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TMI Blog2022 (8) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... ng s final products manufactured from EN-45 alloy steel had been accepted by the railways after due quality inspection. This, by itself, leaves little room to allege that the input materials were something other than alloy steel. The ingots/billets procured by Mak Engineering and directly sent to its job workers, who had undertaken re-rolling on job work basis, were of grade EN-45. Such grade had also been specifically mentioned in the job work challans issued by the job workers. The job workers challans, manufacturers challans and other relevant challans should have been given due recognition by the Commissioner. On a query from this Bench, Sri Khaitan satisfied us that all such challans had formed part of the Department s seized records - the Commissioner wrongly observed that the invoices and relevant documents relating to job work showed that the disputed inputs were non-alloy. The said observations are contrary to the records of the case. The case of alleged price differential between alloy and non-alloy steel products sought to be made against the appellant on the basis of two invoices, one dated 08.08.1996 and the other dated 22.09.1996, lacks merit - it is evident from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hur, only presence of chromium at 0.3% will change the character of non- alloy steel to alloy steel products. This observation is completely arbitrary and perverse inasmuch as it is based on a total ignorance of the provisions of Chapter Note 1(f) of Chapter 72 of the Excise Tariff. Thus, the denial of Modvat Credit in relation to Rail Anchor was not in accordance with law and we set aside the impugned findings in this regard. CENVAT Credit on Fish Plate Bar and Loose Jaw Bar - denial on the ground that duty had been paid by the manufacturer, M/s Bengal Hammer Industries (Unit II) whereas the commercial invoice for the same had been raised by Unit III or Unit IV of the said manufacturer - HELD THAT:- Having gone through the excise documents issued by the said M/s Bengal Hammer Industries Pvt. Ltd., it is clear that the bills contained reference to the said manufacturer s Works, Rolling Mills, Registered Office as well as City Office. The commercial invoices of the said manufacturer containing reference of its Units III and Unit IV could not have, by itself, negatively impacted the availment of credit at the end of the supply recipient. Mak Engineering had rightly submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice has merely set out the language of Section 11A of the Excise Act without specifying as to which particular fact was suppressed by Mak Engineering - the present case does not involve any suppression of facts on part of the assessee. The Commissioner too, had mechanically upheld the invocation of extended period of limitation - there is no hesitation in holding that Mak Engineering is entitled to succeed on the point of limitation. Appeal allowed. - Excise Appeal Nos.283 & 267/2012 - FINAL ORDER NO.75439-75440/2022 - Dated:- 5-8-2022 - SHRI P. K. CHOUDHARY, JUDICIAL MEMBER AND SHRI RAJU, TECHNICAL MEMBER Shri Debjyoti Basu Chandan Kumar Lal, both Advocates for the Appellant Shri A.Roy, Authorized Representative for the Respondent ORDER The present appeals by M/s Mak Engineering Industries Limited (hereinafter Mak Engineering ) and M/s Alloy Steel Rolling Mills (hereinafter ASRM ) are directed against a common de-novo adjudication order dated 21.02.2012 passed by the Commissioner of Central Excise, Kolkata-II Commissionerate. Vide the said impugned order, the adjudicating authority disallowed Modvat Credit of Rs.15,73,482/- to Mak Engineering und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Rail Anchor 1999-2000 Allegations stated in page nos. 65 to 69 of Paper Book, Volume I in Ex. Appeal No. 283 of 2012. 3. Suspension Shackle 1999-2000 Allegations stated in page nos. 68 and 69 of Paper Book, Volume I in Ex. Appeal No. 283 of 2012. 4. Fish Plate and Loose Jaw 1997-98 and 1999-2000 Allegations stated in page nos. 63 and 64 of Paper Book, Volume I in Ex. Appeal No. 283 of 2012. ii) It was also alleged by the show cause notice that the 2nd noticee viz. ASRM had mis-declared the fact that it had not done re-rolling of non-alloy steel and violated the provisions of Section 3A of the Excise Act read with Rule 96ZP(1) of the Excise Rules and the Notification No. 32/97-CE(NT) dated 01.08.1997 read with Notification No.214/86 dated 25.03.1986, as amended. The said show cause notice sought to determine the annual capacity of ASRM in terms of the aforesaid Notifications and fixed the total outstanding duty liability at Rs.48,20,700/- for the period 30.03.1998 to 31.03.2000 along with applicable interest and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RC and MLJ, credit of Rs.2,95,547/- in respect of inputs of Rail Anchor and credit of Rs.2,89,742/- in respect of Fish Plate and Loose Jaw was the same as in the case of Manash Forgings decided vide the adjudication order dated 25.07.2006 of the Joint Commissioner. Mak Engineering, therefore, prayed that the proceedings be dropped and also made further submissions on merit as well as on limitation. Material documents and brief note of arguments were also filed before the Commissioner at the de-novo adjudication. viii) ASRM also made exhaustive submissions in its defence at the de-novo adjudication proceedings. The said appellant, inter alia, highlighted that the provisions of Notification No.32/97-CE(NT) dated 01.08.1997 and that of Rule 96ZP of the Excise Rules were not applicable to its case as it was engaged in rolling of alloy steel and that it had simply job worked the raw materials supplied at the instance of the principal manufacturer i.e. Mak Engineering. The revenue had unnecessarily made it a party to the show cause proceedings without appreciating the duties of a job worker and the due diligence expected from a job worker under the Central Excise law. ix) The de-no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Commissioner of Cus. (General) Mumbai, reported in 2013 (294) ELT 415 (T). B. It was submitted that, in any case, there was no dispute that the appellant had manufactured its final products according to the Railways specifications and supplied the same to the Railways who had accepted such final products after due inspection. Even if it be accepted that the ingots/billets or the rounds/rods/bars used were not of the type specified by the buyer, there was absolutely no ground available to disallow Modvat Credit. It is a settled principle of law that if at all a manufacturer uses raw materials of a type different from that specified by its buyer then it is a matter exclusively between the manufacturer and its buyer and no Modvat Credit can be disallowed on such allegation. In this behalf, Sri Khaitan placed reliance on the following decisions contained in the Paper Book, Volume III and in the Compilation of case laws :- i) Brijmohan Sheokishan v. Commissioner of Central Excise, reported in 2003 (160) ELT 188; ii) Delta Plastics v. Commissioner of Central Excise, reported in 2003 (56) RLT 85; iii) Indian Polypipes v. Commissioner of Central Excise, reported in 2003 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Department from M/s Poddar Udyog Limited. The other two job workers, viz ASRM and Bengal Hammer had categorically stated that they had used only alloy steel. Grade EN-45 was also the specification mentioned by the job workers in their challans. I(d). The statement of M/s Falta Steel (P) Ltd., one of the ingot manufacturers, was wholly irrelevant as the 13 invoices of the said supplier listed in Annexure-I/96-97 to the show cause notice had not been shown to it nor had it been required to state as to whether the goods covered by the said 13 invoices were alloy steel or non-alloy steel. Similarly, the Commissioner had failed to appreciate that the statement on behalf of M/s Jai Salasar Balaji Industries (P) Ltd. and Deb Steel Casting Pvt. Ltd. had been taken almost three years after supply of the goods in question and after extension of Section 3A of the Excise Act to non-alloy products. Further, when asked to specify the percentage composition of alloy and non-alloy products, the deponent had given a generic answer and when asked questions with reference to the pre-compounded levy scheme invoices raised upon the appellant, the deponent had simply gone by the invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mium had been appropriately classified as alloy steel as per Chapter Note 1(f), Chapter 72 of the Excise Tariff. II(b). Sri Khaitan also drew our attention to the contemporaneous records of the tests conducted by M/s Bhaskar Industrial Development Limited which formed part of the annexures to show cause notice. He submitted that the Commissioner had been totally unjustified in disregarding the test reports of M/s Bhaskar Industrial Development Limited on specious grounds. Moreover, solely because the Railways inspection agency, M/s Rites had not checked the Railway Anchor for chromium content, it could not have been presumed that the use of chromium for manufacturing Rail Anchor was prohibited. II(c). It was also submitted that the Commissioner had grossly erred by failing to read the statement given by the appellant s employee, Sri Dilip Kumar Sen and that of ASRM in their proper perspective. ASRM had categorically stated that the Rail Anchor bars rolled by it were of alloy steel. Moreover, the suppliers of the ingots for manufacture of Rail Anchor had stated that the said ingots were alloy steel, notwithstanding that in their statements/communications the chemical composit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawing of commercial invoices bearing reference to their units III or IV was purely an internal matter of M/s Bengal Hammer Industries and, in any case, there was nothing illegal about it. III(c). Further, the Commissioner had grossly erred by attempting to make out a new case as if Mak Engineering had purchased non-alloy steel ingots from Units III and IV of M/s Bengal Hammer Industries and gotten the same re-rolled at Unit II by way of job work. The actual allegations in the show cause notice had been duly met by the appellant and it was not open to the Commissioner to make out a new case in favour of the revenue at the stage of de-novo adjudication proceedings. IV(a). Regarding the findings relating to Suspension Shackle, the Commissioner had failed to hold that the appellant had used MS rounds of 25 mm diameter for the manufacture of Suspension Shackle. Denial of credit in respect of input rounds on the allegation that Mak Engineering had used rounds of diameter other than 25 mm solely on the strength of certain statements given by the suppliers was illegal and unjustified. There was no dispute that MS rounds purchased by the appellant had actually been used for manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with the Excise Rules and there was no scope to sustain the purported finding that the appellant-ASRM had job worked on non-alloy steel. Learned counsel for ASRM also drew our attention to the documents at pages 14 19 of its written notes of argument filed before this Tribunal on 25.03.2022 and submitted that the revenue had never disputed the authenticity or genuineness of the said documents and it would be evident therefrom that ASRM had received only alloy steel ingots. It was contended that even after submission of requisite information to the Department vide its letter dated 18.08.1997, the Department had not taken steps for determining ASRM s annual capacity since the authorities were convinced that ASRM was rolling only alloy-steel. Assuming though denying that Compounded Levy Scheme was applicable as against the said appellant, the calculation of demand was erroneous. 5. On the other hand, the Learned DR for the revenue reiterated the findings in the de-novo adjudication order and argued that the demands confirmed by the Commissioner were in accordance with law. It was also submitted that the Commissioner had rightly upheld invocation of the extended period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore us and which we hold to be, then it follows that it was not open to the Commissioner to take a contrary view and confirm the purported demands against Mak Engineering. A comparison of the show cause notice issued to Manash Forgings, as set out in the adjudication order dated 25.07.2006 in the case of Manash Forgings, and the show cause notice issued to Mak Engineering leaves no room for doubt that the evidences in each case and the allegations against each assessee were nearly identical. This fact has also been acknowledged in paragraph No. 14 of the show cause notice dated 04.07.2001 against Mak Engineering. We agree with the submission of Sri Khaitan that revenue authorities cannot be permitted to take contrary stand in the case of two similarly situated assessees. Neither can the revenue follow a pick and choose policy and treat any assessee differently. The decisions at Serial Nos. 3 to 8 of the Compilation of case laws filed on 30.03.2022 are germane on this point and have unanimously laid down the aforesaid principle and we respectfully abide by the same. During the hearing of the appeals before us, the Learned DR for the revenue also could not point out any material di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urers of steel ingots/billets had not been very particular about classification of their products with reference to Chapter Note 1(f), Chapter 72 of the Excise Tariff. The question of attributing any ulterior motive to those in the trade for describing their products as non-alloy steel of grade EN-45, which were actually alloy steel, does not arise in the facts and circumstances of the case. 10. Having closely scrutinized the findings at page Nos. 23 to 26 of the impugned de-novo order, we find that the Commissioner has himself accepted that steel products covered by the British Specification Nos. EN-45 and EN-45A were alloy steel inasmuch as the requisite silicon content was in the range exceeding 0.60%. There can be no dispute that according to Chapter Note 1(f), Chapter 72 of the Excise Tariff, steel containing by weight 0.6% or more of silicon was alloy steel. Even otherwise, there has been no attempt on part of the revenue to controvert Mak Engineering s averments and submissions regarding the chemical composition of EN-45 grade steel or the views given in the publication Tool and Alloy Steel of M/s Dhiraj Steel Company produced in support thereof (such technical lite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worker viz M/s Poddar Udyog Limited, no inquiry had been conducted by the Department. Our attention was invited to the job workers challans at page Nos. 306, 310, 314, 318, 322, 326, 330, 334, 338 and 342 of the Paper Book, Volume-III filed by Mak Engineering and we have noted the contents thereof. Thus, we are constrained to hold that the Commissioner wrongly observed that the invoices and relevant documents relating to job work showed that the disputed inputs were non-alloy. The said observations are contrary to the records of the case. 13. Additionally, we find that the Commissioner erred by placing heavy reliance upon the statement of M/s Falta Steel Pvt. Ltd., one of the ingot manufacturers, inasmuch as the 13 invoices of the said supplier listed in Annexure-I/96-97 to the show cause notice had not been shown to it nor had it been required to state as to whether the goods covered by the said 13 invoices were alloy steel or non-alloy steel. With regard to the statement on behalf of M/s Jai Salasar Balaji Industries Pvt. Ltd. and Deb Steel Casting Pvt. Ltd., we observe that the said statement had been taken in August, 2000 almost three years after supply of goods in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the revenue, though attractive at first glance, do not hold good on deeper scrutiny for the reasons enumerated below :- i. Railways Specification, Sl. No. T-2465 vide clause 2.1 (at pages 446 to 452 of the Paper Book, Volume-III in Mak Engineering s appeal) permitted use of materials that conformed to IRS Grade I-55C-6 water hardening quality to IS:3885 (Part I) 1977 or other recognized spring steel specification producing Anchor to comply with the tests as specified in clause 6. In other words, it was not mandatory only to use materials having specifications under Grade I-55C-6, which vital point has been totally overlooked in the impugned de-novo order; ii. One of the tests specified in clause 6.1.5 of the above Railways Specification was the hardness test in order to comply with which, if grade I-55C-6 was used, then the carbon and manganese had to be increased. Instead, several manufacturers opted for using material having chromium for achieving the requisite hardness. We have been shown the Certificate dated 10.05.2006 of the Senior Metallurgist, United Consultants (India) Pvt. Ltd. issued to Manash Forgings regarding use of chromium in Rail Anchor (page 464 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld the findings that the said test reports were . covert attempt by the said Mak Engineering to prove otherwise that the materials used in the manufacture of the said rail anchor were alloy steel .. . 18. To us, it seems wholly unreasonable on part of the Commissioner to have given a go-bye to the ingot manufacturers invoices for ingots used in the manufacture of Rail Anchor which described the products as alloy ingots. When admittedly the ingot manufacturers had supplied alloy ingots under proper central excise invoices, subsequently confirmed vide the statements given by the said ingot manufacturers, Mak Engineering had availed Modvat on alloy steel, the job worker namely, ASRM had also categorically stated to have rolled alloy steel anchor bars and the use of alloy steel having chromium in the range of 0.32% to 0.38% for manufacturing Rail Anchor was not prohibited as per the Railways Specification, there remains no scope to sustain the findings that Mak Engineering had irregularly availed credit on the inputs. In our opinion, nothing turns on the fact that the railways inspection agency, M/s Rites had never checked the Rail Anchor for chromium content. If the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the presence of chromium at 0.3% or more would make the product alloy steel. 21. When compared and contrasted with the impugned de-novo adjudication order, we find that the adjudication order in the case of Manash Forgings, insofar as the same related to the issue of Rail Anchor, was a well-reasoned order passed after scrutinizing the evidences and authoritative publications submitted by the assessee and after analyzing the quality improvement in Rail Anchors due to addition of chromium. In any event, without providing proper justification the Commissioner could not have differed from the said findings in the case of Manash Forgings and taken an adverse view against Mak Engineering. 22. For the reasons mentioned above, we are of the opinion that the denial of Modvat Credit in relation to Rail Anchor was not in accordance with law and we set aside the impugned findings in this regard. III. Fish Plate and Loose Jaw 23. As regards Fish Plate and Loose Jaw, sum and substance of the revenue s case in the show cause notice was that Mak Engineering had violated the provisions of Notification No. 58/97-CE dated 30.08.1997 while procuring fish plate bars and loose jaw bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I, it becomes evident that the correct price had been shown in the central excise invoice as well as in the corresponding commercial invoice. Consequently, we cannot subscribe to the Commissioner s view that non-fulfillment of conditions of the abovementioned Notification dated 30.08.1997 has been proven. 25. Sri Khaitan strongly argued that in the impugned order the Commissioner had disallowed the disputed credit by making out entirely a new case in favour of the revenue as if Mak Engineering had purchased non-alloy steel ingot either from Unit III or Unit IV of M/s Bengal Hammer Industries Pvt. Ltd. and gotten the same re-rolled at Unit II by way of job work. We agree with the said submissions that the adjudicating authority could not have travelled beyond the show cause notice and canvassed an altogether new case on behalf of the revenue. During the course of hearing before this Bench on 31.03.2022, the learned AR for the revenue was also at pains to support the purported findings in the impugned order that Mak Engineering had gotten non-alloy steel ingots job worked by M/s Bengal Hammer Industries Pvt. Ltd. 26. We have also examined the adjudication order in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the other hand, it was the assessee s plea that it had used MS rounds of 25 mm diameter for manufacturing Suspension Shackle. 29. The impugned order has placed reliance on the communications dated 08.11.2000 of two of the suppliers viz. M/s Beekay Bros. and M/s Micky Metals Limited. We have been taken through the said communications dated 08.11.2000 and we find that the contents thereof are indeed strange and unbelievable. Sri Khaitan had forcefully argued that it was unnatural and rather uncommon business conduct to say that though a supplier manufactured rounds of various sizes, the said supplier mentioned the size in the relevant documents only if the rounds were of 25 mm diameter while no size was mentioned if the diameter was 12 mm or 20 mm or 22 mm or 32 mm etc. It was further argued before us that it was ex-facie apparent that the said two communications, both of the same date, were of unbelievably identical content and in any case were inadmissible and/or unreliable. We find considerable force in the said submissions on behalf of Mak Engineering. This apart, there is no specific averment by the said two suppliers with reference to the goods supplied to Mak Engineeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter appropriate inspection. In such circumstances, we are unable to persuade ourselves to hold that there were valid grounds for invoking the longer period of limitation. From a careful perusal of the show cause notice it is apparent that the said show cause notice has merely set out the language of Section 11A of the Excise Act without specifying as to which particular fact was suppressed by Mak Engineering. In any view of the matter, we hold that the present case does not involve any suppression of facts on part of the assessee. The Commissioner too, had mechanically upheld the invocation of extended period of limitation, as appears from pages 30 to 31 of the impugned de-novo order, without taking note of the following :- a) That there was no legal requirement to file Indian Railways Specifications or chemical test reports with RT-12 returns; b) That no specific instance of suppression of facts was proved against Mak Engineering; c) That credit had been availed on the basis of duty paying documents duly verified and defaced by the Department; d) That on identical facts and evidences show cause proceedings had been dropped against Mak Engineering s sister concern, Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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