M/S Farseen Rubber Industries Ltd. vs Commissioner Of Central Gst Indore

Heard on admission.

This appeal under section 354 of the Central Excise Act, 1944 (for brevity “1944 Act”) is directed against the order dated 27.9.2017 passed by the Custom, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi, whereby the order dated 15.3.2013 passed by the Commissioner, Central GST, has been upheld.

Facts as borne out from the pleadings giving rise to the controversy reveals that, appellant is a private limited company registered under Central Excise Department engaged in the manufacture of Butyl Rubber Products falling under Chapter 40 of the Central Excise Tariff. That during the period 2008- 2009 to 2010-2011 (from 3.6.2008 to 19.1.2011) under Job Work Notification No.214/86- CE dated 25.3.1986, the appellant manufactured Inner tubes and some Mixing compound on behalf of M/s Birla Tyres Ltd. (Unit

II) Laksar, District Haridwar, Uttrakhand on job work basis with raw materials supplied by them.

It is the contention of the appellant that immediately after taking up the job work the appellant informed the the Deputy Commissioner of Central Excise on 05/06/2008 that “We understand that M/s. Birla Tyres might have filed the declaration for this. We understand that duty liability on job work manufacturing will be on the principal manufacturer.” And that during the relevant period M/s Birla Tyres were fully exempted from the payment of duty on their final products under notification No.50/2003-CE dated 10/06/2003.

That on 31/03/2010, Preventive Team, Central Excise Division Gwalior visited the unit. Some documents/records were resumed. Statements of the General Manager of Appellant-Company were recorded under Section 14 of 1944 Act.

The Appellants were summoned for recording their statement under Section 14 of 1944 Act. One Shri Dinesh Upadhyay an authorized signatory appeared, he stated of filing of ER-1 Returns and admitted of nonmention of production and clearance of “Tubes” and “Mixed Chloro Butyl Compound” in the return. Various information were furnished as to how materials were received. And that w.e.f. 01/04/2011 they have stopped the job work of M/s Birla Tyres Unit-I, Laksar Haridwar. The Preventive Team observed that clearance of scrap with respect to Butyl Rubber Compound the noticee submitted of fly loss allowance of 0.8%; however, in challan 'scrap' and not fly loss was found mentioned. 6. From these facts the Preventive Team observed that the noticees were engaged in manufacture or job work of M/s Birla Tyres Unit-II Laksar claiming Notification No.214/1986 dated 25/03/1986 from 20082009 and the Principal Manufacturer were also not discharging the Central Excise Duty on the final product and were availing the area based exemption under Notification No. 50/2003-CE dated 10.6.2003. The Team observed the non-availability of the benefit of Notification No.214/1986 to the noticee, further observing that a job worker is exempted from the payment of duty of excise only when the Principal Manufacturer undertakes to discharge their liabilities at their end. The Preventive Team did not find any such declaration and as the Principal Manufacturer themselves were functioning within the duty exempted area and not paying the Central Excise Duty in term of exemption Notification No.50/2003-CE dated 10/06/2003, as amended. And the finished goods were cleared by Noticee without payment of Central Excise Duty, found them recoverable as per Section 11A of 1944 read with Rules 4, 6 and 8 of the Central Excise Rules.

The Preventive Team further noticed from the statement of Noticee's General Manager, recorded on 31/03/2010 that, the Principal Manufacturer had filed declaration under the exemption Notification No.214/86CE dated 25/03/1986 to the Department on 01/04/2009 whereas raw materials for job work from 2008-2009 were sent prior to the filing of declaration.

The Preventive Team observed that the Noticee suppressed these vital facts which led to issuance of the show cause notice No. V(40) 15- 06/2011/Adj-I/2276 dated 18/01/2012.

The Appellant besides contradicting on facts also raised objection as to invocation of extended period of limitation stating that the show cause notice covers the period between 03/06/2008 to 19/01/2011 whereas the show cause notice was issued on 18/01/2012.

Commissioner, Customs Central Excise and Service Tax dwelling on the aspect of limitation and the merit, respectively held that the Principal Manufacturer having not filed the declaration as stipulated under exemption Notification No.214/86-CE dated 25/03/1986 for the Butyl Inner Tubes manufactured and cleared by noticee without payment of duty in the year 2008-2009. That the letter dated 05/06/2008 filed by the noticee informing manufacture of tube on job work basis for M/s Birla Tyres also does not reflect that the Principal manufacturer is not registered under Central Excise.

That even the declaration filed by M/s Birla Tyre dated 26/03/2009 to the department on 01/04/2009 did not reveal the manner of payments of duty on final goods as they had not taken the registration, upheld the invocation of extended period.

The Tribunal upheld this finding vide impugned order observing that since there was a suppression of fact and also mis-declaration the department was within its jurisdiction to avail the extended period.

Section 11A of 1944 provides:

“11A Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. — (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or [erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder], a Central Excise Officer may, within [one year] from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:

Provided that where any duty of excise has not been levied or paid or has been shortlevied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect,[as if [***]] for the words [one year], the words “five years” were substituted:

Explanation .—Where the service of the notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the aforesaid period of [one year] or five years, as the case may be.

Thus the period of one year get extended to five years where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of fact, or contravention of any of the provisions of the Act or of the rules made thereunder with intent to evade payment of duty by which person or his agent.

It is urged on behalf of the Appellant that having discharged its onus vide communication dated 05/06/2008 and the Principal Manufacturer having given the undertaking to discharge the liability in respect of Central Excise Duty leviable on the furnished products, viz., tyres, tubes, and flap followings under Chapter 40, it was beyond the jurisdiction of the Authorities to have proceeded under Section 11A of 1944 by invoking extended time.

These communications referred to are reproduced for ready reference:

“To

Dy. Commissioner,

Central Excise & Custom

Division Gwalior,

45A, City Centre,

Gwalior (M.P.)

Sub: Job work of Butyl Tube manufacturing for M/s Birla Tyres II (Prop. Kesoram Industries Ltd.) Laksar, Haridwar.

Dear Sir,

We have got job work (conversion) contract of tube manufacturing from M/s Birla Tyres II, Lakshar, Haridwar under notification No.214/86-CE dt. 25.3.1986.

They will supply all input material & we will do job work for them & will return tubes as well as scrap generated during the process. We understand that M/s Birla Tyres might have filed the declaration for this. We understand that the duty liability on job work manufacturing will be on the principal manufacturer.

This is for your information & records please.

Yours faithfully,

For Farseen Rubber Industries Ltd. Authorised Signatory.” and

“Birla Tyres Unit-II

(PROP. KESORAM INDUSTRIES LTD)

Gram Khedimubarakpur, Tehsil: Lakshar

Tel: (01332) 258000

Fax: (01332) 256226

Email: [email protected].

Ref: BT/C.Ex./2008-09/ Date: 26.3.2009

Assistant Commissioner

Central Excise & Customs

Div. Gwalior

45A City Center,

Gwalior -474001, Sub: Intimation to remove inputs under Rule 4 (6) of Cenvat Credit Rules 2002 and/or Notification No.214/86-CE dt.25.3.86 & circular No.146/57/95-CX dated 12.9.95 for movement of Goods.

Dear Sir, We are enclosing herewith our intimation dated 26.3.2009 submitted to our jurisdictional Assistant Commissioner, Central Excise & Customs Dehradun division for getting nor inputs processed at M/s Farseen Rubber Industries Ltd. A-1, Banmore Industrial Area, Banmore, Distt.

Morena (M.P.) as stipulated in Para 2 of Notn. No.214/86-CE dated 25.3.1986 we hereby undertake as under:

1) That the processed goods i.e. rubbercompound of tubes shall be used in the manufacture of Tyres, tubes & Flaps falling under chapter-40)

2) To produce evidence that the said goods have been so used and

3) To discharge the liability in respect of Central Excise dut leviable on the finished products namely tyres, tubes & flaps falling under Chapter 40.

We are exempted from Central Excise Registration and Excise Duty vide Notification No.50/2003 dt. 10/06/03.

We shall be maintaining the necessary Central Excise records as prescribed under Rules for this purpose.

Thanking you

Yours faithfully

For BIRLA TYRES-II

(Prop. Kesoram Industries Ltd.)

(S.C. Sood)

Vice President (Commercial)”

The expression “understand” as per MerriamWebster is a transitive verb which means (i) to grasp the meaning of; (ii) to grasp the reasonableness of; (iii) to have thorough or technical acquaintance with or expertness in the practice of; (iv) to accept as a fact or truth or regard as plausible without utter certainty; (v) to interpret in one of a number of possible ways.

Furthermore, it is clear from the correspondence dated 26/03/2009 by the Principal Manufacturer, that, it was exempted from Central Excise Registration and Excise Duty vide Notification No.50/2003 dated 10/06/2003.

Thus a wrong declaration was given by the Appellant that the finished job work product is duty paid by the manufacturer. This, in our considered opinion was rightly construed as a deliberate act, and willful misstatement and suppression of facts which fact could be unearth when the Preventive Team visited the unit on 31.3.2010. It was only then, the department came to know the evasion of duty by the Appellant, which led the department to invoke the extended limitation under proviso to Section 11A of 1944 Act.

It is held in Commissioner of C.Ex., Visakhapatnam Vs. Mehta & Co. [2011(264) ELT 481 (SC)], wherein it is held:-

The cause of action, i.e., date of C.E.A. No. 122/2017 (M/s Jamna Auto Industries Ltd. Vs. Union of India and others) knowledge could be attributed to the appellant in the year 1997 when in compliance of the memo issued by the appellant and also the summons issued, the hotel furnished its reply setting out the details of the work done by the appellant amounting to Rs. 991.66 lakhs and at that stage only the department came to know that the work order was to carry out the job for furniture also. A bare perusal of the records shows that the aforesaid reply was sent by the respondent on receipt of a letter issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of five years is computed from the aforesaid date, the show cause notice having been issued on 15-5-2000, the demand made was clearly within the period of limitation as prescribed, which is five years."" 20. In view whereof, the findings qua availing of extended period of limitation cannot be faulted with.

Now coming to the factual aspects, the Commissioner Customs, Central Excise and Service Tax found that since Principal manufacturer was availing the exemption, the noticee who had manufactured and cleared Butyl Inner Tubes and Rubber Compound Mixing following under Chapter 40 of the 1st scheduled to the Central Excise Tariff Act, 1985 and also scrap was liable for payment of duty totaling to Rs.8,89,73,647/(Rs.2,11,95,575/- + 6,77,78,072/-). While confirming the said demand imposed the penalty of Rs. 8,89,73,647/- under Section 11AC of 1944 Act and Rs. 2,22,43,412/- under Rule 25 of the Central Excise Rules, 2002 and the interest thereon in terms of Section 11AB(currently Section 11AA) by order dated 15/03/2013. The Tribunal affirmed the same vide impugned order.

The impugned order when tested on the anvil of the fact analysed above leaves no scope for interference, as the findings are in consonance with the material facts on record.

Additional grounds are raised in the present appeal as to non-joinder of necessary parties viz., the principal manufacturer. However, no such objections were raised before the Commissioner, nor before the Tribunal; therefore, the Appellant cannot for the first time be permitted to raise the objection in Appeal under Section 35G of 1944 Act.

Having thus considered, we do not perceive any substantial question of law arising for consideration.

Consequently, appeal fails and is dismissed. No costs.