TaxTMI 
TaxTMI 
2023 (7) TMI 43
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....ufacture of Earth Moving Machinery by the appellant and the finished goods are cleared on payment of appropriate duty. On detailed verification it was noticed that the Earth Moving Machinery manufactured out of such intermediate goods (engines received from sister units without payment of duty) have not been cleared within a period of six months from the date of receipt of such intermediate goods as mandated under Rule 12BB of CER, 2002. On being pointed out, the appellant paid total duty along with interest for the intermediate goods received by appellant during the period May 2010 to November 2013 as mandated under Rule 12BB of CER, 2002. 2. Apart from this, it was noticed that appellant had availed CENVAT credit during the period January 2014 to July 2014 on the duty paid under Rule 12BB on the clearances of engines from their Hosur Unit. It appeared that the said credit was availed under the provisions of section 12A of CENVAT Credit Rules, 2004 (CCR, 2004). The department was of the view that credit can be availed only on inputs and not on intermediate goods. The engines received from Hosur Unit being only intermediate goods and not inputs for further manufacture of Earth M....
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....nd were lying in the Tiruvallur unit. Considering the above, the Appellant wrote to the Department under Letter dated 03.06.2014 stating that the Appellant would not be continuing with the procedure under Rule 12BB of the CER w.e.f. 01.06.2014 and that all engines thereafter would be transferred from Hosur unit to Tiruvallur unit on payment of applicable excise duty. 7. The learned counsel referred to Rule 12BB of CER, 2002 which reads as under:- "12BB. Procedure and facilities for large taxpayer Notwithstanding anything contained in these rules, the following procedure shall apply to a large taxpayer. (1) A large taxpayer may remove excisable goods, except motor spirit, commonly known as petrol, high speed diesel and light diesel oil (hereinafter referred to as the intermediate goods), without payment of duties of excise, under the cover of a transfer challan or invoice, from any of his registered premises, (hereinafter referred to as the sender premises) where such goods are produced, manufactured or warehoused to his other registered premises, other than a premises of a first or second stage dealer (herein after referred to as the recipient premises....
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....tion are tabulated below. Demand Summary of Findings in impugned Order-in-Original Demand of duty under Rule 12BB of the CER along with interest. The Appellant has not disputed the allegation that they have received the goods under Rule 12BB of CER without payment of duty. They have failed to manufacture and clear the finished goods within the mandatory period of six months. (Para 9). The twin conditions mentioned in Rule 12BB of CER i.e., finished goods must be manufactured by the recipient using the intermediate goods; such finished goods must be cleared on payment of duty to DTA/ exported under bond or LUT within 180 days is not adhered to. Therefore, the Appellant was held liable for payment of duty on the inputs received, along with interest. (Para 10) Demand Summary of Findings in impugned Order-in-Original Denial of Credit of duty paid under Rule 12BB on clearance of intermediate products (engines). Engines are not inputs but are intermediary products manufactured by the Hosur Units using their own inputs. The amount paid under Rule 12A (1) of the CCR and the proviso therein pertains only to 'inputs cleared as such' and not to 'intermediary/ finished ....
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.... Knowledge Center Private Limited vs. Commissioner of Service Tax 2023 (3) TMI 695 j) Hindalco Industries Ltd. vs. CCE 2023 (5) TMI 720 12. It is assertively and vehemently argued that penalty under Sec. 11AC of the Central Excise Act, 1944 cannot be invoked in cases when there is failure to pay duty or short-payment of duty in situation falling under Rule 12BB of CER, 2002. The Finance Minister during Budget Speech 2005-2006 had announced to set up a facility for LTUs by way of introducing a self-contained code through insertion of Rule 12BB to CER, 2002 and Rule 12A to CCR, 2004. These provisions contemplate a special procedure along with consequences, for non-compliance of the same as applicable to LTUs notwithstanding other general provisions. Further, instructions to such LTUs were also issued by CBEC vide Circular No. 834/11/2006-CX dated 05.10.2006. 13. On a bare reading of Rule 12BB of CER, it can be understood that on compliance with the conditions contained therein the liability to pay duty and interest on intermediate goods is shifted on the recipient premises. 14. Further, Explanation 3 to Rule 12BB of the CER borrows only the mode of recovery prescrib....
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.... Rule 12BB) on account of a market slump during the disputed period. Therefore, even if for argument sake, it is assumed that penalty provision under Section 11AC of the Act is provided for in Rule 12BB cases, the same cannot be invoked on the facts of the present case. In this regard, reliance is placed on the following decisions: a) Maruti Udyog Limited vs. Commissioner of Customs Kandla 2001 (132) E.L.T. 340 (Tri.-Mumbai.) b) Suncity Synthetics Ltd. vs. Commissioner of Customs 2001 (132) E.L.T. 684 (Tri. Mumbai.). c) Commissioner of Customs, Bangalore vs. Indo Nissin Foods Ltd. 2013 (294) E.L.T. 259 (Tri.-Bang.) 17. Without prejudice to above, it is submitted that the Appellant had intimated the department of payments of duty and interest vide letter dated 03.06.2014. In such cases, no Notice ought to have been issued in the first place, as stipulated in Section 11A(2) of the Act. To support this argument, the judgment in the case of Rashtriya Ispat Nigam Ltd. vs. CCE (2003) 161 E.L.T. 285 was relied. In such cases, no penal consequences ought to visit the Appellant and the penalty proceedings in the present case ought to have been dropped. 18. O....
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....s in the recipient premises, and that any other conditions prescribed by the [Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be], Large Tax payer Unit in this regard are satisfied. Explanation 1. - The transfer challan or invoice shall be serially numbered and shall contain the registration number, name, address of the large tax payer, description, classification, time and date of removal, mode of transport and vehicle registration number, quantity of the goods and registration number and name of the consignee : Provided that if the final products manufactured or produced using the said inputs are not cleared on payment of appropriate duties of excise leviable thereon or are not exported out of India within the said period of six months from the date of receipt of the input goods in the recipient premises, or such inputs are cleared as such from the recipient premises, an amount equal to the credit taken in respect of such inputs by the sender premises shall be paid by the recipient premises with interest in the manner and rate specified under rule 14 of these rules. Provided further that if such capital goods ....
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....les, insofar as they are not inconsistent with the provisions of this rule shall mutatis mutandis apply in case of a large tax payer." 20. It is submitted that Rule 12A of the CCR does not stipulate anywhere that the duty paid by the Appellant is not eligible for credit. While Rule 12A(1) of the Credit Rules permits the removal of inputs, as such, to sister units without reversal of credit as mandated under Rule 3(5) of the Credit Rules, the first proviso to Rule 12A(1) of the Credit Rules requires the recipient unit to pay the amount mandated under Rule 3(5) of the CENVAT Credit Rules in case of non-fulfilment of the condition. Rule 12(A)(2) of the Credit Rules expressly permits the recipient unit to take CENVAT credit of the amount paid under first proviso to 12A(1) as if it was a duty paid by the sender premises who removed such goods on the basis of a document showing payment of such duties. Therefore, there is no embargo in CENVAT Credit Rules, 2004 for taking credit of the duty paid on intermediate goods transferred between sister units. 21. It is submitted that the impugned OIO does not reason why the 'Engine' is not an input in essence, for the EMM. The engines being ....
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....n the following decisions:- a) Commissioner of Central Excise vs. Chemplast Sanmar Ltd. 2009 (239) E.L.T. 398 (SC) b) CCE, Jaipur vs. Goyal Products Ltd. 2015 (325) E.L.T. 165 (Tri.-Del.) c) Jindal Steel & Power Ltd. vs. CCE, Raipur 2015 (329) E.L.T. 595 (Tri.-Del.) d) Laxai Avanti Life Sciences Pvt. Ltd. vs. CC.C.Ex. & ST 2017 (350) E.L.T. 443 (Tri.-Hyd.) e) Schwing Stetter (I) Pvt. Ltd. vs. C.CE&ST, LTU, Chennai 2018 (364) E.L.T. 653 (Tri.-Chennai.) 25. To support the argument that substantive right of CENVAT credit cannot be denied on procedural requirements, the learned counsel relied on the following decisions:- a. Cosmos Casting India Ltd. vs CCE (2011) 23 STR 144 (Tri.-Del.) b. Formica India Division vs. CCE 1995 (77) E.L.T. 511 (SC) c. Sharda Motor Industries Ltd. vs. Union of India 2011 (267) E.L.T. 634 (Bom.) d. Commissioner of Central Excise vs. MRF Limited 2009 (244) E.L.T. 601 (Tri.-Chennai.) 26. The issue whether debit entries made in CENVAT account along with document on the basis of which such debit entry was made is sufficient to satisfy the requirement under Rule 9 of CCR, 2004 ....
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....t. Clause (5) of section 11A of the Act requires a finding to be made during the course of audit that the duty was not paid with intent to evade for reasons stated in clauses (a),(b),(c),(d) and (e) of sub-section (4) of Section 11A of the Act. Whereas in the present case, the appellant is required to pay duty for non-fulfilment of condition required under Rule 12BB. The learned counsel prayed that there are no grounds for invoking extended period and the penalty imposed and the interest demand may be set aside. 31. The learned AR Ms. K. Komathi appeared and argued for the Revenue. It is submitted by the learned AR that 12BB is a facility provided to a Large Taxpayer and is subject to the condition mentioned therein. If the condition is not fulfilled, the unit is liable to pay duty and the provisions for short-payment and non-payment of duty are automatically attracted. The condition is that the recipient (the appellant unit) has to manufacture and clear the finished products using the intermediate product (engine) received from sister unit within a period of six months from the date of receipt of the intermediate goods. The following events have to take place to satisfy Section....
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....t the violation and non-payment of duty would not have come to light but for the verification of accounts by the Audit Wing. The provision contained in sec. 11AC of CEA, 1944 for imposing penalty in cases of short-payment of duty is equally applicable to the duty demand raised for violation of provisions of Rule 12BB. The Act has overriding effect over the Rules and the Act has to prevail. The learned AR prayed that the appeal may be dismissed. 35. Heard both sides. 36. The first issue is with regard to demand of duty on engines with interest and the equal penalty imposed under sec. 11AC of the Central Excise Act, 1944. Though there is a demand of duty on engines (intermediate goods) raised in the Show Cause Notice, the learned counsel for appellant has submitted that they are not contesting the demand and has confined the arguments on the demand of interest and imposition of equal penalty under section 11AC of the Central Excise Act, 1944. The second issue is the demand of wrongly availed credit with interest and penalty. 37. The issues that arise for consideration are (i) Whether the appellant is liable to pay interest for the delay in payment of duty on engines....
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....emand) and 11AA for (interest demand) is silent as to 11AC and that therefore penalty under section 11AC is not invokable. The learned counsel has relied on the decision of the Hon'ble Supreme Court in the case of CCE, Jaipur Vs. Raghuvir (India) Ltd. - 2000 (118) ELT 311 (SC) to argue that Rule 12BB is a self-contained code and as it does not mention sec. 11AC, the said section cannot be invoked for imposing penalty. In the judgment referred to by the learned counsel, it is held that section 11A would have no application for any action to be taken under Rule 57-I of the Central Excise and Salt Rules, 1944 prior to the amendment on 6.10.1988 and that Rule 57-I are not in any manner subject to Sec. 11A of the Act. The said decision has analyzed the provisions for recovery of credit wrongly availed under the MODVAT scheme. The said scheme is for avoiding the cascading effect of duty. Availment of credit is a right accruing on fulfilment of conditions. Rule 12BB offers a facility of deferred payment of duty. It is postponement of the liability to pay duty. Rule 12BB cannot stand on its own as it does not completely waive the liability to pay duty. It only defers it. 42. Be that....
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....NVAT credit. The appellant has availed credit of the duty paid above. The department has denied the credit alleging that if assessee adopts Rule 12BB the engines are 'intermediate goods' and not 'inputs'. It is also alleged that as there is no duty paying documents, the credit is inadmissible. 45. As per Rule 12BB, the burden to pay the duty on the stock transferred goods is shifted to the recipient unit. The stock transferred goods are referred to as 'intermediate goods' in Rule 12BB. The word 'intermediate goods' is used in the Rules for sake of convenience taking into the varieties and variable complexities of materials that may require to be stock transferred in the process of manufacture of products. This cannot mean that 'engines' which is otherwise an input for manufacture of Earth Moving Machine, loses its nature of being an input by opting Rule 12BB. We do not find any logic or legality in this view of the department. 46. The second ground on which the credit is denied is that there are no duty paying documents. Only if the engines are stock transferred on payment of duty to the Hosur unit, the appellant will receive duty paid invoices. While following the procedure ....