TaxTMI 
TaxTMI 
2022 (5) TMI 1301
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....redit Rules, 2004. (b) I order for recovery of interest at appropriate rate from M/s. Saint Gobain Gyproc India Ltd. on the confirmed demand at (a) above under Section 11AB of the Central Excise Act, 1944., read with Rule 14 of the Cenvat Credit Rules, 2004. (c) I impose a penalty of Rs. 13,77,42,794/-( Rupees Thirteen crore seventy seven lakh forty two thousand seven hundred ninety four only) on M/s. Saint Gobain Gyproc India Ltd., and order its recovery from them under the provisions of Section 11 AC of the Central Excise Act, 1944, read with Rule 15(2) of the Cenvat Credit Rules, 2004, and (d) I order confiscation of the capital goods valued at Rs. 76,28,11,644/- on which Cenvat credit of Rs.13,05,24,5061- is wrongly availed in contravention of the provisions of the Cenvat Credit Rules, 2004, under Rule 15 (1) of the Cenvat Credit Rules, 2004. However, I impose a fine of Rs.5,00,00,000/- (Rupees Five crore only) in lieu of confiscation and M/s Saint Gobain Gyproc India Ltd shall have the option to redeem the said goods on payment of the said fine. (e) If M/s. Saint Gobain Gyproc India Ltd., pay the Central Excise duty a....
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....h interest and penalty. It was also alleged that the appellants have incorrectly classified Jointing Compound under Tariff Item (TI) 6809 9000, whereas the same is correctly classifiable under TI 2520 2010 and chargeable to nil rate of duty. 2.4 The show cause notice was adjudicated as per the impugned order referred in para 1, above. Aggrieved appellant have filed this appeal. 3.1 We have heard Shri Gajendra Jain with Ms. Payal Nahar, Advocates for the appellant and Shri Anantha Krishnan, Commissioner, Authorized representative for the revenue. 3.2 Arguing for the appellant learned counsel submits: • The appellants had obtained central excise registration in April 2005 for manufacturing gypsum plaster, gypsum plaster board and Jointing Compound. This shows that the appellants always intended to use the capital goods in the manufacture of dutiable goods. Also, Gypsum Plaster Board was conditionally exempted and therefore, non fulfillment of condition would lead to charging full duty on Gypsum Plaster Board. The capital goods at the time of receipt were capable of being used in the manufacture dutiable goods. In fact, March 2006 onwards, the a....
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....ucts Ltd. [2011 (273) ELT 112 (T)] affirmed in [2016 (342) ELT A115 (AP). • Input services received by them are specified under Rule 6(5) of Cenvat Credit Rules, 2004. These services were received in connection with erection and installation the capital goods. Such input services do not pertain exclusively to the gypsum plaster (exempted) division but also pertained to the gypsum plaster board and jointing compound division. Therefore, the said input services cannot be said to be exclusively used in the manufacture of exempted goods and credit cannot be denied in terms of Rule 6(5) of CCR, 2004. • Decision of Surya Roshni Ltd. - 2003 (155) ELT 481 (T) is not applicable in the present case. • Without prejudice to the above submissions, the payment of excise duty at the time of clearance of Jointing Compound by the appellants should be treated as the reversal of disputed credit. Excise duty already paid has to be adjusted against the cenvat credit demand. • The entire demand raised in the show cause notice is for the period beyond the normal period of limitation of one year prior to the date of show cause notice. They entertained bo....
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....he Cenvat credit of duty paid on capital goods, received in their factory from January 2005 to February 2006, for manufacturing finished goods, i.e. "Gypsum plaster board" and "Gypsum plaster", which were exempted from payment of Central Excise duty at the time of receipt of the capital goods and their other product "Jointing compound" was not being manufactured at all at the relevant time. It indicated that the assessee had availed said Cenvat credit on 2nd March, 2006, when "Gypsum plaster board" became chargeable to Central Excise duty @ 8%. As per intelligence the assessee has also availed the Cenvat credit of Service Tax paid on various input services like Consultancy services, Labour/ Manpower supply services, Security services etc., which were received and utilized by them for erection and installation of capital goods plant, which in turn were used in the manufacture of their finished goods i.e. "Gypsum plaster board" and "Gypsum plaster", which were exempted from payment of Central Excise duty at the relevant time of availment of such services. (49) In order to work out the intelligence, visits to the assessee's factory were undertaken, relevant records ....
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....as amended, the assessee, on the 2nd of March 2006, availed 50% Cenvat credit of the duty paid on capital goods, received in the factory from January 2005 to February 2006, for the manufacturing of "Gypsum plaster board" and "Gypsum Plaster", which were exempted from payment of Central Excise duty/chargeable to nil rate at the time of receipt of such capital goods. Similarly, on the 31st of March 2006, they have also availed Cenvat credit of Service Tax paid on input services, which were utilized by them at the time of erection and installation of the said capital goods plants, received in the factory from January 2005 to February 2006 and used in the manufacture of their finished goods i.e. "Gypsum Plaster" and "Gypsum Plaster Board" which were chargeable to nil rate of duty/exempted from payment of duty at the relevant time of availment of such services. (53) This factual position about the receipt of the capital goods, dutiability of their three products and date of availment of Cenvat credit has not been disputed by the assessee, but the availment of the Cenvat credit has been claimed to be in consonance with the provisions of law. The notice has disputed this cr....
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....er" by the assessee. The manufacture of Jointing Compound was started after March, 2006. ii. The product "Gypsum Plaster Board" was conditionally exempted at the time of receipt of the said capital goods by virtue of Notification No 6 / 2002 dated 1-3-2002 as amended and the first clearance of "Gypsum plaster board" in the months of January 2006 and February 2006, were effected by the assessee under "Nil" rate of duty as per the notification. iii. The assessee had decided to clear the "Gypsum plaster board" at "Nil" rate of duty only availing the benefit of the notification. iv. The moment "Gypsum Plaster Board" became chargeable to duty @ 8%, by virtue of Notification No 5 /2006 dated 1-3-2006 as amended, the assessee, on 2nd of March 2006, availed 50% Cenvat credit of the duty paid on capital goods, which were received in the factory from January 2005 to February 2006, for the manufacturing of "Gypsum plaster board" and 'Gypsum Plaster", which were exempted from payment of Central Excise duty/chargeable to nil rate of duty at the time of receipt of capital goods and similarly, on 31st of March 2006, they have also availed Cenvat cr....
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....inal products and later when the exemption to one final product stood withdrawn, quickly took credit of the Service Tax paid thereon. (59) In the light of these findings, the Cenvat credit of the duty paid on capital goods amounting to Rs. 13,77,42,794- and of Service Tax paid on services used in erection/commissioning of the said capital goods, is wrong and so, is recoverable from the assessee. The view is substantiated by the decision of the Hon'ble Tribunal in the case of CCE Versus M/s Surya Roshani Ltd. reported in 2003(155) E.L.T. 481 (Tri.Del.), where facts were exactly identical to the present case, and wherein it is clearly held by Hon'ble Tribunal that: (a) "Eligibility to be determined at the time when goods received by the manufacturer - Subsequent becoming of the goods as dutiable or the manufacturer putting the capital goods to other use would not revive the question of admissibility of Modvat credit - Machine, when received, used in manufacture of exempted products - Credit not admissible - Rules 57Q, 57R(1) and 57T(2) of the erstwhile Central Excise Rules, 1944. The classification list may contain details of goods which are liab....
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....ch exempt goods. Thus they have conferred a status of "exempted goods" to their product "Gypsum plaster board". The other product Jointing Compound was not manufactured. In view of these facts which place the case in purview of above decision of Hon'ble Tribunal and Supreme Court, the assessee are not entitled to Cenvat credit so availed by them on 02-03-2006 (50%) and October 2006 (50%). (61) In the light of Hon'ble S.C. upholding the position as above it is not open for the assessee to claim benefit contrary to the decision. Yet the assessee has cited a number of case laws, mainly, of M/s Bhaskar Industries and M/s Arvind Mills supra to support their case. However, the two case laws can be distinguished from the present case inasmuch as in the two cases, either in the second/third phase of the installation thereof or indirectly, the capital goods in question were used in manufacture of dutiable final goods, whereas in present case, when the goods were received, their products "Gypsum Plaster" was chargeable to nil tariff rate, "Gypsum Plaster Board" was fully exempted under a exemption notification and the other product "Jointing Compound" was not being man....
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....03 (158) E.L.T. A273 (S.C.)] stating as follows: "The appeal is not maintainable. Hence, it is dismissed." After the dismissal of the appeal by the Hon'ble Apex Court, M/s Surya Roshni approached the jurisdictional High Court, and filed MCC No 2 of 2004. This application was disposed of by the Hon'ble High Court of Madhya Pradesh by the order dated 21.09.2012, [2013 (298) E.L.T. A24 (M.P.)] stating as follows: "1. This application under Section 35H(1) of the Central Excise Act, 1944 (for short "the Act") has been filed by the applicant Industry for directing the Customs, Excise and Gold (Control) Appellate Tribunal to refer the question of law stated in the application arising from the order of the Tribunal for answer by this Court. 2. In brief, the case of the applicant is that the applicant is engaged in the manufacture of various lamps of different wattages and sizes falling under Chapter 85 of the Central Excise Tariff Act, 1985 and is operating under the Modvat credit scheme. The applicant had imported a machine in March 1996 for the manufacture of lamps of different types including GLS glass lamps. The machine being a sophisticated ma....
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....t in terms of Section 35H of the Act. 6. The MCC is accordingly disposed of." Thus the decision of the Tribunal relied upon by the Commissioner cannot be said to have attained finality, as was observed by the Hon'ble high Court of Madras in the case of Kaleesuwari Refinery Pvt. Ltd [2016 (340) E.L.T. 632 (Mad.)], while interpreting the provisions of Rule 6 (4) of the CENVAT credit Rules. Hon'ble High Court stated as follows: "24. Mr. A.P. Srinivas, learned Senior Panel Counsel relies upon a decision of a Larger Bench of a Tribunal in Spenta International Ltd. v. CCE [2007 (216) E.L.T. 133]. In that case, the issue that was referred to the Full Bench was whether Cenvat credit eligibility has to be determined with reference to the dutiability of the final product on the date of receipt of the goods from the date of utilisation eligibility of 50% credit. For arriving at a decision on the said issue, the Larger Bench followed Surya Roshini, without even taking note of the fact that the decision in Surya Roshini is still at large before the Madhya Pradesh High Court. In any case, the interpretation to be given to Rule 6, was not even considered by the La....
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.... 6(4). 27. The consequences of giving a different interpretation to the Rule is too obvious. Take for instance a case where the factory receives capital goods on a particular day, say for instance 1-10- 2003. If the goods are dutiable goods on the date of receipt, namely 1-10-2003, the Department agrees that the factory will be entitled to Cenvat credit. Suppose an exemption notification is issued on the date following the date of receipt of capital goods, he will still be entitled to the benefit of Cenvat credit. Therefore, to interpret Rule 4(2)(a) in a manner that will benefit a person, who receives the capital goods on the date, on which, the goods to be manufactured were dutiable, despite the same goods becoming exempted goods on the next day, but to deprive the benefit to a person, who manufactures dutiable goods on the basis of the capital goods received in a particular financial year, would not be a proper interpretation to the Rules." 4.4 In view of the decision of the Hon'ble madras High Court, we do not find much merits in the reliance placed by the Commissioner on the decision of tribunal in case of Surya Roshni. Tribunal has in series of decisio....
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....e of two years to manufacture dutiable goods at all. Thereafter, the appellants used machinery to manufacture of dutiable goods for 19 days. Thus, it cannot be said that the goods are used exclusively for manufacture of exempted products. This case is similar to the case of Brindavan Beverages Pvt. Ltd., [2014 (310) ELT 398 (Del.)] = 2014-TIOL-2136-CESTAT-DEL in which, the Tribunal held as follows in paragraphs 6, 7: "6. The undisputed facts are that the capital goods, in question, had been received by the appellant in their Bareilly unit during September 2004 to August 2005 period. There is also no dispute about the fact that during the period till September 2006, the machinery, in question, had been used only for manufacture of fruit pulp based soft drink called MAAZA which is fully exempt from duty. However the appellant had still availed Cenvat credit amounting to Rs. 1,64,08,716/- in respect of these capital goods. According to the appellant, from October 2006 onwards they have started using these machines for manufacture of aerated waters which are dutiable final product and this fact is not disputed by the Department. According to the appellant, they are eligible fo....
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....r exemption, his final product becomes dutiable and in such a case, even during the period of full exemption, the manufacture can take capital goods Cenvat credit which he can utilize when this final product becomes dutiable. A question arises as to when capital goods are used for manufacture of dutiable as well as exempted final product, whether for availing capital goods credit, the dutiable as well as exempted final product have to be manufactured simultaneously. In our view this is not necessary, and Cenvat credit would be admissible even if the capital goods are used for manufacture of dutiable goods and exempted goods at different points of time. However, if at the time of receipt of the capital goods, the manufacturer was using the capital goods only for manufacture of fully exempted final product and had no plan or intention to use them for dutiable final products and later on, either the final product becomes dutiable or he changes his plans and starts using the capital goods for manufacture of dutiable final products, the judgment of the Tribunal in the case of CCE, Indore v. Surya Roshni Ltd. (supra) and Spenta International Ltd. v. CCE, Thane (supra) would become applic....
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....e Cenvat credit and utilizing the same for manufacture of dutiable goods. It is also an admitted fact that the Cenvat credit so availed have been utilized only after Nov. 2005 whereas the production of dutiable goods started admittedly in June, 2005. Thus, I hold that the respondent assessee is entitled to Cenvat credit on the capital goods in question. The appeal of the Revenue is dismissed. The respondent-assessee will be entitled to consequential relief, if any." 8. We respectfully follow the ratio of the above two orders and hold that the assessee is entitled to the benefit of CENVAT credit on capital goods on the Line 3 of their plant as it was: a) Declared to be meant for manufacture of both dutiable and exempted products; b) Used for manufacture of dutiable products although for a mere 19 days. Consequently, the demand, interest, penalty and personal penalty are liable to be set aside and we do so." 4.5 Similarly in case of S T Cottex Export P Ltd [2010 (261) ELT 807 (T)] affirmed by the Hon'ble High Court as reported at [2011 (268) ELT 318 (P&H))], tribunal held: "4. I have carefully considered the subm....
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....n a financial year: Provided that where capital goods are received after the date of commencement of commercial production or provision of services, as the case may be, the period of two years shall be computed from the date of installation of such capital goods.". 4.7 The amended rule clearly stipulated that the credit will be denied only if the Capital Goods were used for two years from the start of commercial production to manufacture exempted goods. This rule has been held to be retrospective as per the following decisions: • Welspun India Limited [2019-TIOL-3031-CESTAT- AHM] • Mohit Industries Ltd. [2019-TIOL-3182-CESTAT- AHM] • Orient Syntex [2020 (12) TMI 634 - CESTAT NEW DELHI] 4.8 In case of Welspun and also in case of Mohit Industries after referring to Rule 6(4) tribunal observed as follows: "As per the above substituted Rule, it is clear that the bar on availing the credit in respect of capital goods used in manufacture of exempted goods shall apply only if the capital goods are used for two years from the date of installation/commencement of production. As per the facts of the present case, though the ap....
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....also challenged the penalties imposed upon them. Commissioner has vide the impugned order held as follows: "(73) However, the assessee have also contested the demand on limitation in respect of Section 11A ibid and arguing in this regard that there was no suppression of fact, in the case as they had not wilfully suppressed the fact of availment of credit on capital goods and input services and had not wilfully mis-stated the classification of jointing compound under Tariff Item 6809 9000. They have argued that the departmental authorities possessed full information with regard to the facts involved in the present case, the final products being manufactured by them was known, they were filing monthly returns along with Cenvat credit details from time to time in showing item-wise availment of credit on various items as well as of the classification adopted by them for jointing compound. Further, that their factory was audited by the Central Excise department in January & March, 2008, and so the facts relevant for the present SCN were known to the department from January, 2008 onwards. Moreover, that their records were always available for departmental scrutiny. As s....
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...., Benequa 4000, Cellulose PVA and Unigel are added. It is therefore clear that they have purposefully misclassified the product "Jointing Compound" under S.H. No. 6809 90 00 as "other articles of plaster or of composition based on plaster", with a malafide intent to demonstrate that the said product is dutiable and to avail the Cenvat credit of duty paid on those capital goods which are used in the manufacture of "Plasterboard" and partly for "Jointing Compound", as claimed by them. Also now they have come up with another classification for the product Jointing Compound which is correctly classifiable under Chapter 25 claiming new composition of the product and departing from the earlier facts which is already discussed earlier. Their claim now to classify their compound under Chapter 38, there are two specific observations flowing from it, firstly that they are inclined to accept their initial mis-classification of the jointing compound, and secondly, that they are desperately seeking a classification which will fetch a rate of duty instead of 'nil duty to the product, so that their claim to the credit on the capital goods in question is pedestalled. Hence, their volte face no....
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....tail and after recording of statements of various officials vis-à-vis records the true position could be made out. It is also surprising that why the assessee, as claimed by them did not revert to the Audit with "correct" position of their disputed credit and classification of the product instead of substantiating their credit. In any case, a reply to audit or correspondence with them or a Return filed can not bring out the exact position of Cenvat credit or classification done by the assessee and it is for the assesse to correctly analyze their activities against various decisions and act as per the law in liberalized system of operation of law. It is also for the record that the Departmental Audits, are mainly on selective basis, on the assesee's statutory/ financial records sans any study of the processes or visits to the factory and so it is wrong to say that as audits were conducted the Department was aware of their activity. The jurisdictional authority's control in liberalized form is also through records and returns filed by the assessee and so their knowledge about the credits availed, classification of the products claimed by the assessee is also incorrect.....
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....fine in lieu of confiscation. For the purpose of imposing fine in lieu of confiscation, the fact that the capital goods in question were received in 2005 which are now old and depreciated substantially is also to be considered. Hence, while imposing fine in lieu of confiscation, such reduced value has to be considered. (77) Also, penalty has been; proposed on Shri Gaganjyot Singh, Vice President, Finance (earlier General Manager) of the assessee has been proposed for penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.As alleged in the notice, being responsible person of the Company he was expected to know the Central Excise law, to take the provisions of law seriously for implementation has overlooked this aspect. On questioning about the decision to take credit after the goods became dutiable, which were initially cleared as exempted goods, he has been unable to substantiate the decision legally but has ducked the queries by talking about modernity of the capital goods and other irrelevant facts more related to marketing than compliance with the law. The assessee have contested this proposal on the grounds t....
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....e for misunderstanding or misinterpretation. The respondent's reliance on diverse decisions of this Court in which it was held that there could be said to be no suppression or wilful misstatement related to cases where it was necessary to interpret a particular provision of law. Where the assessee had proceeded on a misinterpretation of a legal provision, this Court appears to have held that the bona fides could not be called into question. Those decisions are distinguishable since in this case there was no question of the assessee failing to comply with the requirement of the Rule by reason of any alleged misinterpretation of the Rule. Had the assessee given a full description of the excisable goods but claimed classification under a wrong Tariff heading, the principle enunciated by this Court and as relied upon by the respondent may have been applied but that has not happened here." 4.13 In the case of Shree Ramanuj Dyeing and Printing Mills [Final Order No. A/ 10787 /2019 dated 06.05.2019], Ahmedabad bench has in similar circumstances held as follows: "4. We have heard both the sides and perused the records. We find that as regard the submission made by Ld. Cou....