1. This appeal is directed against Order-in-Original No. TTD-EXCUS-000-COM-029-15-16-DT dated 31.03.2016
Brief facts of the case are:
2.1 Intelligence gathered by the Central Excise, Anti-Evasion unit of Kurnool (hereinafter referred to as Officers or Department) revealed that the appellant had cleared the CENVAT credit availed Capital Goods from their premises without payment of amount payable in terms of the provisions of Rule 3(5) of CENVAT Credit Rules, 2004;
2.2 Investigation in to the matter revealed that the appellant had entered into a Lease Agreement dated 07.01.2010 (Annexure-A.1) with M/s. Sree Balajee TMT Rod Mills Private Ltd., Aswathapuram Village, Kallur Mandal, Kurnool District leasing out the SMS Division (located in Part of land in Survey No. 143 B/2) along with its equipment (Plant and machinery) to M/s. Sree Balajee TMT Rod Mills Private Ltd., (SBTMT) for the purpose of manufacture of M.S. Ingots against certain monetary consideration. M/s. SBTMT have obtained separate Central Excise registration in t
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he name of M/s. Sree Balajee TMT Rod Mills Private Ltd., (SMS Division). The name of M/s. Sree Balajee TMT Rod Mills Private Ltd., (SMS Division) was subsequently changed as M/s. Aastha Alloycorp Pvt. Ltd., (SMS Division) and this change of name was incorporated in the central excise records on 05.06.2012;
2.3 The officers of the Anti-Evasion wing of Kurnool have visited the factory premises of M/s. Aastha Alloycorp Pvt. Ltd., (SMS Division) on 28.11.2013 for physical verification of capital goods. At the time of their visit Sri D.V. Suresh Babu, Manager and Authorised Signatory of the M/s. Aastha Alloycorp Pvt. Ltd., was present. On being enquired about the availability of machinery taken on lease from the appellant, in the factory premises, Shri D.V. Suresh Babu stated that no machinery is available in the factory premises and the same was sold out without raising any Invoice;
2.4 Further investigation in the matter revealed that the appellant leased out the Sponge Iron Unit in Survey No. 143 A along with its plant and machinery to M/s. Canara Overseas Ltd., 1129, Sourabha, Service Road, Vijaya Nagar, Bangalore under Lease Agreement dated 30.05.2011 (effective from 15.01.2011). The appellant had retained certain part of land in Survey No. 143 B/2 for themselves and got amended their ground plan accordingly in the Central Excise Registration Records and presently they are filing monthly Central Excise ER.1 Returns with the Range office depicting Nil transactions;
2.5 From the above and as admitted by the appellant vide statements/letters submitted, it appeared that they had removed the capital goods, on which CENVAT credit was availed, by leasing out to other manufacturers without payment of the amount required to be payable in terms of the provisions of Rule 3(5) of CENVAT Credit Rules, 2004;
2.6 The appellant had leased out the capital goods, on which CENVAT credit was availed, to other manufacturers and also transferred the physical possession and absolute control over the capital goods to the lessee. Consequently, lessee has utilized the capital goods so leased out to them, for manufacture of excisable goods by taking separate Central Excise Registration. The change of Ground Plans submitted by the appellant clearly demonstrates that the capital goods are lying/installed outside the registered premises (as per revised ground plan) and are in absolute control of lessee. However, in the case of capital goods of SMS Division, they even gone to the extent of selling CENVAT taken capital goods to others clandestinely. Leasing out of capital goods and handing over the absolute control over them to the lessee does by all means amounts to removal of subject capital goods especially when the goods are falling out of the premises of the appellant as discussed above.
3. Appellant were issue a show cause notice for reversal of CENVAT credit with interest and also for imposing penalties. The show cause notice was resisted by appellant on merits and also on limitation. The adjudicating authority after following due process of law, passed the following order after granting whatever relief is possible in within the framework of law.
i) I confirm demand of an amount of Rs. 18,31,267/- (Rupees eighteen lakhs thirty one thousand two hundred and sixty seven only) in respect of capital goods removed from the premises of SBTMT under Rule 3(5A) of the CENVAT Credit Rules, 2004. I appropriate an amount of Rs. 13,42,844/- (Rupees thirteen lakhs forty two thousand eight hundred and forty four only) towards the above liability.
ii) I demand interest under Section 11AB/11AA of the Central Excise Act, 1944 on the amount at (i) above.
iii) I impose penalty of Rs. 18,31,267/- (Rupees eighteen lakhs thirty one thousand two hundred and sixty seven only) under Section 11AC of the Central Excise Act, 1944 read with Rule 15(2) of the CENVAT Credit Rules, 2004 for contravention of the provisions as mentioned above.
iv) I drop demand of Rs. 2,12,77,122/- in respect of capital goods leased to M/s. Canara Overseas and Rs. 20,60,828/- in respect of capital goods leased to M/s. SBTMT.
Revenue has not filed any appeal against the impugned order. Appellant assessee is aggrieved by the impugned order for confirmation of demand of Rs. 18,31,267/- with interest and penalties.
4. Ld. Counsel submits that the impugned order is not correct in confirming the demand. It is his submission that appellants could not discharge the duty liability on the capital goods sold as the prices were not finalised. It is his submission that once prices were finalised they paid on amount of Rs. 13,42,844/- as duty on transaction value. It is his submission that having discharged the entire duty liability and interest, penalties be set aside.
5. Ld. Departmental Representative reiterates the findings of adjudicating authority and submits that appellant is in an organized sector and was aware of the law.
6. Heard both sides, considered detailed submissions and perused the records.
7. At the outset it is to be recorded that the facts are not disputed and appellant is only contesting the penalties impose by the adjudicating authority. The adjudicating authority has imposed a penalty of Rs. 18,31,367/- under Section 11AC of Central Excise Act, 1944, read with Rule 15(2) of the CENVAT Credit Rules, 2004, which is contested by appellant.
8. In my opinion, the adjudicating authority has given a detailed reasoning for confirmation of demand of Rs. 18,31,367/- with interest and also for imposing penalties. I would like to reproduce the said findings.
32.8 The amount arrived is Rs. 18,31,267/- (Rupees eighteen lakhs thirty one thousand two hundred and sixty seven only). The detailed worksheet is enclosed as Annexure to this order. As per provisions of rule 3(5A) read with proviso thereto, says that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value. In the present case, the amount calculated at is arrived at Rs. 18,31,267/- where as the duty paid on transaction value is arrived at Rs. 13,42,844/-. Since the amount calculated as per the provisions of Rule 3(5A) are higher than the amount of duty paid on transaction value, the amount payable by the assessee is Rs. 18,31,267/-.
33. The assessee in their reply to the show cause notice submitted that they arrived at Rs. 13,42,844/- towards CENVAT credit liable to be paid as per provisions of Rule 3(5A) of CENVAT Credit Rules, 2004. The said amount was paid by them. The show cause notice alleges that the assessee removed capital goods without raising invoice and payment of appropriate amount. The assessee contested that they have removed the capital goods during the month of October, 2013. Department has verified from the receiving party the receipt of the said capital goods and there was no rebuttal in the notice regarding removal of capital goods during the month of October, 2013, as such, it is to be accepted that the capital goods are removed during the month October, 2013 only. The assessee has removed the capital during the month of October, 2013 and paid the amount on 02.12.2013 and required to pay interest.
34. As regards the claim of the assessee that the notice is time barred, it can be seen that the departmental officers visited the factory on 23.11.2013 on specific intelligence that the assessee had removed capital goods without raising a proper document. On the visit of the departmental officers they agreed that the price was not finalized as such they have not raised invoice and subsequently they raised invoices and submitted to the department. If the departmental officers had not noticed the irregularity, the issue would not have come to the notice of the department. To argue that the price was not finalized at the time of removal is only an afterthought and there is no truth in their submission. The assessee would have lied about their removal date and it is because of officers visit and verification at the other end only made them to accept removal date and payment of the amount. There is clear mala fide intention on the part of the assessee as there is clear case of suppression and accordingly invoking extended period is sustainable.
34.1 The assessee has relied on certain case laws regarding invoking extended period. I am not going into the merits of these cases, as they are different from the assesses case and there is a clear evidence that the assessee has suppressed the removal of the capital goods without intimating the department and following the procedures as laid down the in the central excise rules for removal of capital goods. Accordingly, they are liable to penal action under Section 11AC of the Central Excise Act, 1944.
9. In my considered view, the above said findings of the adjudicating authority are flawless and needs to be upheld. There is no dispute that appellant had not discharged the duty liability at the time of clearance capital goods cleared from the factory and duty liability was discharged only on being pointed out, this act of appellants is gross violation of the provisions of the law with intent to evade duty.
10. In view of the foregoing, in the facts and circumstances of this case, I hold that impugned order is correct and legal and does not suffer from any infirmity. The appeal is devoid of merits and accordingly is rejected