Grupo Antolin India PVT Limited vs Commissioner Of Central Excise & ST, Ahmedabad II

C.L. Mahar, Member (T)

The facts in brief are that appellant are manufacturer of motor- vehicle parts for M/s. Ford India Pvt. Limited falling under Chapter 87 of Central Excise Tariff Act, 1985. During the course of audit of the appellant’s financial records for the period 2014-15 to 2016-17, it was noticed by the department that the appellant has procured certain tools and moulds valued at Rs. 28,60,37,256/- on payment of duty and the appellant availed Cenvat credit of duty paid on such tools and moulds. These tools and moulds were further sold to M/s. Ford India Pvt. Limited by the appellant by issuing commercial invoices on which VAT was discharged however, no central excise duty was paid. The Cenvat credit availed at the time of procurement of such tools and moulds was not reversed by the appellant as these goods were not removed by them from the factory of manufacture. The department has also observed that the appellant in their books of accounts have reduced inventory of tools and moulds equivalent to one which was sold by them to M/s. Ford India Pvt. Limited. The department entertained a view that the appellant have removed tools and moulds on which Cenvat credit has been availed by them without discharge of proper Central Excise duty in terms of Rule 3(5A)(a) of Cenvat Credit Rules, 2004. Accordingly, a show cause notice dated 20.09.2018 was issued to the appellant demanding Central Excise duty of Rs. 3,57,54,657/- as per the provisions of Section 11A of the Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rules, 2004. Interest and penal provisions have also been invoked in the show cause notice. The matter was adjudicated by the impugned order-in-original dated 02.06.2021 whereunder all the charges invoked in the show cause notice has been confirmed by the Adjudicating Authority. The appellant is before us against the above mentioned impugned order-in-original.

Learned advocate appearing for the appellant has submitted that they have received purchase order from their customer M/s. Ford India Pvt. Limited for manufacture and supply of certain auto components for which they have asked M/s. Ford India Pvt. Limited to supply tool and moulds for manufacture of required automobile components. After discussion with M/s. Ford India Pvt. Limited the appellant have placed purchase order for such tools and moulds from various vendors during the relevant time and had taken Cenvat credit to the tune of Rs. 2,14,03,051/- on procurement of such tools and moulds on the strength of purchase invoices. The learned advocate has further submitted that after receiving the tools and moulds into their factory, the appellant had raised commercial invoice to them for sale of such tools and moulds to M/s. Ford India Pvt. Limited. The said commercial invoices were only to effect the sale of such tools to their customers namely M/s. Ford India Pvt. Limited. It was further explained by learned advocate that such tools and moulds were supposed to be provided to M/s. Ford India Pvt. Limited for manufacture of various automobile components. However, since it was requested by M/s. Ford India Pvt. Limited that appellant can procure the same from various vendors and use the same for manufacture of automobile components and the ownership of such tools and moulds is to be transferred to M/s. Ford India Pvt. Limited.

The learned advocate further emphasized that tools and moulds on which they have availed Cenvat credit has not been physically removed by them from their factory of manufacture. It has been the contention of the learned advocate that no violation of Rule 3 (5A)(a) of Cenvat Credit Rules, has been caused by the appellant as the tools and moulds on which the Cenvat credit has been availed has not been removed from their factory of manufacture and therefore they are entitled to take the credit of the same and not required to reverse the Cenvat credit or pay Central Excise duty at the prevalent rates as per Cenvat Credit and Central Excise Rules. It has further been contended that it was wrong on the part of the department to assume that capital goods on which appellant has availed Cenvat credit were physically removed to M/s. Ford India Pvt. Limited and no evidence leading to removal of such goods has been produced in the show cause notice. Therefore, it was wrong on the part of the Adjudicating Authority to confirm Central Excise duty and impose penalty on the appellant. The learned advocate has relied upon various decisions in support of their arguments:-

(a) H.V. Axles Limited vs. Commissioner of Central Excise, Jamshedpur - 2012 (279) ELT 95 (Tri. - Kolkata)

(b) Polyplastics Industries (I) Pvt. Limited vs. Commissioner of Central Excise & Service Tax, Panchkula -2016 (332) ELT 895 (Tri. - Del.)

(c) Commissioner of Central Excise & Service Tax, Panchkula vs. Polyplastics Industries (I) Pvt. Ltd, -2017 (351) ELT 129 (P & H)

(d) TC Healthcare Pvt. Limited vs. Commissioner of Central Excise, Ghaziabad - 2015 (329) ELT 529 (Tri. - Del.)

(e) DCM Engineering Products vs. Commissioner of Central Excise, Jalandhar - 2010 (251) ELT 91 (Tri. - Del.)

(f) L.G. Balakrishnan & Brothers Limited vs. Commissioner of Central Excise, Trichy - 2016 (340) ELT 708 (Tri. - Chennai)

We have also heard Shri Rajesh Nathan, learned Assistant Commissioner, (AR) who reiterates the findings as given in the impugned order-in-original.

Having heard both the sides, we find that the only question which needs to be answered by us is whether the appellant are entitled for rightfully availment of Cenvat credit as per the provisions of Cenvat Credit Rules, 2004 under the circumstances where though the tools and moulds purchased by them were continue in use for manufacture of excisable automobile components however same has been shown as sold on record on VAT-able invoice issued to M/s. Ford India Pvt. Limited and whether the Cenvat credit availed by them is hit by the provisions of Rule 3(5A)(a) of the Cenvat Credit Rules, 2004.

The facts of the matter are that though the tools and moulds purchased by the appellant have been sold by them on record on VAT-able invoices however, it is mater of record that such tools and moulds are still being used by the appellant for manufacture of automobile components which were being supplied by them to M/s. Ford India Pvt. Limited. It will be relevant to have a glance at the relevant provisions of Rule 3(5A)(a) of Cenvat Credit Rules, 2004:-

“(a) if the capital goods, on which Cenvat credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT credit, namely:-

(i) for computers and computer peripherals: For each quarter in the first year@ 10% For each quarter in the second year@ 8%

(ii) for capital goods, other than computers and computer peripherals @ 2.5% for each Quarter:

Provided that if the amount so 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.”

From a plain reading of Rule 3(5A)(a), it can be seen that Cenvat credit is to be reversed only if the capital goods on which Cenvat credit has been availed by any assessee, have physically been removed. We find from the entire proceedings that no evidence has been adduced by the department to prove that the tools and moulds which were purchased and used by the appellant have been physically removed from their factory of manufacture and therefore, we are of the view that since the tools and moulds were being used in manufacture of excisable goods it was wrong on the part of the department to ask for the payment of Central Excise duty on such tools and moulds that these are physically available in the appellant’s manufacturing premises.

The above view has also been endorsed by various decisions of this Tribunal in the following decisions:-

(a) L.G. Balakrishnan & Brothers Limited vs. Commissioner of Central Excise, Trichy - 2016 (340) ELT 708 (Tri. - Chennai)

“10. In view of the above settled decision, we find that the provisions of Rule 3(5) are not attracted in the present case. The original authority’s attempt to distinguish the above findings is not appropriate. He found that these decisions are regarding change of ownership of whole factory whereas here only a part of the factory is transferred. We find such finding as untenable. Further, regarding question of issue of invoice by the appellant for sale and transfer of capital goods and inputs to the new legal entity, we find on perusal of sample invoice that these are not invoices in terms of Rule 11 of Central Excise Rules, 2002. The appellant contended that the goods were identified with value for the purpose of business transaction and not for sale transaction in terms of Sales Tax or Central Excise provision. We note that the invoices issued did not contain the details of any removal, mode of transport, rate of duty, duty payable thereon, etc., as per the requirement of Rule 11(2) of Central Excise Rules, 2002. We also note that based on these invoices no credit can be availed by any buyer as these are not in terms of Rule 9 of Cenvat Credit Rules, 2004. In view of settled legal position regarding need for physical removal of capital goods or inputs, in order to attract the provisions of Rule 3(5) of Cenvat Credit Rules, 2004, we find that there is no justification to invoke such provision to demand and recover any amount from the appellant in this case. As such, we find no justification for the confirmation of demand towards capital goods. The same reasoning is applicable to the recovery of amount for the inputs amounting to Rs. 91,76,449/-. The demand towards such recovery is also not sustainable. There is no allegation or finding regarding any irregular credit availed on inputs or capital goods or usage of these goods for other than approved purposes.”

(b) Polyplastics Industries (I) Pvt. Limited vs. Commissioner of Central Excise & Service Tax, Panchkula -2016 (332) ELT 895 (Tri. - Del.)

“5. I find from the available records that upon verification of the documents and after visiting the factory of the appellant, the Chartered Engineer has certified that the moulds in question are in possession of the appellant and that the said moulds are running in good working condition. The said certificate proves beyond any shadow of doubt that the moulds on which Cenvat credit taken by the appellant had been installed in the factory for use, in or in relation to manufacture of the final product. In view of the fact that the said moulds have not been removed from the factory, the requirements of Rule 3(5) of the Cenvat Credit Rules will have no application. The said rule provides payment of equal amount of Cenvat credit, when the Cenvat availed inputs or capital goods are removed as such from the factory. Since, moulds, in this case, have not been removed from the factory by the appellant; denial of Cenvat benefit by the authorities below is not justified. Further, ownership or control of capital goods by the assessee is not a decisive factor for determination of eligibility to Cenvat credit. As per the statutory provisions, an assessee is entitled to avail Cenvat credit on the inputs or capital goods, upon fulfillment of the condition that those goods have suffered duty and received in the factory of manufacture of final product. In the present case, since the requirement of the Cenvat statute has been duly complied with by the appellant, denial of Cenvat credit on moulds is not proper and justified.”

The above decision of this Tribunal has also been endorsed by Hon’ble Punjab & Haryana High Court in the case Commissioner of Central Excise & Service Tax, Panchkula vs. Polyplastics Industries (I) Pvt. Ltd, reported under 2017 (351) ELT 129 (P & H)

“5. The Adjudicating Authority relied upon the invoices to hold that the moulds had not been removed. The invoices merely evidence a sale. They do not evidence the movement of the goods in respect whereof, they are raised. Delivery challans would indicate the removal of the goods from out of the premises of the seller and to the destination indicated therein.

We will presume that absent anything else an invoice prima facie indicates the delivery of possession of the goods sold. However, in the present case, this presumption is rebutted by the certificate issued by the Chartered Engineer. There is nothing that indicates that the certificate issued by the Chartered Engineer is false. The Department could easily have ascertained this fact by an inspection of the assessee’s premises itself.

Even surprise checks could have been carried out. That was not done.

In the circumstances, the Tribunal cannot be faulted for having relied upon the certificate issued by the Chartered Engineer. The Tribunal rightly proceeded on the basis of the balance of probabilities. The finding is far from perverse or absurd. We are, in fact, in agreement with the approach adopted by the Tribunal.”

Following the ratio of above decisions, we hold that impugned order-in-original is without any merit therefore, we set-aside the same. Accordingly, the appeal is allowed.