IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
ON THE 24th DAY OF FEBRUARY, 2022
.
BEFORE
HON'BLE MRS. JUSTICE SABINA
&
HON'BLE MR. JUSTICE SATYEN VAIDYA
CENTRAL EXCISE APPEALS No.1 & 2 of 2013
Between:-
M/S SALUJA EXIM.
(1) CENTRAL EXCISE APPEAL No.1 of 2013
(NOW M/S SE EXPORTS),
THROUGH VIJAY SHARMA,
DEPUTY MANAGER (EXCISE),
PLOT NO.90, HIMACHAL PRADESH
STATE INDUSTRIAL CORPORATION,
INDUSTRIAL AREA, BADDI,
DISTRICT SOLAN (H.P.)
......APPELLANT
(BY SH. NAVEEN BINDAL AND
MR. GOVERDHAN LAL SHARMA,
ADVOCATES)
AND
THE COMMISSIONER,
COMMISSIONERATE OF CENTRAL
EXCISE, CENTRAL REVENUE
BUILDING, PLOT NO.19, SECTOR 17-C,
CHANDIGARH.
......RESPONDENT
(BY SH. VIJAY KUMAR ARORA,
SENIOR STANDING COUNSEL)
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-2-
(2) CENTRAL EXCISE APPEAL No.2 of 2013
Between:-
.
M/S SALUJA EXIM limited.
(NOW M/S SEL MANUFACTURING COMPANY
LIMITED), THROUGH VIJAY SHARMA,
DEPUTY MANAGER (EXCISE),
PLOT NO.106, HIMACHAL PRADESH
STATE INDUSTRIAL CORPORATION,
INDUSTRIAL AREA, BADDI,
DISTRICT SOLAN (H.P.)
......APPELLANT
(BY SH. NAVEEN BINDAL AND
MR. GOVERDHAN LAL SHARMA,
ADVOCATES)
AND
THE COMMISSIONER,
COMMISSIONERATE OF CENTRAL
EXCISE, CENTRAL REVENUE
BUILDING, PLOT NO.19, SECTOR 17-C,
CHANDIGARH.
......RESPONDENT
(BY SH. VIJAY KUMAR ARORA,
SENIOR STANDING COUNSEL)
RESERVED ON : 21.02.2022
DECIDED ON : 24.02.2022
These appeals coming on for hearing this day, Hon'ble
Mrs. Justice Sabina, delivered the following:
JUDGMENT
Vide this judgment, abovementioned appeals would be disposed of as they have arisen out of common order dated ::: Downloaded on - 24/02/2022 20:11:42 :::CIS -3- 22.02.2011, passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi Principal Bench, Court No.1 .
(hereinafter referred to as 'the Tribunal').
2. Case of the appellant, in brief, is that it was engaged in the manufacture of readymade garments, falling under Chapter heading 61 of the Central Excise Tariff Act, 1985 (hereafter referred to as 'the Act'). Prior to 2003, there was no Central Excise duty on readymade garments. However, in the budget presented in the year 2003, Government imposed duty on all kinds of garments, falling under Chapter heading 61 and 62 of the Act. As per Rule 3 (2) of the Cenvat Credit Rules, 2002 (hereafter referred to as 'the Rules'), a manufacturer was entitled to Cenvat Credit of duty paid on inputs lying in stock or in process of the inputs contained in the final products lying in the stock on the date on which any goods cease to be exempted goods or any goods become excisable. As per rules, Cenvat Credit could be availed only on the basis of duty paying documents. Prior to the year 2003-04, there was no duty on grey fabric and in case of dyed fabric, duty was paid by processor and suppliers. The manufacturers were having stock of raw material, semi-finished and finished goods, therefore, goods duty was levied on garments and the manufacturers were not entitled to Cenvat ::: Downloaded on - 24/02/2022 20:11:42 :::CIS -4- Credit because goods were received without excise invoices. In order to overcome this problem, Government had introduced the .
concept of 'Deemed Cenvat Credit', vide notification No.35/2003 (NT) dated 10.04.2003, w.e.f. 01.04.2003. The said notification was amended vide notification No.47/2003 dated 17.05.2003. The scope of earlier notification was widened by the later notification. Appellant had declared the stock of inputs, semi-finished goods and finished goods. Out of the total declared finished goods, some stock was lying in the factory premises itself, whereas, some stock had been kept in the godown/depot located near the ports, i.e., Mumbai Port and Kolkata Port.
3. Respondent-department formed an opinion that the appellant was not entitled to claim Cenvat Credit with regard to the goods stored in the godown/depot near the ports because the said goods had already been cleared from the factory prior to the issuance of the notification. On the basis of this opinion, show-cause notices dated 06.05.2005 were issued to the appellant as to why Cenvat Credit, availed and utilized by it, should not be recovered and penalty should not be imposed. The show-cause notices were duly contested by the appellant. However, the Joint Commissioner/ Adjudicating Authority, vide orders dated 06.05.2005, confirmed the ::: Downloaded on - 24/02/2022 20:11:42 :::CIS -5- demand and imposed penalty on the appellant. In appeal, the orders passed by the Adjudicating Authority were set-aside by the .
Commissioner (Appeals), vide its order dated 24.05.2005.
Respondent challenged the said order before the Tribunal and the appeals filed by the respondent were allowed, vide the impugned order dated 22.02.2011. Hence, the present appeals by the appellant.
4. The controversy involved in the present case is as to whether the goods stored in the port area by the manufacturer, could be considered as "goods in stock".
5. Learned counsel for the appellant has argued that the goods in question were lying in the godown of the appellant near the port area and the appellant was entitled to claim Cenvat Credit.
Learned counsel has further submitted that the appellant was entitled to claim Cenvat Credit with regard to the goods lying in its stock prior to 1st April, 2003.
6. Learned counsel for the respondent-department, on the other hand, has opposed the appeals and submitted that the goods had been removed to port area from the factory by the appellant in pursuance to invoices issued in favour of the purchasers. Hence, the goods lying in the port area could not be described to be a stock ::: Downloaded on - 24/02/2022 20:11:42 :::CIS -6- lying in the premises of the manufacturer.
7. Rule 9-A of the Cenvat Credit Rules, 2002 reads as .
under:-
Rule 9-A. Transitional provisions for Textile and Textile Articles:-
(1) A manufacturer, producer, first stage dealer or second stage dealer of yarns and unprocessed fabrics falling under Chapter 50,51,52,53,54,55, 58, 59 or 60 of the First Schedule to the Tariff Act or a manufacturer of processed fabrics falling under Chapter 50,51,52,53,54,55, 58, 59 or 60 of the First Schedule to the Tariff Act shall be entitled to avail credit equal to the duty paid on inputs of such finished product, lying in stock or in process or contained in finished products, lying in stock as on 31st day of March, 2003 upon making a written declaration of the description, quantity and value of the stock of inputs (whether lying in stock or in process or contained in finished products lying in stock) and subject to availability of the document evidencing actual payment of duty thereon.
(2) Notwithstanding anything contained in sub-rule (1), the manufacturer, producer, first stage dealer or second stage dealer, as the case may be, referred to in the said sub-rule, who is unable to produce the document evidencing actual payment of duty, shall be entitled to avail credit, calculated in a manner referred to in sub-rule (3), on inputs falling under Chapters 50 to 63 of the First Schedule to the Tariff Act, lying in stock or in process or contained in finished products lying in stock as on 31st day of March, 2003 upon making a written declaration of the description, quantity and value of the stock of each of such goods. The declaration made under this sub-rule shall exclude quantity stock declared under sub-rule (1). (3) (a) The credit of duty on each such input lying in stock and in process shall be calculated on the basis of such rate as may be notified by the Central Government in this behalf, having regard to the ::: Downloaded on - 24/02/2022 20:11:42 :::CIS -7- average price of such inputs, and the applicable rate of duty and the quantity of input as declared by the Assessee under sub-rule (2).
.
(b) The credit of duty on inputs contained in the fabrics lying in stock as on the 31st day of March, 2003 shall be calculated in the following manner, namely:
(i) where the inputs and the finished products are covered under Notification No. 52/2001-Central Excise (N.T.), dated the 29th June, 2001, subject to such conditions as prescribed under the said notification, the credit shall be equal to the such rate of credit as may be notified by the Central Government in this behalf, multiplied by the quantity of such finished product as declared by the Assessee; or
(ii) where the inputs and the finished products are covered under notification Nos. 54/2001-Central Excise (N.T.) dated the 29th June, 2001, or 6/2002- Central Excise (N.T.) dated the 1st March 2002, subject to such conditions as prescribed under the said notifications, the credit shall be equal to the product of, (A) the applicable percentage credits in terms of the said notifications;
(B) the value of such finished product declared by the Assessee; and (C) the duty rate applicable to such final product in terms of Notification No.7/2003-Central Excise, dated 28-2-2003.
Explanation:- For removal of doubt, it is hereby clarified that the entire amount of credit as eligible under sub-rule (1) and/or (2) shall be calculated by the Assessee himself who can take credit accordingly."
8. Facts in the present case are not in dispute. Appellant is dealing in manufacture of readymade garments. During the course of scrutiny of quarterly returns filed by the appellant for the ::: Downloaded on - 24/02/2022 20:11:42 :::CIS -8- period April, 2003 to June, 2003, it was noticed by the respondent-
department that the appellant had taken credit on the finished goods .
lying at Mumbai Port and Kolkata Port. It was declared by the appellant that the stock had been dispatched before 31st March, 2003 and was lying at the port on 31st March, 2003. Appellant filed reply to the show-cause notices issued to it by the respondent-
department. It was noticed by the Adjudicating Authority that the documents, i.e. invoices and transport documents, submitted by the appellant showed that the goods in question had been removed from the factory for the period 11th November, 2002 to 28th March, 2003 and 27th November, 2002 to 27th March, 2003. The goods had been cleared on the basis of commercial invoices and were lying at the port for export. Admittedly, the goods had been removed to the port area on issuance of invoices disclosing the buyers name. The goods were not subjected to duty liability at the time of clearance from the factory. Since the goods had been removed from the factory area to the port area on the basis of invoices disclosing buyers name, the same were liable to be excluded from being considered as "goods lying in stock". In this situation, Adjudicating Authority rightly came to the conclusion that the goods had already been removed from the premises of the appellant and had been ::: Downloaded on - 24/02/2022 20:11:42 :::CIS -9- discounted from the stock account maintained at the factory.
Therefore, the appellant could not claim that the goods were still .
lying in its stock. As per Rule 9-A of the Rules, a manufacturer could avail credit vis-à-vis equal to the duty paid on inputs of such finished product, lying in stock or in process or contained in finished products, lying in the stock as on 31st March, 2003 by making a written declaration. However, in the present case, the Adjudicating Authority as well as learned Tribunal rightly came to the conclusion that the goods in question could not be said to be lying with the assessee in stock as they had already been removed to the port area from the factory on the basis of issuance of invoices disclosing buyers name.
9. In the facts and circumstances of the case, impugned order dated 22.02.2011 does not call for any interference.
Accordingly, appeals are dismissed. Pending miscellaneous application(s), if any, shall also stand disposed of.
( Sabina ) Judge ( Satyen Vaidya ) Judge February 24, 2022 ( Himalvi ) ::: Downloaded on - 24/02/2022 20:11:42 :::CIS