CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
Appeal(s) Involved: E/918-920/2009-SM
[Arising out of Order-in-Appeal No. 77-79/2009-CE dated 28/07/2009 passed by Commissioner of Central Excise (Appeals) BANGALORE-I ]
Bombay Rayons Fashions Ltd (Unit-I), Peenya Industrial Area,
Commissioner of Central Excise BANGALORE
Mr. N. Anand, Adv For the Appellant
Ms Ezhil Mathi, A.R. For the Respondent
Date of Hearing: 28/11/2016
Date of Decision: 15/03/2017
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER
FINAL ORDER No. 20366-20368/ 2017
Per : S.S GARG
Appellants have filed these three appeals against the impugned order dated 28.07.2009 whereby the Commissioner (Appeals) has passed a common order disposing of three orders-in-original. Since the issues in all the appeals are mostly identical, therefore all the three appeals are being disposed of by this common order. The details of the three appeals and the period involved and the credit denied and the reasons for denial of credit is mentioned herein below in the tabular form.
Appeal No. Period Credit demand (Rs) Penalty (Rs) Credit involved Reasons for denial
E/918/09 June 2005 to May 2007 11,08,732/- 11,43,383/- 11,04,372/- Appellant unit had availed Cenvat credit on inputs based on invoices which were addressed to the other units of the Appellant. 4360/- Credit is availed on the basis of xerox copies of input invoice
E/919/2009 June 2005 to May 2007 26,18,844/- 26,25,125/- 2,59,731/- Appellant unit had availed Cenvat credit on capital goods full 100% in the first year itself and hence irregular availment of credit 1,45,706/- Credit availed on storage racks is not used for manufacture 4,17,271/- Appellant unit had availed Cenvat credit on inputs based on invoices which were addressed to the other units of the Appellant. 17,96,136/- Appellant availed credit in input servicessuch as testing of fabrics; dry cleaning services; courier services; GTA service and security service. This credit is alleged to be irregular.
E/920/2009 August 2006 to May 2007 8,68,262/- 8,68,262/- 67,987/- Appellant unit had availed Cenvat credit on capital goods full 100% in the first year itself and hence irregular availment of credit. 2,83,583/- Credit availed on storage racks is not used for manufacture 5,16,692/- Appellant unit had availed Cenvat credit on inputs based on invoices which were addressed to the other units of the Appellant.
2. Briefly the facts of the case are that the appellants are engaged in the manufacture and export of garments falling under Chapter heading 62 of the 1st Schedule of the Central Excise Tariff Act 1985. Appellant has his factories in and around Bangalore falling under the jurisdiction of Bangalore and all the factories are registered with the jurisdictional Central Excise Authorities. Appellant is working under CENVAT credit scheme and availing credit of eligible types of duties and taxes paid on inputs, input services and capital goods in terms of CENVAT Credit Rules 2004. The period involved in the different appeals, the amount involved and the reasons for denial of CENVAT credit in each appeal has been stated in the table. On an investigation by the preventive unit of the Central Excise Department relating to the appellants availing CENVAT credit, the department found that the appellant has availed irregular and inadmissible credit and on this allegation various show-cause notices were issued for different periods alleging contravention of various provisions of CENVAT Credit Rules on the grounds stated (supra). The appellant filed reply to various show-cause notices issued by the Department and after following the due process of law the Additional Commissioner of Central Excise passed orders-in-original confirming the demand along with the interest and penalty under Section 11AB and Section 11AC of the Central Excise Act 1944 read with Rule 15 of the CENVAT Credit Rules and also appropriated the CENVAT Credit already reversed by the appellant. Aggrieved by the said orders-in-original, appellants filed appeals before the Commissioner and the Commissioner vide the impugned order rejected all the appeals of the appellant and upheld the orders passed by the Additional Commissioner. Aggrieved by the said impugned orders appellants have filed these three appeals.
3. Heard both the parties and perused the records. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without considering the submissions of the appellant and without considering the various judgements relied upon by the appellant. He further submitted that the impugned order is not a speaking order as both the authorities have not given any reasoning in support of their conclusions and therefore the impugned order is violative of principles of natural justice. He further submitted that both the lower authorities have merely decided the cases on the basis that the appellant admitted the lapse and hence the allegation in the notice were confirmed whereas the facts of payment of credit during investigation did not mean that the appellant has waived his right to contest the case on merits. He further submitted that merely because the appellant has paid the credit during investigation does not absolve the duty of the quasi-judicial authorities to examine the merits of the case. He further submitted that in the present case, learned Commissioner (Appeals) in para 13 of the impugned order has observed that since the appellant has admitted the allegations of ineligible availment of credit and has not contested the departments allegation by producing evidences and therefore he did not dwell the case on merits. Learned counsel for the appellant further submitted that the lower authorities have found easy way of confirming adjudicating levies ignoring the fact that the appellant had contested the case on merits from the stage of reply to the show-cause notice. He further submitted that the CENVAT credit has been denied on the ground that the invoices on the basis of which credit was taken by the appellant was in some other units address and in some cases credit was taken on photocopy of invoices and in certain cases, the appellant has availed the CENVT credit on capital goods full 100% in the first year itself and in some cases, the credit availed on storage racks is not used for manufacture and also with regard to certain input services, he further submitted that the appellant did not contest a sum of Rs 34,651/- which was availed twice in Appeal No E/918/2009 and also a sum of Rs 6280/- which was availed twice in Appeal No 919/2009 which was inadvertently taken and the same has been admitted by the appellant in reply to the show-cause notice itself. He further submitted that the CENVAT scheme is a beneficial legislation and vests substantive rights in the appellant since the appellant is engaged in the manufacture of excisable goods. He further submitted that substantive right cannot be defeated or taken away on procedural grounds. He also submitted that both the authorities below have not appreciated the well settled legal principal that substantive rights would have precedence over the procedural/technical aspects. When substantial law is pitted against the procedural infraction, then procedural infraction cannot come in the way of substantial benefit. In support of this submission, he relied upon the decision of the Honble Supreme Court in the case of Eicher Motors Ltd Vs UOI [1999 (106)ELT 3(SC)] and in the case of Formica India Division Vs CCE [1995 (77)ELT 511 (SC)]. Learned counsel further submitted that Commissioner (Appeals) as well as adjudicating authority have gone by sheer technicalities ignoring the material facts namely that the appellant had received the inputs in question inside their factory, appellant is a multi-unit company, the inputs in question were duty-paid and the inputs were used in the appellants factory for manufacture of excisable goods which were ultimately exported. The Revenue did not contest these material facts in the show-cause notice. Learned counsel has further relied upon the decisions in the case of Larsen & Toubro Ltd Vs CCE [1994 (72)ELT 948(T) wherein under similar facts and circumstances, the Tribunal held that the duty paying documents showing address of other unit of the same manufacturer is a valid duty paying document and there is also no need for endorsement of the invoice by the other unit to the unit which received the inputs. Similarly in the case of CCE Vs Chemplast Sanmar Ltd [2007(208)ELT 208(T) wherein it was held that when invoices were addressed in the Plant-II, and III and not in the name of Plant-I, since the inputs were received and used in Plant-I, the credit was still admissible. Similarly in the case of CCE Vs Snow Cem India Ltd [1997(96)ELT 627(T), the invoices were first sent to the Bombay factory of multi unit company and later the entire consignment in original packing transferred to their sister factory at Cochin. It was held that the benefit of CENVAT credit is not deniable merely because the gate pass was in the name of the Bombay factory and not Gotan factory. Further in the case of CCE Vs ACC Ltd [2006(205)ELT 730(T)] it has been held that the appellant being multi-unit factory, the input invoice mentioning wrong units address cannot be a reason for denial of credit of duty. He further submitted that the denial of CENVAT credit on the ground that the credit was taken on the basis of xerox copy of the invoice is not deniable in law and is opposed to the following judicial decisions.
1) Controls & Drives Coimbatore (P) Ltd Vs CCE [2008(222)ELT 470(T)
2) Sehmbey Products Vs CCE [2007(215)ELT 156(T)
3) Vardhaman Acrylics Ltd Vs CCE & Cus [2006(204)ELT 321(T).
Learned counsel further submitted that there is nothing wrong in taking CENVAT credit on capital goods 100% in the first year itself though as per rules only 50% of the same is to be taken in the first year and 50% credit in the subsequent year. But in this case, since he has availed 100% in the first year and has not utilized the same and for the subsequent year he is entitled to avail 50% therefore it will not result in to any loss to the Revenue. In support of this submission, he relied upon the following authorities.
1) Indian Oil Corporation Ltd Vs CCE[2005(187)ELT 241(Tri-Del)]
2) Bombay Paints Ltd Vs CCE [2015(326)ELT 335(Tru-Mum)]
3) Sanghi Industries Ltd Vs CCE [2013 (294)ELT 303(Tri-Ahmd)]
4) Sunder Ispat Ltd Vs CCE, F.O.No. A/30538/16 dt 13.6.2016
On the other hand learned A.R. reiterated the findings of the impugned order and submitted that once the appellant has reversed The CENVAT credit by admitting his fault, he is barred from contesting the same.
4. After considering the submissions of the parties and perusal of the material on record and the various judgements relied upon by the appellant in support of his submissions, I find that the impugned order is not sustainable in law because the same has been passed mechanically without considering the submissions of the appellant. Both the authorities have not considered the reply filed by the appellant to the show-cause notice wherein the appellants have contested the denial of CENVAT credit by producing the documents as well as the judgements/decisions in their favour allowing CENVAT credit in similar situations. Further I also find that simple reversal of the CENVAT credit at the asking of the Revenue does not debar the appellant to contest the same by filing a detailed reply to the show-cause notice. Both the authorities have not considered the same and therefore the impugned order is without any reason and is passed in violation of principles of natural justice. Therefore I am of the considered opinion that this case needs to be remanded back to the original authority with a direction to decide afresh after considering the submissions of the appellant and also various decisions which has been relied upon by the appellant in support of his submission. Consequently I remand all the three cases to the original authority to pass denovo order after considering the submissions of the appellant. The original authority before deciding the appeals will afford an opportunity of hearing to the appellant and also opportunity to produce documents in support of their claim. Original Authority is expected to take into account the various decisions which have been discussed above while deciding the issue afresh. With these observations, the impugned orders are set aside and appeals allowed by way of remand.
(Order pronounced in Open Court on 15/03/2017)