2014 (12) TMI 72

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....nished form and the same are called "Sputtering Targets Blanks". The Kathua unit is availing the duty exemption under Notification No. 56/2002-C.E. The Delhi branch imports gold and silver on payment of duty and sends the same to Kathua (J&K) unit, where it is used for manufacture of Sputtering Targets blanks. The Sputtering Targets Blanks manufactured at J&K unit are cleared to the appellant company's unit at Nathupur, Sonepat where according to the appellant, the same are subjected to further processing like drilling holes, threading operation, counter sunk operation, buffing, cleaning of copper plate, etc. as a result of which, the fully finished sputtering targets emerge. The fully finished sputtering targets are cleared by the Nathupur unit on payment of duty and the same were being exported under rebate claim. The Nathupur unit was availing Cenvat credit in respect of the sputtering target blanks received from the Kathua unit in terms of the provisions of Rule 12 of the Cenvat Credit Rules, 2004 and the Cenvat credit was being used for payment of duty on fully finished sputtering targets cleared for export. 1.2 The sputtering targets are used as part of Physical Vapou....

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.... notice dated 17th August 2012 was issued to the Nathupur unit of the appellant company for demand of allegedly wrong Cenvat credit of Rs. 21,26,69,393/- taken by the unit during the period from 2008-2009 to 2010-2011, alongwith interest thereon under Section 11AB of Central Excise Act, 1944 and also for imposition of penalty on the appellant unit under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. The show cause notice was issued by invoking extended period under proviso to Section 11A(1) of Central Excise Act, 1944 by alleging that the appellant unit had suppressed the relevant facts from the department and has availed this credit by adopting fraudulent means. 1.4 The above show cause notice was adjudicated by the Commissioner, Central Excise, Rohtak vide order-in-original dated 31-1-2013 by which the above-mentioned Cenvat credit demand was confirmed against the appellant alongwith interest thereon under Section 11AB of Central Excise Act, 1944 and beside this, penalty of equal amount was imposed on them under Section 15 of Central Excise Act, 1944 read with Section 11AC of Central Excise Act, 1944. Against this order of the....

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.... the consignments Sputtering Targets were being examined and sealed in the factory under Central Excise supervision, that in this background, if there is absolutely no manufacturing activity in Nathupur unit, this fact would not remain unknown to the Departmental officers, that the officers who had visited the appellant's Nathurpur unit had not seen the entire factory and merely on the basis of the condition of a part of the factory premises concluded that there was no manufacturing activity, that as regards classification of the Sputtering Targets, the same are correctly classifiable under heading 8543 90 00 and not as 'articles of gold' under sub-heading 71159090, that the letter dated 9-10-2009 of Deputy Commissioner, Kundli addressed to the Deputy Commissioner (Shed), Air Cargo Complex, New Delhi mentions that while the physical vapour deposition machines are classifiable under heading 8543, the Sputtering Targets being part of such machine are correctly classifiable under sub-heading 85439000, that in view of this, the Department cannot revise the classification of this Sputtering Targets to heading 71159090 as 'otherArticles of gold', that in any case, the correct classificat....

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....pre-deposit of Cenvat credit demand, interest thereon and penalty may be waived for hearing of the appeal and recovery thereof may be stayed till the disposal of the appeal. 4. Ms. Suchitra Sharma, the learned Jt. CDR, opposed the stay application by reiterating the findings of the Commissioner in the impugned order and emphasized that during the visit of the officers to Nathupur unit, absolutely no manufacturing activity had been found and the condition of the factory indicated that there was no manufacturing activity at that place. She also pointed out to the statement of Shri I. Rajasekar, Production Supervisor of Kathua unit, wherein he stated that the unit had started manufacturing gold Sputtering Targets since February 2009, that finished Sputtering Targets are packed by individually wrapping the same in bubble sheets to avoid any damage to surface and that the statement of the Production Supervisor of the Kathua unit shows that the Sputtering Targets as cleared by Kathua unit were in fully finished condition. She also pleaded that Shri Debrabrata Mohanty, Consultant, in the appellant company in his statement dated 18-1-2011 has stated that he agrees with the statemen....

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....re in semi-finished conditions and the same have to be subjected to the process of drilling holes, threading, cleaning of copper plates etc. at Nathupur unit. According to the department, the Kathua unit manufactures fully finished Sputtering Targets which are not required to be subjected to any further process and the same were being exported in the condition in which the same came out of Kathua unit and, as such, the Nathupur unit is a dummy unit created to wrongly avail the Cenvat credit by misusing the provisions of Rule 12 of the Cenvat Credit Rules, 2004 and in this regard, the Department relies upon the statements of the employees at Kathua unit according to which each piece of Sputtering Targets was individually packed in bubble plastic sheets to avoid any damage to the surface and that at the time of officer's visit to the Nathupur unit, there was no manufacturing activity found in it and the condition of the factory indicated that it was closed for a long time. However, we find that the Deputy Commissioner, Incharge of Nathupur unit in his letter dated 9-10-2009 addressed to the Deputy Commissioner (Shed), Air Cargo Complex, New Delhi has stated that the appellant unit is....

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....rima facie would be classifiable under sub-heading 85439000. We also find that though sub-heading 71159090 covers "other articles of precious metal or metal clad with precious metal", according to Chapter Note 3(k) of Chapter 71, this Chapter does not cover the machinery, mechanical appliances or electrical goods or parts thereof of Section XVI and since the goods, in question, are clearly identifiable part of "Physical Vapour Deposition Machine", the same would be excluded from the purview of Chapter 71. Moreover, the correspondence of the Deputy Commissioner, Kundli, Sonepat, the Jurisdictional Deputy Commissioner with the Deputy Commissioner (Shed), Air Cargo Complex and internal notings in the files of Air Cargo Complex clearly indicate that the Central Excise Authorities at Sonepat as well as Customs Authorities at the Air Cargo Complex have treated the goods, in question, as classifiable under 85439000, not as "other articles of gold" under sub-heading 71159090. Therefore, the Department's contention that these goods are classifiable under sub-heading 71159090 and being fully exempt from duty would not be eligible for exemption under Notification No. 56/2002-C.E., and hence t....