TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1193
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.... etc. During audit scrutiny it was noticed that manufacturing operations at the Authorised unit had stopped with effect from 04.05.2010 (due to labour unrest, certificate of Asst. Commissioner of Labour on record). A large CENVAT credit balance of Rs.3,41,70,655/- stood unutilised as on that date in their records. 2.2 The Appellant received duty-paid imported HR/CR coils from dealers viz., M/s. Shree Ganesh Ventures and M/s Kaizen Cold Formed Steel (P) Ltd., and availed CENVAT credit on dealer invoices, and sent the coils to job workers for de-coiling, cutting and slitting. The processed sheets after receipt were cleared back to the same dealers on payment of duty. The duty payments were made by utilising the CENVAT balance and by adjusting the credit on subsequent receipts. 2.3 During the Audit of Accounts, the Department took the view that cutting/slitting of coils is not a process of manufacture, a position crystallised by Delhi High Court's decision in M/s. Faridabad Iron & Steel Traders Association upheld by SC and CBEC Circular No.811/08/2005 dated 02.03.2005. On this basis two show-cause notices were issued, SCN No.16/2015 dated 05.06.2015 demanding reversal of CENVAT ....
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....wing wilful overvaluation has been placed on record. 4.5 Section 11D applies to amounts actually collected from buyers as representing duty that are required to be deposited. In the present case the Appellant has not collected deposits pending adjudication; the amounts were paid as part of trade transactions and not retained as a "duty deposit" pending a decision. Treating receipts as deposits under Section 11D misconstrues the statutory scheme. 4.6 The Appellant places reliance on several judgments and tribunal rulings and those case Laws demonstrate that in comparable situations revenue's reclamation of credit is inappropriate and that penalties should not be levied in interpretation of disputes. 4.7 Finally the Appellant respectfully prayed that this Tribunal to set aside the impugned Order. 5. Per contra, the Authorized Representative Ms. O.M. Reena submitted as follows: - 5.1 M/s. Shree Ganesh Steel Rolling Mills Ltd. (Appellant/SGSRM) stopped manufacturing operations on 04.05.2010, as certified by the Assistant Commissioner of Labour. On that date, an unutilised CENVAT credit balance of Rs.3.41 crores existed. Despite cessation of manufacture, SGSRM continued t....
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....rmissible only when the assessee proves that incidence has not been passed on, which SGSRM has not established. 5.5 Extended Period is Invoked correctly as the ER-1 returns merely reflect utilization of credit against clearances but conceal material facts, namely that: the purported "inputs" were not inputs under Rule 2(k); goods were sent to job-workers, never disclosed; procedure under Rule 3(5) of CCR was not followed and inflated valuation was used to transfer credit. These facts came to light only during the Audit scrutiny, fully justifying invocation of Section 11A (4) of Central Excise Act, 1944. There is clear suppression and an intent to evade. 5.6 In view of the clear illegality in availment and utilization of credit, deliberate inflation of value, and contravention of CCR provisions, it is prayed that this Hon'ble Tribunal to uphold the impugned Order-in-Original in entirety; and Reject the Appeal filed by the Appellant/SGSRM. 6. We have carefully perused the appeal records, judicial precedents cited, examined the Appellants comparative data sheets from purchase of Coils to again resending it back to the same supplier. 7. In light of the rival submissions,....
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.... credit cannot be denied if duty is paid. The clearances should be treated as inputs removed as such under Rule 3(5) of CCR 2004 and Payment of duty on final goods constitutes reversal of credit. 10.2 The Respondent on the other adverted that Rule 2(k) after 01.04.2011 excludes goods that have no relationship whatsoever with manufacture and since appellant's factory was shut since 04.05.2010, goods cannot qualify as "inputs". That Rule 3(5) CCR applies only to valid inputs and CENVAT Credit availment is illegal at threshold. 10.3 We have considered the submissions of both the sides and find that the Input must have a direct and immediate nexus with manufacture of a final product. 10.4 If there is no manufacturing activity, the question of availment of input credit does not arise. Here we find that no manufacturing activity existed at all during 2010-2015. Therefore, the HR/CR coils fails the very existential requirement of input under Rule 2(k). The Payment of duty on non-manufactured goods cannot legitimise the credit. 10.5 We distinguish the case of Ajinkya & Hansa Tubes relied upon by the Appellant as in both cases: there was ongoing manufacturing and the process was....
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....er, to Appellant- Job-worker- Appellant- back to original dealer-original dealer to third parties. We have gone through the data and we tabulate the details test checked as below: - From Price per M.T.(Case I) Price per M.T.(Case II) Price per M.T.(Case I) Price M.T.(Case III) per us YEAR 2012-13 YEAR 2011-12 Importer to Dealer 36,500 33,138 20,731 29,879 Dealer(Kaizen/SGV) to Appellant 71,500 44,000 40,000 40,000 Appellant to Dealer(Kaizen/SGV) 72,000 58,500 77,374 72000 Dealer(Kaizen/SGV) to Third Parties 72,500 77,874 77,874 72,500 11.5 From the above Table, barring the data in the first Column, the data in other three columns show that there is a marked build up in price in the year 2011-12 after removal from the Appellant premises and the above data support the Respondents allegation on the inflation of data to attempted encash the accumulated CENVAT Credit when there is no manufacture after 04.05.2010. 11.6 From our above findings, we have to conclude that there is a conscious inflation, with intention to utilize & pass on lapsed credi....
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.... that ER-1 returns merely show "inputs removed as such" and that they did not disclose that the goods were sent to job workers, cut/slit, and returned to the same suppliers; They also do not disclose cessation of manufacture in 2010. Thus, crucial facts were suppressed. Returns cannot disclose fraud unless accompanied by full documents. 13.3 By Circular 811/08/2005-CX and Hon'ble Supreme Court's confirmation of Faridabad Iron & Steel Traders, it was settled that cutting/slitting of coils is not manufacture. Any continued payment of duty thereafter indicates deliberate mis-declaration and definitely not bona fide belief. There is an intentional design to utilize lapsed credit. Revenue also submitted that: a large CENVAT balance of Rs.3.41 crores existed on 04.05.2010 when manufacture stopped. Subsequently, the appellant created inflated values (60-150% markup) to utilize this credit. This constitutes a planned mechanism to evade lapse of credit, attracting Section 11A (4). Further the procedure laid down under Rule 3(5) of CCR was never followed. 13.4 The appellant did not declare that inputs were removed for job work and did not obtain permission under Rule 4(6) of CCR and....
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.... We therefore hold that there were clear suppression and mis-statement of facts. 13.7 The Appellant has will fully acted contrary to settled law since 2005. The law declaring that cutting/slitting is not manufacture was conclusively settled by the case law in Faridabad Iron & Steel Traders Association (Del HC), which was affirmed by SC and followed by CBEC Circular 811/08/2005. Thus, the appellant cannot invoke "bona fide belief". When the law is settled, any contrary conduct is mala fide. Our view is fortified by the ratio of the following decision: Nirlon Ltd. - 2015 (320) ELT 22 (SC) ("Once law is settled, plea of bona fide belief is unavailable"). We find that the appellant undertook a deliberate plan to utilise the credit that would be lapsing otherwise. 13.8 We also find on record that a huge CENVAT balance of Rs.3.41 crores existed when manufacture stopped. Thereafter, the appellant cleared goods at highly inflated values (60-150% markup) to utilise the accumulated credit. Goods were returned to the same suppliers, indicating no genuine sale. Such conduct reveals a planned mechanism to utilise credit that would otherwise lapse. We find that such design f....
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....preme Court allowed revenue-neutrality only because the availment of credit was bona fide and there was no intention to evade. There was no factual deceit and the Credit and duty amounts were exactly identical But in the case of the Appellant, the Apex Court has ruled that the process undertaken is not manufacture (binding SC/Delhi HC judgments + CBEC Circular 811/08/2005). The Appellant knew this but still created artificial duty payments. Value was artificially inflated to pass on lapsed credit. Duty was not equal to the credit; it was 150-163% of credit, proving wrongful attempt to transfer credit. Thus, the Narmada Chematur actually supports the Department, not the appellant. In the cases of Hansa Tubes, Vickers Systems, Crompton Greaves, Sona Koyo, PSL Holdings CCE Rajkot 2003(156) ELT 602(Tri-Mumbai) All these cases share the following common facts: - 1) Inputs were eligible inputs 2) duty was legitimately paid 3) No inflation of transaction value 4) No fraudulent intention 5) No deliberate passing of lapsed credit 6) Dispute was purely interpretational In the case of Appellant/SGSRM: All six conditions f....