ORDER
S. Sekhon, Member (T)
1. The appellant is a production unit under the Ministry of Railways, Government of India, was set up to manufacture wheel, axle and wheel sets for supply and captive consumption use in various organizations of the Indian Railways System. The appellants, also catered to the need of some private parties including meeting export orders, which was slightly less than 2% of the total output. The price of such goods sold to private parties was decided by the Ministry.
2. Consequent to the eligibility of Modvat facility granted, the appellants opted for the same w.e.f. 1-7-95 for the supplies made to private parties. The goods supplied to the Indian Railways system were exempted vide Notification No. 62/95-CE, dated 16-3-95 as amended. Whenever goods were supplied to the Indian Railways, duty on inputs utilized for manufacture of such wheel, axle and wheel sets was worked out and based on norms prepared, the amounts were reversed. However, when supplies were effected to private parties, credit to the extent based on the said norms was availed and the balance amount paid from PLA of the duties which were paid on supplies made to such private parties. The input credits availed during the initial stage in respect of each of the items cleared to Indian Railways were based on the following norms :-
“(i) Wheel Rs. 605/- as Modvat credit based on the norms
(ii) Axle Rs. 2007/- as Modvat credit based on the norms
(iii) Wheel sets Rs. 3230/- as Modvat credit based on the norms.”
By following the above procedure, the appellant benefited to the extent of Modvat credit mentioned when goods were supplied to private parties. Consequent to the introduction of Rule 57CC w.e.f. 1-9-96, the appellant was required to reverse ‘an amount’ equivalent to 8% of the price, of the exempted goods, cleared to Indian Railways.
3. The audit party of the Central Excise Department pointed out certain defects during the course of audit of the records of the appellant and based on their observation, a Show Cause Notice dated 5-7-2000 for the period 1-9-96 to 31-3-99 was issued by the Commissioner as to why :-
“(i) The assessable value of goods supplied to Indian Railways by adopting a lesser value should not be determined in terms of Section 4 of Central Excise Act, 1944, read with Rule 6(b)(i) & (ii) of the Central Excise (Valuation) Rules, 1975 for the period up to 30-6-2000 and under Rule 8 of Valuation Rules, 2000 for the period from 1-7-2000 to 31-3-2001 for the purpose of determining liability for payment of 8% amount under erstwhile Rule 57CC of Central Excise Rules, 1944 and Rule 57D of Central Excise Rules, 1944.
(ii) The differential duty of Rs. 9,22,83,577/- on account of undervaluation should not be recovered under proviso to Section 11A of the Central Excise Act, 1944.
(iii) Penalty should not be imposed equivalent to the amount should not be imposed under the provisions of Section 11 AC. (iv) Penalty should not be imposed under the provisions of Rules 173Q and 226 of Central Excise Rules, 1944. (v) Interest should not be charged and recovered under Section 11AB of the Central Excise Act, 1944."
4. The Commissioner vide the Order impugned, after considering the replies and findings that there was suppression of facts with intent to evade payment of duty as alleged in the notice and other five subsequent notices, passed the following order :-
“(i) the assessable value of the goods supplied to Indian Railways should be re-determined in terms of Section 4 of CEA, 1944 read with Rules 6(b)(i) and (ii) of the Central Excise (Valuation) Rules, 1975/ Rules 8 and 9 of Central Excise (Valuation) (Determination of Price of Excisable Goods) Rules, 2000 for the purposes of determining duty liability under the erstwhile Rule 57CC/57AD(2) of CER, 1944.
(ii) I confirm the differential duty of Rs. 9,22,83,577/- (Rs. Nine crores twenty-two lakhs eighty-three thousand five hundred and seventy-seven only) for the period 1-9-96 to 31-3-99 under the proviso to the erstwhile Rule 57-I(ii)/57AH(i) of CER, 1944 read with Section 11A of CEA, 1944, as per the Show Cause Notice dated 5-7-2001. The amount of Rs. 4,38,75,084/- (Rs. Four crore thirty-eight lakhs seventy-five thousand and eighty-four only) already paid by the as-sessee is appropriated against the demand confirmed above.
(iii) I also confirm the demand of duty of Rs. 2,94,20,344/- (Rs. Two crores ninety-four lakhs twenty thousand three hundred and forty-four only) for the period from 1-4-99 to 31-3-2001 made in the following Show Cause Notices under the provisions of the erstwhile Rule 57-I(i)/57AH(i) of CEA, 1944 read with Section 11A of CEA, 1944.
SI. No.
SCN No.
& Date
Period Covered
Duty
Involved (in Rs.)
01
OC No. 1044/99, dated 25-10-99 ssued by the Supdt. of Central Excise, Yelahanka I Range
April ’99 to Sept. ’99
86,75,182/-
02
Of No. 207/2000, dated 6-3-2000 ssued by the Supdt. of Central Excise, Yelahanka I Range
Oct ’99
to Feb.’ 2000
1,71,216/-
03
C. No. IV/ 16/42/2000 C & V, dated 27-3-01 Issued by the As-sistant Commissioner Central Excise ‘C’ Dvn.
March,
2000
7,74,600/-
04
C.No.
IV/16/42/2000 C & V,
April, 2000
to
1,05,31,475/-
dated
27-3-2001 Issued by the Assistant
Commissioner of Cen-tral Excise, Bangalore read with Corrigendum of Even
No. dated 5-2-02
Dec.’ 2000
05
C. No. V/86/15/9/99 Adjn., dated 5-2-2002 Issued by Assis-tant Commissioner of Central Excise ‘C’ Dvn., Bangalore
Jan.’ 2001
to March, 2001
92,67,871/-
TOTAL
2,94,20,3447-
(iv) I impose a mandatory penalty of Rs. 9,22,83,577/- (Rs. Nine crores twenty-two lakhs eighty-three thousand five hundred and seventy-seven only) equivalent to the amount mentioned at Sl. No. (ii) above under the erstwhile Rule 57-I(4)/57AH(ii) of CER, 1944 read with Section 11 AC of CEA, 1944 on them.
(v) A penalty of Rs. 1,00,000/- (Rs. One lakh only) is also imposed on the assessee under the erstwhile Rule 173Q of CER, 1944. (vi) Interest under the erstwhile Rule 57-I(5)/57AH(i) of CEA, 1944 read with Section 11AB of CEA, 1944 is also chargeable from them." Hence this appeal. 5. After hearing both sides, considering the submissions made, it is found:
(a) The reliance of the ld. Advocate for the appellants on the case of Ballarpur Industries ltd. v. CCE [2001 (138) E.L.T. 94 (T)] and in the case of CCE v. Ballarpur Industries Ltd. [2001 (137) E.L.T. 164 (T)] is well-founded. In absence of any contrary decisions shown to us, we agree, that, there is force in the submissions being made that shifting of the goods to another unit of the assessee for captive consumption, as in this case, to the Zonal Railways of Indian Railways System, from the premises owned by Indian Railways, where wheels and other entities emerged for captive consumption and use in the Railway Bogies, Engines etc., for manufacture etc., there is no sale involved. Since the appellant and the Zonal Railways, both constitute and are the same legal entity i.e. Indian Railways. Hence, following the case law, cited, based on Supreme Court decisions, Modvat credit as availed, was not required to be reversed under Rule 57CC since no sale price of the goods removed for use in the Indian Railways system i.e for captive consumption of Indian Railways, is not available in this case. We are reinforced in coming to such a finding, that there was no sale price available, since the Commissioner in the impugned order itself is determining the valuation, of the removals effected to Indian Railways, under Rule 6(b)(i) of the Central Excise (Valuation) Rules, for the purposes of determining liability under erstwhile Rule 57CC and Rule 57AD. Rule 6(b)(i) of the Central Excise (Valuation) Rules, is applicable, if the value of the excisable goods under assessment cannot be determined under Rule 4 or 5. Rules 4 and 5 of these Rules prescribe valuation to be based on the value of such goods sold by the assessee, for delivery at any other time nearest to the time of removal or when price was not the sole consideration for such sale effected. In the present case, when it is found that no sales are being effected, we cannot determine valuation under 6(b)(i) without ruling out Rule 4 and 5. Thus, the valuations as directed by the
Commissioner cannot be upheld. Once the sale value as arrived at and directed, cannot upheld, the sale price cannot be determined, once sale price cannot be determined, 8% of the amount, as required, cannot be determined under Rule 57CC.
(b) It is also found that differential duties have been demanded for the period 1-9-96 to 31-3-99 and 1-4-99 to 31-3-2001 based on the provisions contained under erstwhile Rule 57-I(ii)/57AH(i) or/and 57-I(i)/57AH(i) of the said Rules read with Section 11A of the Central Excise Act, 1944. Since Rule 57CC prescribes reversal ‘of an amount’ and not of Modvat credit availed or of duty; no machinery provision exist under the Rules for the reversal of ‘the amounts’ required under Rule 57CC, the reversal as ordered under Rule 57-I or Section 11A cannot be upheld. Since Rule 57-I provides for reversal of credit and recovery of credit wrongly availed and Section 11A restricts itself to recovery of duty. Tribunal in the two decisions, which are being relied upon, has held that the ‘amounts’ mentioned in Rule 57CC is not in the nature of a duty. Therefore, the recoveries as ordered cannot be upheld. Relying on Pushpaman Forgings [2002 (149) E.L.T. 490 (T)= 2002 (48) RLT 107] wherein the Tribunal held that in the absence of machinery provision in the Act or the Rules for the recovery of ‘an amount’ under 57CC, the present order of recovery of ‘an amount’ under 57CC cannot be upheld. We also rely upon the case of Gas Authority of India Ltd. [2001 (135) E.L.T. 795] to come to our conclusion that recoveries under Rule 57CC of Central Excise Rules, 1944 is not in the nature of duty and therefore Rule 57-I (ibid) cannot be invoked to recover any short payment relying upon Board Circular No. B-42/1/96/TRU, dated 27-9-96 which has clarified that Board also holds that deposits made under Rule 57CC was not in the nature of duty and therefore cannot be taken as Modvat credit, would induce us, to confirm that there is no substance to support the present order and the same is required to be set aside.
(c) As regards the mandatory penalty imposed, equivalent to duty evaded under Rule 57-I(iv)/57AH(ii) read with Section 11AC of Central Excise Act, 1944, it is found that the same cannot be upheld, for recovery of ‘an amount’ since the Rules and Sections relied upon by the adjudicator to impose the 100% mandatory penalty cover only input credit and duty and not an amount under Rule 57CC.
(d) The penalty under Rule 173Q of Central Excise Rules, 1944 also cannot be upheld since Rule 173Q(i)(bb) is applicable only to taking of credit or duty or money in respect of inputs, capital goods and it is not applicable to an ‘amount’ which is required under Rule 57CC to be reversed.
(e) Since interest under Rule 57-I(v)/57AH(i) of Central Excise Rules, 1944 read with Section 11AB of Central Excise Act, 1944 is required to be imposed only in case of duty and credit and the present recoveries not being in the nature of duties and credit, the interest as ordered cannot be upheld.
6. In view of our findings, the order is set aside and appeals allowed with consequential relief, as per law.