Caterpillar India Pvt Ltd Vs Commissioner of GST (CESTAT Chennai)
CESTAT Chennai held that duty burden is shifted to the appellant unit only because facility under rule 12BB is opted. Also, penalty under section 11AC of the Central Excise Act, 1944 unwarranted when duty liability is paid with interest.
Facts- Appellants are engaged in manufacturer of ‘Earth Moving Machinery’. During the course of verification of records of appellant by the Audit Wing of the Large Taxpayer Unit (LTU), Chennai, it was noticed that appellants have been receiving engines without payment of duty from their sister unit located in Hosur under Rule 12BB of the Central Excise Rules, 2002 (CER, 2002). On detailed verification it was noticed that the Earth Moving Machinery manufactured out of such intermediate goods (engines received from sister units without payment of duty) have not been cleared within a period of six months from the date of receipt of such intermediate goods as mandated under Rule 12BB of CER, 2002. On being pointed out, the appellant paid total duty along with interest for the intermediate goods received by appellant during the period May 2010 to November 2013 as mandated under Rule 12BB of CER, 2002.
Apart from this, it was noticed that appellant had availed CENVAT credit during the period January 2014 to July 2014 on the duty paid under Rule 12BB on the clearances of engines from their Hosur Unit. It appeared that the said credit was availed under the provisions of section 12A of CENVAT Credit Rules, 2004 (CCR, 2004). The department was of the view that credit can be availed only on inputs and not on intermediate goods. The engines received from Hosur Unit being only intermediate goods and not inputs for further manufacture of Earth Moving Machinery, the credit was not eligible.
Conclusion-In the present case, it is an admitted fact that the condition has not been satisfied. Rule 12BB casts the liability on the recipient unit. The appellant is therefore liable to pay duty on the engines. It is also an admitted fact that there is a delay in making the payment. Rule 12BB not only defers the payment of duty but also shifts the liability on the recipient unit. The Rule itself states that if the condition is not satisfied the duty along with interest has to be paid by the recipient unit. We therefore do not find any grounds to interfere with the demand of interest and we uphold the same.
Held that Sub-section (2) of Section 11A provides that when the duty is paid on being pointed out by the Central Excise Officer and is intimated to the department, no Show Cause Notice shall be issued and that no penalty shall be leviable. Moreover, the duty demand, in the present case, is on the engines. The duty liability for manufacture and clearance of engines is on the Hosur unit and not on the appellant. Only because appellant opted for the facility of Rule 12BB, the duty burden is shifted to the appellant unit. In such circumstances, when the duty liability is paid with interest, the penalty levied under Sec. 11AC is unwarranted.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that appellants are engaged in manufacturer of ‘Earth Moving Machinery’ viz. Dumpers, Loaders, Excavators and are registered with the Central Excise Department. They are availing the facility of CENVAT credit of duty paid on inputs, capital goods and service tax paid on input services. During the course of verification of records of appellant by the Audit Wing of the Large Taxpayer Unit (LTU), Chennai, it was noticed that appellants have been receiving engines without payment of duty from their sister unit located in Hosur under Rule 12BB of the Central Excise Rules, 2002 (CER, 2002). The said engines are used in the manufacture of Earth Moving Machinery by the appellant and the finished goods are cleared on payment of appropriate duty. On detailed verification it was noticed that the Earth Moving Machinery manufactured out of such intermediate goods (engines received from sister units without payment of duty) have not been cleared within a period of six months from the date of receipt of such intermediate goods as mandated under Rule 12BB of CER, 2002. On being pointed out, the appellant paid total duty along with interest for the intermediate goods received by appellant during the period May 2010 to November 2013 as mandated under Rule 12BB of CER, 2002.
2. Apart from this, it was noticed that appellant had availed CENVAT credit during the period January 2014 to July 2014 on the duty paid under Rule 12BB on the clearances of engines from their Hosur Unit. It appeared that the said credit was availed under the provisions of section 12A of CENVAT Credit Rules, 2004 (CCR, 2004). The department was of the view that credit can be availed only on inputs and not on intermediate goods. The engines received from Hosur Unit being only intermediate goods and not inputs for further manufacture of Earth Moving Machinery, the credit was not eligible.
3. Show Cause Notice dated 14.10.2014 was issued invoking the extended period proposing to demand the duty payable under Rule 12BB on intermediate goods along with interest and for imposing The Show Cause Notice also proposed to deny the CENVAT credit wrongly availed and to recover the same along with interest and for imposing penalty. After due process of law, the original authority confirmed the demands along with interest and imposed penalties in regard to both the demands. Aggrieved by such order, the appellant is now before the Tribunal.
4. The learned counsel Shri Raghavan Ramabhadran appeared and argued for the appellant. It is submitted that being an LTU, the appellant manufactures the engines at its Hosur Unit and stock transfers the engines to its Tiruvallur Unit without paying excise duty on the engines in terms of Rule 12BB of CER, 2002. The appellant undertakes the stock transfer under a transfer challan. The engines are then used in the appellant unit (Tiruvallur Unit) in the manufacture of final products viz. Earth Moving Machines (EMMs).
5. According to Rule 12BB of the CER, the EMM (final products) using the engines (intermediate goods) ought to have been cleared on payment of appropriate duties of excise within 6 months from the date of receipt of the stock-transferred engines i.e., the intermediate goods. The issue under dispute revolves around the duty demand on engines stock-transferred between theAppellant’s sister unit under Rule 12BB of the CER, 2002. As the finished products were not cleared within a period of 180 days as required under Rule 12BB, the Appellant paid duty and interest on the stock-transferred engines on being pointed out by audit. On the duty so paid, the appellant availed credit since the engines were inputs used to manufacture the EMM. The dispute now relates to penalty proceedings initiated over the duty paid under first proviso to Rule 12BB of the CER and also on the validity of the credit availed by the Appellant.
6. During the period 20 12-13 there was an industry-wide slowdown in the production and sales of Off-Highway Truck and hence there were some delays in dispatching the EMMs out of the Tiruvallur unit within six months as mandated in Rule 12BB of the CER. Further, some of the stock-transferred engines could not be used to manufacture EMM and were lying in the Tiruvallur unit. Considering the above, the Appellant wrote to the Department under Letter dated 03.06.2014 stating that the Appellant would not be continuing with the procedure under Rule 12BB of the CER w.e.f. 01.06.2014 and that all engines thereafter would be transferred from Hosur unit to Tiruvallur unit on payment of applicable excise duty.
7. The learned counsel referred to Rule 12BB of CER, 2002 which reads as under:-
“12BB. Procedure and facilities for large taxpayer
Notwithstanding anything contained in these rules, the following procedure shall apply to a large taxpayer.
(1) A large taxpayer may remove excisable goods, except motor spirit, commonly known as petrol, high speed diesel and light diesel oil (hereinafter referred to as the intermediate goods), without payment of duties of excise, under the cover of a transfer challan or invoice, from any of his registered premises, (hereinafter referred to as the sender premises) where such goods are produced, manufactured or warehoused to his other registered premises, other than a premises of a first or second stage dealer (herein after referred to as the recipient premises), for further use in the manufacture or production of such other excisable goods (hereinafter referred to as the subject goods) in recipient premises subject to condition that-
(a) the subject goods are manufactured or produced using the said intermediate goods and cleared on payment of appropriate duties of excise leviable thereon within a period of six months, from the date of receipt of the intermediate goods in the recipient premises; or
(b) the subject goods are manufactured or produced using the said intermediate goods and exported out of India, under bond or letter of undertaking within a period of six months, from the date of receipt of the intermediate goods in the recipient premises, and that any other conditions prescribed by the 3[Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be], Large Taxpayer Unit in this regard are satisfied:
Explanation 1. The transfer challan or invoice shall be serially numbered and shall contain the registration number, name, address of the large taxpayer, description, classification, time and date of removal, mode of transport and vehicle registration number, quantity of the goods and registration number and name of the consignee:
Provided that if the subject goods manufactured or produced using the said intermediate goods are not cleared on payment of appropriate duties of excise leviable thereon or are not exported out of India within the said period of six months, duties of excise payable on such intermediate goods shall be paid by the recipient premises with interest in the manner and rate specified under section 11AA of the Act:”
8. The Appellant, without prejudice, paid excise duty amounting to 3,97,08,057/- and interest of Rs. 1,11,95,739/- for the period from May 2010 to November 2013 and paid duty of Rs, 3,31,81,659/- and interest of Rs. 10,35,828/- for the period from December 2013 to May 2014 for the engines cleared from Hosur unit to Tiruvallur unit.
9. Being eligible, the Appellant then availed credit of Rs. 7,28,89,714/- of the duty paid on the engines as per Rule 12A of the CENVAT Credit Rules, 2004. Thereupon the Show Cause Notice dated 10.2014 has been issued which has culminated in confirming the demands in toto.
10. The two issues under dispute as confirmed by the impugned OIO and the reasons for confirmation are tabulated below.
