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ter. #./ F.No. V.72/15-56/Abhinay Steel/OA-I/ Commr.2013

31T 2T f at-Ur/Date of Order :27 .11.2013

cbi.) dl /Date of Issue :28.11.2013

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BHARAT! CHAVAN, COMMISSION' ER cl-kcq 3i1 2i , -1(s.4-0 /

Order-In-Original No. : ADM-EXCUS-001-COM-006-13-14 Dtd: 27.11.2013

c7z1(z1)") T) . 7rA. t, 341. ce44.11(-1 crzta -r 1:4:2k-cb 1;1" tl This copy is granted free of charge for private use of the person(s) to whom it is sent.

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Any person deeming himself aggrieved by this Order may appeal against this Order to the Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad Bench within three months from the date of its communication. The appeal must be addressed to the Assistant Registrar, Customs, Excise and Service Tax Appellate Tribunal, 0-20, Meghani Nagar, Mental Hospital Compound, Ahmedabad-380 016.

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The Appeal should be filed in Form No. E.A.3. It shall be signed by the persons specified in sub-rule (2) of Rule 3 of the Central Excise (Appeals) Rules, 2001. It shall be tiled in quadruplicate and shall be accompanied by an equal number of copies of the order appealed against (one of which at least shall be certified copy). All supporting documents of the appeal should be forwarded in quadruplicate.

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The Appeal including the statement of facts and the grounds of appeal shall be filed in

quadruplicate and shall be accompanied by an equal number of copies of the order appealed against (one of which at least shall be a certified copy.)

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vritv The form of appeal shall be in English or Hindi and should be set forth concisely and under distinct

heads of the grounds of appeals without any argument or narrative and such grounds should be numbered consecutively.

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The prescribed fee under the provisions of Section 35 B of the Act shall e paid through a crossed demand draft, in favour of the Assistant Registrar of the Bench of the Tribunal, of a branch of any Nationalized Bank located at the place where the Bench is situated and the demand draft shall be attached to the form of appeal.

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The copy of this order attached therein should bear a court fee stamp of' Schedule I, Item 6 of the Court Fees Act, 1970.

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Appeal should also bear a court fee stamp of 4.00.

1.00 as prescribed under

—

Sub : Show Cause Notice No. V.72/15-56/Abhinay/OA-I/Commr/2013 dated 30.04.2013 for

Demand / Recovery of Central Excise Duty, amounting to Rs. 1,05,32,571/- issued to Mls Abhinay Steel, Plot No. 615, Phase-IV, GIDC,Vatva, Ahmedabad- 38 2445

1 F. No. - V.72/15-56/Abhinay/0A I/Commr./2013

Brief facts of the case

M/s. Abhinay Steel, Plot No. 615, Phase-IV, GIDC, Vatva, Ahmedabad

(hereinafter referred to as "the said assessee" for the sake of brevity) are

engaged in the manufacture of S.S. Hot Rolled Patta Patti and S.S. Cold Rolled

Patta Patti, falling under Ch. S.H. No. 72201290 and 72202090 respectively of

the First Schedule to the Central Excise Tariff Act, 1985 and are holding

Central Excise Registration No.AANFA5157HXM001.

2. It is noticed from the ER-1 returns filed by the said assessee under Rule

12 of Central Excise Rules, 2002 that they are clearing S.S. Cold Rolled Patta

Patti on payment of Central Excise duty at the appropriate rate and clearing

the S.S. Hot Rolled Patta Patti at Nil rate of duty as per Notification No.

12/2012 CE (SI. No. 203) and by paying an amount equivalent to 6% of the

value of the Hot Rolled Patta Patti under the provisions of Rule 6 (3)of the

Cenvat Credit Rules, 2004.

3. Whereas, both the Sr. No. 62 of Notification No. 03/2005 CE dated

24.02.2005 and Sr. No. 203 of Notification No. 12/2012-CE dated. 17.03.2012,

reads as under:

S. No . Chapter or heading or sub-heading or tariff

item

Description of goods Rate of duty

(1) (2) (3) (4)

62 7219 or Pattis or pattas when subjected to any process other than cold rolling

Nil

7220

S. No. Chapter or heading or sub-heading or tariff

item


(1) (2) (3) (4)

203 7219 or Pattis or pattas when subjected to any process other than cold rolling

Nil

7220

From the above table, it appears that the exemption to "Patties or Pattas" is

conditional exemption. To get the exemption from duty on the Pattis or Pattas,

the same should be subjected to any process other than cold rolling. In order

to ascertain as to whether the S.S. Hot Rolled Patta Patti manufactured by the

said assessee is subjected to any process before it is cleared to the customers,

an inquiry was made. In the proceedings of inquiry, Shri. Dilip H. Gulechha,

Partner of M/s. Abhinay Steel, Vatva was summoned by the Range

Superintendent on 08/04/2013.

2 F. No. - V.72 15-56/Abhinay/0A-1/Commr./2013

4. A statement of Shri Dilip H. Gulechha, partner of M/s. Abhinay Steel,

Plot No. 615, Phase-IV, GIDC, Vatva, Ahmedabad was recorded under Section

14 of the Central Excise Act, 1944 on 08/04/2013 ; wherein he interalia stated

that they got Central Excise registration on 20/06/2007; for manufacturing

and clearing of S.S. Cold Rolled Patta Patti and S.S. Sheet Patta Patti, falling

under Central Excise Ch. S.H. No. 72202090 and 7219909p respectively; that

vide letter dated 24/12/2007 they informed the Range Superintendent that

they would clear Hot Rolled Patta Patti which is exempted from Central Excise

duty and they would reverse the amount as provided in Ru4 6(3) of the Cenvat

Credit Rules, 2004; that since they started production in the year 2007, they

have been availing the exemption on hot rolled patta patti under Notification

No. 3/2005 CE dated 24/02/2005 and now notification No. 12/2012 CE dated

17/03/2012 which has been declared in returns filed by them from time to

time.

5. Further, on being asked about the manufacturing process of the final

products, Shri. Dilip H. Gulechha, stated that they purchase S.S. Flats 10 mm

to 25 mm from various parties and these inputs are sent to arious job workers

for hot rolling purpose for size thickness 1.62 mm; that aft receiving the hot

rolled patta patti from the job workers, they put the same nto the process of

cold rolling through various process like annealing, pickling, washing, re-

rolling, cleaning, packing of S.S. cold rolled patta patti. He further stated that

sometimes they clear the hot rolled patta patti received from the job workers to

customers by availing the Central Excise duty exemption vide Notification No.

12/2012 CE dated 17/3/2012 and for the earlier period this notification No.

was 03/2005 dated 24/02/2005. He further stated that they are not doing any

process on the Hot Rolled Patta Patti received from the job workers before these

are sent to customers. He further stated that they are sending the S.S. Flats to

job workers under the procedures envisaged under Rule 4 (5) of the Cenvat

Credit Rules, 2002 and these inputs and processed goods are moving under

the cover of challans specified in the Cenvat Credit Rules. He further submitted

the name and addresses of the job workers to whom they were sending the S.S.

Flats for job work for converting into Hot Rolled Patta Patti.

6. On being asked about the process undertaken by these job workers on

the S.S. Flats, he stated that the job workers cut the S.S. Flats for making hot

rolled patta patti as per required size; then annealing proqess is done; after

that there is gauge reduction in hot mill by hot patta job worker; that after this

process the hot rolled patta patti are returned to them by the job worker. On

ORDER-IN-ORIGINAL NO. AHM-EXCUS-001-COM-006-13-14 DATED 27/11/2013

3

F. No. - V.72/15-56/Abhindy/0A-1/Commr./2013

being asked about the further usage of the Hot Rolled Patta Patti by the

customers to whom the said goods are sold, he stated that the customers who

are working under Compounded Levy Scheme in Central Excise are using the

hot rolled patta patti in making cold rolled patta patti . He further undertook to

furnish the details of Hot Rolled Patta Patti cleared from their factory by

availing the Central Excise duty exemption and accordingly, they vide letter

dated 09/04/2013 furnished the same.

7. From the above it appears that the said assessee is purchasing S.S. flats

as their raw material which are then sent to various job workers under the

cover of challans issued as per the Rule 4 (5) (a) of the Cenvat Credit Rules,

2004 for processing ; that at the job workers' premise these S.S. Flats are cut

as per required size, then the same are subjected to Annealing process and are

rolled in Hot Mill for gauge reduction and the processed goods i.e. Hot Rolled

S.S. Patta Patti are sent back to the premise of the said assessee under the

cover of challans as per the said Cenvat Credit Rules . At the factory of the said

assessee, the Hot Rolled S.S. Patta Patti received from job workers are taken for

the manufacture of Cold Rolled Patta Patti through the process of Annealing,

pickling, washing, re-rolling, cleaning and packing. The S.S. Cold Rolled Patta

Patti are cleared from the factory of said assessee on payment of Central Excise

duty at appropriate rate on advalorem basis. The said assessee is not using

the whole quantity of Hot Rolled S.S. Patta Patti received from job workers in

the manufacture of S.S. Cold Rolled Patta Patti and sometimes they are

clearing the Hot Rolled S.S. Patta Patti received from job workers to Cold Rolled

Patta Patti manufacturers at Nil rate of excise duty by claiming the exemption

as per Notification No. 03/2005 CE dated 24/02/2005 and Notification No.

12/2012 dated 17/03/212 (S1. No. 203) and by paying an amount equivalent

to 10%/5%/6%, as the case may be, of the value of the Hot Rolled S.S. Patta

Patti as per the provisions of Rule 6 (3)(i) of Cenvat Credit Rules, 2004.

Further it is also noticed from the ER-1 returns filed by the said assessee for

the period from April, 2008 to March, 2013 that they paid an amount of Rs.

51,80,484/ under Rule 6 (3) (i) of Cenvat Credit Rules, 2004.

8. It appears from the manufacturing process of the Hot Rolled Patta patti

narrated by Shri. Dilip H. Gulechha that no further process is undertaken on

the Hot Rolled Patta Patti at the job workers' premise. The job workers are

sending the processed goods i.e. Hot Rolled S.S. Patta Patti to the factory of the

said assessee. It also appears that at the factory of the said assessee no further

process is done on the Hot Rolled S.S. Patta Patti before they are cleared to

various cold rolling manufacturers at Nil rate of duty by availing notification

ORDER-IN-ORIGINAL NO. AHM-EXCUS-001 COM-006-13-14 DATED 27/11/2013

4

F. No. - V.72/15-56/Abhinay/0A-1/Commr./2013

No.3/2005 CE dated 24.02.2005 (Si. No. 62) superseded by Notification No.

12/2012 dated 17/03/2012 (Sl.No. 203), as the case may be.

9. Whereas, Notification No. 03/2005-CE dated 24-02-2005 (Si. No. 62)

superseded by Notification No. 12/2012 dated 17/03/2012 (Sl.No. 203) as

amended, grants the exemption from payment of Central pxcise duty to the

"Pattis or pattas when subjected to any process other than cold rolling".

The condition to avail the duty exemption under the notific tion ibid, the patti

or patta should be subjected to any process other than Id rolling. In this

case, the said assessee is manufacturing "Hot Rolled S.S.P tta Patti" from the

input, S.S. Flats, and the said "Hot Rolled Patta Patti" is ither subjected to

any process at the premises of the job worker not at factcry premises of the

said assessee after receiving the same from the job workers. The Hot Rolled

Patta Patti other than those used for manufacture of S.S. Cold Rolled Patta

Patti are not subjected to any type of further processing at the premise of the

said assessee but are cleared by paying duty at nil rate as per Notification No.

03/2005-CE dated 24-02-2005 (Sr. No. 62) superseded y Notification No.

12/2012-CE dated 17-03-2012 and after paying an amoun equivalent to 10%

or 5% or 6% as the case may be of the value of "Hot Rolled Patta Patti" under

Rule 6(3)(i) of Cenvat Credit Rules, 2004. The said assessee has manufactured

the "Hot Rolled Patta Patti" from input stage, and the said "Hot Rolled Patta

Patti" was not subjected to any further process either at the premise of the job

workers or at the factory premises for availing the exempti r from payment of

Central Excise duty claimed by them as per Sr. No. 62 'of Notification No.

03/2005-CE and from 17-03-2012 as per Sr. No. 203 of Notification No.

12/2012-CE dated 17.03.2012, as amended in as much as the condition of the

notification mandates that further process other than cold rolling should be

carried on the Hot Rolled Patta patti before the same are cleared from factory

and this condition is not fulfilled by the said assessee and hence they have

wrongly availed the said notification .

10. From the above facts, it appears that the said assessee had availed

exemption under the notifications ibid and cleared the same at NIL rate of duty

after self assessment. They were also fully aware that they were not carrying

out any further process on the Hot rolled S.S. Patta Patti cleared to customers

and deliberately availed the duty exemption wrongly. Thus, the said assessee

have evaded Central Excise duty by taking undue advantage of the said

notifications ibid without fulfilling the condition that Hot Rolled Patta Patti

should be subjected to process other than cold rolling as envisage at Sr. No.

203 of Notification No. 12/2012-CE dated 17-03-2012 (earlier Sr. No. 62 of

ORDER-IN-ORIGINAL NO. AHM-EXCUS-001-COM-006-13-14 DATED 27/11/20 3

5


Notification No. 03/2005-CE elated 24-02-2005). To avail the benefit of an

exemption, a manufacturer should do so only after satisfying himself that he

fulfills all the conditions attributed thereon and not otherwise. Thus the onus

is on the part of the said assessee to fulfill the condition stipulated in theses

notifications to avail the exemption benefit. It also appears that the said

assessee had only intimated the Department vide letter dated 24-12-2007 that

they would clear Hot roller Patta Patti which is exempted from Central Excise

duty and they would reverse the amount as provided in Rule 6(3) of the Cenvat

Credit Rules, 2004 but they had never intimated the department about the

manufacturing process of the said Hot Rolled S.S. Patta Patti, at any stage. The

manufacturing process of the said Hot Rolled S.S. Patta Patti was submitted to

the department only at the time of recording the statement of Shri Gulechha on

08-04-2013. It further, appears that they deliberately suppressed the fact that

the S.S. Hot Rolled Patta Patti, cleared by availing the Notification No.

12/2012-CE (earlier Notification No. 03/2005-CE) was not subjected to any

process, from the department with an intention to wrongly avail the benefit of

the duty exemption proceed under these notifications.

11. Worksheet, showing the details of Hot Rolled S.S. Patta Patti cleared

during the period April, 2008 to March, 2013 upon which Central Excise duty

was required to be paid by M/s. Abhinay Steel, GIDC, Vatva, Ahmedabad, is

prepared on the basis of ER-1 returns filed under Rule 12 of Central Excise

Rules, 2002 and the statement dated 08/04/2013 of Shri Dilip H. Gulechha

and marked as Annexure 'A' to this Notice.

12. On the basis of the facts mentioned above, it appears that the said

assessee had evaded Central Excise duty on the clearances of Hot Rolled S.S.

Patta Patti by claiming undue advantage of Notification No. 12/2012-CE (Sr.

No. 203) dated 17-03-2013 (earlier Notification No. 03/2005:CE) and by

suppressing willfully, the manufacturing process of the said Hot Rolled S.S.

Patta Patti from the department. All these acts of contravention on the part of

the said assessee appear to have been committed deliberately with intent to

evade the payment of duty by wrongly availing the said notification. Therefore,

the Central Excise duty Rs. 1,05,32,571/- as detailed in Annexure-A is

required to be demanded and recovered from them under the provisions of

Section 11 A (4) of the Central Excise Act, 1944 by invoking the extended

period of five years.

13. It further appeared that the said assessee have contravened the

provisions of Rule 4 of Central Excise Rules, 2002, in as much as they failed to

ORDER-IN-ORIGINAL NO. AHM-EXCUS-001 COM 006 13 14 DATED 27/11/2013

6

r. NO. - V.IL/17-3O/HIMIOdy/LHA- 1/LUMITIF./LV.L3

pay duty leviable on the Hot Rolled S.S. Patta Patti; Rule 8 of Central Excise

rules, in as much as they failed to pay duty in prescribed manner and within

time; Rule 5 of Central Excise Rules, 2002, in as much as they failed to

determine the correct rate of duty on removal of Hot Rolled S.S. Patta Patti and

Rule 6 of Central Excise Rules, 2002 in as much as they failed to assess the

correct duty on the said S.S. Hot Rolled S.S. Patta Patti corrqctly.

14. Since the said assessee has cleared the said Hot rolled S.S.Patta Patti in

contravention of provisions of Central Excise Act and Rules framed thereunder

and Notification issued thereunder with an intent to evade payment of Central

Excise duty by suppressing the facts, they are also liable for penalty of Central

Excise duty by suppressing the facts, they are also liable for penalty under the

provisions to Section 11 AC of the Central Excise Act, 1944. The goods cleared

by the said assessee are also liable to confiscation under the said provision of

Rule 25 of the Central Excise Rules, 2002. As the said assessee has failed to

pay the duty leviable on the S.S. Hot rolled Patta Patti cleared from their

factory during April, 2008 to March, 2013 of the same in rescribed manner

and time asper Central Excise Rules, they are also require to pay interest at

applicable rate under Section 11 AB/11AA of the Central Eixcise Act, 1944, as

applicable at the relevant time, on the duty demanded as per Annexure-A.

I 15. Therefore, the Central Excise duty amounting to 1R.1,05,32,571/-, as

detailed in Annexure-A above, involved on the said clearan 4 s is required to be

demanded and recovered from them under Section 11 A ( of Central Excise

Act, 1944. Further, by contravening the above mentioned provisions of Central

Excise Act, rules framed there under and Notification issued there under, the

said assessee has committed the offence of the nature as described under

Section 11 AC of the Central Excise Act read with Rule 25(41) of Central Excise

Rules, 2002 and thereby rendered themselves liable for penalty under Section

11AC of the Central Excise Act read with Rule 25 ibid. As the said assessee has

failed to pay the duty leviable on the S.S. Hot Rolled Patta Patti cleared from

their factory during April, 2008 to March, 2013 at the time of removal of the

same in prescribed manner as per various Central Excise rules, they are also

required to pay interest at applicable rate under Section 1'1AA of the Central

Excise Act, 1944.

16. As per the above, M/s Abhinay Steel, Plot No. 61$, Phase-IV, GIDC,

Vatva, Ahmedabad were issued a Show cause notice from F.No.V.72/ 15-

56/Abhinay/0A-I/Commr/2013 dated 30.04.2013 as to why;


7

F. No. - V.72/15-56/Abhinay/OA-I/Commr./2013

i) Central Excise duty of Rs. 1,05,32,571/, as detailed in Annexure-A,

should not be demanded and recovered from them under Section 11A

(4) of the Central Excise Act, 1944;

ii) Interest at the appropriate rate on the duty of Rs. 1,05,32,571/,

demanded at 16 (i) above , should not be charged and recovered from

them under Section 11AB/11 AA of the Central Excise Act, 1944 for

the delayed payment, and

iii) Penalty should not be imposed upon them under Section 11 AC of the

Central Excise Act, 1944 readwith Rule 25 of Central Excise Rules,

2002 and

iv) the goods cleared by them without payment of duty in the manner as discussed above should not be confiscated under the provisions of rule 25 of the Central Excise Rules, 2002.

Defence Reply:

17. The said assessee vide their letter dated 01-06-2013 have submitted their

defence reply that the contention/allegations and proposals made in the

show Cause Notice are not sustainable and maintainable for the following

reasons:

17.1 They submitted that they purchase flats that are hot rolled from the

market such flats have suffered duty. These flats are then cut breadth-wise

and are subjected to the process of cutting, annealing and hot rolling. On the

said process being carried out, a product called S.S. Hot Rolled "Patta or Patti"

comes into existence for the first time and it is this product that is sold to cold

rolling mills who cold roll the same.

17.2 That the flats originally purchased cannot be cold rolled. It has to be

converted into pattas-pattis before the same cannot be cold rolled. Such

intermediate stage (i.e. prior to the stage of cold rolling process) products were

cleared at NIL rate of duty as "pattis-pattas when subjected to any process

other than cold rolling."

17.3 That the entry of the both Notification No. 03/.2005 and 12/2012

clearly described the products "pattis or pattas" when subjected to any process

other than cold rolling. Meaning thereby all the stage (i.e. cutting, annealing,

hot rolling, etc.) prior to the stage of cold rolling process attracts NIL rate of

duty under the said notification prior to the stage of cold rolling process would

cover Hot rolling, cutting, annealing etc. to support their contention they relied

ORDER-IN-ORIGINAL NO. AHM-EXCUS-001-COM-006 13 14 DATED 27/11/2013

8

I- . rvo. - V./L/F17-0/R0r1111ily/Lh4-1/LOMMr./LU13

upon the board's circular no. (based on M.F. (D.R.) F. No. B/31/8/94-TRU,

dated 4-5-1994). (copy enclosed)

17.4 That the said entry under the said Notification has internal indication

that it deals with basic activity of manufacture of hot rolled pattis-pattas as it

excludes cold rolling from the purview of other process.

17.5 That in the instant case, it is the department's case that, further process

other than cold rolling should be carried out on HOT ROLL4D PATTAS-PATTIS

before the same cleared from factory i.e patta-pattis should be subjected to

any process other than cold rolling. The above interpretation of the Entry of

the both notifications would render the said entry redundant. There is no such

commodity i.e Hot rolled patta-pattis available in the market on which further

any process other than cold rolling is to be carried out.

17.6 That the process mentioned against Entry no. 62 of the notification no.

3/2005 and Sl. 203 of Notification No. 12/2012 follows the description of the

goods as patta-pattis as such the goods have to be first patta-patti to fall

under the said entries of both the notification.

17.7 That the reading of the entire said entries of the both the notifications

shows that the patta-patti when subjected to any process other than cold

rolling would continue to fall under the said entry. It is not that processes

undertaken on the patta-patti would bring them undeir the said entry.

(Emphasis supplied) As there is no patta-patti in the market which are

subjected to cold rolling after patta-patti in fully manufactured.

17.8 That the entry of the both the notification which covers "patta-patti

which subjected to any process other than cold rolling" is that it would cover

those semi-processed patta/patti which are yet to be subjefted to cold rolling

to manufacture finished patta-pattis. It would not cover those patta/pattis

which are subjected to cold rolling as appears from the plait reading of entries

of the said notification. As there is no patta/pattis in the market which

subject to cold rolling after patta/patti is fully manufactured. Any other

interpretation would make the entry redundant.

17.9 That they have subjected to duty paid flat to the process of cutting,

annealing and hot rolling. They have manufactured "S.S. Hot rolled

patta/patti". In order to complete the process of manufacture of S.S. cold

rolled patta/patti it has to only cold rolled i.e they have nanufactured S.S.

Hot rolled patta/patti which has to be cold rolled to complete, the process of

manufacture of patta/ patti.

13 ORDER-IN-ORIGINAL NO. AHM-EXCUS-001-COM-006-13-14 DATED 27/11/2

9

F. No. - V.72/15-56/Abhinay/OA I/Commr./2013

17.10 That they purchased S.S. flats from open market which are then cut into

required size and rolled in a hot rolled mill where is reduced to particular

thickness where it comes to a stage where it is called as hot rolled comes into

existence which are known as hot rolled patta/patti and thereafter without

applying any process, the same are cleared to their customer. They also

contended that the contention raised in the subject notice is nothing but a

mis-reading of the Entries of the said notification which specifically described

the product as patta/patti and product in question is patta/patti. The

contention raised in the subject notice that patta-patti gets covered under the

said entries only when they subjected to any process erroneous. i.e. further

process should be carried out on patta/patti before the same are cleared from

the factory is erroneous and not sustainable and maintainable.

17.11 That they also relied upon the decisions of CESTAT in case of M.K.

Industries -2011 (272) ELT 125 (Tri-Ahmd), in case of M/s. Metweld Industries

order no. A/860/WZB/AHD/2009 dat. 24-4-2009 and OIA No. 232 to

236/2005 (232 to 236 - A - II)CE/DK/Commr(A) dt. 03-01-2006 and 138/2006

(Ahd-II) CE/DK/Commr(A) dt. 18.05.2006 in case of Mangaldeep Metal and

M/s. Shayona Enterprise ., Divyang Rolling Mills.

17.12 They stated that in view of the above grounds/reasons and decisions,

circulars which are relied upon. It is clear that the subject notice is not

sustainable and maintainable and liable to be quashed and set -aside in the

interest of justice and they are not liable to pay duty demanded and also not

liable to pay penalty and interest as proposed in the notice. Goods are also not

liable to be confiscated as proposed in the subject notice.Hence the impugned

show cause notice is required to be dropped being not sustainable.

17.13 They also craved leave to add, amend, vary or delete any one or more of

the above submission.

17.14 They also prayed that they may be granted an opportunity of being

heard before passing any order.

Personal Hearing:

18. The said assessee was granted Personal Hearing in the matter on 29-

08-2013. The Advocate of the said assessee Shri Harshad G. Patel attended

the P.H. and reiterated the submissions already made by them vide letter

dated 01-06-2013. He also argued that the issue was a settled one and the

demand was non sustainable. To strengthen his argument, he furnished the

decision of CESTAT in the case of M.K. Industries Vs CCE-Ahmedabad and

M/s. Metweld Industries Vs CCE-Ahmedabad. He also furnished

ORDER-IN-ORIGINAL NO. AHM EXCUS 001 COM-006 13-14 DATED 27/11/2013

10

-. NO. - V✓ Z/1.1.S-Sb/HDrIlrlay/UA-1/LOR11111./LUI3

Commissioner (A), Ahmedabad's decision dated 28-04-2006 in case of

Mangaldeep Metals. He further submitted that the products manufactured by

them did not attract any duty and the same was explained by the Board's

Circular dated 04-05-1994 which is furnished along with a copy of

Not.No.106/94-CE dated 04-05-1994.

18.1 Shri Patel further argued that the extended period cannot be invoked

in their case. He furnished the decision of the Hon'ble Apex court in the case

of CCE Vs HMM Ltd., dated 18-01-1995 and Rai Bahadur Narain Singh Sugar

Vs UOI dated 31-07-1996

18.2 For the issue of penalty, he submitted that it cannot be imposed on

them as this was not a case of suppression; he furnished a copy of decision of

High Court of Gujarat in case of CCE Vs Saurashtra Cement 2010(260) ELT

71(Guj) to strengthen his argument.

18.3 For proposal of confiscation of the goods and subsequent redemption

fine Shri Patel submitted that since the goods were not available same cannot

be confiscated and redemption fine cannot be imposed. In support of his

arguments he furnished copies of decision of High Court's in case of CCE V/ s.

Raja Impex and in case of CCE, Bangalore V/ s. Raja Impex. He also furnished

a copy of decision of CESTAT in case of M/s. Shiv Krupa Ispat Pvt. Ltd. V/ s.

CCE, Nashik.

Discussion and findings:-

19. I have carefully gone through the Show Cause Notice, written as well as

oral submissions made by the said assessee and records available of the case.

The issue to be decided whether Hot Rolled Patta Patties without further

process on them and cleared by the said assessee are chargeable to duty as

alleged in the SCN or are exempted from the payment of Central Excise duty

as per notification No. 03/2005-CE dated 24-02-2005 12/2012-CE dated 17-

03-2012 respectively. Before going in to the discussion, I would like to take a

proper look in to the above said notifications. The relevailt portion of Tariff

Headings and the notifications in question are re-produced below :-

19.1 The term patta/ patties used to figure in 6-digit Tariff but does not figure

in 8-Eight Tariff. It is commercially used for rolled SS Sheets / Strips produced

by Hot Rolling of SS Flats, followed by cold Rolling, The relevant excerpts from

Chapter 72 (Six-digit Tariff) are re-produced below for ease of reference.


11


Heading No. Sub-Heading No.


72.19 Flat-rolled products of stainless steel, of a width of 600 mm or more.

7219.30 Patties/Pattas when subjected to any process other than cold rolling

NIL

Identical construction was employed for heading no,. 72.20 also (For products

of width less than 600 mm)

From the above, it is clear that the intended NIL duty benefit contained in

tariff itself under Sub heading 7219.30/7220.30 was extended through Sr.No.

62 of Notification No. 3/2005-CE dated 24-02-2005 initially and thereafter

continued through Sr. No. 203 of exemption notification No. 12/2012-CE

dated 17-03-2012.

19.2 I also notice that Patties/pattas when subjected to any process other

than cold rolling, falling under chapter heading No 7219 or 7220 of the first

schedule of the central excise tariff Act, 1985 attract NIL rate of duty as per Si.

No. 203 of Notification No. 12/2012-CE dated 17-03-2012. For ease of

reference Sr. # 203 of Notification No. 12/2012-CE dated 17-03-2012 is re-

produced below:-

Sr. No. Chapter or heading or sub-heading No.

Description of goods Rate •

Condition No.

203 7219 or Patties or Pattas when NIL --- 7220 subjected to any process

other than cold rolling

The intended benefit envisaged vide Sr. No. 203 was available earlier too, vide

Sr. No. 62 of Notification N. 03/2005-CE dated 24-2-2005.

19.3 I further observe that the Notification No. 3/2005- CE dated 24-2-2005

was issued on the eve of transition from 6-digit to 8-digit Central Excise tariff.

In ordcr to appreciate the genesis of this notification, it would be pertinent to

reproduce excerpts from Board's circular No. 808/05/2005-CX dated 25-02-

2005,

"3. Notification No. 3/2005-CE dated 24-02-2005 has

been issued to preserve the existing duty rates on

specified commodities where effective rates were built

into the six-digit tariff but are now subject to different

rates in the 8-digit code. This is subject to any

subsequent changes.

ORDER-IN-ORIGINAL NO. AHM EXCUS 001 COM 006-13-14 DATED 27/11/2013

12 V. NO. - V. /115-5b/AMMay/UA-1/LOMMr./2U13

4. General Notification No. 1/2005-CE, 2/2005-CE, 5/2005-CE

(NT), 7 to 10/2005-CE (NT) all dated 24-02-2005 have been

issued so as to substitute any reference to the chapter,

heading or sub-heading of the first schedule or the second

schedule to the central excise tariff act, 1985 ( 5 of 1986), as

the case may be, relating to any goods or class of goods,

wherever occurring in the existing notifications /rules./ad-hoc

exemption orders by corresponding reference to the Chapter,

heading or sub-heading or tariff item, of the First Schedule or

the Second Schedule to the Central Excise Tariff Act, 1985 (5

of 1986), as amended by the Central Excise Tariff

(Amendment) Act, 2004 (5 of 2005). These Notificationp intend

to take care of the technical changes adopted in the

numbering scheme for Central Excise classification !through

the central Excise Tariff (Amendment) Act, 2004 ( 5 of2005)."

Above excerpts indicate that the intended benefits that wre built into six-

digit Tariff itself, were continued through notification no. 3A2005-CE ibid; and

that such changes were of technical nature, i.e. effective duty rate for a given

product was not to change.

19.4 I further observe that the phrase "patties/pattas whOn subjected to any

process other than cold rolling" contained in tariff has found mention in both

the Notification No. 3/2005-CE dated 24-02-2005 and No. 12/2012-CE dated

17-03-2012. The reason for divergent interpretation of this phrase, it appears,

partly lies in the fact that it is a standalone phrase, in so far as the two

notifications are concerned. However, I find that the said phrase i.e.

patties/pattas is not standalone in the erstwhile six-digit tariff. The contextual

meaning of this phrase comes out more clearly, when read with the phrases

used in sub-heading 7219.10 and 7219.20. The same are reproduced below

for ease of reference'

Heading No.

Sub- Heading

No.

Description of Goods Rate of Duty

72.19 Flat-Rolled products of stainless steel, of a width of 600 mm or more

7219.10 Not further worked than hot-rolled , whether or not in colds

16%

7219.20 Not further worked than cold rolled (cold-reduced) 16% 7219.30 Patties/pattas when subjected to any process

other than cold rolling NIL

Heading No. 72.20 has also has identical construction.

Sub heading 7219.00 indicates that flat-rolled products,

than hot-rolled, were leviable to 16% Excise duty.

of worked further

In other words,


Further worked Hot-

pattalpa Annealing, Pickling, etc.

Cold rolled patta/patti

Cold Rolling Melting Hot rolling Hot —Rolling

13 F. No. - V.72/15-56/Abhinay/0A-1/Commr./2013

pattas/patties, obtained immediately after hot-rolled (and not subjected to any

further process), were leviable to 16% Excise duty.

Sub- heading 7219.20 indicates that flat-rolled products, not worked further

than cold-rolled, were leviable to 16% Excise duty. In other words,

pattas/patties, obtained immediately after cold-rolling (and not subjected to

any further process), were also leviable to 16% Excise duty.

If both hot-rolled and cold-rolled pattas-patties were leaviable to 16% duty,

then the question arises as to what was . the implication of sub heading

7219.30? In other words, what was the nature of intended exemption benefits?

19.5 The schematic diagram shown below brings about the fact that there

are certain intermediate processes between hot rolling and cold rolling

processes. Hot-rolled pattas/patties are subjected to pickling process,

annealing process, etc. to make them suitable for cold-rolling process that

results into cold-rolled pattas/patties.

SS Pattas/patties come into existence after hot-rolling process is performed on

SS flats. Such Pattas/patties have to be subjected to certain processes, e.g.

pickling and annealing, in order to prepare them for cold rolling, process.

Sourced from Para 22.1 of CESTAT judgment in the case of Bharatbhai B.

Gala Vs. CCE, Ahmedabad-I (2007 (214)ELT419 (Tri.Ahd).

Pickling is a metal surface treatment used to remove impurities, such as

stains, inorganic contaminants, rust or scale from ferrous metals, copper and

aluminum alloys. May hot working processes (which include hot-rolling) that

occur at high temperatures leave a discoloring oxide layer or scale on the

surface. In order to remove the scale the work-piece is dipped into pickle

liquor. The primary acid used is hydrochloric acid, although sulfuric acid was

previously more common (Source-Wikipedia).

Annealing is a heat treatment that alters a material to increase. its ductility

and to make it more workable. It involves heating material to above its critical

temperature, maintaining a suitable temperature, and then cooling (Source-

Wikipcdia).

ORDER-IN-ORIGINAL NO. AHM-EXCUS 001-COM-006 13 14 DATED 27/11/2013

14 I- . No. - V./1/15-5b/AOhmay/OA-I/Commr./2013

19.6 From the above discussion, I infer that

➢ In order to qualify for classification under heading 7219.30, the

product should be patta/patti first, and it should have been

subjected to any process, barring cold rolling.

The exemption intended for processes that are performed on the

pattas/patties (other than cold rolling).

➢ Raw material for hot rolling process is not patta/patti, but SS

flats. Pattas/patties emerge only after hot rolling process. In view

thereof, hot rolling process would not get covered by 7219.30 or

7220.30, because it is SS flat (and not patta/patti) that is

subjected to hot rolling process.

)=- It is processes like annealing, pickling etc. thatt were intended to

have been covered by the exemption.

Certain other similar processes performed on "patta/patti could be

leveling and slitting. "Levelling " is performed on individual

sections of steel to remove the tendency of the steel particularly

when heated, to "remember" the coiled shape it once was in.

"Slitting " is cutting a sheet lengthwise to form narrow strips.

19.7 The inference is drawn identically for chapter heading No. 7220 also.

19.8 Now, going through the relevant excerpts, contained in clarification

based on circular No. MF (DR)_ F.No. B/31/8/94-TRIJ dated 4-5-1994

however, are as under,-

"Thus, all stages prior to the stage of cold rolling have been

exempted from excise duty. This would cover hot rolling of

pattas & patties processes such as annealing, pickling etc."

I find from the construction of the above clarification , it is clear that the

exemption covers only processes such as annealing, pickling that are

associated with hot rolling., Had the intention been to exempt hot rolling

process too, then it could have been clearly mentioned along with annealing

and pickling.

19.9 Now, going by the processes undertaken by the said assessee either at

the premises of the job worker or at their factory premisels as mentioned in

the SCN it is clear that the said assessee had not undertaken any processes

on the hot rolled Patta/Patti. This fact is was also confirmeld in the statement


15

F. No. V.72/15-56/Abhinay/OA-I/Commr./2013

dated 08 - 04 -2013 of Shri Diip H. Gulecha, Partner of the said assessee that

they have not carried out any processes on hot rolled patta/patti so cleared by

them

19.10 Now, coming to the defence put forth by the said assessee supporting

with the case laws cited by them, I find that all the case laws cited by them

dealt with the classification of the product and not having any regard to the

exemption from duty under the said notification. Therefore I find that the case

laws cited by the said assessee do not come to their rescue.

19.11 Therefore, I hold that the hot rolled patta/patti cleared by the said

assessee without carrying out any process on the said goods would not be

eligible for the exemption from payment of central excise duty under

Notification No. 3/2005-CE dated 24-02-2005 and 12/2012-CE dated 17-03-

2012 and the duty demanded of Rs. 1,05,32,571/- as shown in Annexure A to

the SCN is to be recovered from them under Section 11A(4) and Section 11

(A)(5) of CEA, 1944 as applicable during the relevant period covered under

the Show Cause Notice. Section 11 of CEA, 1944 has been amended w.e.f. 8-4-

2011. As per Section 11 A (5) where, during the course of audit, investigation

and verification, it is found that any duty (has not been levied or paid or has

been ) short -levied or short-paid or erroneously refunded for the reason

mentioned in clause (a) or clause (b) of clause (c)_ or clause (d) or clause (e) of

sub section (4) but the details relating to their transactions are available in

the specified records and then in cases, the Central Excise Officer shall,

within a period five years from the relevant date, serve a notice on the person

chargeable with the duty requiring him to show cause why he should not pay

the amount specified in the notice alongwith the interest under 11AA and

penalty equivalent to fifty percent of such duty. They are also required to pay

interest on the duty demanded under Section 11 AB/ 1 IAA of CEA, 1944.

19.12 Regarding the invocation of extended period raised by the said assessee I

find that they had availed the exemption under the notification ibid and

cleared the same at NIL rate of duty after self assessment. They were also fully

aware that they had not carried out any further process on the Hot Rolled S.S.

patta Patti and cleared to customers deliberately availing the duty exemption

wrongly. The said assessee have evaded Central Excise duty by taking undue

advantage of the said notifications ibid without fulfilling the condition that Hot

Rolled Patta Patti should be subjected to any process other than cold rolling

as envisaged at Sr. No. 203 of Notification No. 12/2012-CE dated 17 - 03 - 2012

(earlier Sr. No. 62 of Notification 3/2005-CE dated 24-02-2005).

ORDER-IN-ORIGINAL NO. AHM EXCUS 001 COM-006-13-14 DATED 27/11/2013

1 g F. NO. - V./1/0-Sb/ADOIrlaY/UA-1/l.OMMi./LUIJ

19.13 To avail the benefit of an exemption, a manufacturer should do so only

after satisfying himself that he fulfills all the conditions attributed thereon

and not otherwise. Thus the onus is on the part of the said assessee to fulfill

the conditions stipulated in the Notification so to avail exemption benefit. In

this regard, I place reliance on the judgement of Hon'ble Apex Court in case of

Union of India Vs. Ganesh Metal processors Industries reported in 2003 (151)

ELT 21 (SC), wherein it was held that:

"The notification has to be read as a whole. If any of the

conditions laid down in the notification is not fulfilled, the

party is not entitled to the benefit of that notification".

Since the said assessee has not fulfilled the conditions of the notifications ibid

and they have not intimated the department in any manner that no further

process has been carried out on the hot tolled patta/patti, Therefore, I find

that they have suppressed the facts and thereby the extended period is rightly

invoked in the show cause notice.

19.14 Regarding the penalty, I find that the said assessee has wrongly availed

the benefit of notification which was not available to tiliem and also not

intimated to the department about the manufacturing process of the said hot

rolled patta/patti at any stage thereby rendering themselves liable for penalty

under erstwhile Section 11 AC of Central Excise Act, 1944 and now Section 11

AC (1) (b) of CEA, 1944 as applicable during the relevant pejriod readwith Rule

25 of Central Excise Rues, 2002.

19.15 Regarding confiscation of goods, I find that the goods cleared by the said

assessee as shown in Annexure- A to the Show Cause Noticie without payment

of appropriate duty are liable to confiscation under rule 2$ of Central Excise

Rules, 2002. Since the goods are not available for confiscation and I am also in

agreement with the case laws cited by the said assessee in the case of CCE,

Banglore V/ s. Raja Impex reported at 2008 (229) ELT 185 (P&H) of Hon'ble

High Court of Punjab and Haryana. He also furnished a copy of decision of

CESTAT in case of M/s. Shiv Krupa Ispat Pvt. Ltd. V/ s. CCE, Nashik reported

at 2009 (235) ELT 623 (Tri.LB); wherein it was held that redemption fine can

only be imposed in respect of goods actually seized and provisionally released

and it is not sustainable against goods not seized. I refrain from actual

confiscation of the said goods and any order of imposing redemption fine.

19.16 As per the above discussion, I find that the said assessee has

contravened;


17


(a) conditions of the notification nos. 3/2005 dated dated 24.02.2005

and 12/2012 dated 17.03.2012 respectively issued under Section 5A

of Central Excise Act, 1944, in as much as they have failed to fulfill

the conditions of the said notifications to avail the exemption under

the said notifications.

(b) Provisions of Rule 4 of Central Excise Rules, 2002, in as much as

they failed to pay duty leviable on the Hot Rolled S.S. Patta Patti;

Rule 8 of Central Excise rules, in as much as they failed to pay duty

in prescribed manner and within time; Rule 5 of Central Excise

Rules, 2002, in as much as they failed to determine the correct rate

of duty on removal of Hot Rolled S.S. Patta Patti and Rule 6 of

Central Excise Rules, 2002 in as much as they failed to assess the

correct duty on the said S.S. Hot Rolled S.S. Patta Patti correctly.

20. As per the discussion and findings made above, I pass the following

ordcr:-

ORDER

(i) In terms of Section 11A(2) and Section 11A(10) of the Central Excise Act, 1944,

I confirm the duty demand of Rs. 1,05,32,571/- (Rs. One Crore Five

Lakhs Thirty Two Thousand Five Hundred Seventy One only) under

Section 11A (4) &, 11 A (5) of the Central Excise Act, 1944 as applicable.

I also order for recovery of interest at the appropriate rate on the duty of

Rs. 1,05,32,571/- (Rs. One Crore Five Lakhs Thirty Two Thousand Five

Hundred Seventy One only) under Section 11 AB/ 11AA of the Central

Excise Act, 1944.

( i ) I impose penalty of Rs. 5,19,598/- for the period upto 07.04.2011 under

erstwhile Section 11 AC of CEA, 1944. I impose a penalty of Rs.

50,06,486/- being 50% of Rs. 1,00,12,973/- for the period from 8-4-

2011 to March' 2013 under Section 11AC (1) (b) of Central Excise Act,

1944 read with Rule 25 of Central Excise Rules, 2002.

21. In terms of the provisions of Section 11AC of Central Excise Act,

1944 where such duty, as determined under sub-section (2) of Section 11A

(now sub-section (10) of Section 11A) of the Central Excise Act, 1944 and the

interest payable thereon under Section 1 lAB (now section 1 IAA )of the Central

Excise, 1944, is paid within thirty days from the date of the communication of

ORDER-IN-ORIGINAL NO. AHM-EXCUS 001-COM-006-13-14 DATED 27/11/2013

18 r. NO. - V. LC/ 10- 317//11)11111dyf V/A - Ir-U1111111.1 LUID

the order of the Central Excise Officer determining such duty, the amount of

penalty liable to be paid by such person under this section, shall be twenty-five

percent of the duty so determined. Further that the benefit of reduced penalty

shall be available if the amount of penalty so determined has also been paid

within the period of thirty days referred above.

22. Accordingly, M/s. Abhinay Steel, Plot No. 615, Phase-IV, GIDC,

Vatva, Ahmedabad are given an option to avail the offer of payment of reduced

penalty amounting to Rs. 26,33,143/- [Rupees Twenty Six Lakh Thirty Three

Thousand One Hundred Forty Three only- being 25% of Rs. 1,05,32,571/-

under Section 11AC of Central Excise Act, 1944, subject toy the condition that

entire amount of duty determined and confirmed in Para 20(i) of this order

alongwith interest at appropriate rate as ordered in Para 20(ii) of this order

and 25% penalty as mentioned vide Para 21 of this order Le. Rs. 26,33,143/-

is paid within the period of thirty days of the communication / receipt of this

order. If the same is not paid within 30 days of receipt of this order, then the

said option will not be available to them and they will be liable to pay the entire

amount of penalty of Rs. 55,26,084/ as imposed on them, under Section 1 lAC

of the Central Excise Act, 1944, as per Para 20(iii) of this order.

(Bharati Chavan) Commissioner

F. No. V.72/15-56/Abhinay/ OA-I/Commr/2013

BY REGISTERED POST A.D./HAND DELIVERY

To

M/s Abhinay Steel, Plot No. 615, Phase-IV, GIDC, Vatva, Ahmedabad -382 445

Date: 27 .11.2013

Copy to :

(1) The Chief Commissioner, Central Excise, Ahmedabad.

(2) The Deputy /Assistant Commissioner (RRA), Central Excise, Ahmedabad-I

(3) The Deputy/Assistant Commissioner (Legal), Central Excise, Ahmedabad-I

(4) The Deputy/Assistant Commissioner (TAR), Central Excise, Ahmedabad-I

( The Deputy/Assistant Commissioner (System), Central Excise, Ahmedabad-I

(6) The Deputy/Assistant Commissioner, Central Excise, Division-II, Ahmedabad-I

(7) The Superintendent, Central Excise, AR -II, Division-II, Ahmedabad-I

(8) Guard file.


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