State Industrial Corporation vs The Commissioner
2022 Latest Caselaw 375 HP

    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)




                                     ::: Downloaded on - 24/02/2022 20:11:42 :::CIS
                                     -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

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

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

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

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

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

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

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 )