2013 (5) TMI 677 - AT - Central Excise

Clandestine removal - Duty on coating charges along with interest and imposition of penalty - as per dept. duty on the bare pipes was paid by the appellant without shifting the bare pipes from the factory premises and the fact that bare pipes had never left the factory and it was only after CTE coating pipes were cleared from the factory was suppressed by the appellant from the department - assessee contention against invoking of extended period of limitation - Held that - As from the invoices of bare pipes, no details of transport are shown which means the goods did not move outside the factory premises. On the other hand, the goods which were cleared from the factory were coated pipes and in the invoices issued by the appellant for coated pipes, transport vehicle numbers were clearly mentioned. From these observations, it can be concluded that bare pipes have never gone out of the factory premises and appellant merely shifted pipes from SW Division to SPEC Division for the purpose of coating and the goods which were removed outside the factory were in fact the coated pipes given to M/s IOCL. Since the bare pipes had never gone out of the factory and the coating was done within the factory premises, and the goods finally cleared were coated pipes, duty is required to be paid on the coating charges also in the light of decision in the case of Sidhartha Tubes Lt Vs CCE, Indore (2005 (12) TMI 92 - SUPREME COURT OF INDIA). The appellant s contention that show cause notice is hit by time limit is not acceptable as the activity of coating was done on the bare pipes manufactured by the appellants themselves was never brought to the notice of the department. Moreover, the fact that figures of coating pipes shown in the excise records were not in respect of the bare pipes received from outside for coating was never brought to the notice of the department. This is also seen from fact of entering two separate contracts with M/s IOCL on the same date was also not brought to the notice of the department. This action shows that this was a deliberate attempt to evade duty on the coating charges. Thus the extended period is rightly invokable in this case. Against assessee.

Summary

Issues:
1. Duty liability on coating charges for CTE Coated Pipes.
2. Allegation of evasion of central excise duty.
3. Time limitation for demand of duty.
4. Cenvat credit entitlement on inputs.
5. Imposition of penalty under Rule 25 of Central Excise Rules.

Analysis:
1. Duty liability on coating charges for CTE Coated Pipes:
The case involved the appeal by M/s Man Industries India Ltd against the demand for duty on coating charges of CTE Coated Pipes supplied to M/s Indian Oil Corporation Ltd (IOCL). The issue was whether duty was payable on the coating charges as the coating process did not amount to manufacture. The Revenue argued that duty was required as the cleared goods were coated pipes, not bare pipes. The Tribunal found that since the coated pipes were finally cleared, duty was indeed payable on the coating charges as per relevant legal precedents.

2. Allegation of evasion of central excise duty:
The appellant contended that they had paid duty on the bare pipes when shifting them for coating, and the coated pipes were supplied to IOCL without further duty payment. However, the Revenue argued that the bare pipes never left the factory premises and were shifted within for coating. The Tribunal observed that the bare pipes were never physically removed from the factory, and the coated pipes were cleared to IOCL, indicating an attempt to evade duty on the coating charges.

3. Time limitation for demand of duty:
The appellant raised the issue of time limitation for the demand of duty, stating that the demand pertained to a period from December 2003 to May 2004, while the show cause notice was issued in September 2005. The Tribunal rejected this argument, noting that the appellant had not disclosed crucial facts to the department, such as the separate contracts with IOCL, justifying the invocation of the extended period for demand and imposition of penalty.

4. Cenvat credit entitlement on inputs:
The appellant claimed entitlement to cenvat credit on inputs used in manufacturing the coated pipes. However, the Tribunal did not address this issue explicitly in the judgment, focusing instead on the duty liability on the coating charges and the alleged evasion of duty.

5. Imposition of penalty under Rule 25 of Central Excise Rules:
The Tribunal upheld the imposition of penalty under Section 11AC of the Central Excise Act, considering the deliberate attempt to evade duty on the coating charges. The failure to disclose crucial information to the department, such as the nature of the contracts with IOCL, and the movement of goods within the factory premises supported the imposition of penalty.

In conclusion, the Tribunal dismissed the appeal, affirming the duty liability on the coating charges for CTE Coated Pipes, rejecting the time limitation argument, and upholding the penalty imposed under the Central Excise Act.