2024 (7) TMI 994 - AT - Central Excise

Clandestine Removal - trading of goods and/or clearance of inputs as such or not - denial of CENVAT Credit - Liability to pay the duty, Interest, and penalty in connection with clearance of goods for the period from FY 2007-08 to 2011-12 - time limitation. Demand of differential duty demand of Rs. 40,70,142/- - Appellant has contended that while transporting goods to depot, Appellant had paid Octroi and Municipal Cess and also given discount to the various buyers while selling of the goods from depot - HELD THAT - It is settled law that in terms of statutory provisions and decision, show that deductions claimed from assessable value must be actual and not artificial - there are force in appellant s submission that amount of discounts from price passed on to its customers and Octroi/ Cess paid by it to NMMC is required to be deducted from assessable value of goods. Various decisions relied upon by the Appellant on this aspect supports their submissions. Consequently, considering Octroi and Municipal Cess paid by Appellant and the discount given to the various buyers by Appellant, the net amount of duty difference payable Rs. 3,81,322/- is also accepted by Appellant in their written submissions as against confirmation of duty demand of Rs. 40,70,142/- by the Commissioner under the impugned order - the Appellant is liable to pay the differential duty of Rs. 3,81,322/- along with interest and penalty and Appellant would also be eligible for reduced penalty @ 25 % of the duty demand, subject to the condition that Appellant pay the differential duty Rs. 3,81,322/- with interest and reduced penalty @ 25 % of duty is also paid within 30 days of communication of this Order. This differential duty of Rs. 3,81,322/- with interest and reduced penalty @ 25 % payable may also be deducted from the amounts deposited during the proceedings which is appropriated by O-I-O. Duty demand of Rs. 43,19,238/- confirmed on clearance of showers holding that the same were cleared as such after import and the process carried out thereon after import does not amount to manufacture - HELD THAT - The definition of manufacture under Central Excise Act, 1944 is very wide and includes any process incidental or ancillary to the completion of a manufactured product. The process carried out by the Appellant on subject goods was incidental and ancillary for making the product marketable in India. Thus, it would amount to manufacture and hence demand of duty Rs. 43,19,238/- is not sustainable - In the case of Shital Industries vs CCE, Ahmedabad-II 2024 (6) TMI 1261 - CESTAT AHMEDABAD , this Tribunal has held that the Rule 16 of Central Excise Rules 2002 unambiguously provide that if an assessee even does not carry out manufacturing activity but carried out any activity whether the same is amount to manufacture or not manufacture, assessee can avail Cenvat credit on the duty paid goods received in the factory. And after any process, if it is cleared from the factory, in case of activity amount to manufacture it is cleared on payment of duty on the transaction value and if the activity does not amount to manufacture then the same is cleared on payment of duty equivalent to the Cenvat credit. Thus, the transactions of appellant are covered by the provision of Rule 16 of Central Excise Rules, 2002 - the demand of duty Rs. 43,19,238/- is not sustainable. As the final product shower head was cleared on payment of duty and such duty amount was also recovered by the Appellant as per the law and therefore, the payment of duty on goods can not be considered as deposited in terms of Section 11D of Central Excise Act 1944. Cenvat Credit demand of Rs. 27,61,517/- in respect of Cenvat credit taken for Additional Duty of Customs (CVD) paid on import of such parts of shower head as per law - HELD THAT - It is observed that it is not open for Revenue to demand duty of Rs. 43,19,238/- for clearance of final product on one hand and demand of Rs. 27,61,517/- under Rule 14 of the Cenvat Credit Rules 2004 for Cenvat Credit contained in those very goods, on the other hand. It is also settled law that demand of duty on final product and also on inputs contained therein is impermissible. Duty demand of Rs. 3,12,373/- on alleged Clandestine Clearance of Goods - HELD THAT - The demand is based on confessional statements which have not been taken on record since the provisions of section 9D of Central Excise Act 1944 not followed in this matter. There are force in the submissions of Appellant on this ground. It is also found that demand on the basis of certain private records viz. dispatch Register recovered during search are not supported by any other corroborative clinching evidence not sustainable - since there is no evidence to support clandestine clearance of goods without payment of duty, confirmation of demand of duty amounting to Rs. 3,12,373/- also is not sustainable as we set aside the same. Penalty imposed under Rule 26 of Central Excise Rules, 2002 - HELD THAT - Since major/substantial demand of duty with interest penalty is set aside, separate penalty imposed under Rule 26 of Central Excise Rules, 2002 on the co-Appellants Shri Shri Hemantkumar N. Shah, Director and Shri Kalpesh M. Sapa, Ex-Dy. Manager is not warranted and deserves to be set aside, and is set aside. The differential duty of Rs. 3,81,322/- with interest and penalty are upheld. Remaining duty demands with interest and Penalty are set aside - Appeals are partially allowed.

Summary

Issues Involved:
1. Treatment of duty paid on clearance of imported showers.
2. Demand and recovery of Central Excise duty.
3. Appropriation of amount paid during inquiry.
4. Recovery of interest under section 11AB/11AA.
5. Demand and recovery of Cenvat credit.
6. Imposition of penalties under various sections and rules.
7. Alleged clandestine clearance of goods.
8. Time-barred nature of Show Cause Notice.

Detailed Analysis:

1. Treatment of Duty Paid on Clearance of Imported Showers:
The Appellants argued that the imported showers underwent significant processing, including testing and assembly with other components, which constituted "manufacture" under the Central Excise Act, 1944. The Tribunal found that the process carried out by the Appellants amounted to manufacture, as defined under section 2(f) of the Central Excise Act. Consequently, the demand of Rs. 43,19,238/- for treating the duty paid on imported showers as a deposit under section 11D was not sustainable. The Tribunal cited previous judgments supporting the view that payment of duty on processed goods, whether the process amounts to manufacture or not, entitles the assessee to Cenvat credit.

2. Demand and Recovery of Central Excise Duty:
The Tribunal noted that the Commissioner had confirmed a differential duty demand of Rs. 40,70,142/- but had not allowed deductions for Octroi, Municipal Cess, and discounts. The Tribunal held that these deductions are admissible under the statutory provisions and various judicial precedents. Consequently, the correct differential duty was determined to be Rs. 3,81,322/-, which the Appellants accepted. The Tribunal upheld this amount along with interest and a reduced penalty of 25%, provided the Appellants paid within 30 days.

3. Appropriation of Amount Paid During Inquiry:
The Tribunal appropriated the amount of Rs. 60,00,000/- paid by the Appellants during the inquiry towards their duty liability. This appropriation was accepted as part of the differential duty payment.

4. Recovery of Interest Under Section 11AB/11AA:
Interest on the differential duty of Rs. 3,81,322/- was upheld as per sections 11AB/11AA of the Central Excise Act, 1944.

5. Demand and Recovery of Cenvat Credit:
The Tribunal found that the Cenvat credit demand of Rs. 27,61,517/- was not sustainable. It was impermissible for the Revenue to demand duty on the final product and also on the inputs contained therein. The Tribunal cited legal precedents supporting the view that once duty on the final product is accepted, Cenvat credit cannot be denied.

6. Imposition of Penalties Under Various Sections and Rules:
The Tribunal set aside the penalties imposed under Rule 26 of the Central Excise Rules, 2002, on the co-Appellants, as the major/substantial demand of duty with interest and penalty was set aside.

7. Alleged Clandestine Clearance of Goods:
The Tribunal found that the demand of Rs. 3,12,373/- for alleged clandestine clearance was based on confessional statements and private records, without corroborative evidence. The Tribunal held that such demands could not be sustained without credible evidence and cross-examination of witnesses. Consequently, this demand was set aside.

8. Time-Barred Nature of Show Cause Notice:
The Tribunal did not specifically address the time-barred nature of the Show Cause Notice, as the appeals were decided on merits. However, the Appellants had argued that the extended period for demand could not be invoked as there was no suppression of facts, willful misstatement, fraud, or collusion.

Conclusion:
The impugned order was set aside, except for the differential duty of Rs. 3,81,322/- with interest and penalty, which were upheld. The appeals were partially allowed with consequential relief as per law.