At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai
By, THE HONORABLE JUSTICE: SULEKHA BEEVI C.S.
By, MEMBER AND THE HONORABLE JUSTICE: MADHU MOHAN DAMODHAR
For Petitioner: R. Parthasarathy, Advocate And For Respondents: K. Veerabhadra Reddy, JC (AR)
1. The appellants are manufacturers of automobile parts and seat parts. During the period April 2006 to April 2008, they manufactured and supplied seat assembly to Hyundai Motors India Pvt. Ltd. (HMIL for short). However, certain material for use in the manufacture of such seat assemblies were supplied by HMIL to the appellant free of cost (FOC) by way of stock transfer. The appellant while discharging their duty liability did not include the value of FOC materials and availed CENVAT credit on the materials. This was objected to by the department and accordingly show cause notice dated 22.3.2010 was issued to the appellant, inter alia, proposing to demand differential duty of Rs. 1,76,13,726/- along with interest thereon and for imposition of penalty. In adjudication, vide the impugned order dated 20.9.2010, the original authority confirmed the proposals in the show cause notice and appropriated the amount already paid by the appellant and also imposed equal penalty under section 11AC of the Central Excise Act. Hence this appeal.
2. Today when the matter came up for hearing, ld. counsel submits that the appellants were under bona fide belief that the value of FOC material need not to be included since the same would be forming part of the assessable value of the motor vehicles cleared by HMIL on payment of duty. The entire issue is therefore revenue neutral. He further submits that the issue now stands settled by the decision of the Tribunal in SRF Ltd. Vs. Commissioner of Central Excise : 2007 (220) ELT 201 (Tri. Chennai) which has been affirmed by the Hon'ble Apex Court reported in 2016 (331) ELT A138 (SC). Ld. counsel also places reliance on the decision of the Apex Court in International Auto Vs. Commissioner of Central Excise: 2005 (183) ELT 239 (SC). Ld. counsel draws the attention to the decision of the Tribunal in Law Kim Ltd. Vs. Commissioner of Central Excise, Pune II 2007 (218) ELT 142 (Tri. Mum.) where identical issue had been addressed by the Tribunal and the matter decided in favour of the appellant therein following the law laid down by the Hon'ble Supreme court in International Auto cited supra. The ld. counsel further submits that in any case suppression cannot be alleged against the and since they were under bona fide belief and in fact when the matter was brought to their notice, they immediately paid the amount of differential duty along with interest thereon.
3. On the other hand, ld. AR supports the impugned order. He draws our attention to page 7 of the impugned order wherein the adjudicating authority has distinguished the facts of the present case vis-a-vis facts in International Auto (supra) and has pointed out that in the latter case, the appellant therein had not taken CENVAT credit.
4. In response, ld. counsel points out that the judgment of Hon'ble Supreme Court in International Auto involved two sets of appeals, one Civil Appeal No. 176 of 2000 by International Auto and another Civil appeal Nos. 4086 & 4087/2001 filed by Jay Yuhshin Ltd. He points out that the facts of the Jay Yuhshin Ltd. discussed by the Tribunal in the Lawkim Ltd. decision (supra), in para 6 therein, would clearly indicate that in that case Jay Yuhshin Ltd. Had received the goods free of charge, and had also availed credit of the duty paid thereon. As such the facts of Jay Yuhshin and the facts of the present case are pari materia and hence ratio of the International Auto judgment fully applies to the present case.
5. Heard both sides.
6. After hearing both sides, we find that the ratio laid down in respect of Jay Yuhshin Ltd. in Civil Appeal No. 4086 & 4087/2001 in the judgment of the Apex court in International Auto: 2005 (183) ELT 239 (SC) wi
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ll apply to all fours to the facts of the appeal in hand. The said ratio has been followed by the Tribunal in Lawkim Ltd. (supra) and also in SRF Ltd. (supra). The latter decision has also been affirmed by the Apex Court as reported in 2016 (331) ELT A138 (SC). Hence, following the same, we find merit in the appeal for which reason the impugned order cannot be sustained and therefore set aside. The appeal is allowed.