THIRD MEMBER ON REFERENCE : SHRI M.V. RAVINDRAN, MEMBER (J) MAJORITY ORDER : MS. ARCHNA WADHWA, MEMBER (J) AND SHRI B.S.V. MURTHY, MEMBER (T) STERLITE OPTICALS TECHNOLOGIES LTD. Vs. COMMISSIONER OF C. EX., VAPI

JUDGEMENT

(1.) M/s. Sterlite Optical Technologies Limited (SOTL for short) and M/s. Sterlite Telelinks Limited (STL for short) are companies, engaged in the business of manufacture and clearance of Polyurethylene Insulated Jelly Filled Cables (PIJFC), ADSL 2+ Modems etc. Bids submitted by these two companies for supply of four varieties of ADSL 2+ modems in response to a tender floated by Bharat Sanchar Nigam Limited (BSNL for short) for its Dataone scheme, were accepted and orders were placed on the two companies for supply. The appellant companies imported modems from M/s. Huawei Technologies Limited (HTL for short) and availed Cenvat credit of additional duty of customs and SAD paid at the time of import and cleared the same to BSNL, paid the excise duty thereby claiming that they had undertaken manufacturing activity on the modems imported by them before supply of the same to BSNL. After search, seizure and investigation in the form of recording of statements, issue of show cause notice and adjudication process, it has been held that the process undertaken by the two companies on the modems cannot be said to amount to manufacture and therefore, the Cenvat credit availed by these two companies was not admissible. Accordingly, the Cenvat credit reversed by the appellant companies at the time of clearance of modems from their factory has been adjusted towards the duty demand and amount reversed by the appellants after the investigation was taken up has been appropriated and balance if any has been demanded. In the case of STL, total amount of Cenvat credit availed was Rs. 3,63,13,047/ - out of which Rs. 2,78,67,395/ - had been paid as Central Excise duty at the time of clearances and were adjusted. STL had subsequently reversed the Cenvat credit of Rs. 80,17,787/ - which has been appropriated and adjusted towards their duty liability. In the impugned order, an amount of Rs. 4,27,870/ - has been demanded along with interest as applicable. Further, penalty equal to total amount of Cenvat credit availed has also been imposed. In the case of SOTL, the total amount of Cenvat credit taken was Rs. 8,32,71,289/ - out of which they had paid an amount of Rs. 6,54,27,474/ - while clearing modems and further, after the investigation was taken up, they had reversed an amount of Rs. 1,85,13,700/ -. Interest has also been demanded and penalty equal to Cenvat credit availed has been imposed. In addition, penalties have also been imposed on Shri K.S. Rao, Director and Chief Operating Officer of both the Companies. Shri N.R. Patil, Chief Manager (Business Development) of both the companies, Shri C. Srinivas Kali, Commercial Manager of both the companies separately in both the orders. It is to be mentioned that these officers hold the same designation in both the companies. Penalties have also been imposed on Shri V.K. Mishra, Assistant Manager (Commercial) of SOTL, Shri Baburaman, Excise officer of STL and Shri S.G. Tata, Maintenance Engineer of STL. Both the companies as well as all the persons named above are in appeal against the impugned orders.

(2.) HEARD both sides. It was submitted on behalf of the appellants that process undertaken in the factory on the modems received from HTL amounted to manufacture by explaining the process undertaken and the requirement for the same. Therefore, It was submitted that the Cenvat credit taken was perfectly in order and the impugned order is required to be set aside. Further, alternatively it was also submitted that even if the process did not amount to manufacture, the extended period for demanding duty could not have been invoked, in view of the fact that the situation was Revenue neutral and in a Revenue neutral situation, it cannot be said that there was an intention to evade the duty. This is because, what Cenvat credit was availed was utilized for payment of duty on the modems when they were cleared. In support of their contention, several decisions of the Tribunal and Honble Supreme Court were cited by the learned advocate for the appellants. It was also submitted that penalty on the employees of the companies were not at all warranted. On the other hand learned DR submitted that process did not amount to manufacture and relied upon various decisions of the Tribunal in support of his contention that merely because the situation is Revenue neutral, it cannot be said that extended period cannot be invoked. Further, it was also submitted that officers and the employees of the companies have played a very active role in relation to maintaining the records to show that there was manufacture and also gave statements contrary to the facts. Therefore, he submitted that penalties imposed on the appellant officers and employees of the Companies should be sustained.

(3.) WE have considered the submissions made by both the sides and have gone through the records carefully.