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TMI Blog2025 (4) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... d sale of gold, diamond and silver jewellery and registered under the service tax law. Based on the intelligence report regarding evasion of excise duty on the goods manufactured and cleared without payment of duty, violating the conditions of exemption notification, etc., proceedings were initiated and on conclusion of the investigation, show cause notice was issued and thereafter Adjudication authority as per the impugned order, confirmed the demand of central excise duty along with interest and also imposed penalties. Aggrieved by said order, present appeal is filed before the Tribunal. 3. When the appeal came up for hearing, the Learned Counsel for the Appellant submits that the entire demand is barred by limitation since the demand is made for the period from 01.03.2016 to 30.06.2017 and Show Cause Notice (SCN) was issued on 03.01.2021. In this regard, Ld. Counsel for the Appellant submits that there is no allegation of suppression of facts. The Appellant had paid appropriate duty on sale of gold and reported in ER-8 returns. Therefore the allegation that the Appellant failed to classify the goods by paying appropriate duty while filing ER-8 returns is factually incorre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter alia, include other articles for domestic or similar use such as table centre-pieces, vases, mantelpiece ornaments, plates, medals and medallions (other than those for personal adornment) etc. Considering the same, Adjudication authority held that articles of silver, other than articles of silver jewellery classifiable under CETH 7113, including lamps, bowls, spoons, table-ware etc., manufactured by the assessee, are rightly classifiable under Central Excise Tariff Item entry 7114 11 10 of the First Schedule to Central Excise Tariff Act, 1985 and confirmed the demand of central excise duty at the tariff rate of 12.5% ad valorem on these goods. 5. As regards the classification of the goods whether they are falling under CETH 7113 or 7114, Learned counsel also draws our attention to sample copies of the invoices, where it is clearly mentioned the gross weight and the other particulars and if any precious stone is available, it is separately shown in the invoices. Moreover in the impugned order, Adjudication authority also held that "On going through these invoices, I find that the assessee was selling articles of silver jewellery and other articles of silver @Rs. 56/- per gram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red articles of silver jewellery studded with precious stones. Thus the finding regarding classification of the goods as falling under CETH 7114 is unsustainable, since there is no evidence to prove that the goods manufactured by the appellant are articles of silver jewellery, studded with diamond, ruby, emerald or sapphire and in the absence of any finding regarding quantification of duty against goods falling under CETH 7113 and under CETH 7114, separately. 8. Regarding applicable rate of duty, Ld counsel submits that as per the Notification No. 12/2012-CE dated 17.03.2012, articles of silver jewellery is exempted, unconditionally. Thereafter, as per the Notification No. 12/2016-CE dated 01.03.2016, articles of jewellery where subject to 1% of excise duty and articles of silver jewellery other than the studded diamond, ruby, emerald or sapphire was subject to 'nil' rate of duty. Both the goods were subject to fulfilling the condition no. 16 as per the notification produced below:- (1) (2) (3) (4) (5) 199 7113 (I) Articles of jewellery 1% 16 (II) Articles of silver jewellery, other than those studded with diamond, ruby, emerald or sapphire N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above. However, articles of silver jewellery other than the studded diamond, ruby, emerald or sapphire were brought under (III) having 'nil' rate of duty subject to condition No. 16. The condition No. 16 remain the same from 01.03.2016 to 02.02.2017 and during the relevant period, the goods manufactured by the appellant were subject to 'nil' rate of duty since they have complied with condition No. 16 regarding non-availment of Cenvat credit on inputs or capital goods used in the manufacturing of these goods. However, as per the Notification No. 6/2017-CE dated 02.02.2017, condition No. 52A was introduced against the Serial No. 199 of the Notification 12/2012-CE where the condition of not availing the cenvat credit of inputs or capital goods used in the manufacture of these goods is added with inputs or capital good or service tax or input services. Condition no 52A is reproduced below:- 'If the said excisable goods are manufactured from inputs or capital goods or by utilising input services on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minerals Water Pvt. Ltd., Vs. Union of India, 2004 (174) E.L.T. 422 (All.) 4. Franco Italian Co. Pvt Ltd., Vs. Commissioner, 2000 (120) E.L.T 792 (Tribunal-LB) 5. Tiara Advertising Vs. UOI, 2019 (30) G.S.T.L. 474 (Telangana) 6. Agrawal Metal Works Pvt. Ltd., Vs. Commr. of CGST, Alwar, 2022 (65) G.S.T.L. 372 (Tri. - Del.) 7. Hamdard (Wakf) Laboratories Vs. Commr., Cus., C. Ex. S.T., Ghaziabad, (2023) 4 Centax 62 (Tri.-All.) 8. Rohan Motors Ltd. Vs. Commr. of Customs, C. Ex. & S.T., Noida, 2024-VIL-301-CESTAT-ALH-ST 9. M/s Mercedes Benz India (P) Ltd. Vs. Commissioner of Central Excise, Pune-1, 2015 (40) STR 381 CESTAT-Mum 10. Satyakala Agro Oil Products Ltd., Vs. CCE, Guntur, 2008 (223) ELT 441 (Tri Bang) 11. CCE, Ahmadabad-II Vs. Maize Products, 2009 (234) ELT 431 (Guj) 12. Mafatlal Industries Ltd Vs. Commr of Cex & ST, Ahmedabad, 2020 (43) GSTL 562 13. Alstom T&D India Ltd Vs. Commr GST & C.Ex, Chennai, 2019 (370) ELT 625 (Tri-Che) 14. Aster Pvt. Ltd., Vs. Commr of Cus and C & Ex Hyderabad, 2016 (43) STR 411 15. VLCC Health care Ltd., Vs. Commr of GST & Cex, Chennai South, 2019 (27) GSTL 357 16. Mangalore Chemicals and Fertilizers Ltd., Vs. Deputy Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42,869,925 2092940 07/11/2016 176-33652894 08/11/2016 KJ/35 19/01/2017 22,014,861 3570267 20/01/2017 176-33664304 20/01/2017 2016-17 Total 128,013,743 16. The Ld Counsel further submits that the finding given by the Adjudication authority on this aspect is contradictory. As per paragraph 74 of the impugned order, it is held that:- "74. Verification of the assessee's sales turnover for the period under investigation revealed that they had manufactured articles of Jewellery/ articles of silver, falling under CETH 7113/7114, valued at Rs. 2,09,34,327/- during 2015-16 (March) Rs. 12,80,13,747/- during 2016-17 and Rs. 2,73,34,866/- during 2017-18 (up to June) and shown as exports in their financial statements without following proper procedures prescribed under the central excise law. 17. Whereas in paragraph 75 of the impugned order, it is stated that the Appellant failed to produce copy of relevant documents to substantiate their claim regarding export and based on that it is held that; "in the absence of any documentary evidence, I reject their claim that the goods were actually exported". The Ld. Counsel submits that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 26-7-2016 has clarified that Exporters may continue to export articles of jewellery, as provided by the Circular No. 1021/9/2016-CX, dated 21-3-2016, on self-declaration and submission of Letter of Undertaking [LUT] to customs without the need to get such LUT ratified by the jurisdictional Central Excise authorities, till the detailed procedures in this regard are put in place. This clearly shows that the of intention Government is to help the industry, as duty was levied for the first time. This is the reason why Government had prescribed special procedure for registration, valuation, maintenance of stock, filing of returns, computation of SSI exemption limit, job work, repair activity. A separate Rule, Articles of Jewellery (Collection of Duty) Rules, 2016 was notified for rate of duty, assessment, manner of payment including an optional scheme for payment of Excise duty, stock position, job-work, dead stock, removal of semi-manufactured jewellery, etc., exclusively for appellant's industry. Hence it clear that the normal procedures prescribed for other goods do not apply to articles of jewellery. Thus, the above said finding that the Appellant has failed to produce copie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to be assessed to sales tax on the ground that they are in the same position as sale price. In appellant's case, demand under Rule 6 (3) of Cenvat Credit Rules 2004 is confirmed only on the ground that the appellant had entered into hedging and considering it as trading of goods, an exempted service and there by it is held that appellant failed to exercise the option under sub-rule (3) of Rule 6 of CENVAT Credit Rules, 2004 and not complied with Rule 6 (3A) of CENVAT Credit Rules 2004, appellant is liable to pay an amount equal to seven percent of value of the exempted services subject to the maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period as per Rule 6 (3) (i) of Cenvat Credit Rules 2004. Appellant has not carried out any speculative business operations i.e. Hedging operations for earning income and the said activity is carried out only to safeguard the financial interest of the appellant against the price fluctuations. It is part and parcel of appellant's manufacturing activity only. As regarding Hedgi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (182) Kerala, wherein it is held that when there is no scope as to whether duty was payable or not, penalty cannot be imposed under the provisions of the Act. Learned counsel relied on the following decisions also in this regard:- 1. Tamil Nadu Housing Board Vs. CCE, Madras, 1994 (74) ELT 9 (SC) 2. Hindustan Steel Ltd., Vs. The State of Orissa, 1978 (2) E.L.T. (J 159) (S.C.) 3. Commissioner of Customs Vs. Cochin Minerals & Rutiles Limited, 2010 (259) ELT 182 (Ker.) 22. The Learned Authorised Representative (AR) for the Revenue reiterated the findings in the impugned order and submits that the Appellant were manufacturing excisable goods falling under CETH 7114 and without payment of duty, they were sold. Further, even while recording the statement, the Executive Director of the Appellant had admitted that goods manufactured by the Appellant are classifiable under CETH 7114 and they had classified such jewellery including gold coin under CETH 7113. He had also admitted that they have not fulfilled the condition No. 52A of the Notification No. 12/2012-CE dated 17.03.2012 amended by Notification No. 06/2017-CE dated 02.02.2017. As regarding the reliance of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m made is that the quantity and value of such clearances has not been separately quantified, this cannot be a ground for summarily dismissing the demand as the onus is on the appellant to prove the quantum of plain silver jewellery as they are claiming the exemption; even if they agree that it was studded jewellery they are eligible for 1% duty cannot be accepted in as much as the condition specified in the notification has not been fulfilled; there was a categorical finding in the Order-in-Original that the Appellant has not produced any documentary evidence in respect of the claim of exports at the time of the proceedings; hedging is only a term used for covering their risk of fluctuation and does not mean that Trading has not been done; the trading of goods done is real and there is nothing in law differentiating 'Trading' done for the purpose of 'Hedging' or for any other reason hence the inclusion of such trading for calculation of the amount to be reversed is in order. If there was duplication of demand the same should have been demonstrated before the Adjudicating authority as clearly indicated in the Order-in-Original. It is a settled law by catena of decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. 12. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word 'wilful', preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words 'contravention of any of the provisions of this Act or Rules' are again qualified by the immediately following words 'with intent to evade payment of duty.' Therefore, there cannot be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Mis-statement of fact must be wilful." 27. Similarly, in the case of Densons Pultretaknik Vs. Commissioner of Central Excise reported in 2003 (155) E.L.T. 211 (S.C.) it is held that:- "7. Next question is-whether the Tribunal was justified in invoking first provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... willful suppression of facts or contravention of any of the provisions of law with intent to evade payment of duty, there was no justifiable reason for invoking the extended period of limitation. 29. As regarding issue on merit related to classification of the goods and demand of duty, we find that regarding sale of studded silver jewellery, though the entire sale details are available during investigation, there is no invoice relied in the Show Cause Notice to allege sale of studdded silver jewellery. However, we find that the Adjudication authority has classified goods under CETH 7114 on the ground that assessee failed to produce any valid documents to prove that they had infact manufactured and removed this quantity of articles of silver and gold jewellery. It is further held that the assessee has not produced their ledger accounts pertaining to sale of articles of silver jewellery and other articles of silver and it is concluded that "it is evident that assesseee has not manufactured any articles of silver jewellery other than those studded with Diamond, Ruby, Emerald or Safire during the impugned period, as they failed to produce the details of the articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax on input services. Thus, appellant complied with condition No. 52A also since they have not availed cenvat credit of inputs or capital goods used in the manufacture of these goods and by reversing cenvat credit availed against service tax on input services used in the manufacture of these goods. Accordingly, they are entitled for claiming the benefit of 'nil' rate of duty for the period even after 02.02.2017 to 30.07.2017 as confirmed the impugned order. 30. As regards Hedging, the appellant had entered into only forward contracts for sale of gold with SBI under Hedging Activity. Hedging is a risk management strategy employed to offset losses in investment which is meant to reduce a potential loss. As per the Cambridge Dictionary Hedging means "A way of controlling or limiting a loss or risk". There is no sale of gold with the bank based on forward selling contract has part of Hedging, thus there is no trading involved in Hedging. Moreover, SBI charges service tax for booking of forward contract, service tax is charged and collected from the appellant. We also find that inputs services in respect of which the credit is held to be ineligible viz., advertisement, secur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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