Air Pac Filters & Systems Pvt. Ltd vs Commissioner Of Central Excise, ...

(Arising out of Order-in-Appeal No. SB-98-99/Th-II/09 dated 3.12.2009 passed by Commissioner of Central Excise (Appeals), Mumbai-I)

For approval and signature:

Honble Mr. Ramesh Nair, Member (Judicial) ======================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :

CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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Air Pac Filters & Systems Pvt. Ltd. Appellant Vs. Commissioner of Central Excise, Mumbai-I Respondent

Appearance: Shri S.S. Gupta, C.A., for appellant Shri Sanjay Hasija, Superintendent (AR), for respondent

CORAM: Honble Mr. Ramesh Nair, Member (Judicial)

Date of Hearing: 17.4.2015 Date of Decision: 17.4.2015

ORDER NO

The appeal is directed against order-in-appeal No. SB-98-99/Th-II/09 dated 3.12.2009 passed by Commissioner of Central Excise (Appeals), Mumbai-I, wherein the learned Commissioner (Appeals) maintained the confirmation of demand and imposed penalty of equal amount under Section 11AC in the appeal filed by the Revenue.

2. The fact of the case is that the appellant, Air Pac Filters & Systems Pvt. Ltd., availed cenvat credit in respect of beams and angles which are not received in their factory premises but are used outside for the production of structures which are finally exported. A show cause notice was issued and the same was adjudicated vide order-in-original No.3921/06 dated 29.9.2006, wherein the adjudicating authority has confirmed the demand of cenvat credit of Rs.85,599/-, demanded interest under Section 11AB and imposed penalty of Rs.21,400/-. Aggrieved by the said order, the appellant filed appeal for allowing cenvat credit and waiver of penalty and interest. On the other hand, the Revenue also filed appeal for enhancing the penalty from Rs.21,400/- to equal amount of duty i.e. Rs.85,599/-. The learned Commissioner (Appeals) vide the impugned order, maintained the original order to the extent of confirmation of demand and interest. However, in the Revenues appeal, the penalty was enhanced to Rs.85,599/- under Section 11AC. Aggrieved by the said order, the appellant is before me.

3. Shri S.S. Gupta, learned Chartered Accountant appearing on behalf of the appellant, submits that the fact is not under dispute that the beams and angles on which cenvat credit was availed, though not received in the appellants factory but the same was received by their job worker, used in the manufacture of final product which is owned by the appellant and the same final product was admittedly exported, which shows that right from purchase of inputs, use of inputs, manufacture of final product and export thereof was on behalf of the appellant only. He submits that the only reason for disallowance of the credit is the inputs have not been received in the appellants factory, but it is settled position that even though the input was not received in the factory of the appellant but directly delivered to job worker and the manufactured goods is exported, the cenvat credit is admissible. As regards the contention of the learned Commissioner (Appeals) that the procedure was not correctly followed, Ld. Shri S.S. Gupta submits that the appellant has issued challan to the job worker for manufacture of the goods by the job worker. While clearing the final product from the job workers premises for export, invoice and ARE-1 were issued by the appellant. Therefore, it is not correct to say that the appellant has not followed the procedure. When the goods are manufactured by the job worker and cleared for export, nothing more procedural formalities are required. Without prejudice, he also submits that even if some procedural lapse is there, it is an admitted position even by the Revenue that the input was purchased by the appellant and supplied on their behalf to the job worker and the job work was done on behalf of the appellant. After the job work, the finished goods have been exported under the cover of ARE-1. Therefore, even though minor procedural lapse exists, the same cannot be the reason for disallowance of cenvat credit.

4. On the other hand, Shri Sanjay Hasija, learned Superintendent (AR) appearing on behalf of the Revenue, reiterates the findings of the impugned order. He further submits that this fact is not under dispute that the input was not received by the appellant in their factory and the same was directly sent to the job worker. For availing the cenvat credit, it is mandatory that the input should be received in the factory of the manufacturer. Therefore, under the admitted fact, the cenvat credit cannot be allowed to the appellant. He prays for dismissal of the appeal.

5. I have carefully considered the submissions made by both the sides. I find that when the final product of the appellant was decided to be manufactured on job work basis by the job worker, the input need not come to the factory of the appellant and in any case it has to be supplied to the job worker. There is no dispute that the input used in the manufacture of final product by the job worker was purchased by the appellant. The final product manufactured on behalf of the appellant and the said goods were exported by the appellant. Under this undisputed fact, I am very clear in my mind that the appellant is legally entitled for the cenvat credit. The movement of input for job work is governed by Rule 4(5)(a) of the Cenvat Credit Rules, 2002. Under this provision, no statutory procedure was prescribed. However, on the basis of documents otherwise available, it can be satisfied that the input belonging to the appellant was sent for job work and the final product was exported by the appellant, in my considered view, no further procedure is required to be followed.

6. As regards direct supply of input from the supplier to the job worker, this Tribunal in various judgments held that even if the input is supplied directly from supplier to the job worker, the cenvat credit cannot be denied.

7. In view of the above discussion, the finding of the learned Commissioner (Appeals) is against the settled legal position on the issue involved and, therefore, the impugned order is not sustainable. I, therefore, set aside the impugned order and allow the appeal.

(Operative part pronounced in Court)

(Ramesh Nair) Member (Judicial)

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