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TMI Blog2020 (10) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... l paper book, being the extract of cenvat credit, that VAL alone had sufficient credit balance in their cenvat account exceeding 1 crore, whereas the duty payable was in few lakhs only and thus the cumulative credit balance in cenvat register of VAL was increasing from month to month. Further, it is evident from record that the parties suo motu changed the basis of valuation to the tender price of NALCO for calcined alumina (under International Competitive Bidding). Revenue Neutrality - HELD THAT:- The situation is wholly revenue neutral as BALCO is clearing their finished product on payment of duty, and whatever duty is charged by VAL is available to BALCO as cenvat credit. Suppression of facts or not - penalty - extended period of limitation - HELD THAT:- Upon enquiry and investigation by Revenue, disputing the method of valuation of calcined alumina by VAL, on being so advised agreed to the valuation as suggested by Revenue and suo motu deposited the differential duty alongwith interest much prior to issue of show cause notice. VAL also bonafide issued supplementary invoice to BALCO in December, 2009. Thus, we find that the issue is wholly interpretational in nature, and there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inery at Korba, the appellant was not able to use the bauxite fully from its captive mines. Accordingly, the appellant decided to get 'Calcined Alumina' manufactured on job work basis from VAL by using the bauxite extracted from its captive mines. This was found to be better and more cost effective method, than importing the deficit requirement of Calcined Alumina. Accordingly, M/s Balco entered into agreement for conversion with VAL, providing for supply of bauxite by M/s Balco and conversion to alumina at the plant of VAL at Lanjigarh, on job work basis. It was further provided that M/s Balco shall make arrangement for supply of bauxite to VAL from its mines located at different places. VAL shall convert bauxite to alumina using consumables, power and steam required for conversion to alumina as per the specifications agreed. M/s Balco shall lift alumina from VAL plant at Lanjigarh, as per the monthly mutually agreed schedule, alumina to be delivered by VAL ex-plant. The agreement also provided for payment of conversion charges for which VAL shall raise invoice on M/s Balco. Further, provided - inadmissible /vatable taxes like VAT, entry tax etc. paid by VAL on consumables and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BALCO's input (Bauxite) under 'conversion agreement' - referred as 'Conversion Sale'. -do- 10. In case of goods removed by 'job worker' (VAL), the provision for valuation w.e.f. 01.04.2007 is as follows:- Notification No. 9/2007-CE (NT) dt. 01.03.2007 Rule 10A. Where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer) then, (i) in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer; (ii) in a case where the goods are not sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of job-worker and where the principal manufacturer and buyer of the goods are not related and the price is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust, 2010, alongwith proposal to impose penalty under Section 11AC read with Rule 25 of Central Excise Rules, 2002. Penalty was also proposed on four officers of M/s VAL under Rule 26. 14. Pursuant to raising of supplementary invoice on M/s Balco, M/s VAL had intimated the Department regarding payment of differential duty through supplementary invoices, on clearances by way of job work. 15. On 20.12.2010, M/s VAL filed an application before the Settlement Commission at Kolkata for settlement of the aforementioned show cause notice inter-alia stating as follows:- "4.1 In the application for settlement, the applicants (VAL) submitted mainly the following- (a) Alumina manufactured by the applicants was disposed off/ removed by - (i) clearance to Balco on conversion of bauxite received from them, on job work basis, (ii) direct sale to Balco as per sale orders, (iii) stock transfer to the applicant (VAL)'s own unit at Jahrsuguda. (b) in respect of clearances to BALCO, duty was discharged from Aug. 07 - Nov. 08 on formula linked to price of Aluminium at London Metal Exchange (LME) and from Dec. 08 on "Alumina Spot Tender price of NALCO"- a Govt. Owned company. (c) Stock t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be under Rule 8 of the Valuation Rules. (o) Their bona fide belief was, however, incorrect in view of the decision in the case of Ispat Industries vs. CCE, Raigad -2007 (209) ELT 185 and subsequent decisions. The applicants adopted this method, as the extra duty paid by debiting the cost of production was available as credit to its other unit. (p) The entire exercise was revenue neutral, inasmuch as the duty paid was available as credit to BALCO. In support, they relied on the following cases laws- (i) Amco Batteries Ltd. vs. CCE-2003 (153) ELT 7 (SC) (ii) International auto Ltd. vs. CCE-2005 (183) ELT 239 (SC) (iii) CCE vs. Narayan Polyplast Ltd. 2005 (179) ELT 20 (SC) (iv) CCE vs. Narmada Chermatur Pharma-2005 (179) ELT 276 (SC) (v) CCE vs. Textile Corporation -2008 (231) ELT 195 (SC) (vi) CCE vs. Hamshedpur Beverages-2007 (214) ELT 321 (SC) (vii) CCE vs. Coca Cola India (Pvt.) Ltd., -2007 (213 ELT 490 (SC). (q) The applicants could have worked as a job worker under Notification No. 214/86-CE dated 25.03.1986 while BALCO could have cleared the bauxite in terms of Rule 4(5)(a) of the Cenvat Credit Rules, 2004 and the applicants could have manufactured a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AL and BALCO are different legal persons. It was further held that plea of bonafide is not acceptable. 18. With reference to issue of supplementary invoices by VAL to enable Balco take credit of the differential duty so paid during and after investigation, the Commission observed that since the issue is not before it, it need not go into it. 19. The Commission further noted that VAL has made true and full disclosure of their duty liability and co-operated fully and the entire amount of duty liability has been deposited with interest thereon, and accordingly the Settlement Commission settles the dispute on the following basis:- "Central Excise Duty: The Central Excise Duty in this case is settled at ₹ 66,64,436/-. This amount has already been deposited by the applicant, the same is ordered to be appropriated by the Commissioner within 30 days from the date of receipt of the order. Interest: The applicant has paid interest amount of ₹ 15,37,19,183/-. There being no dispute from the Department regarding quantum of interest payable over and above the aforesaid amount, the same is ordered to be appropriated by the Commissioner within 30 days from the date of receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t credit in the hand of Balco. M/s VAL has taken decision to remit the duty based on cost of production + 10% as in the case of clearance to their own unit at Jharsuguda by way of stock transfer. Further, mentioning the facts at the end of VAL, referring to the show cause notice issued to M/s VAL alongwith the final order of Settlement Commission dated 23.09.2011. It was also observed in the show cause notice that VAL has deposited penalty as imposed by the Settlement Commission consequent to the final order. Subsequently, the Range officer of Balco have received the relied upon documents from the jurisdictional officer of VAL upon requisition. 21. Further, alleging collusion between Balco and VAL in the payment of differential duty of ₹ 24,65,79,458/- including cess, appears to be done with clear motive to avail credit of differential duty paid by VAL and disallowed the same alleging that the parties have undervalued the clearances under job work arrangement leading to evasion of duty, and the differential duty was paid vide supplementary invoice only in course of enquiry and investigation by Revenue. Thus, as per provision of Rule 9(b) of Cenvat Credit Rules which stipulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of calcined alumina spot tender price, as per NALCO (Government company) which was based on International Competitive Bidding method. Thus, in view of the reasonable method of valuation adopted for clearance under the job work arrangement, no malafide can be alleged. It was further pointed out that there is no loss of Revenue, the situation is wholly revenue neutral. Reliance was placed on the Ruling of the Apex Court in the case of Amco Batteries Ltd. vs. CCE-2003 (153) ELT 7 (SC). Further, taking of credit by Balco is within the scope of Rule 9(1)(b) of Cenvat Credit Rules, which restricts taking of credit only in case of wilful mis-statement or suppression of facts or fraud. Under the admitted fact that there is no loss of revenue as Balco has cleared the final goods on payment of duty. Thus, the allegation of evasion of duty is bald and vague. 23. The other appellants also contested the show cause notice by filing their replies objecting to the show cause notice. 24. However, learned Commissioner was pleased to confirm the proposed disallowance of cenvat credit to Balco alongwith equal amount of penalty and also imposed penalty under Rule 26 on the other appellants v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable as the issue at hand is not of a 'sale transaction'. Relevant part of Rule 9(1)(b) of the Credit Rules reads as follows: (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be on the basis of any of the following documents, namely:- (a) … (b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules,2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty leviable under section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non- levy or short-levy by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any provision of Excise Act, or of the Customs Act,1962(52 of 1962) or the rules mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Impugned Order stand vitiated. Hence, CENVAT Credit under Rule 9(1)(b) of the Credit Rules could not have been denied to the Appellant at all. 26.4 In any case, allegation of suppression against VAL does not stand adjudicated by the proceedings of the Settlement Commission. It is settled principle of law that settlement of a matter does not tantamount to adjudication of the matter and thereby the Settlement Commission's Order dated 23.09.2011 cannot be regarded as an Order wherein charges levied by Show Cause notice dated 11.10.2010 against VAL stand confirmed. Reliance is placed on Ashwani Tobacco Cp Pvt Ltd vs UOI 2010 (251) ELT 162 (Del). It is settled law that settlement is different from adjudication. Given this, since the Show cause notice dated 11.10.2010 (on VAL) never came to be adjudicated, the same cannot be relied upon to establish mens rea against VAL and then deny CENVAT Credit to the Appellant. Further, mere filing of application to Settlement Commission and payment of duty would not amount to admission of guilt. The same stands settled by Hon'ble Delhi High Court in case of Agson Global Pvt Ltd vs Income Tax Settlement Commission &Ors. 2016(380) I.T.R 342 (Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the argument of the Revenue that mens rea under section 11AC stands established against VAL is absolutely incorrect in law. Given all of the above, the Impugned Order is incorrect in law. The issue at hand is revenue neutral. Hence, the allegation of suppression is incorrect. 26.8 The Appellant submits that restriction under Rule 9(1)(b) is not applicable in the absence of intention to evade duty. In the present case, there could be no intention to evade payment of duty for the simple reason that the amount paid by VAL as duty was available as cenvat credit at the Appellant's end. It is submitted that suppression cannot be alleged in Revenue Neutral situations. The issue at hand is of a revenue neutral situation. Thus, the basis of fraud etc. cannot arise in the situation at hand. Reliance is placed on the decision of Hon'ble Supreme Court in the case of Nirlon vs Commissioner of Central Excise 2015 (320) E.L.T 22 (S.C) wherein it was held as follows: "We have ourselves indicated that the two types of goods were different in nature. The question is about the intention, namely, whether it was done with bona fide belief or there was some mala fide intentions in doing so. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... job worker was entitled to avail benefit of Notification No.214/1986. It is settled law, benefit of exemption Notification 214/1986-CE, if not claimed earlier, can be claimed at a later stage, as held in Neo Sacks Ltd. Vs CCE 2004 (177) ELT 206, Share Medical Care vs UOI 2007 (209) ELT 321(SC). That VAL is still entitled to claim the benefit of this Notification. Pursuant thereto, the entire issue of payment of additional duty by VAL and availment of CENVAT Credit by the Appellant, will simply not arise at all. The Impugned Order has failed to recognize and deal with this argument of the Appellant. Show Cause notice dated 06.05.2013issued to the Appellant is completely time barred 26.12 It is submitted that Show Cause notice dated 06.05.2013 issued to the Appellant is completely time barred. That CENVAT Credit (on supplementary invoice) was availed by the Appellant in December 2009. That Show cause notice came to be issued to VAL on 11.10.2010 demanding excise duty from VAL. In fact, this Show Cause notice dated 11.10.2010 stood forwarded by the Ld. Commissioner of Central Excise, Bhubaneshwar-I to the Central Excise Division/Commissionerate of the Appellant [i.e. Assistant Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for invoking the extended period of limitation, and the penalty provisions against the Appellant. Reliance is placed on the decision in the matters of Tamil Nadu Housing Board vs CCE 1994 (74) ELT 9 (SC), CCE vs Chempar Drugs & Liniments 1989 (40) ELT 276 (SC), CCE vs HMM limited 1995 (76) ELT 497(SC). He prayed that the Impugned Order is liable to be set aside and appeal of the Appellants may kindly be allowed. 27. Learned Senior Counsel further urges that the impugned order has been passed in a mechanical way, without application of mind. There is no independent finding recorded. The impugned order is fully based on presumptions and assumptions as per the show cause notice in the case of VAL, and the order of the Settlement Commission. Further, M/s Balco was not made a co-noticee in the show cause notice issued to VAL. 28. Learned Authorised Representative appearing for the Revenue relies on the impugned order. He particularly refers to Question No. 5, from the statement of Shri Dinesh Mantri, Chief Financial Officer of Balco, which is as follows:- "Q.-5. Have you received any supplementary invoices for the alumina supplied by M/s Vedanta Aluminium Ltd., Lanjigarh? Ans. Yes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of duty as discussed and alleged in Show Cause Notice No. V(28)15/Adjn/11A/70/2010 dated 11.10.2010 issued by Commissioner, Central Excise, Bhubaneswar-I and held in the Final Order No. F-282/CE/11-SC(KB) dated 23.09.2011 passed by Settlement Commission in respect of appeal filed by M/s Vedanta Aluminium Ltd., Lanjigarh. Ans. While availing and utilising the credit against supplementary invoices in December, 2009, we were not aware about any show cause notice and order as mentioned above. Q. No. 15. Please go through the show cause notice No. V(28)15/Adjn/11A/70/2010 dated 11.10.2010 issued by Commissioner, Central Excise, Bhubaneswar-I wherein it is mention that officers of Central Excise department audited the books of account of M/s Vedanta aluminium Ltd., Lanjigarh during the period 12.10.2009 to 15.10.2009 and sought for documents regarding conversion sale of BALCO. Instead of providing the copy of conversion agreement and CAS-4 statement to the auditors, M/s Vedanta Aluminium Limited, Lanjigarh has debited an amount of ₹ 24,65,79,458/- towards short payment of duty covering the period August, 2007 to November, 2009 and intimated the department on 21.12.2009 int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SIIL is the promoter of VAL and its Annual Report 2008-2009 contains information/ performance of VAL & BALCO The relationship as reflected in the Notes of Balance Sheet and the Holding of Shares placed in the web page of various Companies, it is seen that Balco is a fellow subsidiary of VAL. The ultimate holding company i.e. Vedanta Resources (P) ltd., has control over its subsidiary companies through the ownership of shares. The holding of shares, directly or indirectly, give the parent company the necessary votes to determine the composition of board of subsidiaries and so exercise control. Both VAL & Balco are owned and controlled by the same Group of Company. During recording of statement the GM(F) has confirmed to the above facts." 29. Learned AR also points out that three Directors are common as regard the appellant company and VAL. Thus, the appellant and VAL are under the same management. In this view of the matter, VAL was obligated to follow the valuation procedure under Section 4(1)(b) read with the Valuation Rules. 30. Learned AR also relies on the Division Bench order of Hon'ble Kerala High Court in CCE vs. VAL- 2016 4 TMI 932 wherein, in the case of appeal by Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to issue of show cause notice. VAL also bonafide issued supplementary invoice to BALCO in December, 2009. Thus, we find that the issue is wholly interpretational in nature, and there is no element of fraud, suppression or intention to evade payment of duty. Reliance placed by Revenue on the show cause notice of VAL is erroneous and misconceived. We further find that the allegation by Revenue are bald and unsubstantiated. Only for the reason that VAL instead of contesting the show cause notice went for settlement before the Settlement Commission, no adverse inference can be drawn against the appellant BALCO. We further take notice of order of Settlement Commission, which cannot be used for making allegations against the appellant - Balco. We further find that the benefit of Notification No. 214/86-CE was available to BALCO i.e. they could have received calcined alumina from VAL without payment of duty, as prescribed. We further hold that the extended period of limitation is not warranted in the facts and circumstances, there being no suppression of facts or attempt to evade duty, etc. 31. Accordingly, we allow all the appeals and set aside the impugned order. The appellants shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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