TaxTMI 
TaxTMI 
2025 (11) TMI 302
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....cts cleared as samples for testing purposes by the appellant were actually not samples but finished products cleared without payment of duty and, therefore, whether the appellant can be said to be engaged in clandestine removal of goods. The tax amount involved in this issue is Rs. 2,57,86,877/-; and (ii) Whether certain amount of CENVAT credit was availed and utilized wrongly as the same had been availed beyond the period of one year from the date of invoice. The amount involved in this issue is Rs. 46,43,061/-. 3. The appellant is registered as an Export Oriented Unit [EOU] under the Foreign Trade Policy and is engaged in the provision of Contract Research and Manufacturing Services [Contract Research Services] in relation to various fluoro chemical products. It is stated that for the purpose of this service, the appellant carries out research for and on behalf of its clients with the objective of developing new processes and products as per the objectives and specifications of the clients. To achieve this end, the appellant enters into contracts with the clients which have specific provisions under which the appellant is required to undertake process development/proc....
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.... (i) The goods that were cleared were not finished goods. All goods despatched to the laboratories were madeto-order and, therefore, needed testing and all the goods in question were testing samples sent to specialized testing facilities; (ii) They were, therefore, in very small quantities and while there were numerous despatches for the same project, but they were duly accounted for; (iii) The question of applying a 'selling price' did not arise as the appellant was undertaking Contract Research Services activity and, therefore, the appellant only provided the value of the raw materials used in the samples; (iv) 'Similar' products were seen in the list of finished products because when the samples were sent, the name of the end product was only used to identify the products being synthesized, though the samples sent were mostly raw material or intermediate stage; and (v) The question of clandestine removal, therefore, does not arise as only miniscule quantities were sent and the goods were not sent to any customers but to laboratories, which is an admitted fact. There is no revenue earned by the appellant and the samples also had no commercial v....
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....ly and these finished products were cleared by them without payment of duty. xxxxxxxxxxxx 29(21). Further on perusal of the ER-2 Returns for the period from April'2016 to June 2017 and Credit Ledger which were produced by the Noticee during the course of search, the officers observed that the Noticee have availed the Input Goods Credit of Rs. 35,11,453/- & Input Service Credit of Rs. 11,31,608/-, against those invoices which were older than one year. xxxxxxxxxx. Thus, the Noticee failed to follow the provisions of Rule (4) of Cenvat Credit Rules'2004 in as much as they have availed the Input Goods Credit of Rs. 35,11,453/- & Input Service Credit of Rs. 11,31,608/-, beyond the prescribed time limit of 'one year' from issue date of their respective documents, as prescribed under Notification No. 06/2015-Central Excise (N.T.) dated 01.03.2015. Therefore such Credit stands inadmissible and should be disallowed to them and to be recovered from them along with applicable interest and penalty. xxxxxxxxxxxx 29(25). Further, since the Noticee failed to inform to the department about removal of Goods [Organic Chemicals (FLUORO Finished Goods)] as mentioned....
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....shed goods exported by the appellant, concluded that the appellant cleared finished goods disguised as testing samples, resulting in clandestine removal. Further investigation as to the nature of the samples was not undertaken nor was the explanation provided by the appellant contradicted by any evidence; (iv) The impugned order erred in not applying paragraph 6.28 in the Handbook of Procedures under Foreign Trade Policy, which provides that export oriented units are permitted to transfer goods for quality testing/ research and development purpose to any laboratory/institution without payment of duty, and where goods have been consumed/destroyed in process of testing a certificate from laboratory/institution to this effect is required; (v) The impugned order erroneously held that the quantity of goods cleared as mentioned in Annexure-F to the show cause notice is higher than what is mentioned thereunder based on the weight of the goods recorded by the courier agencies. The impugned order conveniently ignored the fact that the invoices issued by the courier agencies are based on weight slabs and do not record the actual weight; (vi) The department ha....
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....ny time bar. Annexure-4 to the reply to the show cause notice clearly demonstrates that the relevant credits were availed in RG-23C, which pertains to the availment of credit on capital goods. The annexure contains a tabulated statement indicating the date of the invoice and the corresponding claim of the balance 50% credit in the financial year following the date of the invoice. Thus, credit was validly claimed to the extent of claim of credit on such balance 50% portion of CENVAT credit on capital goods. 9. Shri Ratnesh Kumar Mishra, learned authorised representative appearing for the department, however, supported the impugned order and submitted that it does not call for any interference in this appeal. 10. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 11. The first issue that arises for consideration is whether the products cleared as samples by the appellant for testing purposes were finished products cleared without payment of duty and, therefore, were removed in a clandestine removal by the appellant. 12. As noticed above, the appellant was engaged in Co....
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....n that since there is similarity in the names mentioned in Annexures- F and I to the show cause notice, the products which the appellant claims were sent by testing were final products. There is no other evidence on record which may lead to the aforesaid conclusion. 18. The contention of the appellant can be believed since the covering letters accompanying the despatches clearly show that raw material/ intermediate goods were being despatched and the details in Annexure - F to the show cause notice match the covering letters which were issued at the time of testing. The corresponding test reports were also issued by the laboratory in respect of each sample after the testing was completed. This is also evident from the fact that testing reports for all the samples have been placed on record. The corresponding certificates also confirm that the samples were consumed in the testing purposes. This would be clear from the following Chart in respect of the samples: S. No. Sample Name Project Code Cover Letter Test Reports Certificates of Consumption 1. 4-Bromo-1-fluoro-2(trifluoromethyl) benzene NCR221 The same sample named, which further specifi....
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.... reports and consumption certificates that only testing samples were sent by the appellant to its in-house facility at Surat and not the finished products. 20. This is also clear from the contracts entered into between the parties which show that the scope of work was process familiarization and development/familiarization and development of analytical method/laboratory demonstration of optimised process, deliverable was report and in some case sample batch in relation to various chemicals. 21. The appellant had produced enough evidence to substantiate that only testing samples had been sent to the in-house facility at Surat, but the department did not produce any evidence to support its view. 22. In this view of the matter, it is not possible to accept the finding recorded the impugned order that the samples that were sent were finished products which had been cleared without payment of excise duty and, therefore, were removed in a clandestine manner. 23. The second issue that arises for consideration is regarding the finding recoded in the impugned order that the quantity of goods shown to have been cleared in Annexure - F to the show cause notice was higher then what....
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.... is clear that the credits were claimed by the appellant in the books of account within one year of the date of invoice. 33. In Origin Learning Solutions, the Tribunal held: "5. It is not in dispute that the appellants are eligible for credit to the tune of Rs.16,93,074/- on the service tax paid by them under reverse charge mechanism on input services availed by them. The only reason for denying the credit is that they have not reflected such availment of credit in ST-3 returns for July, 2013 to September, 2013. The services having been exported, the service tax paid on the input services used for export of services should be refunded to the appellants as per Rule 5 of Cenvat Credit Rules, 2004. The appellants have properly accounted in their books of account. Not mentioning the credit availed in ST-3 returns is only a procedural lapse, which can be condoned." (2) Reclaim of CENVAT credit previously reversed pertains to refund claims withdrawn amounting to Rs. 32,61,281/- 34. The appellant has provided detailed of the credit which are as follows: S. No. Period of claim Amount (in Rs.) Date of submission of claim Date of Reversal of Credit Date....