2007(02)LCX0052
IN THE CESTAT, WEST ZONAL BENCH, MUMBAI [COURT NO. I]
Ms. Jyoti Balasundaram, Vice-President and Shri K.K. Agarwal, Member (T)
Atul Industries
Versus
Commissioner of Central Excise, Pune-II
Final Order Nos. A/130-132/2007/C-I/(E.B.), dated 1-2-2007 in Appeal Nos. E/1501-1503/04
Cases Quoted -
Commissioner v. Shrijee Heavy Project Works Ltd. - 2006(04)LCX0291 Eq 2006 (203) ELT 0232 (Tribunal)
- Relied on [Para 4]
Commissioner v. TELCO Ltd. - 2006(07)LCX0139 Eq 2006 (204) ELT 0083 (Tribunal) - Referred [Para 7]
D.C.M. Shriram Industries Ltd. v. Collector - 1996(03)LCX0049 Eq 1996 (084) ELT 0221 (Tribunal) - Relied on [Para 4]
Navbharat Industries v. Commissioner - 2006(04)LCX0154 Eq 2006 (201) ELT 0274 (Tribunal) - Relied on [Para 4]
Raunaq International Ltd. v. Commissioner - 2001(09)LCX0112 Eq 2001 (138) ELT 1009 (Tribunal) - Referred [Para 7]
Una Subbarao v. State of Orissa - 1984(10)LCX0010 Eq 1987 (030) ELT 0105 (Ori.) - Referred [Para 4]
Advocated By -
Shri V.B. Gaikwad, Advocate, for the Appellant.
Shri C. Lama, JDR, for the Respondent.
[Order per : Jyoti Balasundaram, Vice-President]. -
The above appeals arise out of the order of the Commissioner of Central Excise, Pune, confirming a duty demand of Rs. 57,75,839/- on Big Crystal Sugar (Diamond Sugar), Khadi Sugar and Bura Sugar, holding that they are products manufactured out of Cane Sugar, classifiable under CET sub-heading 1701.39 attracting central excise duty at the appropriate rate during the period April 1998 to June 2003, together with interest, and imposing penalty of equal amount upon the assessee and penalties of Rs. 10,00,000/- each on its partners. Extended period of limitation has been applied against the assessee. The benefit of exemption in terms of SSI Notifications 8/1998, 8/1999, 8/2000 and 8/2001 has been extended and duty liability worked out on clearances in excess of the ceiling limit prescribed thereunder.
2. We have heard both sides.
3. The issues for determination are -
(1) Whether the activity of conversion of sugar into Big Crystal Sugar Khadi Sugar and Bura Sugar amounts to manufacture under the provisions of Section 2(f) of the Central Excise Act. 1944;
(2) Whether the assessee is eligible to Cenvat credit of duty paid on sugar in case issue No. 1 is answered in the affirmative;
(3) Whether sugar cess is leviable on the products in dispute;
(4) Whether the demand is partly barred by limitation; and
(5) Whether the benefit of cum duty price is available to the assessee.
4. Finding on issue No. 1
We find that on merits, the issue stands decided against the assessee by Tribunal's decision in Navbharat Industries v. CCE, Aurangabad - 2006 (201) ELT 274 wherein the Tribunal has noted the decision of the Hon'ble Orissa High Court in Una Subbarao v. State of Orissa - 1984(10)LCX0010 Eq 1987 (030) ELT 0105 (Ori.) and held that sugar confectionary is different from sugar but since it is sugar as defined in the Sugar Cess Act, 1982, the same will be charged to sugar cess once again. We also note that in the case of DCM Shriram Industries v. CCE, Meerut - 1996 (084) ELT 221, the Tribunal has held that sugar cubes, sugar sachets and pharmaceutical grade sugar are classifiable under Chapter sub-heading 1701.90 of the schedule to the Central Excise Tariff Act and in the case of CCE, Aurangabad v. Shri jee Heavy Projects Works Ltd. - 2006 (203) ELT 232, the Tribunal has held that Big Sugar Crystal and Sugar Candy are classifiable under CET sub-heading 1701.39. Following the ratio of the above orders, we hold that the goods in question are excisable and fall for classification under CET sub-heading 1701.39 (the assessees do not contest the classification under this heading and only dispute the excise-ability). Issue No. 1 is therefore answered in the affirmative.
5. Finding on issue No. 2
The Commissioner has held that cenvat credit is not admissible to the assessees on the ground that they failed to produce any evidence of the duty paid nature of the inputs (sugar) and use thereof in their final products. However, we note that invoices evidencing payment of duty on inputs were filed before the adjudicating authority and therefore they should have been verified and credit extended thereafter. As regards the finding that there was no material adduced by the assessees to establish use of the inputs in the manufacture of their final products, we hold that this is no ground for denial of credit for the reason that it is the case of the department itself that sugar purchased by the assessees was used for the manufacture of Big Crystal Sugar, Khadi Sugar and Bura Sugar. In these circumstances, we direct the adjudicating authority to verify the input invoices produced/to be produced by the appellants and then extend cenvat credit thereon. This issue is, therefore, remanded to the Commissioner for the above purpose.
6. Finding on issue No. 3
The contention of the assessees that sugar cess is leviable on Khadi Sugar for the reason that Khadi Sugar is not manufactured by vacuum pan process while sugar cess is leviable only on sugar so manufactured, has been raised before the Tribunal for the first time. However, it has been the stand of the assessees throughout that Khadi Sugar was not manufactured by the vacuum pan process, and this is not a new plea raised on at this stage. We, therefore, remand this issue to the Commissioner for fresh decision.
7. Finding on issue No. 4
Show cause notice dated 30-7-2003 covers the period from 1998-99 to 2003-04 (up to June 2003). The submission of the appellants that the demand up to June 2002 is barred by limitation and that they were under a bona fide belief that the process carried out by them on sugar does not amount to manufacture in view of decisions in the case of Raunaq International Ltd. v. CCE - 2001(09)LCX0112 Eq 2001 (138) ELT 1009 and CCE v. Telco Ltd. - 2006 (204) ELT 83 to the effect that mere change in physical form does not amount to manufacture, and due to such bona fide belief they did not apply for central excise registration and did not declare their process to excise authorities, is not tenable for the reason that the judgments cited supra relate to different processes and different products and therefore cannot be said to form the basis of the assessees' bonafide belief. Since the appellants did not disclose their manufacturing activity, they are guilty of suppression with intent to evade payment of duty and hence the longer period of limitation has been rightly invoked against them. This issue is, therefore, answered in the negative.
8.Finding on issue No. 5
The benefit of cum duty price is required to be extended to the assessees and the duty demand will have to be reworked out accordingly and this issue is, therefore, remanded for duty re-computation.
9 As regards penalty on the assessee firm, while it is sustainable in the light of our finding on applicability of the extended period of limitation, the quantum is to be worked out afresh after arriving at the duty liability after extending the benefit of cenvat credit and the benefit of cum duty price and it is, therefore, left open to the adjudicating authority to determine the quantum of penalty to be imposed upon the assessee firm. Penalties on the partners of the firm under the provisions of Rule 209A read with Rule 26 of the Central Excise Rules are set aside as the provisions of these rules are not attracted against them in the absence of any finding of liability of any goods to confiscation.
10. In the result, appeal No. E./1501/04 of the assessee firm is partly allowed as above and appeal Nos. E/1502 & 1503/04 of the partners are allowed in toto.
Equivalent 2007 (210) ELT 0681 (Tri. - Mumbai)
Equivalent 2007 (080) RLT 0198 (CESTAT- Mum.)