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TMI Blog2023 (7) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... ise duty was not paid by the Hosur unit. Rule 12BB allows this facility of clearances without payment of duty on complying the condition that the intermediate goods have to be cleared or used further in the manufacture of finished products by the recipient unit and such finished products should be cleared within a period of six months. In the present case, it is an admitted fact that the condition has not been satisfied. The appellant is therefore liable to pay duty on the engines. It is also an admitted fact that there is delay in making the payment. Rule 12BB not only defers the payment of duty but also shifts the liability on the recipient unit. The Rule itself states that if the condition is not satisfied the duty along with interest has to be paid by the recipient unit - there are no grounds to interfere with the demand of interest. Penalty under section 11AC of the Central Excise Act, 1944 for short-payment of duty on engines - HELD THAT:- Availment of credit is a right accruing on fulfilment of conditions. Rule 12BB offers a facility of deferred payment of duty. It is postponement of the liability to pay duty. Rule 12BB cannot stand on its own as it does not complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and unjustified - credit allowed. Appeal partly allowed. - Excise Appeal No. 40180 of 2016 - Final Order No. 40464/2023 - Dated:- 22-6-2023 - Hon ble Ms. Sulekha Beevi C.S., Member (Judicial) And Hon ble Shri M. Ajit Kumar, Member (Technical) Shri Raghavan Ramabhadran, Advocate for the Appellant Smt. K. Komathi, ADC (AR) for the Respondent ORDER Per Ms. Sulekha Beevi C.S., Brief facts are that appellants are engaged in manufacturer of Earth Moving Machinery viz. Dumpers, Loaders, Excavators and are registered with the Central Excise Department. They are availing the facility of CENVAT credit of duty paid on inputs, capital goods and service tax paid on input services. During the course of verification of records of appellant by the Audit Wing of the Large Taxpayer Unit (LTU), Chennai, it was noticed that appellants have been receiving engines without payment of duty from their sister unit located in Hosur under Rule 12BB of the Central Excise Rules, 2002 (CER, 2002). The said engines are used in the manufacture of Earth Moving Machinery by the appellant and the finished goods are cleared on payment of appropriate duty. On detailed verification i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the stock-transferred engines i.e., the intermediate goods. The issue under dispute revolves around the duty demand on engines stock-transferred between the Appellant s sister unit under Rule 12BB of the CER, 2002. As the finished products were not cleared within a period of 180 days as required under Rule 12BB, the Appellant paid duty and interest on the stock-transferred engines on being pointed out by audit. On the duty so paid, the appellant availed credit since the engines were inputs used to manufacture the EMM. The dispute now relates to penalty proceedings initiated over the duty paid under first proviso to Rule 12BB of the CER and also on the validity of the credit availed by the Appellant. 6. During the period 2012-13 there was an industry-wide slowdown in the production and sales of Off-Highway Truck and hence there were some delays in dispatching the EMMs out of the Tiruvallur unit within six months as mandated in Rule 12BB of the CER. Further, some of the stock-transferred engines could not be used to manufacture EMM and were lying in the Tiruvallur unit. Considering the above, the Appellant wrote to the Department under Letter dated 03.06.2014 stating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not cleared on payment of appropriate duties of excise leviable thereon or are not exported out of India within the said period of six months, duties of excise payable on such intermediate goods shall be paid by the recipient premises with interest in the manner and rate specified under section 11AA of the Act: 8. The Appellant, without prejudice, paid excise duty amounting to Rs. 3,97,08,057/- and interest of Rs. 1,11,95,739/- for the period from May 2010 to November 2013 and paid duty of Rs, 3,31,81,659/- and interest of Rs. 10,35,828/- for the period from December 2013 to May 2014 for the engines cleared from Hosur unit to Tiruvallur unit. 9. Being eligible, the Appellant then availed credit of Rs. 7,28,89,714/- of the duty paid on the engines as per Rule 12A of the CENVAT Credit Rules, 2004. Thereupon the Show Cause Notice dated 14.10.2014 has been issued which has culminated in confirming the demands in toto. 10. The two issues under dispute as confirmed by the impugned OIO and the reasons for confirmation are tabulated below. Demand Summary of Findings in impugned Order-in-Original Demand of duty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diate goods) even prior to issuance of the SCN albeit under protest. It is settled law that once the tax was paid, an assessee would be entitled to avail credit of the same, thereby leading to a revenue neutral situation. In such circumstances there can be no question of demand of tax and consequently interest and penalty cannot be sustained as well. In this regard, reliance is placed on the following decisions: a) International Auto Ltd. Vs. CCE (2005) 183 ELT 239 (SC) b) British Airways vs. CCE (2014) 36 STR 598 (Tri.-Del.) c) Jet Airways (India) Ltd. vs. Commissioner (2017) 7 GSTL J35 (SC) d) CCE, Vadodara-II vs. Indeos ABS Limited 2011 (254) ELT 628 (Guj.) Order of the Hon ble Supreme Court dismissing Revenue Appeal e) CCE vs. Ultratech Cement 2016 (343) ELT 164 (Tri.-Chennai.) f) Jay Yushin Ltd. vs. Commissioner of Central Excise, New Delhi 2000 (119) E.L.T. 718 (Tribunal-LB) g) Standard Grease Specialties Pvt. Ltd. vs. CCE ST 2014 (303) E.L.T. 434 (Tri.-Ahmd.) and the Order of Hon ble Bombay High Court dismissing Department Appeal h) Mahindra Mahindra Ltd. vs. CCE 2015 (324) E.L.T. 189 (Tri.-Mumbai.). i) Scope E Knowledge Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self-contained code, no action outside it would be attracted: a) Collector of Central Excise vs. Raghuvar (India) Ltd. (2000) 5 SCC 299. b) Hans Steel Rolling Mill vs. CCE (2011) 3 SCC 748. c) Oswal Paper Allied Industries vs. CCE 2006 (206) ELT 991 (Tri.-Del.) d) Systematic Steel Industries Ltd. vs. CCE 2010 (262) E.L.T. 317 (Tri. Ahmd). e) Dyna Lamps Glass Works Ltd. vs. Commissioner of Customs, Chennai 2003 (157) E.L.T. 73 (Tri.-Chennai.). 16. The learned counsel submitted that it would be pertinent to note that the Appellant paid the duty and interest as contemplated in 1st proviso to Rule 12BB of CER and as such there is no contravention of Rule 12BB of CER. Assuming without admitting that Section 11AC of the Act is applicable in Rule 12BB cases, it is not the allegation of the Department that the Appellant availed the LTU facility under Rule 12BB of CER fully knowing, or believing that the conditions contained therein would not be capable of being fulfilled. It is a fact that the Appellant was not in a position to clear certain manufactured EMMs/manufacture the EMMs using the engines (intermediate goods under Rule 12BB) on account of a market s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A large tax payer may remove inputs, except motor spirit, commonly known as petrol, high speed diesel and light diesel oil or capital goods, as such, on which CENVAT credit has been taken, without payment of an amount specified in sub-rule (5) of rule 3 of these rules, under the cover of a transfer challan or invoice, from any of his registered premises (hereinafter referred to as the sender premises) to his other registered premises, other than a premises of a first or second stage dealer (hereinafter referred to as the recipient premises), for further use in the manufacture or production of final products in recipient premises subject to condition that (a) the final products are manufactured or produced using the said inputs and cleared on payment of appropriate duties of excise leviable thereon within a period of six months, from the date of receipt of the inputs in the recipient premises; or (b) the final products are manufactured or produced using the said inputs and exported out of India, under bond or letter of undertaking within a period of six months, from the date of receipt of the input goods in the recipient premises, and that any other conditions prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d without payment of an amount specified in sub-rule (5) of rule 3 of these rules; or (b) on the ground that the said inputs or capital goods have been used in the manufacture of any intermediate goods removed without payment of duty under sub-rule (1) of rule 12BB of Central Excise Rules, 2002. Explanation. - For the purpose of this sub-rule ―intermediate goods‖ shall have the same meaning assigned to it in sub-rule (1) of rule 12BB of the Central Excise Rules, 2002. **** ***** ***** (5) A large tax payer shall submit a monthly return, as prescribed under these rules, for each of the registered premises. (6) Any notice issued but not adjudged by any of the Central Excise Officer administering the Act or rules made thereunder immediately before the date of grant of acceptance by the [Principal Chief Commissioner of Central Excise or Chief Commissioner of Central Excise, as the case may be], Large Tax Payer Unit, shall be deemed to have been issued by Central Excise officers of the said Unit. (7) Provisions of these rules, insofar as they are not inconsistent with the provisions of this rule shall mutatis mutandis apply in case of a large ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel submitted that the adjudicating authority ought to have considered firstly, whether it was possible for the Hosur Unit (sister premises) operating under Rule 12BB to comply with Rule 9 of CCR, 2004. Secondly, whether such a procedural infraction of non-compliance with Rule 9 can lead to denial of substantive benefit under the CENVAT credit scheme when the duty paid is not disputed. 23. Rule 12BB facility enables the sender premises to remove manufactured intermediate goods to the recipient premises without payment of duty. In these circumstances, an assessee would not be in a position to issue a document under Rule 9 of CCR evidencing payment of duty. Therefore, it is submitted that the Appellant in the present case was not able to issue a document in terms of under Rule 9 of CCR so as to comply with the procedural requirements for availing credit. 24. The learned counsel submitted that an assessee cannot be compelled to do something which is impossible. The legal maxim lex non cogit and impossiblia was referred. The learned counsel relied on the following decisions:- a) Commissioner of Central Excise vs. Chemplast Sanmar Ltd. 2009 (239) E.L.T. 398 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of suppression does not arise. The Show Cause Notice itself relies on the details maintained by the appellant and then there cannot be any suppression or manipulation to evade payment of tax, and the extended period of limitation cannot be invoked. Reliance is placed on the decision of the Hon ble Tribunal, New Delhi in CCE, Raipur v. Orion Ferro Alloys (P) Ltd. (2010) 259 ELT 84 (Tri. -Del.). 29. The following decisions was also relied. a) Pushpam Pharmaceuticals Co. vs. CCE (1995) 78 ELT 401 (SC) b) Continental Foundation Jt. Venture v. CCE (2007) 216 ELT 177 (SC) c) CCE vs. Damnet Chemicals Pvt. Ltd. (2007) 216 ELT 3 (SC) d) Padmini Products Ltd. vs. CCE (1989) 43 ELT 195 (SC) e) Uniworth Textiles Ltd. vs. CCE (2013) 288 ELT 161 (SC) 30. The arguments put forward by the learned AR adverting to Section 11AC(b) of the Central Excise Act, 1944 was countered by the learned counsel by stating that in the said clause (b) reference is made to clause (5) of Section 11A of the Act. Clause (5) of section 11A of the Act requires a finding to be made during the course of audit that the duty was not paid with intent to evade for reasons stated in clauses (a),( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the provision of law. 33. With regard to the demand raised denying the credit, the learned AR submitted that the appellant has paid the duty much later only after being pointed out by the Audit Wing. After paying the duty on engines, appellant made a debit entry in their CENVAT account so as to avail credit of the duty paid on the engines. It is pertinent to note that the engines were cleared to the appellant unit without payment of duty. Rule 12A(1) provides that the first recipient unit may take CENVAT credit of the duty paid by the sender premises (Hosur Unit) on the basis of document showing payment of duty. Rule 12BB uses the word intermediate goods . However, Rule 12A of CENVAT Credit Rules, 2004 uses the word inputs . Thus, credit can be availed only on inputs and not on intermediate goods . In the present case, the credit has been rightly denied invoking Rule 12A of CCR, 2004 and therefore the demand raised is proper. 34. In regard to penalty, the learned AR argued that the violation and non-payment of duty would not have come to light but for the verification of accounts by the Audit Wing. The provision contained in sec. 11AC of CEA, 1944 for imposing pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the recipient unit and such finished products should be cleared within a period of six months. In the present case, it is an admitted fact that the condition has not been satisfied. Rule 12BB casts the liability on the recipient unit. The appellant is therefore liable to pay duty on the engines. It is also an admitted fact that there is delay in making the payment. Rule 12BB not only defers the payment of duty but also shifts the liability on the recipient unit. The Rule itself states that if the condition is not satisfied the duty along with interest has to be paid by the recipient unit. We therefore do not find any grounds to interfere with the demand of interest and we uphold the same. 41. The Show Cause Notice has proposed to impose penalty under section 11AC of the Central Excise Act, 1944 for short-payment of duty on engines. It is argued that Rule 12BB is a self-contained code and though the said Rule has adopted, the provisions of Section 11A (for duty demand) and 11AA for (interest demand) is silent as to 11AC and that therefore penalty under section 11AC is not invokable. The learned counsel has relied on the decision of the Hon'ble Supreme Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es within a period of six months as required under Rule 12BB; that it would not have come to light but for verification of audit party. Sub-section (2) of Section 11A provides that when the duty is paid on being pointed out by the Central Excise Officer and is intimated to the department, no Show Cause Notice shall be issued and that no penalty shall be leviable. Moreover, the duty demand, in the present case, is on the engines. The duty liability for manufacture and clearance of engines is on the Hosur unit and not on the appellant. Only because appellant opted for the facility of Rule 12BB, the duty burden is shifted to the appellant unit. In such circumstances, when the duty liability is paid with interest, the penalty levied under Sec. 11AC is unwarranted. In the peculiar facts of this case, we are of the considered opinion that the penalty imposed requires to be set aside which we hereby do. 44. The second issue is with regard to the denial of CENVAT credit. The appellant has availed credit of the duty paid above. The department has denied the credit alleging that if assessee adopts Rule 12BB the engines are intermediate goods and not inputs . It is also alleged that as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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