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TMI Blog2024 (12) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... THAT:- The appellant is clearing the goods for sale to their sister unit and clearing a some part of the goods for captive consumption to their own unit for stock transfer. Therefore, the decision in the case of IOCL [ 2023 (5) TMI 436 - CESTAT KOLKATA] is squarely applicable to the facts and circumstances of the case and the duty cannot be demanded in terms of Rule 8 of the Valuation Rules, accordingly, the demand of Rs.1,94,02,717/- is not sustainable. Moreover, it is a situation of revenue neutrality. Undervaluation relating to sale to sister unit, M/s Aarem Chemicals Private Limited - HELD THAT:- The fact is further noted that the value of Formaldehyde and Melamine has been taken incorrectly by the Department as the cost prices which kept fluctuated and the Department took the balance sheet figures, which included miscellaneous overhead, but the Adjudicating Authority has taken the balance sheet figures, which does not represent appropriate value, the said figures are much lesser than the actual figures adopted by the appellant for some of the financial years in question and the Revenue has taken the higher figures shown in the balance sheet for whole of the period and there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been used in or in relation to the manufacture of the final product' - the Cenvat Credit of Rs.2,50,647/- cannot be denied to the appellant. Accordingly, the demand confirmed against the appellant is set aside. Demands of Rs.14,86,640/- and Rs.34,88,013/- sought to be confirmed by way of impugned order by disallowing the cenvat credit, which was taken on the basis of endorsed invoices/Xerox copies/endorsed bills of entry - HELD THAT:- It is found that the appellant s sister unit, M/s Aarem Chemicals Private Limited has imported the goods and endorsed the bills of entry and issued invoices in favour of the appellant and the appellant has taken the cenvat credit thereon. The similar issue came up before the Hon ble Allahabad High Court in the case of Uni Cast Private Limited [ 2015 (10) TMI 375 - ALLAHABAD HIGH COURT] , wherein the Hon ble High Court has observed ' The fact that the invoice did not indicate the name of the appellant was only a procedural lapse, which was rectified by the endorsement made by the manufacturer in favour of the applicant. Such endorsement made cannot make the document invalid and, consequently, we are of the opinion that endorsement made by the m ..... 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Authorized Representatives for the Respondent ORDER The appellants are in appeals against the impugned order wherein the demand of Rs.3,14,66,034/- of Central Excise duty along with interest was confirmed and equivalent amount of penalty on the first appellant and penalty of Rs.1.00 Lakh on the co-appellant, were also imposed. 2.1 The facts of the case are that the appellant is engaged in the business of manufacture of formaldehyde, various grades of formaldehyde resin powders such as, SBPF-401G, SBPF-401M, SBPF-405T, SBPF-20, SBPF-20M etc., various grades of liquid urea formaldehyde resin such as strong bond M1, M2, M3 and M4 and various grades of free flowing dried urea formaldehyde resin powder such as, Strong Bond P-101G, Strong Bond P-102P, Strong Bond P-105E and Strong Bond P-202G falling under Chapter 39 of the First Schedule to the Central Excise Tariff Act, 1985, at its factory at Rampur in South 24 Parganas District. 2.2 The appellant s sister concern, Aarem Chemicals Private Limited set up its manufacturing facilities in June, 2007 at Rampur adjoining the factory of the appellant, manufactured various grades of free flowing dried urea formaldehyde resin powder by using t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the said imported inputs into licenced storage tanks of the appellant through pipelines and subject to strict compliance of all relevant rules/regulations including observance of safety measures as mentioned in detail in the permission letters. For storage of the said imported inputs in the appellant s Custom Bonded Storage Tanks, bills of entry for warehousing were filled by the Aarem Chemicals at the time of unloading from the vessel. In view of the said inputs being hazardous chemicals and a high flammable liquid, it used to be cleared from the said customs bonded storage tank to the appellant s factory strictly as per the requirements at the factory. For such clearance, in accordance with the provisions of the Customs Act, Bills of entry for ex-bond clearance for home consumption for the required quantity were filled by the Aarem Chemicals and in the bills of entry in accordance with the Circular No.179/13/96-CX dated February 29, 1996 issued by the Government of India, Ministry of Finance, the Aarem Chemicals made endorsement in favour of the appellant. 2.9 The said bills of entry for ex-bond clearance for home consumption were duly assessed by the proper Customs Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d P-101G, 38545 kgs of SBPF-401G and 21985 kgs of SBPF-402P as compared to the stock entered in the Daily Stock Account. The officers also found that Aarem Chemical had stored 1,55,050 kgs of Strong Bond P-101 G in old and used bags, some of which bore the marks the appellant. The appellant states that the said 1,55,050 kgs were packed in old and used bags, some of which bore the marks of the appellant had been borrowed from the appellant by Aarem Chemicals because its vendor failed to supply its requisition for the bags in time. The product being such that it cannot be kept in unpacked condition, Aarem Chemicals had no other alternative but to pack the product in old and used bags including bags borrowed from the appellant and carrying its markings. The said quantity of 1,55,050 kgs of Strong Bond 101G was seized and is subject matter of a separate show cause notice dated November 4, 2008, issued to Aarem Chemicals, which has since been adjudicated. 2.13 On 05.11.2007 the afore-mentioned Aarem Chemicals Pvt. Ltd. obtained central excise registration and both the appellant and the aforesaid sister concern had units at Rampur, Budge Budge Trunk Road and at Hide Road. In 2011 the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 12.03.2010, wherein all the proposed demands of central excise duty, interest and penalties were confirmed. Aggrieved by the said order, the Aarem Chemcials Pvt. Ltd filed an appeal before this Tribunal bearing Excise Appeal No. 445 of 2010, which has since been decided by a final order dated 11.12.2023 by setting aside the purported demands, except demands of central excise duty to the tune of Rs.3,02,176/- and Rs.1,50,540/-. 2.17 As against the present appellant, demands were raised vide a show cause notice dated 04.05.2009. Under cover of its letter dated 21.01.2010 the appellant, inter alia, denied and disputed all the allegations. However, the Commissioner of Central Excise confirmed the demands of central excise duty aggregating to Rs. 3,14,66,034/- under Section 11A together with interest under Section 11AB of the Central Excise Act, 1944 and equivalent penalty under Section 11AC thereof read with Rule 25 of the Central Excise Rules, 2002 and Rule 15(2) of the Cenvat Credit Rules, 2004 while passing the impugned Order-in-Original dated 31.03.2010. 2.18 Against the said order, the appellants are before us. 3. The ld.Counsel for the appellants submits that urea formalde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Melamine was concerned, he submits that though the Department had purported to take Balance Sheet figures which, in its opinion, represented the appropriate values, it was demonstrable that such figures were actually lesser than the rate/kg adopted by the appellant for some of the financial years in question i.e. Department always considered the higher figures without justification. 3.5 He further submits that the decrease in conversion cost for strong bond M3 was attributable to market forces resulting from BIFR proceedings. As such, the appellant had never acted with malafide intention. Similarly, no fault could have been found with the valuation method adopted by the appellant while paying Central Excise duty on sale to the sister concern. Demand on account of such sales for Rs.52,28,055/- out of Rs.2,46,30,772/- is unsustainable. 3.6 It is his further contention that the longer period of limitation could not have been invoked in a situation of revenue neutrality nor demand sustained as per the principles laid down in the following decisions (i) Nirlon Ltd. vs. CCE, 2015 (320) ELT 22 (SC) (ii) Mahindra Mahindra Ltd. v. CCE, 2019 (368) ELT 105 (Tri-Mumbai) - appeal dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased to hold in its final order dated 29.01.2020 that Cenvat availed on the basis of endorsed bills of entry cannot be denied. It has also been held in Uni Cast Pvt. Ltd. v. CCE, 2016 (331) ELT 369 (All) that credit cannot be denied when availed on the strength of an endorsed invoice, when genuineness of the transaction stands established and the inputs have suffered duty. 3.11 Insofar as the allegation relating to incorrect availment of credit on xerox copy of bill of entry no.334545 is concerned, the appellant states that it had correctly availed credit on the strength of the original bill of entry but subsequently, the same had been misplaced. Apart from that, in the SCN there was no allegation that the goods covered by the bill of entry no. 334545 were not received by the appellant in its factory and/or were not used the same by it in or in relation to manufacture of the final product. In such circumstances, there is no warrant to dispute the availment of credit, as held in Commissioner of C.Ex., Vapi v. Mehta HWA FUH Plastics Pvt. Ltd., 2012 (285) ELT 253 (Tri-Ahmd). 3.12 In respect of duty demand of Rs.34,88,103/- and as regards the denial of cenvat availed on the basis of 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been seized by the Department which were found in the factory of Aarem Chemicals Pvt. Ltd. but in bags bearing a mark of the present appellant. The disputed 30 MT lay in those bags. 3.16 As regards shortages of SBPF - 401G and SBP - 402P, he submits that the Department failed to appreciate that a total of 55 MTs had been issued for captive production of different grades of PF resin, while 228.535 MT of 401G and PF - 402P had been found recorded in the appellant s books and the stock physically found was 168 MT. The resultant difference was 60.535 MT, whereas 55 MT had been issued for captive consumption. The final difference is of a negligible quantity of 5.53 MT which, inter alia, is explainable with reference to difference in weighment, accounting anomaly, production loss etc. 3.17 It is trite law that the onus to establish clandestine removal with cogent evidences lies on the Department, as held by the Hon ble Calcutta High Court in CCE v. Sai Sulphonate Pvt. Ltd., 2022 (380) ELT 441 (Cal). In the present case, there is no evidence on record to sustain the charge of clandestine removal. 3.18 In relation to invocation of longer period of limitation, it is submitted that the SCN a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various counts. 6. A demand of Rs.89,855/-, has been confirmed on account of removal of waste an scrap generated from the capital goods and no reversal of cenvat credit was done. The said demand has been conceded by the appellants, therefore, the same is payable by the appellants along with interest. 7. A major demand of Rs.2,46,30,772/- has been confirmed alleging under valuation for the period 2004-2005 and 2008-2009, out of which Rs.1,94,02,717/- relates to stock transfer to their own unit and remaining amount of Rs.52,28,055/- pertains to sale to sister unit, M/s Aarem Chemicals Private Limited. 8. The Revenue is disputing the value adopted by the appellant as of the goods are cleared to sister unit, it is to be valued in terms of 8 of the Valuation Rules i.e. as per CAS-4 method (cost + 10% of profit). In this case, the costing Certificate has been issued by the Chartered Accountant, the CAS-4 value was not available and the appellant paid the duty thereon. The appellant has disputed that the duty has been demanded in terms of Rule 8 of the Valuation Rules, which is not applicable to the facts and circumstances as the goods were sending to their own unit in relation to stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire goods are captively consumed and there is no other method of sales involved. In this case we find that the Appellant has partly consumed the goods captively and partly cleared the same to their sister unit. The above Circular does not visualize this situation. For captive consumption Rule 8 would be applicable and for sale to their sister unit Rule 9 of the Valuation Rule 2000 would be applicable. Since none of the Valuation Rules from Rule 4 to 10A covers the above said situation, the Appellant stated that they have adopted Rule 11 Best Judgement Method Rule 11 is adopted when the situation is not covered by any of the other methods of valuation prescribed from Rule 4 to 10A. We find that the method of valuation adopted by the Appellant under Rule 11 of the Valuation Rules is the appropriate method in this case because the situation of part sale to related person and part captive consumption is not covered by any of the other Rules in the Valuation Rules 2000. Even if CAS-4 is arrived at and the goods are valued as per Rule 8 of the Valuation Rules, there is no loss of revenue because of the duty paid will be available as credit and the entire exercise would be revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have taken cenvat cedit on quantity shown in the invoices. The appellant has submitted that the methanol is highly inflammable items and short receipt of the quantities was wholly attributable to evaporation loss/handling loss and short receipt of the quantities was attributable to only 0.5%, so it cannot be said that the appellant has short receipt of methanol. The said issue has been examined by this Tribunal in the case of Hindustan Petroleum Corporation Limited (supra), wherein this Tribunal has held as under : 8 . There is no doubt that the Lube Base Oil are being transported through pipeline. If any goods are transported through pipeline or by other means of transports, if they are not solid, there is every chance of loss of quantity of the goods by way of evaporation. Therefore, as held by the Hon ble High Court of Bombay in the appellant s own case (supra) transit loss can be allowed. I also find that in this case the transit loss is varying between 0.01 and 0.72% which is admissible in the facts and circumstances of the case. Therefore, I hold that there may be variation in the transportation of the quantity of the goods accordingly, transit loss is allowable. Hence, I hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled on such inputs which went for testing and analysis to manufacture the final product. The CENVAT credit on capital goods used in R D section is also entitled as the same has been used in or in relation to the manufacture of the final product. Therefore, we hold that the Cenvat Credit of Rs.2,50,647/- cannot be denied to the appellant. Accordingly, the demand confirmed against the appellant is set aside. 13. With regard to confirmation of demands of Rs.14,86,640/- and Rs.34,88,013/- sought to be confirmed by way of impugned order by disallowing the cenvat credit, which was taken on the basis of endorsed invoices/Xerox copies/endorsed bills of entry. We find that the appellant s sister unit, M/s Aarem Chemicals Private Limited has imported the goods and endorsed the bills of entry and issued invoices in favour of the appellant and the appellant has taken the cenvat credit thereon. We find that the similar issue came up before the Hon ble Allahabad High Court in the case of Uni Cast Private Limited (supra), wherein the Hon ble High Court has observed as under : 21 . From the aforesaid, it is clear that credit would be given on an invoice bill, which indicates payment of duty on su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation does not arise in this case for the simple reasons that the importer M/s. Essar Gujarat Limited had loaned the goods to the assessee (which transaction is not doubted in the show cause notice). Further the goods were transferred directly by the importer to the Unit of the assessee from the Port. Therefore, the goods never went to the manufacturing Unit of M/s. Essar Gujarat Limited. For such a situation the proviso to sub-rule (2) of Rule 57G states that the relevant document indicating payment of duty would be Bill of Entry. 11. Now in the present case, as far as Bills of Entry dated 30th May, 1994 and 31st May, 1994 are concerned, Bills of Entry were produced by the assessee which indicate that M/s. Essar Gujarat Limited had paid duty at the time of import and, therefore, the assessee was Excise Appeal Nos.83 84 of 2009 7 entitled to take MODVAT Credit for the duty paid on the imported goods. However, when we come to the 3rd Bill of Entry dated 6th June, 1994, only the above Certificate at Page No. 42 of the Paper Book was relied upon and the triplicate copy of the Bill of Entry was not produced. In the circumstances, in our view, the respondent had wrongly availed of MODVA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken note of to disallow the credit. In this case Commissioner has not simply allowed the credit but has relied upon the decision of the Tribunal in the case of Steelco Gujarat Ltd. - 2009 (242) E.L.T. 229 (Tri.-Ahmd.) and distinguished the decision of the Larger Bench in the case of Avis Electronics Pvt. Ltd. - 2000 (117) E.L.T. 571 (Tri.-LB). Further, he has also relied upon the decision of Hon ble High Court of Bombay in the case of Marmagoa Steel Ltd. - 2005 (192) E.L.T. 82 (Bom.), Simplex Mills Co. Ltd. - 2007 (81) RLT 331 (Bom.) wherein it was held that credit is admissible on the basis of endorsed copies of invoice if inputs have been received and used. He has also relied upon the decision of Hon ble High Court of Madhya Pradesh in the case of Kataria Wires Ltd. - 2009 (241) E.L.T. 31 (M.P.) wherein it was held that the credit is admissible on the basis of certified copy of invoices. In view of the detailed order passed by the ld. Commissioner which has taken note of several decisions while coming to the conclusion and which has also come to the conclusion that goods have been received and used in the manufacture and duty has been paid, I find that there is nothing legally o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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