9911796707
TMI Blog1997 (5) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... hain Division, Plot No. 1, Kazipally Village, Jinnaram Mandal, Medak District, Hyderabad (RCD for short) in order to reactivate the sick unit (RCD) taken over by TIL, by adopting an irregular procedure under Rule 57F(1)(ii), the Central Excise Officers visited the factory of TIDC on 11-12-1995 and conducted enquiries. Shri R. Narayanan, Senior Manager (Accounts), TIDC, informed that :- (a) TIDC are importing certain raw material from oversees suppliers under QBAL. (b) They have been issued with DEEC Books covering the same. (c) They generally consumed the imported duty free DEEC raw material in their factory. (d) A part of the imported duty free DEEC material was sent to RCD, Hyderabad, for conversion into chains, that such chains were brought back to their factory for greasing, testing and repacking and such repacked chains were exported in fulfilment of their (TIDC) export obligation and that such transfer of imported duty free DEEC material to RCD was under Rule 57F(1)(ii) procedure upon payment of Central Excise duty and handed over the documents (computer print out) reflecting the particulars of removal of such duty free DEEC materials to RCD. 4. In his statement, Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the imported duty free DEEC materials transferred to RCD was Rs. 61,15,713, out of which Rs. 56,83,433 has been paid from Modvat account and the balance Rs. 4,32,280 from PLA account. (v) TIDC belong to `Murugappa Group and that they do not have any intention to contravene provisions of law wantonly and that in case of omissions on their part, the same were due to inadvertence and requested for a lenient action. 6. A scrutiny of the documents revealed that the imported duty free DEEC inputs have been despatched to RCD on payment of duty. From the above, it came to light as follows :- (a) TIDC are manufacturers of chains and parts thereof falling under Chapter Heading 7315 of Central Excise Tariff Act, 1985. (b) TIDC belong to `Murugappa Group , to which TIL also belongs. TIL have taken over a sick company which is functioning under the name and style of RCD at Hyderabad. (c) TIDC obtained the basic raw material from TIL. (d) TIDC imported certain raw materials without payment of duty under QBAL scheme. (e) The duty free imported material have been despatched to RCD under Rule 57F(1)(ii) on payment of Central Excise duty amounting to Rs. 61,15,713. (f) RCD avails c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their reply dated 19-4-1996, they have inter alia stated that :- (a) they had [not] deliberately paid the Central Excise duty on imported duty free DEEC material with an intent to enable RCD to avail of ineligible Modvat so as to revive their manufacturing activity; but that was only a case of mistaken impression of the law on their part. (b) The domestic inputs as also DEEC material were being cleared by them to RCD for manufacture of chains. (c) They followed the provisions of Rule 57F(1)(ii) as well in respect of clearance of DEEC material also by debiting of duty in respect of DEEC inputs when cleared to RCD in respect of which admittedly no duty was payable which resulted in their having to deposit an equivalent amount of cash in their PLA to meet the duty payment requirement of their own production. Total amount, thus, deposited by them in the PLA and the debit made in the RG 23A account during the period in question, namely April, 1993, to November, 1995, was indicated by them in the following Table :- (Rs. in lakhs) PLA RG 23A TOTAL Total Credit taken 530 479 1009 Total debit made 533 487 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. They reiterated that the payment of duty on imported DEEC inputs arose as a result of mistaken impression of law on our part and that there is no nexus between the payment of duty by them and the reactivation of the sick unit taken over by TIDC; that various officers of the department including the Range officials have been regularly visiting their factory and examining the records and that, no inputs as such have been cleared from their factory without fulfilling the legal requirements of the Modvat rules. The Range officials have also been inspecting the chains manufactured by RCD received by them for greasing, testing and repacking and the fact of such reprocessing being done in the presence of the said officials has been endorsed on the AR4 applications received from RCD during the period in question; that therefore, it cannot be said that the despatch of DEEC inputs to RCD and receipt of the chains manufactured therefrom was not within the knowledge of the department. 13. As regards the question of endorsing RCD as a supporting manufacturer in the DEEC books held by them, they pointed out that the definition of actual user (industrial), as per Export and Import Policy, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of Modvat credit that was accumulated. It was pointed out by the learned Consultant that in any case, no excess credit had accumulated at the end of the noticee as the duty liability on the end product viz chains was higher than the duty liability on the inputs. During the personal hearing, a statement of the total amount transferred to M/s. RCD for payment of duty and the details of conversion charges paid to RCD have been furnished, indicating that from May, 1993 to December, 1995 a total amount of Rs. 1.11 crore was transferred to M/s. RCD at Hyderabad for payment of duty, while, during the same period, a total of Rs. 9 crores approximately was paid to M/s. RCD on account of conversion charges. It is pleaded that had the noticee intended to transfer indirectly some money to their sick sister unit at Hyderabad, nothing had prevented them from inflating the conversion charges to accumulate the duty payable on the finished products produced at Hyderabad. In any event, it is submitted that the duty on finished products at Hyderabad unit, as per the agreement between the noticee and the RCD, was payable by the noticee only and therefore, there was no reason to hide the above fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and utilised the same in paying duty on the finished products viz Chains. The department has, therefore, alleged that by paying duty on non-dutiable goods, the noticee have indirectly passed on their excess Modvat credit to their sick sister unit to enable them to pay duty on the finished products. 23. It is now the case of the noticee as advanced by Shri S. Venkatrama Iyer, the learned Consultant, that in the first place, M/s. RCD at Hyderabad were none but a job worker and as per the agreement, between M/s. RCD and the noticee, the duty on the finished products produced at Hyderabad on job work basis was payable by the noticee themselves. M/s. RCD were entitled to recover, conversion charges only from the noticee. Thus, nothing had prevented the noticee from directly transferring the money to their job worker to enable them to pay the duty on the finished products and they had no reason to take recourse to transfer the money in form of Modvat credit or otherwise. 24. The learned Consultant during the personal hearing has produced statement of the total amount transferred to M/s. RCD for payment of duty during the period from May, 1993 - December, 1995 as also the conversion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty from Modvat account, an attempt was made by the noticee to pass on their accumulated surplus Modvat credit to their sick sister unit. It is the case of the noticee that the only dutiable item manufactured by them is Chain and it is not the case of the department that the duty liability on the inputs of Chain was higher than the duty liability on the Chains manufactured by the assessee, thus resulting in accumulation of excess Modvat credit. In their reply to the show cause notice, it is pointed out that the noticee had deposited Rs. 530 lakhs in their PLA account which would clearly indicate that they did not have accumulated surplus credit. 28. From the statement furnished by the learned Consultant during the personal hearing, it is seen that during the material period, the noticee debited Rs. 5.21 crores towards duty from their PLA account and Rs. 3.04 crores from their RG 23A account. This would clearly establish that the noticee did not have any problem of accumulation or extra Modvat credit which could not be utilised in their Chennai unit. 29. In view of the above facts, I am unable to see any reason why the noticee should take recourse to manipulation by paying duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
