M/s. Visen Industries Limited v. Commissioner of Central Excise, Thane – II

1. Commissioner of Central Excise, Commissioner of Central Excise, Thane – II Thane – II Having its office at 3 Having its office at 3rd rd Floor, Floor, Navprabhat Chambers, Ranade Navprabhat Chambers, Ranade Road, Dadar (W), Mumbai – 400 028 Road, Dadar (W), Mumbai – 400 028 2.

2. Office of the Superintendent of Office of the Superintendent of Central GST & Central Excise Central GST & Central Excise having its address 1 having its address 1st st Floor, Floor, Sai Shopping Centre, Chitralaya, Sai Shopping Centre, Chitralaya, Boisar (W), Dist. Palghar – 401 504 Boisar (W), Dist. Palghar – 401 504......Respondents Respondents Mr. Vikram Nankani, Senior Advocate a/w Mr. Pradeep Bakhru Mr. Vikram Nankani, Senior Advocate a/w Mr. Pradeep Bakhru & Mr. Omkar Chavan i/b. Wadia Ghandy & Co. for Appellant. & Mr. Omkar Chavan i/b. Wadia Ghandy & Co. for Appellant. Mr. Ram Ochani a/w Ms. Niyati Mankad (through VC) & Mr. Ram Ochani a/w Ms. Niyati Mankad (through VC) & Mr. Akash Singh for Respondent. Mr. Akash Singh for Respondent. CORAM: M. S. Sonak & Jitendra Jain, JJ.

1. Heard learned counsel for the parties. Heard learned counsel for the parties.

2. T This appeal is filed under Section 35G of the Central Excise his appeal is filed under Section 35G of the Central Excise Act, 1944 by the Appellant-Assessee proposing the following substantial Act, 1944 by the Appellant-Assessee proposing the following substantial questions of law arising out of the Tribunal’s order dated 27 February questions of law arising out of the Tribunal’s order dated 27 February 2024:- 2024:- QUESTIONS OF LAW QUESTIONS OF LAW “(1) “(1) Whether the Tribunal erred in holding that there was no reversal of Whether the Tribunal erred in holding that there was no reversal of Cenvat Credit merely because the reversal was in the form of debit Cenvat Credit merely because the reversal was in the form of debit in the Cenvat register, at the time of issuing the sales invoice? in the Cenvat register, at the time of issuing the sales invoice? (2) Whether the Tribunal erred in equating the Cenvat Credit reversal with utilization in as much as utilization of Cenvat Credit is for with utilization in as much as utilization of Cenvat Credit is for payment of excise duty, whereas in the present case admittedly payment of excise duty, whereas in the present case admittedly excise duty was paid on receipt from the buyer and not through excise duty was paid on receipt from the buyer and not through Cenvat Credit? Cenvat Credit? (3) (3) Whether, in the absence of prescribed method for reversal of Whether, in the absence of prescribed method for reversal of Cenvat Credit, has the Tribunal erred in not accepting the method Cenvat Credit, has the Tribunal erred in not accepting the method adopted by the Appellant. adopted by the Appellant. (4) (4) Whether the impugned order is sustainable in upholding the equal Whether the impugned order is sustainable in upholding the equal penalty by the non-speaking and without reasons order on the penalty by the non-speaking and without reasons order on the issue of extended period of limitation, and consequently, penalty? issue of extended period of limitation, and consequently, penalty? (5) (5) Whether a legitimate demand can be raised to recover the CENVAT Whether a legitimate demand can be raised to recover the CENVAT Credit availed on inputs despite there being a reversal of the entire Credit availed on inputs despite there being a reversal of the entire availed CENVAT Credit and no loss being suffered by the availed CENVAT Credit and no loss being suffered by the exchequer? exchequer? (6) (6) Whether penalty can be imposed as a matter of course in a Whether penalty can be imposed as a matter of course in a mechanical manner without given reasons for such imposition of mechanical manner without given reasons for such imposition of penalty? penalty? (7) (7) Whether a patently and solely punitive action on part of the excise Whether a patently and solely punitive action on part of the excise authorities in seeking to recover the CENVAT credit and imposing authorities in seeking to recover the CENVAT credit and imposing interest and penalty is justifiable and permissible despite a reversal interest and penalty is justifiable and permissible despite a reversal of the entire amount of CENVAT Credit availed on inputs resulting of the entire amount of CENVAT Credit availed on inputs resulting in no loss being caused / suffered by the exchequer? in no loss being caused / suffered by the exchequer? (8) (8) Whether in the facts and circumstances of the case and in law, the Whether in the facts and circumstances of the case and in law, the demand of Rs.5,63,66,047/- raised by the Commissioner of Central demand of Rs.5,63,66,047/- raised by the Commissioner of Central Excise, Thane-II vide the Show Cause Notice dated 5 Excise, Thane-II vide the Show Cause Notice dated 5th th September September 2014 for the period August 2009 to September 2012 is barred by 2014 for the period August 2009 to September 2012 is barred by limitation? limitation? Brief facts Brief facts:-:-

3. The Appellant is engaged in the manufacture of polymer The Appellant is engaged in the manufacture of polymer emulsions, which are used in paint, textiles and adhesive industries. For emulsions, which are used in paint, textiles and adhesive industries. For the product's manufacture, the primary raw material, i.e., Vinyl Acetate the product's manufacture, the primary raw material, i.e., Vinyl Acetate Monomer, is imported by the Appellant and stored in Customs Bonded Monomer, is imported by the Appellant and stored in Customs Bonded Warehouses. The Appellant cleared the said Vinyl Acetate Monomer to Warehouses. The Appellant cleared the said Vinyl Acetate Monomer to their customers directly from the said Custom Bonded Warehouse but their customers directly from the said Custom Bonded Warehouse but maintained the records in such a manner that the said raw material was maintained the records in such a manner that the said raw material was received in the factory and subsequently cleared from the factory received in the factory and subsequently cleared from the factory without bringing the said goods into the factory. This was done to take without bringing the said goods into the factory. This was done to take Cenvat Credit of the admissible duties and issue a central excise invoice Cenvat Credit of the admissible duties and issue a central excise invoice to clear the same to their customers by debiting the Cenvat Credit to clear the same to their customers by debiting the Cenvat Credit account and passing on the credit to their customers. This account and passing on the credit to their customers. This modus modus operandi operandi was unearthed by the Respondent-Revenue. After a detailed was unearthed by the Respondent-Revenue. After a detailed investigation, a show cause notice dated 5 September 2014 was issued investigation, a show cause notice dated 5 September 2014 was issued by invoking a larger period of limitation since, according to the by invoking a larger period of limitation since, according to the Respondent-Revenue, there was suppression, fraud etc. on the part of Respondent-Revenue, there was suppression, fraud etc. on the part of the Appellant-Assessee in doing so. The show cause notice and the the Appellant-Assessee in doing so. The show cause notice and the statement recorded of the Appellant’s representative and its customers statement recorded of the Appellant’s representative and its customers were also enclosed. were also enclosed.

4. On 23 December 2014, the aforesaid show cause notice came On 23 December 2014, the aforesaid show cause notice came to be adjudicated by the Commissioner of Central Excise, Thane, who to be adjudicated by the Commissioner of Central Excise, Thane, who passed an order disallowing the Cenvat Credit of Rs. passed an order disallowing the Cenvat Credit of Rs.5,63,66,047/- 5,63,66,047/wrongly availed and utilised by the Appellant during the period August wrongly availed and utilised by the Appellant during the period August 2009 to September 2012 and ordered the recovery of the said amount. 2009 to September 2012 and ordered the recovery of the said amount. By this order, a penalty of Rs.6,82,11,154/- was also imposed on the By this order, a penalty of Rs.6,82,11,154/- was also imposed on the Appellant under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Appellant under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944. The Commissioner also Section 11AC of the Central Excise Act, 1944. The Commissioner also imposed a penalty on the Managing Director and ordered the reversal of imposed a penalty on the Managing Director and ordered the reversal of other Cenvat Credit with which we are not concerned in the present other Cenvat Credit with which we are not concerned in the present appeal since the relief on the other issues has been granted by the appeal since the relief on the other issues has been granted by the Tribunal. Being aggrieved by the said Order-in-Original of the Tribunal. Being aggrieved by the said Order-in-Original of the Commissioner, the Appellant appealed to the Tribunal, raising various Commissioner, the Appellant appealed to the Tribunal, raising various grounds. grounds.

5. The Tribunal, vide its order dated 27 February 2024, The Tribunal, vide its order dated 27 February 2024, confirmed that the Order-in-Original, whereby Cenvat Credit of confirmed that the Order-in-Original, whereby Cenvat Credit of Rs. Rs.5,63,66,047/- 5,63,66,047/- was disallowed and ordered to be recovered along was disallowed and ordered to be recovered along with interest and penalty, was set aside. Insofar as other demands and with interest and penalty, was set aside. Insofar as other demands and penalties are concerned, the same were set aside. penalties are concerned, the same were set aside.

6. Aggrieved by the aforesaid order of the Tribunal, the Aggrieved by the aforesaid order of the Tribunal, the Appellant has preferred the present appeal on substantial questions of Appellant has preferred the present appeal on substantial questions of law referred to hereinabove. Question No.(1) to Question No.(7) deals law referred to hereinabove. Question No.(1) to Question No.(7) deals with the confirmation by the Tribunal of the Order-in-Original dealing with the confirmation by the Tribunal of the Order-in-Original dealing with Cenvat Credit of Rs. with Cenvat Credit of Rs.5,63,66,047/- 5,63,66,047/- along with interest and penalty. along with interest and penalty. Question No.(8) deals with the show cause notice dated 5 July 2014 Question No.(8) deals with the show cause notice dated 5 July 2014 being barred by limitation. being barred by limitation.

7. We have heard Mr. Vikram Nankani, learned Senior Advocate We have heard Mr. Vikram Nankani, learned Senior Advocate for the Appellant and Mr. Ram Ochani, learned counsel for the for the Appellant and Mr. Ram Ochani, learned counsel for the Respondent. Respondent.

8. We first propose to decide Question No.(8) which deals with We first propose to decide Question No.(8) which deals with the show cause notice being barred by limitation. Section 35G(1) reads the show cause notice being barred by limitation. Section 35G(1) reads as under:as under:- 35G Appeal to High Court 35G Appeal to High Court (1) An appeal shall lie to the High Court from every order passed (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1 in appeal by the Appellate Tribunal on or after the 1st st day of July, day of July, 2003 (not being an order relating, among other things, to the 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial the High Court is satisfied that the case involves a substantial question of law. question of law.

9. For the question to be raised in an appeal to the High Court For the question to be raised in an appeal to the High Court under Section 35G, the same should arise out of the Tribunal’s order under Section 35G, the same should arise out of the Tribunal’s order against which an appeal is preferred to the High Court. Section 35G(1) against which an appeal is preferred to the High Court. Section 35G(1) provides that an appeal shall lie from every order passed in appeal by provides that an appeal shall lie from every order passed in appeal by the Appellate Tribunal. Therefore, the issue raised in the Question No. the Appellate Tribunal. Therefore, the issue raised in the Question No. (8) dealing with notice being barred by limitation should arise from the (8) dealing with notice being barred by limitation should arise from the Tribunal's order. On a perusal of the Tribunal's order, the issue of notice Tribunal's order. On a perusal of the Tribunal's order, the issue of notice being barred by limitation does not appear to have been raised by the being barred by limitation does not appear to have been raised by the Appellant since there is no such recording by the Tribunal in the order. Appellant since there is no such recording by the Tribunal in the order. This issue, in the facts of the case, is a mixed issue of fact and law. Since This issue, in the facts of the case, is a mixed issue of fact and law. Since the issue of a notice being barred by limitation has not been argued in the issue of a notice being barred by limitation has not been argued in the view of the absence of the same being recorded in the Tribunal’s the view of the absence of the same being recorded in the Tribunal’s order, in our view, Question No.(8) would not arise from the Tribunal’s order, in our view, Question No.(8) would not arise from the Tribunal’s order. order.

10. In-ground (h) of the appeal memo before this Court it is In-ground (h) of the appeal memo before this Court it is stated that ground relating to limitation was raised in the appeal before stated that ground relating to limitation was raised in the appeal before the Tribunal. However, the Tribunal has failed to consider the same and, the Tribunal. However, the Tribunal has failed to consider the same and, therefore, the Tribunal’s order suffers from infirmities. In our view, therefore, the Tribunal’s order suffers from infirmities. In our view, raising ground in the appeal and advancing arguments at the time of raising ground in the appeal and advancing arguments at the time of the hearing before the Tribunal are two different things. A ground may the hearing before the Tribunal are two different things. A ground may be raised in the appeal but may not have been argued before the be raised in the appeal but may not have been argued before the Tribunal, in which case the Appellant cannot raise a grievance that the Tribunal, in which case the Appellant cannot raise a grievance that the Tribunal has failed to give its finding on the said ground. If the ground Tribunal has failed to give its finding on the said ground. If the ground was argued before the Tribunal and the same has not been considered was argued before the Tribunal and the same has not been considered by the Tribunal then the correct approach of the Appellant should have by the Tribunal then the correct approach of the Appellant should have been to make an application for rectification of the order passed by a been to make an application for rectification of the order passed by a Tribunal by filing application for Rectification of Mistakes (ROM) before Tribunal by filing application for Rectification of Mistakes (ROM) before the Tribunal. In the instant case, we are informed that the Appellant has the Tribunal. In the instant case, we are informed that the Appellant has not filed any such application before the Tribunal. We cannot, in an not filed any such application before the Tribunal. We cannot, in an appeal before us, entertain such a ground because we are not aware as appeal before us, entertain such a ground because we are not aware as to whether the ground of limitation was argued before the Tribunal or to whether the ground of limitation was argued before the Tribunal or not. The Tribunal’s record must be given credence. The appeal Court not. The Tribunal’s record must be given credence. The appeal Court does not lightly entertain any attacks against the Court’s record. The does not lightly entertain any attacks against the Court’s record. The proper mode is approaching the same court within a reasonable period, proper mode is approaching the same court within a reasonable period, if not at the earliest. Even ground (h) only speaks that same was raised if not at the earliest. Even ground (h) only speaks that same was raised in the appeal, but it does not say that it was argued before the Tribunal. in the appeal, but it does not say that it was argued before the Tribunal. Admittedly, there is no discussion on the ground of limitation in the Admittedly, there is no discussion on the ground of limitation in the Tribunal’s order and, therefore, in our view, since the issue of limitation Tribunal’s order and, therefore, in our view, since the issue of limitation does not arise from the present Tribunal’s order dated 27 February does not arise from the present Tribunal’s order dated 27 February 2024, same is to be rejected. 2024, same is to be rejected.

11. The Co-ordinate Bench of this Court in The Co-ordinate Bench of this Court in Commissioner of Commissioner of Income Tax vs. Tata Chemicals Ltd. Income Tax vs. Tata Chemicals Ltd.[1] while dealing with Section 260A of while dealing with Section 260A of the Income Tax Act on appeals to the High Court in paragraph 9 the Income Tax Act on appeals to the High Court in paragraph 9 observed as under:observed as under:- “9. “9. As far as question (a) is concerned, it is not in dispute that this As far as question (a) is concerned, it is not in dispute that this question was not raised before the Tribunal. Mr. Desai submitted question was not raised before the Tribunal. Mr. Desai submitted before us that under section 260-A(6)(a) it is permissible for the before us that under section 260-A(6)(a) it is permissible for the High Court to determine any issue which is not determined by the High Court to determine any issue which is not determined by the Appellate Tribunal. The careful reading of section will show that Appellate Tribunal. The careful reading of section will show that High Court can decide only that question which was raised but not High Court can decide only that question which was raised but not determined by the Tribunal. Therefore it was necessary that the determined by the Tribunal. Therefore it was necessary that the question sought to be raised ought to have been raised before the question sought to be raised ought to have been raised before the Tribunal and then if it had not determined it, one can say that it Tribunal and then if it had not determined it, one can say that it has not been determined by Tribunal and therefore the High Court has not been determined by Tribunal and therefore the High Court should look into it. In the present case, we do not find that this should look into it. In the present case, we do not find that this issue had been raised before the Tribunal. It is also not the case of issue had been raised before the Tribunal. It is also not the case of revenue that the issue or question was raised but not decided by revenue that the issue or question was raised but not decided by the Tribunal. In the circumstances, we do not propose to dwell on the Tribunal. In the circumstances, we do not propose to dwell on this question”. this question”. The above decision squarely supports the view we have taken The above decision squarely supports the view we have taken on Question No.(8) above. on Question No.(8) above. 1 (2002) 256 ITR 395

12. Now, we propose to deal with Questions Nos.(1) to (7), which Now, we propose to deal with Questions Nos.(1) to (7), which concerns a Cenvat Credit of Rs. concerns a Cenvat Credit of Rs.5,63,66,047/- that was 5,63,66,047/- that was wrongly availed wrongly availed and ordered to be recovered by the Order-in-Original and confirmed by and ordered to be recovered by the Order-in-Original and confirmed by the Tribunal. In this connection, the findings of the two authorities, the the Tribunal. In this connection, the findings of the two authorities, the Commissioner of Central Excise in his Order-in-Original and the Commissioner of Central Excise in his Order-in-Original and the Tribunal as the final fact-finding authority, are relevant. Tribunal as the final fact-finding authority, are relevant.

13. The modus operandi concerning the issue above has been narrated in paragraph 3 of the present order, wherein we have observed narrated in paragraph 3 of the present order, wherein we have observed that the Appellant used to clear the imported goods directly from the that the Appellant used to clear the imported goods directly from the customs bonded warehouse and send them to its customers. Still, the customs bonded warehouse and send them to its customers. Still, the records were maintained in such a manner that they reflect that the records were maintained in such a manner that they reflect that the goods entered the Appellant's factory premises and left the factory goods entered the Appellant's factory premises and left the factory premises for the customer's destination. Based on the excise invoices premises for the customer's destination. Based on the excise invoices raised by the Appellant, the customers used to take Cenvat credit. There raised by the Appellant, the customers used to take Cenvat credit. There is no dispute that unless the goods enter the factory premises and leave is no dispute that unless the goods enter the factory premises and leave the factory premises, Cenvat Credit cannot be taken. the factory premises, Cenvat Credit cannot be taken.