9911796707
TMI Blog2011 (11) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... not decided at that time thus it is held that extended period of limitation is not invokable. When demands are not sustainable, demanding interest and imposing penalty are also not sustainable. Rule 57(E)(3) was introduced to deny the Modvat Credit if the differential duty payable by the manufacturer was due to fraud, suppression, mis-statement etc only with effect from 01.03.97. The said rule does not have retrospective operation. Hence, for goods cleared prior to March, 1997, the said rule 57(E)(3) cannot be applied. See CCE V/s T I Metal Sections (2003 - TMI - 52365 - CESTAT, South Zonal Bench, Chennai). - Decided partly in favor of assessee. - E/993/2007-Mum - A/947/2011/EB/C-II - Dated:- 16-11-2011 - Shri Ashok Jindal, Shri Sahab Singh, Member JJ. Represented by: Rep by: Shri Bharat Raichandani, Advocate for Appellant Shri Y K Agarwal, Addl.Commissioner (AR) for Respondent Per: Ashok Jindal: This appeal is filed by the appellant against the confirmation of duty demand of Rs.1,12,78,251/- on account of under-valuation of goods along with interest and equivalent amount of penalty under Rule 173Q of Central Excise Rules, 1944. By the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... step 5 mentioned above are put in drums and are transferred to the appellants' Bhosari unit on payment of duty for sulphonation. At Bhosari unit, the beads are subjected the process of sulphonation (Step 6 mentioned above). The sulphonated beads after being washed (Step 7) are cleared to the appellants' unit at Paudh on payment of duty. The Bhosari unit has taken Modvat credit of the duty paid by the Paudh unit on beads. On receipt of the sulphonated beads from Bhosari unit, the Paudh unit undertook the following process: Step 8 Conversions. The sulphonated acid free beads are checked for quality before sending to converter. The beads are fluidized in column to get required size and then are converted to required anionic form using salt. The product is tested in the lab and then based on the application the ion exchange resins are allocated. The allocated ion exchange resins are packed and then cleared on payment of duty. These facts are not in dispute. A Show cause notice dated 08.07.99 was issued to the appellants proposing to demand differential duty of Rs.1,12,78,251/- on 3 types of beads cleared by the appellants from their Paudh unit to their Bhosari unit. The per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggrieved, once again, the appellants approached this Tribunal. Vide order dated 05.04.2005, this Tribunal once again remanded the matter to the Commissioner to look into all issues raised in the show cause notice including marketability. This order passed by this Tribunal has also become final. 3.6 On remand, yet again, vide impugned order, the Commissioner has confirmed the entire demand of duty and imposed equivalent penalty on the appellants. Hence, this appeal. 4. The learned Advocate for the appellant submits as under:- (a) The beads in question are not marketable and hence not liable to duty (i) The process of manufacture of ion exchange involves polymerization of Styrene, Divinyl and Benzene and other raw materials. The beads emerging at the intermediate stage were subjected to washing and drying and packed in drums and cleared to other unit of the appellants. At this stage, the beads contained coarse and other materials and were also not of required size. The beads are in crude form. There is no market for the intermediate stage beads. These facts are not in dispute. (ii) Every manufacturer of ion exchange resins has own formula and process of making gel beads. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c remands by this Tribunal. (v) The Department has not produced on record any evidence, much less substantial evidence to prove marketability of gel beads. It is settled law that onus to prove marketability is on department. The Revenue has failed miserably to discharge the onus in the present case. When there is a specific direction by this Tribunal while remanding the matter back, not once but on two occasions, the department ought to have followed such specific directions. Sadly, it appears that having chosen to ignore such directions; the department seems to be picking holes in the defense put up by the appellants. (vi) In the instant case, it is not in dispute that the gel beads are not sold by the appellants. The gel beads are captively consumed by the appellants only. It is also not in dispute that there is no market for such gel beads. It is also not in dispute that all ion exchange resins manufacturers make their own gel beads in their factory for their exclusive use using their own exclusive process. It is also not in dispute that gel beads are not commercially sold or bought in normal course of trade. The department has not conducted any market inquiry. The departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to discharge the burden of proving the marketability. Second member, however, disagreed and held that the revenue has discharged its burden. The third member agreed with the second member and held that the goods were liable to central excise duty. The Apex court, after examining the law on the subject, held that the burden to show that the product is marketable or marketed or capable of being bought and sold in the market so as to attract the duty is entirely on the Revenue. Marketability is a question of fact. The revenue in that case did not produce any material before the Tribunal to show that the product is either being marketable or capable of being marketed. The test of marketability is that the product is made liable to duty must be marketable in the condition in which it emerges. The question, it was held, is not whether hypothetical possibility of purchase and sale of the commodity but whether there is sufficient poof that the product is commercially known. The mere fact that the product in question was entrusted outside for some job work is not an indication to show that the product is commercially distinct or marketable product. In that case, the Supreme Court even rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actory at Patalganga in drums. Accordingly, it was held that as the product was packed and had a shelf life, it was capable of being marketed. Before the Tribunal, initially there was difference of opinion between two members and by 2:1 majority appeal of the assessee was rejected. In that case as well, the Supreme Court held that the Revenue has failed to adduce any evidence to show that the product in question was marketable or capable of being marketed. The Department simply relied upon the Chemical Weekly Drug Directory wherein BMS was shown as an intermediate product. It was, once again, re-iterated that burden is on the Revenue to prove that the goods are marketable or are exigible. Simply because a product is mentioned in the Chemical Weekly Drug Directory as intermediate product does not mean that the product is marketable. According to the Supreme Court, one Member was, therefore, right in observing that BMS being used in the manufacture of final product, i.e. Salbutamal Sulphate was neither marketed nor marketable and was only an intermediate product. (xii) Similar view has been taken by the Apex court in the case of Hindustan Zinc Limited 2005 (181) ELT 170 (SC). A 3 J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex court held that the test, therefore, is "marketability" and this test has to be applied in a pragmatic and practical sense. It was further held that marketability is a question of fact to be decided in facts of each case. There can be no generalization. The Apex court held that, in facts of that case, in State of Kerala, these poles were manufactured by independent contractors who sell them to Kerala State Electricity Board. This, according to the Apex Court, shows that the poles have a market. The Apex court further observed that it was the assessee's own case before the excise authorities as well as CEGAT that the said poles were manufactured by independent contractors from whom the assessee had purchased. On this count alone, the Apex Court was of the view that the case on marketability goes. The ratio laid down by the Apex Court would apply here as well i.e. marketability is essentially a question of fact to be proved by the department. However, in the facts of the present case, no evidence has been produced on record by the Department that similar products were being manufactured and sold by the other manufacturers. It is also not the case of the department that the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined ratio with the help of electro mechanical device by effecting uniform dispersion of liquid, semi-solid ingredients of mixture by means of mechanical agitation and the product so obtained was called "intermixture of vitamins". The dispute was about marketability of such intermixture of vitamins used in the manufacture of infant foods. Firstly, the Tribunal held that the activity undertaken by the assessee amounted to "manufacture". We are not concerned with that aspect in the present case. Thereafter, the question of marketability was considered. The Tribunal itself noted that undoubtedly, the burden to prove the issue of marketability lies upon the Department. The Tribunal, examined the evidence produced on record by the Department in that case. In that case, there were statements recorded under section 14 of the Central Excise Act of the officers of the assessee company wherein it was admitted by them that vitamin mix is known in the market as vitamin premix or intermixture of vitamins. These statements were not even disputed by the assessee. Further, the Tribunal took note of invoices issued by M/s. Redimix Pharma Private Limited, Bangalore on M/s Smithkline Consumer Hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m falls in a Tariff Entry it must be deemed that there is manufacture. The law still remains that the burden to prove that there is manufacture and that what is manufactured is on the revenue. In this case no new evidence is placed to show that there is manufacture. "Spent earth" was "earth" on which duty has been paid. It remains earth even after the processing. Thus if duty was to be levied on it again, it would amount to levying double duty on the same product". (ii) Similar view has been taken by the Apex Court in United Phosphorous 2000 (117) ELT 529 (SC). In that case, the Hon'ble Supreme Court, at Para 4 thereof, held that mere mention of the product in the dictionary and the drawback rate schedule cannot be a ground to allege that the intermediate product coming into existence in the course of manufacture a final product is marketable and is liable to duty. In other words, even if the product is specifically mentioned in the drawback schedule unless it is shown by the department that the product is capable of being marketed, no duty can be levied on such product. (c) Benefit under Rule 57F(4) read with Notification No. 214/86-C.E is available for the period in question. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner the materials have been received by the appellants. The Tribunal also observed that once the assessee has chosen to pay duty, he has to discharge all the consequences of payment of duty. On time bar aspect as well, the Tribunal held against the assessee negating the contention that credit will be available to TELCO and hence, there is no revenue loss. On appeal, the Hon'ble Supreme Court vide order reported at 2005 (183) ELT 239 (SC) allowed the appeal of the assessee holding as under: "6. We are of the view that the submission of the appellant is correct. The Tribunal appears to have been confused between the manufacture of the final product, namely, excavators and the manufacture of the intermediate product, namely, the floor plate assemblies. The scheme of Modvat permits the person who clears the ultimate final product to take the benefit of the Modvat scheme at the time of clearance of such final product. The manufacturer of the final product, in this case TELCO, would therefore, be entitled not only to adjust the credit on the inputs supplied by it to the intermediate purchaser such as the appellant but also to the credit for the duty paid by the intermediate purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the matter was referred to Larger Bench of Tribunal. Vide order reported at 2000 (119) ELT 718, the Larger Bench held that Jay Yuhshin had suppressed the fact of non-inclusion and, therefore, short levy was due to such suppression. The Bench rejected the contention that there was no intention to evade payment of duty as the entire duty paid by Jay Yuhshin was available as credit to MUL. Following the Larger Bench's decision, the Division Bench of the Tribunal upheld the Commissioner's order and rejected the appeal of the assessee vide order reported at 2001 (137) ELT 1098. On appeal, the Supreme Court allowed appeal of Jay Yushin, vide Para 8 of the order in the case of International Auto (supra). (v) This fact has been noted by this Tribunal in the case of Lawkim Limited 2007 (218) ELT 142. In that case, inputs for stator laminations and stator stacks manufactured by the assessee and cleared to M/s. Tecumseh Products India Pvt. Ltd. were duty paid and supplied by M/s. Tecumseh Products India Pvt. Ltd. The assessee had taken Cenvat credit of the duty paid on such inputs and passed on the benefit to M/s. Tecumseh Products India Pvt. Ltd. Noting Rule 4(5)(a) and Rule 4(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there is more payment of duty on such input and allowed adjustment in credit account maintained under Rule 57G(3). It further provided that if such adjustment is not possible in the credit account then refund of the same can be granted to the manufacturer availing credit. Therefore, even if the demand of duty is confirmed against Paudh unit is recovered in cash, simultaneously it has to be given as credit to Bhosari unit and if adjustment is not possible, refund has to be granted to Bhosari unit. There is no useful purpose in effecting cash recovery from Paudh unit and granting it as a cash refund to Bhosari unit. (iv) Show cause notice dated 08.07.99. relates to dispatches of May, 1995 to March, 1997 of Paudh unit. The show cause notice seeks enhancement of the approved assessable value. Instead of waiting for nearly two years, if department had revised the assessable value on the day of clearance of goods by Paudh unit to Bhosari unit itself, Paudh unit would have paid the more excise duty of around Rs.1.1 crore and Bhosari unit would have adjusted its credit account instead of paying duty of about Rs.2 crores crores in PLA, Bhosari unit would have paid about Rs.90 lacs in PL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and in marry cases must, take cautious cognisance of events and developments (subsequent to the institution of the proceeding provided the rules of fair-' ness to both sides are scrupulously. On both occasions the High Court, in revision, correctly took this view. The later recovery of another accommodation by the landlord, during the pendency of the case, has as the High Court twice pointed out, a material bearing on the right to evict in view of the inhibition written into Section 10(3) (iii) itself. We are not disposed to disturb this approach in law or finding of fact. ...(emphasis supplied) (vii) Similarly, in Commissioner of Agricultural Income-Tax v. Amalgamated Tea. Estates Co. Ltd. 1970 ITR (Vol.77) pg. 455 (Ker), it was held that that the principle that subsequent events can be taken into consideration by a court in granting relief to parties can be applied by Tribunals also. (viii) The above judgments apply with greater force in the present case. Payment of duty in case of Rs.2 crores by Bhosari unit is not a subsequent event occurring after issue of show cause notice. That is an event which has happened between date of clearance of goods by Paudh unit and issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly allowed."s (c) Hindustan Zinc Ltd. Vs. CCE-2008 (232) ELT 687 "4. We, after hearing both sides, find that the appeal can be disposed of on the point of revenue neutrality. Admittedly, the duty paid by the appellant was being availed as Modvat credit, which the other unit was in a position to utilize. The Tribunal in the case of PTC Industries Ltd. v. C.C.E., Jaipur-I - 2003 (159) E.L.T. 1046 (Tri-Del.) has held that whatever duty is paid by one unit on sale of goods to the assessee's another unit is being available as credit to the other unit, there was no warrant for demanding duty. In the present case, we find that the zinc concentrate was only being transferred to the appellant's own unit and was not being sold at all. Whatever duty was being paid by the appellant was available as credit to them and nothing would go into the Revenue's pocket. The entire excise is revenue neutral as neither the assessee stands to loose anything by paying higher duty nor the Revenue stands to gain anything by the appellant's adoption of lower assessable value. As such, we are of the view that demand is unwarranted and unsustainable on this count alone. We, accordingly, set aside the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross profit of margin based on balance sheets of 1994-1995 and 1995-1996. The appellants vide letter dated July, 1997 submitted that the allegation of undervaluation is not correct. In any event, for the period from April, 1996 to December, 1996, the appellants paid differential duty of Rs.10,69,303/- on 13.05.1997 (vide PLA entry-No. 29) by adopting the revised assessable value as mentioned in the letter dated 23.08.96 of the Superintendent of Central Excise. The applicants also requested the department to issue 57E certificate for the said amount as well. (iv) The Superintendent of Central Excise vide his letter dated 10.06.98 requested the appellants to information regarding raw materials etc used in the manufacture of the semi-finished goods i.e. gel beads. The applicants vide their letter dated 28.01.99 enclosed balance sheets for the year 1994-95 to 1997-98 along with the cost data. The appellants also submitted certificate dated 19.06.98 issued by independent Chartered Accountant certifying the assessable value of the 3 varieties of beads as Rs.70.22, Rs.63.78 and Rs.103.21 respectively for 8% gel beads, 6.4% gel beads and 15% MP beads. (v) Thereafter, no further invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Tribunal in the case of Jay Yushin (supra) by the Ld. Departmental representative is not correct. The Larger Bench held against the assessee. Following the said decision, the Division Bench rejected the appeal holding that the assessee had suppressed the facts from the department. On appeal, the Supreme Court allowed the appeal of the assessee. Similarly, reliance placed on decision of Supreme Court in the case of Kitply industries Limited 2011 (267) ELT 289 (SC) is of no avail. The said order is only a remand order. The Supreme Court set aside the order of the Tribunal and directed the Tribunal to re-consider the issue afresh. Vide Para 7 thereof, the Supreme Court held that they have not expressed any views or opinion on the claims and disputes between the parties. (viii) The reliance placed on decision of the Larger Bench of CEGAT by the Commissioner in the case of Nizam Sugar Factory Vs CCE 1999 (114) ELT 429 is not correct. The facts of the present case are totally distinguishable from the facts in that case. In any event, the said decision of the Larger Bench has been overruled by the Supreme Court vide order reported at 2006 (197) ELT 465 (SC). (ix) The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without intimating the department and hence, extended period of limitation is invokable. This finding of fact was upheld by the Supreme Court. In the instant case, admittedly, price list was filed by the appellants. There is a series of communication with the department thereafter. The appellants have paid differential duty at the instance of the Superintendent of Central Excise. The Superintendent has issued Rule 57E certificate as well. The entire exercise is revenue neutral. The Commissioner, on valuation, himself has applied circular issued by the CBEC on 30.10.1996. The said clarification has been subsequently modified in 2003 by the CBEC. The fact that circulars have been issued by the CBEC from time to time also show that the issue was not free from doubt. Therefore, in the facts of the present case, it is not possible to hold that there was suppression of facts with intent to evade payment of duty. Hence, the entire demand is barred by limitation. (xi) Apart from the above, a 3 judge Bench of the Supreme Court, in a short but self-contained order, in the case of Baidyanath Ayurved Bhavan Limited 2004 (165) ELT 494 (SC) held as under: ".....Was the show cause notice da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s payable due to suppression of fact, fraud, mis-statement etc. on such inputs Modvat credit to the purchaser is not allowed. The said rule does not have retrospective operation. Hence, for goods cleared prior to March, 1997, the said rule 57(E)(3) cannot be applied. This view has been taken by this Tribunal in the case of CCE V/s T I Metal Sections 2004 (164) ELT 48. (xvi) Reliance placed on decision of the Supreme Court in the ease of National Engineering Industries 2005 (188) ELT 471 by the department is wholly misplaced. In that case, period for which refund pertained was from 1976-1977 to 1978-1979. There was a dispute about benefit of exemption notification. The said dispute was decided by the Tribunal in favour of the assessee. Section 11B was amended in 1991. Thereafter, the refund claim was filed and was taken up for adjudication in 1993. By that time, the principle of unjust enrichment was incorporated under section 11B. This decision cannot be applied in the facts of the present case. The cause of action in that case arose i.e. application for refund when the law was amended. Therefore, the amended law would apply. However, the cause of action in the present case i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Nestle India reported in 2011 (270) ELT 575 wherein this Tribunal held that it was not necessary that identical product should be marketable. Even if similar product is proved to be marketable, the test of marketability is satisfied. He also placed on record that copy of the Bills of Entry of the copolymer beads imported by M/s. Doshion Veolia Water Solutions Pvt. Ltd. Therefore, these copolymer beads are a marketable commodity hence the arguments advanced by the learned Counsel for the appellant that these copolymer beads are not marketable is not sustainable. He further submitted that the issue whether the copolymer beads are marketable or not traveled up to the Hon'ble Supreme Court in the case of Ion Exchange - 1999 (112) ELT 746 (S.C.) wherein the apex court remanded the matter back to this Tribunal to decide the issue of marketability of the impugned product but the status in the remand proceedings is not available. On limitation, he submitted that the disputed period in this case is May 1995 to March, 1997 as the appellant is required to file price declaration under Rule 173C in form Annexure II based on cost of production of each year. The appellant did not file this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the appellant is that the beads emerging at the intermediate stage were subjected to washing and drying and packed in drums and cleared to other unit of the appellants. At this stage, the beads contained coarse and other materials and were also not of required size. The beads are in crude form. There is no market for the intermediate stage beads. Every manufacturer of ion exchange resins has own formula and process of making gel beads. These copolymer beads are not commercially sold or bought in normal course of trade and it is an admitted fact that the appellant has not sold these beads but are captively consumed by them only. He also relied on in the case of ion exchange (supra) whether the issue of marketability of these copolymer beads intermediate product arise and in that case also the hon'ble apex court remanded the matter to this Tribunal to decide the issue of marketability on the basis of evidence. 8. We have gone through the submissions made by both the sides but the learned A.R has been able to prove on record that these copolymer beads have been imported by M/s. Doshion Veolia Water Solutions Pvt. Ltd. in 2010 and placed on records the Bills of Entry. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x court on 02.08.1999 wherein the issue of marketability was still pending and in that case the hon'ble apex court has held that as there was Difference of Opinion amongst the Tribunal Members on the question of marketability of the intermediate product but all the three members unanimously held that only normal time limit will be applied to the demands. Admittedly, the learned A.R. is able to produce an evidence of marketability of the impugned product by way of Bills of Entry only in 2010. Therefore, the issue of marketability of impugned product was not decided at that time and in that event, relying on the decision of the Ion Exchange and Nestle India (supra) we find that the extended period of limitation is not invokable in the facts and circumstances of this case. The case laws relied by the learned A.R. are not relevant to facts of this case. Therefore, after considering all the decisions cited by the learned A.R and the learned Advocate, we hold that as the demands are confirmed against the appellant for the period May, 1995 to March, 1997 by invoking the extended period on limitation are not sustainable. When demands are not sustainable, demanding interest and imposing pen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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