Case Law Details
Star Battery Limited Vs Commissioner of Central Tax (CESTAT Kolkata)
Excise Demand Set Aside Because Inputs Were Cleared for Conversion and Not Trading; Rule 3(5) Compliance Accepted Since Assessee Reversed Credit on Inputs Sent to Job Worker; Cenvat Credit Demand Quashed Due to Lack of Evidence of Trading Transactions; Extended Limitation Invalid Because Transactions Were Properly Disclosed in ER-1 Returns.
In Star Battery Limited Vs Commissioner of Central Tax, the Kolkata Bench of CESTAT considered an appeal concerning denial of Cenvat credit on granules used for manufacturing PPCP containers through job workers. The appellant manufactured batteries and required PPCP containers for sale of the finished goods. Since the appellant did not have the facility to manufacture PPCP containers, cenvat-availed granules were cleared to job workers under Rule 3(5) of the Cenvat Credit Rules, 2004 after reversing the credit. The job workers manufactured PPCP containers, paid excise duty on them, and the appellant availed Cenvat credit on the duty paid containers.
The Department alleged that the appellant had cleared the granules for trading purposes and wrongly availed Cenvat credit. The lower authority confirmed the demand. The appeal before the Commissioner (Appeals) was dismissed on limitation because of delayed filing. Pursuant to directions of the Calcutta High Court, the appellant deposited 25% of the demand and approached the Tribunal.
The Tribunal observed that Rule 3(5) requires reversal of Cenvat credit when inputs are removed “as such” from the factory and noted that there was no dispute that the appellant had reversed the credit while sending granules to job workers. It held that the granules were not traded commodities but were only sent for conversion into PPCP containers used in manufacturing batteries on which excise duty was paid. The Tribunal found that the lower authorities had ignored this factual position and held that no contravention of the Cenvat Credit Rules was established.
The Tribunal also accepted the appellant’s contention on limitation. It held that all transactions were disclosed in ER-1 returns and no evidence of suppression or intent to evade duty had been brought by the Revenue. Since the appellant had reversed the Cenvat credit and the quantum was undisputed, invocation of the extended limitation period for issuance of the show cause notice was held unsustainable.
Accordingly, the Tribunal set aside the impugned order, allowed the appeal on merits as well as limitation, and granted consequential relief in accordance with law.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is a manufacturer of battery. In the course of manufacturing the batteries, they require PPCP containers in which the batteries are sold to the customers. The appellants were clearing their finished goods i.e. batteries on payment of Excise duty. Since they did not have the facility to maufacture the PPCP container, they were clearing the cenvat availed granules on payment of duty. The Cenvat availed granules were cleared to their job workers [manufacturer of PPCP container] in terms of Rule 3 (5) of the Cenvat Credit Rules, 2004. The manufacturer for PPCP container was availing the Cenvat Credit and clearing the PPCP container on payment of duty. This duty on PPCP was availed as Cenvat by the appellant. The Department issued Show Cause Notice on the ground that the appellant was clearing the Cenvat availed the granules for trading purpose. Therefore, demand was raised for the Cenvat Credit taken on such granules. After due process, the lower authority confirmed the demand.
2. Since the appellant filed the appeal in a delayed manner before the Commissioner (Appeal) the same was dismissed by the appellant. The appellant approached the Hon’ble High Court of Kolkata which vide their decision on 08.09.2022 directed the appellant to deposit of 25% of the confirmed demand and approach the Tribunal for
disposal of the case. The appellant after fulfilling their directions has filed their appeal before the Tribunal.
3. The Ld. Consultant appearing on behalf of the appellant submits that credit taken on granules was properly reversed in terms of Rule 3(5) of the CCR 2004, when they had sent the same to the job worker. The details of such clearance have also been shown in their ER –I Returns. The Department is erroneously considering the transaction as the trading transaction. As a matter of fact, the converted granules in the form of PPCP container is received from the job worker which is again used in the manufacture of finished goods,i.e., batteries on which Excise duty is paid.
4. The Ld Consultant relies on the case law of CCE Ghaziabad Vs Corrosion Engineers P Ltd – 2016 (337) ELT 304 (Tri-All), wherein in an identical issue, the Tribunal allowed the appeal.
5. Therefore, he prays that the appeal may be allowed on merits.
6. He further submits that the Show Cause Notice issued on 28.01.2010 for the transactions taking place during the period February 2005 to June 2007 is time-barred. He submits that all the clearances are on the basis of proper Central Excise duty payment. The details of the clearance are also shown in the ER-1 returns. Therefore, there is no evidence brought in by the Revenue to allege suppression. Hence, it is prayed that the appeal may be allowed even on account of time bar.
7. The Ld. Authorized Representative appeared on behalf of the Revenue submits that the Commissioner (Appeal) has dismissed the appeal so on account of the delayed of the appeal. She justifies the confirmed demand and prays that the appeal may be dismissed.
8. Perused the appeal papers and other documents placed before me.
9. The Rule 3 (5) of the Cenvat Credit Rules 2004, reads as under :
Rule 3 (5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9
10. Therefore, whenever any cenvat availed goods are cleared from the factory premises, the availed cenvat is required to be reversed. In this case, there is no dispute that the appellant has reversed the cenvat credit while clearing to the job-workers. The only allegation is to the effect that the cenvat availed granules have been used for trading purposes. From the factual details discussed, it clearly emerges that the granules were not being traded, but were sent only for conversion into PPCP containers. This fact has been ignored by the lower authorities. Only when the goods are being sold as a traded commodity consistently by resorting to Rule 3(5) of the CCR 2004, the assessee can be faulted for not following the Dealer Registration process. In this case, the clearance is only for conversion purposes as has been contended by the appellant. Hence, I do not find any contravention on the part of the appellant. Therefore, I set aside the impugned Order and allow the appeal on merits.
11. I also find the arguments of the appellant to be valid that the Revenue could not have invoked the extended period to issue the Show Cause Notice on 30.01.2010, when the appellant has shown all the transactions properly in their monthly Returns. There is no proper evidence brought in by the Revenue to the effect that the appellant has indulged in any suppression with an intent to evade the Excise Duty payment. Factually it is seen that they have reversed the Cenvat Credit, the quantum of which is not disputed by the Revenue. Holding that no case of suppression has been made out against the appellant, I set aside the confirmed demand even on account of limitation.
12. As a result the impugned order stands set aside and appeal is allowed. The appellant would be eligible for consequential relief, if any, as per law.
(Dictated and pronounced in the open court)
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