COMMISSIONER OF CENTRAL EXCISE Vs. SURYA ENGINEERS

JUDGEMENT

(1.) REVENUE filed this appeal against the waiver of penalty under Section 11AC on the respondents.

(2.) The facts of the case are that the respondents are engaged in the manufacture of M.S. Pipes and are availing CENVAT credit of duty paid on capital goods and inputs. The respondents undertook the job work of M/s Shohan Engineering Works (SEW) on labour charges basis for manufacture of excisable goods from the raw materials supplied by SEW. It was found that the respondents cleared M.S. Pipes at Nil rate of duty under exemption Notification No. 6/2002 dated 1.3.2002 as amended by Notification No. 42/2002 dated 6.9.2002 on the basis of certificate given by the District Collector and had reversed the amount @ 8% of the value of the exempted products under Rule 6(3)(b) of Cenvat Credit Rules, 2002. It was noticed that while calculating the value of the raw material, the freight charges and excise duty element were not included in the Landed Cost of the raw material in case of M.S. Pipes. It was further noticed that the respondents did not return the scrap generated during the course of manufacture/job work. In fact, the value of such scrap was to be taken as part of the job charges. This was not so done for the purpose of payment of amount under Rule 6(3)(b) ibid. Also some inputs on which CENVAT credit was taken were used in the manufacture of exempted final products. A show -cause notice was issued directing the respondents as to why:

(3.) On the other hand, Shri Prakash Shah, learned Advocate for the respondent appeared before me and submitted that; the main allegation against the respondents is wrong calculation of Landing Cost of raw materials in the manufacture of the exempted M.S. Pipes. The second is that the duty not included the transport charges of scrap in the Labour charges. These allegations are on the basis of wrong calculation. There was not willful mis -statement or intentional suppression of the facts and in absence of the same, no penalty can be imposed under Section 11AC. He further submitted that the amount payable under Rule 6(3)(b) is not the duty of Excise within the meaning of Section 11A and Section 11AC of the Central Excise Act, 1944. Hence, the mandatory penalty cannot be imposed. To support his contention, he placed reliance on Bharat Electronics Ltd. v. Commissioner of Central Excise, Bangalore -II, 2006 (195) ELT 190 (Tri -Bang), wherein it was held that the appellants having already reversed the 8% amount, therefore, the penalty and interest is not leviable. He further relied on Futuristic Concepts Media Ltd. v. Commissioner of Central Excise, Mumbai -II : 2008 (228) ELT 464 (Tri -Mum), wherein it was held that Modvateble inputs use in the manufacture of duty paid as well as exempted goods - 8% amount of value of exempted goods already paid - Rule 57CC of erstwhile Central Excise Rules, 1944 were carved out subsequently with retrospective effect, hence, penal provisions not enforceable.