New India Engineering Works Vs Principal Commissioner, CGST & CE (CESTAT Delhi)
The submission of the appellant that non-manufactured goods were wrongly considered as dutiable goods and duty was confirmed thereon has been examined. We find that during the entire period the value of the goods which were traded and the value of goods, which were manufactured were taken separately and were indicated in the Annexure to the SCN and duty was demanded only on the value of the manufactured goods.
Learned Chartered Accountant submits that since the processes undertaken by the appellant involved are only cutting, slitting, bending etc. they do not amount to manufacture. Therefore, no central excise duty was payable at all. On a query from the bench, he clarified that the appellant buys steel sheets and cuts them, bends them and makes them into the products, such as, MS Shuttering Plates, MS Round Shuttering Plates, MS Crash Bar Plates, MS Hunch Plates, MS Trusses, MS Jali, MS Bar, MS Pier Cap Set, MS Concrete Bucket etc. as indicated in the SCN.
We have considered this submission. It is a well settled principle that manufacture involves change, but every change is not manufacture. Manufacture requires that a new distinct marketable goods should be produced. In this case, the raw material which the appellant was using was steel sheets, as known in the market. What the appellant was producing were MS Shuttering Plates, MS Round Shuttering Plates, MS Crash Bar Plates, MS Hunch Plates, MS Trusses, MS Jali, MS Bar, MS Pier Cap Set, MS Concrete Bucket etc. which are different products known to the market. The appellant is not selling its final products as steel sheets but as these products. There is no mechanism prescribed under the Act for any process to amount to manufacture. So long as a new and distinct commodity known to the market is produced, the process amounts to manufacture and not otherwise. In this case, we are satisfied that the appellant was manufacturing goods using steel sheets and, therefore, there is no infirmity in the appellant being charged to central excise duty.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s New India Engineering Works, Indore1 filed this appeal to assail the order-in-appeal2 dated 28.02.2018 passed by the Commissioner (Appeals), Central Goods & Service Tax and Central Excise, Indore, whereby he partly allowed the appeal of the appellant and partly rejected it.
2. The appellant was engaged in manufacturing MS Shuttering Plates, MS Round Shuttering Plates, MS Crash Bar Plates, MS Hunch Plates, MS Trusses, MS Jali, MS Bar, MS Pier Cap Set, MS Concrete Buckets etc. On the basis of information that the appellant was evading central excise duty, a search operation was conducted in the factory, residence and two other premises of the appellant, panchnamas were drawn, statements were recorded and after completing investigation, a show cause notice3 dated 30.06.2016 was issued to the appellant demanding central excise duty of Rs. 5,71,164/- (including excise duty, education cess, Secondary and Higher Education cess and clean energy cess) invoking extended period of limitation under section 11A (4) of the Central Excise Act, 19444 along with interest under section 11AA. Penalty of equal amount was proposed to be imposed under section 11AC of the Central Excise Act for contravening provision of Rules 4,6,8,9,10,11 & 12 of the Central Excise Rules, 20025 with an intent to evade payment of duty. The goods valued at Rs. 89,500/-, which were seized during investigation were also proposed to be confiscated under Rule 25 of the Central Excise Rules, 2002 and the penalty was proposed to be imposed under Rule 25.
3. The Assistant Commissioner passed order-in-original dated 27.09.2017, confirming the demand along with interest and imposing penalties and confiscating the goods, as proposed in the SCN.
4. Aggrieved, the appellant appealed to the Commissioner (Appeals) who, by the impugned order, set aside the confiscation of the seized goods and imposition of penalty under Rule 25. He also reduced the demand of central excise duty by Rs. 45,314/-on an account of some duplication in the calculation of duty. He upheld the duty of Rs. 5,24,849/- along with interest and imposition of an equal amount of penalty under section 11AC.
5. This appeal has been filed by the appellant and it has no specific prayer. The following are the grounds of appeal :-
(i) That appellant has wrongly been denied SSI exemption in the year 2014-15 ;
(ii) That repeated/Duplicate bills wrongly considered twice which need to be excluded ;
(iii) That value of Non-Manufactured goods wrongly considered as dutiable and confirmed the duty which is required to be deleted.
(iv) That demand of Energy cess is not sustainable as per provisions of law ;
(v) That penalty has wrongly been confirmed under section 11AC of CEA, 1944 ;
(vi)That looking to demand of duty not sustainable on merits hence interest has wrongly been confirmed under section 11AA of CEA, 1944.
6. Learned Chartered Accountant who represented the appellant prayed that the impugned order may be set aside. We now proceed to examine the grounds of the appeal. The first ground of the appellant is that it had been wrongly denied the benefit of the SSI exemption for the period 2014-2015. A perusal of the Annexure to the SCN shows that for the period 2014-2015 the value of the traded goods and the value of manufactured goods were counted separately. The value of the manufactured goods was Rs. 1,97,80,295/-, however, after calculating the benefit of SSI exemption, which is available up to a turnover of Rs. 1.5 crores, the taxable value was reckoned as only Rs. 47,80,295/-. This amount was taken as cum-duty price and the assessable value was worked out Rs. 42,54,446/-. The duty thereon @ 12.63% was calculated, which was confirmed. Therefore, the appellant’s submission that it was denied the benefit of SSI exemption for the period 2014-2015 is not correct.
7. The submission of the appellant that non-manufactured goods were wrongly considered as dutiable goods and duty was confirmed thereon has been examined. We find that during the entire period the value of the goods which were traded and the value of goods, which were manufactured were taken separately and were indicated in the Annexure to the SCN and duty was demanded only on the value of the manufactured goods. Learned Chartered Accountant submits that since the processes undertaken by the appellant involved are only cutting, slitting, bending etc. they do not amount to manufacture. Therefore, no central excise duty was payable at all. On a query from the bench, he clarified that the appellant buys steel sheets and cuts them, bends them and makes them into the products, such as, MS Shuttering Plates, MS Round Shuttering Plates, MS Crash Bar Plates, MS Hunch Plates, MS Trusses, MS Jali, MS Bar, MS Pier Cap Set, MS Concrete Bucket etc. as indicated in the SCN. We have considered this submission. It is a well settled principle that manufacture involves change, but every change is not manufacture. Manufacture requires that a new distinct marketable goods should be produced. In this case, the raw material which the appellant was using was steel sheets, as known in the market. What the appellant was producing were MS Shuttering Plates, MS Round Shuttering Plates, MS Crash Bar Plates, MS Hunch Plates, MS Trusses, MS Jali, MS Bar, MS Pier Cap Set, MS Concrete Bucket etc. which are different products known to the market. The appellant is not selling its final products as steel sheets but as these products. There is no mechanism prescribed under the Act for any process to amount to manufacture. So long as a new and distinct commodity known to the market is produced, the process amounts to manufacture and not otherwise. In this case, we are satisfied that the appellant was manufacturing goods using steel sheets and, therefore, there is no infirmity in the appellant being charged to central excise duty.
8. Another ground of the appellant is that the demand of energy cess is not sustainable as per the provision of the law. We find that the clean energy cess was chargeable along with the education cess and higher education cess along with the excise duty. The appellant has not produced any law under which it was exempted from payment of clean energy cess. Therefore, this ground cannot be accepted. The appellant contested the demand of interest. Payment of interest is mandatory under section 11AA and, therefore, the same cannot be set aside.
9. The appellant also contested that there were repeated or duplicate bills which were wrongly considered twice which need to be excluded. These are as follows
(i) Entry No. 36 of the Annexure G to the SCN under which Invoice No. 16 dated 12.11.2014 issued in the name of M/s Monte Carlo Ltd. for MS Shikanja of 4760 kg. transported by Vehicle No. MP-09 KD 3508 is the same as Invoice No. 24 issued on the same date in the name of the same party and the same quantity and in the same truck. According to the learned counsel, invoice No. 16 was issued and signed by Ms. Ritu Saraf who was not authorized to sign the bill. Therefore, another correct bill with invoice No. 24 was issued with proper person for the same consignment. After considering this submission, we agree that there is a duplication in these two invoices as all the details match and one may be deleted ;
(ii) Entry No. 96, 108 and 122 to the Annexure G to SCN pertain to supplies made to M/s AXIOM Engineering and Contractors, Ujjain. According to the learned counsel, these three invoices No. 52, 57 and 69 were issued during 2014-2015 and invoices No. 44, 48 and 40 of 2015-2016 were also issued for the same quantity of the goods in the name of same party during 2015-2016. According to the learned counsel for the appellant, there is a duplication in the invoices. Having perused the entries and invoice number and dates, we convinced that they are two separate sets of invoices selling the same quantity of goods to the same party on different dates during two different financial years. Therefore, there is no duplication in these three invoices ;
(iii) Entry No. 77, 79 and 81 in the Annexure G to the SCN pertain to invoice No. 44 dated 16.12.2014 issued to M/s S.K. Construction for supply of materials. On the same date, invoice No. 44 was also to be issued for the same quantity of goods in the name of M/s Agroh Infra Developers for the same quantity of goods. According to the learned counsel of the appellant M/s Agroh Infra Developers is the main contractor and M/s S.K. Construction was a sub-contractor executing the work at site. While, the appellant received order for the goods from the sub-contractor to be delivered at the site of the main contractors the invoice was mistakenly issued in the name of main contractor. Thereafter, another invoice of the same number was issued showing of sub- contractor. In view of the above, the invoice issued in the name of main contractor M/s Agroh Infra Developers need to be deducted. After examining the records, we agree that the invoice No. 44 issued in the name of M/s Agroh Infra Developers needs to be deleted from the demand.
10. The appellant also contested the penalty imposed under section 11AC. We find that the appellant had not taken registration and had not paid central excise duty nor had disclosed its activities to the department. Its only the investigation which revealed the activities of th appellant. In view of this, we find that the appellant had evaded central excise duty while suppressing facts. Accordingly, the mandatory penalty under section 11AC needs to be upheld.
11. In view of above, the appeal is partly allowed to the extent of deduction of excise duty on the two sets of duplicate invoices indicated in paragraph 9 (i) and (iii) above by us. Rest of the impugned order is upheld. Appeal is disposed of, as above, with consequential relief to the appellant.
(Order pronounced in open court on 17/04/2023.)
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