2022 (8) TMI 226 - AT - Central Excise

Benefit of Exemption Notification - On receipt of certain amounts for tools/dyes as well as for manufacture of motor vehicle parts, it was observed that the said motor vehicle parts have been cleared to M/s. Force Motors Ltd. without payment of Central Excise duty - Whether the appellant is liable to pay Excise duty on the impugned tools/dyes and that benefit of Notification No. 67/95-CE dated 16.03.1995 is not available to the appellant? - reversal of CENVAT credit - interest and penalty - HELD THAT - Apparently and admittedly, the tools/dyes were not cleared by the appellant despite being manufactured by it and the duty liability has been denied claiming the benefit of exemption Notification No. 67/95 CE dated 16.03.1995. As observed from the Notification, the same is absolutely silent about the sale of manufactured goods to be a criteria for non applicability of said Notification. It only says that the goods to seek exemption should be the goods manufactured by the assessee and should have been retained by the assessee for further manufacture. Customized manufacture is also not the criteria for non-applicability of said Notification. Thus it is clear that the ground raised by the department supporting the order under challenge is not sustainable for denying the benefit of aforesaid Notification to the appellant. Further, there is no evidence by the department to show that the said goods were never captively consumed by the appellant - There is no denial to the fact the goods retained were used for further manufacture. This observation is sufficient to hold that the tools/dyes were kept with the appellant for the purpose of manufacturing motor vehicle parts in future also though only for M/s. Force Motors Ltd. The appellant has challenged the findings on the ground that the cost received by the appellant towards the manufacture of tools/dyes has been amortized by the appellant and for the said reason also appellant is not liable to discharge any duty of excise thereupon. It is observed that the Adjudicating Authority below has not considered the said contention for want of evidence in the form of certificate of Chartered Engineer - Apparently and admittedly, the same is not the fact of the present case. Further the manufacturer therein has not amortized the cost of tools/dyes manufactured by him rather it included the said cost in the cost of components manufactured out of said tools/dyes. Apparently and admittedly this also is not the fact of the present case. That in the purchase order, the amount of cost of tools/dyes (moulds manufactured by the appellant) included in the cost of tools manufactured by the appellant out of said moulds but the tax invoices are revealing appropriate amortization of the cost of said moulds. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay Central Excise duty on tools/dyes manufactured by the appellant.
2. Applicability of Notification No. 67/95-CE dated 16.03.1995 for exemption from duty.
3. Compliance with legal provisions regarding duty payment and captive consumption.

Issue 1: Liability to pay Central Excise duty on tools/dyes:
The Department observed that the appellant manufactured tools/dyes for motor vehicle parts for a customer without paying Central Excise duty on the tools/dyes. The appellant claimed exemption under Notification No. 67/95-CE dated 16.03.1995. The Department issued a show cause notice for duty recovery and an excess Cenvat Credit. The Order-in-Original confirmed the proposal, leading to the appeal before the Tribunal.

Issue 2: Applicability of Notification No. 67/95-CE for duty exemption:
The appellant argued that the tools/dyes were manufactured for a customer and were not cleared from their factory, thus excise duty liability did not arise. They claimed the benefit of the Notification as the tools/dyes were kept for further use, exempting them from duty payment. The appellant cited case laws to support their position.

Issue 3: Compliance with legal provisions:
The Department contended that since the tools/dyes were sold to the customer and not captively consumed by the appellant, duty exemption under the Notification should not apply. They argued that the appellant failed to provide evidence of including the cost of tools/dyes in the value of goods. The Department relied on the decision of Tribunal Chennai to support their stance.

The Tribunal analyzed the admitted facts, noting that the tools/dyes were manufactured by the appellant for motor vehicle parts ordered by the customer. The duty liability was denied based on the Notification, which requires goods to be manufactured and used by the assessee. The Tribunal found that the conditions of the Notification were met as the tools/dyes were kept for further production, granting the appellant the benefit of exemption.

Regarding the Department's argument on duty liability due to the sale of tools/dyes, the Tribunal found the Notification silent on sale being a criterion for exemption denial. It emphasized that the goods were captively consumed by the appellant for further manufacture, supporting the appellant's position.

The Tribunal also addressed the appellant's contention of amortizing the cost of tools/dyes received from the customer. It found sufficient evidence in the purchase orders and tax invoices to conclude that duty liability was fulfilled, and the cost of tools/dyes was amortized. The Tribunal disagreed with the Commissioner's reliance on the Tribunal Chennai decision, highlighting the differences in the cases.

Citing previous Tribunal decisions, the Tribunal affirmed that duty liability is related to manufacture and not sales of goods. It set aside the Commissioner's decision, allowing the appeal in favor of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, holding that they were exempt from paying Central Excise duty on the tools/dyes manufactured for motor vehicle parts based on Notification No. 67/95-CE. The decision emphasized compliance with legal provisions and the captively consumed nature of the goods, ultimately overturning the Commissioner's order.