2022 (2) TMI 1067 - AT - Central Excise

Clandestine removal - alleged shortages found by officers on 12.02.1998 in the various premises of the factory - capital goods available to the appellants on the TBA machine purchased and installed by them - CENVAT credit on the TBA machine - Department alleges that there were excesses and shortages in different products in the company on the day of verification - time limitation - HELD THAT - The department has not made a case against the appellants for demand of duty on goods found in short/excess. Moreover it is neither alleged by the revenue that appellants have removed the goods clandestinely nor any proof of the same is placed on record. Therefore duty cannot be demanded on the simple fact that shortages are found in different units. The appellants contention that the shortage found in one unit is found in the other unit cannot be brushed aside. It is evident from the annexures to show cause notices. Hence duty cannot be demanded on such excesses and shortages. Admissibility of credit on the TBA machine - HELD THAT - In the instant case it is not disputed that a declaration under Rule 57(T)(i) was filed on 14.03.1997 declaring the intent to use the machine for manufacturing Bailey Acqua Water; declaration for intent to use the machine for both Bailey Acqua Water and YoFrooti was filed on 19.03.1997; Machine started for packing YoFrooti from 02.04.1997;YoFrooti Became dutiable on 14.05.1997 and Cenvat Credit was Taken 02.09.1997. The intention is clear about the usage of the machine and the declarations were not denied by the department - in the instant case the appellants have made clear their intention to use the machine for manufacture of dutiable as well as exempted goods. They have filed two declarations to this effect. The declarations were not contested by the department at the material time. The appellants claim that they had utilised the machine for manufacture of Aqua Bailey though on trial basis and the same was not successful. The appellants cleared the scrap of such goods on payment of duty. Learned Commissioner rejects the claim of the appellants saying that the affidavits are filed in a belated manner. It is not the case of the department that the appellant used the capital goods exclusively in the manufacture of exempted products or in provision of exempted services. The appellants have filed declarations under Rule 57(T) (i) and availed credit on 02.09.1997 after YoFrooti Became dutiable on 14.05.1997. We are in agreement with the learned Counsels argument that there is no time limit prescribed for taking credit. They have availed credit within 6 months of receipt of capital goods for which there is no express bar. Express Bar if any is in relation to the usage exclusively in the manufacture of exempted products or in provision of exempted services - the provisions of Rules need to be understood as they are and it is not for the authorities or Tribunal to supplement the same with arguments however cogent. Time Limitation - HELD THAT - The appellant is registered with the department paying central excise duty and are filing periodical ER-1 returns and other declarations as well; the issue involved herein is one of interpretation and is purely legal in nature; moreover there being no positive act on part of the appellants to suppress any fact from the department and there being no evidence for such allegation the proposal to invoke extended period is not correct. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether duty can be demanded on the alleged shortages found by officers on 12.02.1998 in the various premises of the factory.
2. Whether credit of capital goods is available to the appellants on the TBA machine purchased and installed by them.

Detailed Analysis:

Issue 1: Duty Demand on Alleged Shortages
The department alleged shortages and excesses in different products across the company's units. The appellants contended that the shortages in one unit were offset by excesses in another unit within the same premises. They argued that all three units were part of one factory with a common gate and that goods were cleared on payment of duty. The department argued that each unit had separate bonded store rooms and that removal without payment of duty constituted a contravention of Rule 47 of the Central Excise Rules, 1944. However, the appellants maintained that there was no clandestine removal and that the goods found short in one unit were found in another unit within the same factory premises.

The tribunal found merit in the appellants' arguments, noting that the common facilities and interconnected operations within the factory were not disputed by the department. The tribunal referenced the case of Dhampur Sugar Mills Limited Vs CCE (2001 (129) ELT 73 (SC)), which supported the appellants' position that multiple registrations within a single factory premises do not constitute separate factories. The tribunal concluded that the department could not demand duty based on the shortages found in one unit when the goods were found in another unit within the same premises. Therefore, duty could not be demanded on the alleged shortages.

Issue 2: Credit of Capital Goods on TBA Machine
The appellants claimed that the TBA 19 packing machine was intended for the production of both exempted and dutiable goods, specifically "Aqua Bailey" and "YoFrooti." They argued that they had filed the necessary declarations and that the machine was used for trial production of "Aqua Bailey," which was unsuccessful. The department contended that the machine was imported for the production of exempted goods and that credit was not admissible as per the decision in Spenta International Ltd. Vs. CCE Thane (2007 (216) ELT 133 (Tri-LB)), which relied on the Supreme Court's decision in Surya Roshni Ltd. (2003 (158) ELT A273).

The tribunal noted that the appellants had declared their intent to use the machine for both dutiable and exempted goods and that the machine was used for the production of "YoFrooti" after it became dutiable. The tribunal referenced the case of Brindavan Beverages Private Limited Vs. CCE (2014 (310) ELT 398), which held that Cenvat credit is admissible even if capital goods are used for both dutiable and exempted products at different times. The tribunal found that the appellants had correctly availed credit on the TBA machine and that the provisions of the Cenvat Credit Rules did not bar such credit.

Limitation:
The appellants argued that the entire demand was time-barred as there was no suppression of facts with intent to evade duty. The tribunal found the appellants' submissions convincing and concluded that the show cause notice issued on 11.08.1998 was time-barred.

Conclusion:
The tribunal allowed all three appeals with consequential relief as per law, concluding that:
1. Duty could not be demanded on the alleged shortages as the goods were found within the same factory premises.
2. The appellants were entitled to credit on the TBA machine as it was used for both dutiable and exempted goods.
3. The demand was time-barred.

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