstrued the provisions of Rule 57F(2)(b), its decision cannot stand. The decision of the Tribunal is accordingly set aside and the appeal is allowed. (iv) The above decision of the Supreme Court also disposed of the appeal in the case of Jay Yushin Limited by allowing the same. Jay Yuhshin Ltd. was engaged in the manufacture of floor plates, parts and accessories of goods and in respect of some of the items manufactured by them, they received components from Maruti Udyog Ltd. (MUL) on paym....
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....60) ELT A84. Under these circumstances, no demand is sustainable. (d) Duty now being demanded has already been paid by the appellants Bhosari Unit (i) Gel beads have been cleared on payment of duty by Paudh unit to Bhosari unit. The said amount of duty paid has been taken as credit by Bhosari unit. After possessing of the said gel beads, the same have been returned to the Paudh unit on payment of duty by the Bhosari Unit. Hence, whatever duty is now being demanded would have been available as credit to the Bhosari unit, which in turn, would have been utilized for payment of duty. To that extent, the Bhosari unit would have paid less in PLA (in cash). The Bhosari unit, during the period in question, has paid over Rs.2 crores in cash. This fact is not in dispute. In other words, the demand being made now already stands paid by the Bhosari unit. The said amount would in turn have been available as credit to Paudh unit itself. Hence, there is no revenue implication, whatsoever, in the instant case. In such a situation, the demand of duty cannot survive. (ii) Rule 57E as it stood during the period in question reads as under: "Rule 57E- Adjustments in duty credit- If duty pai....
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....if assessable value is to be revised, it cannot result in demand and recovery of duly. In other words, subsequent turn of events (i.e. payment of duly of about Rs.2 crores in cash by the Bhosari unit between the date of clearance from Paudh unit and issue of show cause notice) has rendered the relief claimed by department infructuous. (vi) In P. Venkateswarlu v. The Motor & General Traders 1975 S.C. 1409], the Supreme Court held as under: "5. We feel the submissions devoid of substance. First about the jurisdiction and propriety vis a vis circumstances which come into being subsequent to the commencement of the proceedings. It is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding. Equally clear is the principle that procedure is the handmaid and not the mistress of the judicial process. If a fact, arising after the lis has come to court and has a fundamental impact on the right to relief for the manner of moulding it, is brought diligently to the notice of the tribunal, it cannot blink at it or be blind to events which stultify or render inept the decrotal remedy. Equity justifies bend....
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....the Revenue is that assessable value is not Rs. X, but assessable value is Rs. X plus Y. Department automatically assumes that relief available to it is recovery of excise duty on value of Rs. Y. If, in the meanwhile, duty has already been paid on the full value of final product at the other factory, relief now claimed by Revenue should be declared as infructuous due to efflux of time and demand of duty should accordingly be set aside. (x) In similar cases, this Tribunal has quashed the duty demands and allowed appeals of assessee: (a) CCE Vs Chloride Industries Ltd. 1997 (22) RLT 5815 "3. We observe that the Board itself found that, the proforma credit of duty paid on parts cleared from Shyamnagar factory was taken at the respondent's Entally and Haldia factories. Therefore, it is apparent that even if the valuation of the parts cleared at Shyamnagar factory have been enhanced, the respondents would have been taken immediately the credit in respect of that enhanced valuation at their aforesaid two factories i.e. Entally and Shyamnagar. There is, therefore, no loss of revenue in the real sense as observed by the Collector in the impugned order. The point raised by the Boar....
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....ce there is no suppression of facts (i) The appellants were clearing the aforesaid 3 varieties of beads to their Bhosari unit for further processing on payment of duty and while paying duty they have adopted aforementioned assessable value declared by them. The department did not object to the assessable value so declared by the applicants. The value declared was supported by certificate issued by chartered accountant. The appellants filed price declaration in February, 1995 (06.02.1995 and 27.02.1995) declaring the said value. These facts are not in dispute. (ii) The appellants factory was visited by the officers of the Central Excise Revenue Audit and consequent to the same, assessable value of beads 6.4% gel beads was revised from Rs.47.18 per kg to Rs.63.78, assessable value of beads 8% gel beads was revised from Rs.51.99 per kg to Rs.70.22 and assessable value of 15% gel beads was revised from Rs.90.25 to Rs.103.25. The Superintendent of Central Excise, vide his letter dated 23.08.96 intimated that there was a short payment of duty of Rs.19,56,617/- for the period May, 1995 to March, 1996 (the period in dispute) based on the cost of raw material furnished by Central Exci....
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....n payment of duty and such duty was taken as Cenvat credit by the Bhosari unit of the applicants. The Bhosari unit after undertaking the process of sulphonation cleared the gel beads to the applicant's Paudh unit on payment of duty. While paying such duty, the Bhosari unit had paid duty of more than about Rs.92 lakhs, during the period in question. Thereafter, the Bhosari unit has paid Rs.4.8 crores in total as central excise duty through PLA for all the products manufactured and cleared by Bhosari unit. It is not a case of non-payment of duty. This position is despite the fact that the appellants were of the view that gel beads are not excisable. The question involved in the present case is one of marketability. Even in the decisions relied upon by the Revenue, where, on facts, on issue of marketability it has been held against the assessee, it has been held that there cannot be suppression of facts in matters of these types. The appellants are maintaining regular books of accounts. The appellants were under a bonafide belief that they are not liable to pay differential duty for the reasons stated hereinabove. The issue involved in the present case is one of interpretation. The is....
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....y itself not conclusive or the decisive consideration. It may be one of the relevant consideration. How much weight is to be attached thereto would depend on the facts of each case." In the instant case, apart from revenue neutrality, the facts narrated above, also show that there was no suppression of facts in the present case. (x) The reliance placed on decision of the Gujarat High court in case of Neminath Fabrics Pvt. Ltd. 2010 (256) ELT 369 (Guj) is wholly misplaced and out of context. In that case, the assessee was a manufacturer of fabrics. There was a raid conducted at the premises of the assessee. During the course of search, it was noticed that there was shortage of stock of raw material and finished goods. The books (RG23-Part I and II) were not maintained properly. Statement of the director of the assessee company was recorded, wherein he admitted clandestine clearance of the goods without issuing invoices and without payment of duty. Statements of the merchant manufacturers who purchased such clandestinely cleared goods also admitted the same in statements recorded under section 14 of the Central Excise Act. In these set of facts, the Hon'ble High Court arrived at a....
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....t the assessee was not responding to the Revenue's demand to take out a licence and submit accounts was clear and overt and the Revenue could have taken action based thereon. The show cause notice, therefore, must be held to be beyond time" (xii) Therefore, the entire demand of duty, in the present case, is hit by limitation. (xiii) In any case, valuation of the goods has to be done in accordance with CBEC Circular dated 13.02.2003 and Cost Accounting Standards issued by ICWAI. This circular has been applied for the past period also by the Hon'ble Supreme Court in the case of Cadbury India Ltd. 2006 (200) ELT 353 (SC). Therefore, the demand, if any, needs to be re-quantified. The cancellation of the certificate issued by the Superintendent of Central Excise under Rule 57E is incorrect (xiv) The impugned order directing to cancel the certificate issued by the Superintendent of Central Excise for Rs.19.57 lakhs paid by the appellants as differential duty for the period from May, 1995 to March, 1996 is incorrect. This certificate was issued by the Superintendent, Central Excise, Range II, Khopoli consequent to the payment of differential duty made by the appellants in resp....
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.....1998. In these facts, the Tribunal held that amendment vide Rule 57(E)(3) would apply. The Tribunal did not hold that the rule would apply retrospectively. In other words, in that case, the period was after the amendment whereas in the present case the entire period is prior to March, 1997. In that case, the certificate was issued after the amendment whereas the certificate in the present case has been issued prior to March, 1997. In that case, the credit was availed after the amendment whereas the credit has been availed prior to March, 1997. Hence, the said decision will be of not avail to the department in the facts of the present case. (xviii) For the above reasons, no penalty is imposable on the appellants. In any event, once the Commissioner finds that the provisions of Section 11AC are not applicable to the period prior to 28.09.1996; equivalent penalty could not have been imposed under Rule 173Q. 5. On the other hand Shri Y.K. Agarwal, learned Authorised Representative for the Revenue submitted that the dispute in this case is whether the co-polymer beads are marketable or not. If the same are marketable then extended period is invokable in the facts and circumstance....
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..... Thereafter various letters were written but the appellant gave the information only on 28.01.1999. Based on which a show-cause notice was issued on 08.07.1999. To support his contention on limitation, the learned A.R relied on the decisions in the case of BPL - 2002 (143) ELT 3 (S.C.), Procter and Gamble - 2004 (165) ELT 4 (H.C - M.P), Neminath Fabrics -2010 (256) ELT 369 (H.C. - Guj.) and Mehta & CO - 2011 (264) ELT 481 (S.C.) 5.1 He further submitted that the appellants have claimed that even if duty is paid by their another unit, credit of the same can be availed by another unit in view of supplementary invoice to be issued by Raigad unit and the clause of non-availability of credit on supplementary invoice due to suppression etc. was inserted after the impugned period. In this regard he submitted that refund and CENVAT credit etc. are not automatic and they have to be earned by following a proper procedure and they accrue on the day they are allowed and not prior to that. Refund and CENVAT credit is not like statutory duties or levies which are effective on the date of their levy as mandated by legislature. The cause of action for statutory levies are during their levy per....
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.... marketability of impugned copolymer beads, we hold that the copolymer beads are marketable. 9. Now the issue, because of the facts and circumstances of the case whether the allegations of suppression is sustainable against the appellant or not? 10. In this case the appellant filed a price declaration in February, 1995 declaring the value of the copolymer beads which is not in dispute. During the course of audit conduct by CERA assessable value of these copolymer beads was revised, on basis of revised assessable value the Range Superintendent wrote a letter on 28.03.1996 for demand of differential duty for the period May, 1995 to March, 1996 based on cost of raw material furnished by CERA audit party. The said assessable value was arrived at by considering the price declaration filed by the appellant in February, 1995 and in October, 1996 the appellant paid the differential duty. Consequently the Range Supdt. issued a certificate dated 30.10.1996 under Rule 57E for availment of modvat credit by their Bhosari Unit. Thereafter in June 1997, another letter was written by the Range Supdt. based on the balance sheet for the year 1994-95 and 1995-96. The appellant has also paid the....
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....he beads from the Paudh unit to Bhosari unit, the entire would be allowable as Modvat Credit to the Bhosari unit. It is only with effect from 01.03.97, Rule 57(E)(3) was introduced to deny the Modvat Credit if the differential duty payable by the manufacturer was due to fraud, suppression, mis-statement etc. Hence, only in respect of goods cleared after 01.03.97 and subsequently, if it is found that differential duty was payable due to suppression of fact, fraud, mis-statement etc. on such inputs Modvat credit to the purchaser is not allowed. The said rule does not have retrospective operation. Hence, for goods cleared prior to March, 1997, the said rule 57(E)(3) cannot be applied. This view has been taken by this Tribunal in the case of CCE V/s T I Metal Sections 2004 (164) ELT 48. 12.2 Reliance placed on decision of the Supreme Court in the case of National Engineering Industries 2005 (188) ELT 471 by the department is wholly misplaced. In that case, period for which refund pertained was from 1976-1977 to 1978-1979. There was a dispute about benefit of exemption notification. The said dispute was decided by the Tribunal in favour of the assessee. Section 11B was amended in 199....