Sun Pharmaceuticals Industries Ltd VERSUS C.C.E. & S.T.-Surat-ii

Excise Appeal No. 10958 of 2014

(Arising out of OIO-SUR-EXCUS-002-COM-039-13-14 dated- 03/12/2013 passed by

Commissioner of Central Excise, Customs and Service Tax-SURAT-II)

 

Sun Pharmaceuticals Industries Ltd

VERSUS

C.C.E. & S.T.-Surat-ii

 

Appearance:

Shri A.B Nawal,Cost Accountant & Ms. Nidhi Nawal, Advocate appeared for the

Appellant

Shri Ghanshyam Soni, Additional Commissioner (AR) for the Respondent

CORAM:

HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR

HON’BLE MEMBER (TECHNICAL), MR. RAJU

Final Order No. A / 10110 /2023

DATE OF HEARING: 14.09.2022

DATE OF DECISION: 13.01.2023

RAMESH NAIR

This appeal is filed against the impugned Order-in-Original No.SUR

EXCUS-002-COM-039-13-14 dated 03.12.2013 passed by the Commissioner

of Central Excise & Service tax, Surat –II.

1.2 The brief facts of the case are that during the course of audit while

scrutiny of the Cenvat Credit register of inputs, it was observed that

appellant have taken Cenvat Credit on the basis on their own invoices on

which inputs were cleared to their 100% EOU on job work purpose.

Appellant have two units one is DTA unit and another is 100% EOU, both

manufacturing Bulk Drugs falling under chapter 29 of the CETA 1985.The

100% EOU unit has applied for Job Work permission and sought annual

permission for manufacture of 417600 Kgs. of PENTOXIFYLLYNE meant for

export on behalf of DTA unit. The said permission was sought under Circular

No. 69/1998-Cus dated 14.09.1998 and 74/1999-Cus dated 05.11.1999.

The Deputy Commissioner, Division –III, Ankleshwar has granted permission

to the 100% EOU unit with specific condition. On perusal of the Circular No.

69/98-dated 08.09.1998 it is observed that the Circular pertains to import of

irrigation equipment for use in contract farming under EPCG scheme and for 

export of Agro products, therefore it has no relation with the sub

contracting of manufacture of goods meant for export, by EOU unit on behalf

of DTA unit. Further the Circular No. 74/99-CUS dated 05.11.1999 is in

relation to Job Work undertaken by EOU/EPZ/EHTP units from DTA. As per

para 3 of said circular the benefit of para 4 of circular No. 67/98-Cus. dated

14.09.1998 has been extended to EOU /SEZ units in aquaculture, animal

husbandry, electronics hardware and software sector also subject to the

condition that finished products produced by such EOU/SEZ units will be

exported directly from such units and these goods shall not be allowed to be

brought back to DTA unit and it was also clarified that no drawback/DEPB

benefits shall be admissible either to EOU/EPZ units or the DTA units for

such exports. Further, as per para 11 of Circular No. 49/2000-Cus dated

12.05.2000, the facility to undertake job work on behalf of DTA unit has

been extended to EOU /EPZ units in all sector and it has been decided that

the DTA unit shall be entitled to avail of the brand rate of duty drawback for

such job work undertaken by EOUs/EPZ units concerned. Board’s Circulars

67/98 –Cus. dated 14.09.1998 and 74/99-Cus. dated 05.11.1999 stand

modified to the above extent. As per Exim policy, the circulars and the

conditions laid down by the Deputy Commissioner for Job work, the

Appellant (DTA unit) is only entitled for benefit of Brand rate of Duty

Drawback of the Duty paid on inputs used in the manufacture of goods

meant for export by 100% EOU unit on Job Work basis on behalf of DTA

units; the assessee is not entitled for the benefit of Cenvat Credit of such

inputs. It appears that the DTA unit is only entitled for refund of duty paid

on the inputs by way the brand rate of duty drawback. Accordingly, show

cause notice was issued for recovery of cenvatcredit availed by the appellant

along with interest and penalty. On adjudication demand was confirmed vide

impugned order with interest and penalty. Hence, the present appeal.

Shri A.B Nawal, Learned Cost Accountant along with Ms. Nidhi Nawal,

Learned Advocate for the appellant submits that the present demand is on

DTA unit and in order to utilize idle capacity of the EOU, they sent raw

materials and input to the EOU unit for Job work. DTA unit procured inputs

from the suppliers/other related parties against the various invoices. In

accordance with para 6.14 (b)(1) of FTP job work permission was taken from

the Deputy/Assistant Commissioner for manufacture of specific quantity of

finished goods. During the period May 2010 to October 2010 appellant have

received main inputs on which they have paid duty of Rs. 78,14,427/- but

appellant have not taken cenvat credit on those inputs in accordance with 

job work permission letter. Brand rate application was filed but was rejected.

Since brand rate application for claiming drawback equivalent of cenvat

portion was denied as also rebate claim was not granted and there is no bar

for availing cenvat credit on excisable goods. Appellant submitted letter

before department to get permission to avail cenvat credit.

2.1 He also submits that circular No. 67/1998-Cus. dated 14.09.1998,

Circular No. 74/1999-Cus dated 05.11.1999 and Circular No. 49/2000-Cus.

dated 22.05.2000, Circular No. 31/2000-Cus dated 20.04.2000 have not

restricted for availment of Cenvat credit, but only given the procedure of

exportation. These circular cannot override legal provisions and hence

considered void by various judicial decision. The said circulars were not

applicable to the pharmaceutical units still impugned order is passed

considering the above circulars.

2.2 He further submits that appellant objected to arbitrary condition

mentioned in the Job Work permission letter dated 26.04.2010 and

27.07.2011 and letter dated 04.06.2010. Thereafter in subsequent

permission letter dated 07.02.2012 granted by the DC, the condition of

barring DTA unit to avail cenvat credit has been removed. It clearly shows

that department has accepted their error and therefore they have removed

this invalid condition from subsequent job work permission.

2.3 He also submits that DTA unit has sent the goods to the EOU unit

against the Job Work Challan and not against the invoices and therefore,

EOU unit, otherwise also, is not entitled to avail the cenvat credit and

therefore EOU unit have not taken the Cenvat Credit. There cannot be bar

to avail the cenvat credit on the dutiable goods which has been exported.

2.4 Learned Counsel for the appellant has relied upon the various

judgments in his support :

(i)

Topcom India Vs. Union of India 2021(376)ELT 573 (Gau,)

(ii)

J.K. Lakshmi Cement Ltd. Vs. Commercial Tax officer, Pali –

2018(14)GSTL 497(SC)

(iii)

Sun Pharmaceutical Industries Ltd. – 2015(328)ELT 792 (GOI)

(iv)

Pioneer Miyagi Chemical Vs. Central Board of Cx. &Cus., New

Delhi 2000(116)ELT 441 (Mad.)

(v)

Central Board of Excise & Customs, New Delhi Vs. K.G. Denim

Ltd. – 2020(371)ELT 646(Mad.)

(vi)

Commissioner of Customs, Tuticorin Vs. L.T. Karle & Co.

2007(207)ELT 358 (Mad.)

(vii)

Ranadey Micronutrients Vs. Collector of Central Excise 1996

(87)ELT 19(S.C.)

(viii)

Commissioner of C.Ex. Bolpur Vs. Ratan Melting & Wire

Industries 2008(12)STR 416 (SC)

(ix)

International Travel House Ltd. Vs. CCE, Chennai 2011(22)STR

629(Tri. Chennai)

(x)

Faridabad Iron & Steel Traders Association Vs. Union of India

2004(178)ELT 1099 (Del.)

Shri Ghanshyam Soni, Learned Additional Commissioner (AR)

appearing on behalf of the Revenue reiterates the finding of the impugned

order.

On careful consideration of the submission made by both the sides and

the perusal of the records, we find that in the present matter for

confirmation of cenvat demand revenue is of the view that the Appellant is

not entitled to take Cenvat Credit on the inputs which were sent for Job

Work to EOU unit and exported therefrom. As per the department’s view

Appellant has to go for drawback claim against the duties suffered on the

inputs which were sent for Job work to EOU, Appellant is eligible for brand

rate of draw back against duties suffered on inputs. In this context revenue

referred Para 9.17 (b) of the Foreign Trade Policy 1997-2002, circulars and

Job work permission granted by the Assistant /Deputy Commissioner.

4.1 We find that jurisdictional Assistant / Deputy Commissioner of Central

Excise, Ankleshwar allowed job work from DTA to EOU unit vide permission

letters dated 26-4-2010 and 27-7-2011 subject to following conditions :

“1.

The DTA unit shall be eligible for grant of drawback against

duty suffered on their inputs which are processed by EOU unit for

the manufacture of goods, which are exported. The DTA exporter

is eligible for payment of Brand Rate of drawback against duty

suffered on inputs, on submission of proof of duty.

No CENVAT credit shall be allowed to the DTA unit on the

duty paid on inputs procured for DTA to job work manufacturing.

The finished goods has to be exported from the EOU itself

and cannot be allowed to be taken back to the DTA Unit.

The export is not to be counted under the parameters of

EOU schemes and no benefit would accrue to the EOU.

Shipping Bill to be filed in the name of DTA unit and the

name of the EOU unit will also be mentioned on Shipping Bill as a

job worker. Both units’ name and address to be mentioned on

ARE-1 & invoice. ARE-1 shall be signed by both the parties.

No DEPB benefit shall be admissible either to EOU unit or to

the DTA unit for such exports. Such exporters will not be allowed

to claim all industry rate of drawback.”

The first condition stipulates that DTA unit will be eligible for brand rate of

drawback with regard to duty suffered on inputs. Since above Job Work

permission issued to appellant provides a condition that DTA unit shall be

eligible for Brand Rate of Duty Drawback, also put condition that no cenvat

credit shall be allowed to DTA units. Clearly the intention behind the said

condition that doubles benefit cannot be availed. However in the present

matter it is admitted facts that Appellant has not received duty draw back.

Brand rate application for claiming duty drawback of cenvat portion has been

already rejected by department. Due to this only appellant availed the

Cenvat Credit in the present matter.

4.2 We consider it appropriate to reproduce the relevant statutory

provisions applicable in the present case i.e., Rule 3 and 4(5)(a) of Cenvat

Credit Rules, 2004 :

“Rule 3, CENVAT credit – (1) A manufacturer or producer of

final products or a provider of taxable service shall be allowed to

take credit of —

(I) the duty of excise…………

(ii) the duty of excise……………………….

(vi) the education cess……………………

paid on –

(i)

any input or capital goods received in the factory of

manufacturer of final product or premises of the provider of

output service…………

(ii) any input service received by manufacturer of final

product……….

Including the said duties, or tax,—————-

“Rule 4(5)(a) – The Cenvat credit shall be allowed even if any

inputs or capital goods as such or after being partially processed

are sent to a job worker for further processing, testing, repair, re

conditioning, or for the manufacture of intermediate goods

necessary for the manufacture of final products or any other

purpose, and it is established from the records, challans or

memos or any other document produced by the manufacturer or

provider of output service taking the CENVAT credit that the

goods are received back in the factory within one hundred and

eighty days of their being sent to a job worker and if the inputs or

the capital goods are not received back within one hundred eighty

days , the manufacturer or provider or output service shall pay an

amount equivalent to the CENVAT credit attributable to the inputs

or capital goods by debiting the Cenvat credit or otherwise, but

the manufacturer or provider of output service can take the

CENVAT credit again when the inputs or capital goods are

received back in his factory or in the premises of the provider of

output service.”

From the above, we find that it is very clear that cenvat credit can be availed

by the manufacturer of final products for duties paid on inputs used in goods

sent for Job work.

4.3 We have also gone through the finding of impugned order. The Ld.

Commissioner held that appellant had deliberately availed inadmissible

Cenvat Credit on inputs knowing well that the same is barred by the

permission granted by AC for Job work, the Exim Policy and Circulars.

However Ld. Commissioner in the impugned order nowhere referred any

para of said circulars wherein it has been mentioned that the DTA unit

cannot be eligible for cenvat credit. Further in subsequent Job work

permission granted by the Deputy Commissioner vide letter dtd. 07.02.12

the condition of barring DTA unit to avail Cenvat Credit has been removed. It

clearly shows that department has imposed the condition on Appellant which

is legally not correct. Further we also observe that para 6.14(b)(1) of FTP

provides that DTA unit will be entitled for refund of duty paid on inputs by

way of brand rate of duty drawback, no condition related to non availment of

Cenvat credit was mentioned therein. Without prejudice, even circular, FTP,

job work permission restrict the same but nowhere in Central Excise Act and

rules made thereunder including Cenvat Credit Rules, 2004 it provides for 

such condition that no cenvat credit is eligible if goods are sent to EOU for

Job work.

4.4 On perusal of the impugned order, we find that the Learned

Commissioner has decided the disputed cenvat matter, without proper

examination of the issue and relevant provisions of cenvat credit rules.

Furthermore, it is also observed by us that the submissions made by the

appellant and judgments relied upon by the Appellant were not addressed in

effective manner for adjudication of the dispute. Therefore, we are of the

considered view that the issues involved in this case are required to be

reconsidered by the Learned Commissioner for arriving at a proper

conclusion that whether or not the appellant should be entitled for cenvat

benefit.

4.5 In view of above discussions, the impugned order is set aside and the

matter is remanded to the Learned Commissioner for deciding the issues

afresh. For the said purpose, the Learned Commissioner should examine the

submissions of appellant to be made before him. Needless to say, that

opportunity of personal hearing should be granted to the appellant before

deciding the issues afresh.

In the result, the appeal is allowed by way of remand.

(Pronounced in the open court on 13.01.2023)

RAMESH NAIR

MEMBER (JUDICIAL)

RAJU

MEMBER (TECHNICAL)