C.C.E. & S.T. Raipur vs M/S. Cadbury India Ltd

[Arising out of Order-in-Original No. IND-CE-000-APP-46-2014 dated 31.01.2014 & 10.02.2014 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Indore].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

1 Whether Press Reporters may be allowed to see 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 of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

C.C.E. & S.T. Raipur .Appellants

Vs.

M/s. Cadbury India Ltd. .Respondent

Appearance:

Shri R.K. Mishra, DR for the Appellants

Shri Anurag Kapoor, Advocate for the Respondent

M/s. Mondelez India Foods Ltd. .Appellants

Vs.

C.C.E. & S.T. Indore .Respondent

Appearance:

Shri Anurag Kapoor, Advocate for the Appellants

Ms. Ranjana Jha, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing: 30.04.2015

FINAL ORDER NO. 51617-51618/2015-EX(SM)

Per Ashok Jindal:

Both the Revenue as well as assessee are in appeal against the impugned order. Therefore, both the appeals are taken up together for disposal.

2. The facts of the case are that assessee is a manufacturer of chocolates and coco products. During the course of the manufacturing final product certain floor spillage and sweeping arises which assessee is destroying. Revenue is of the view that on these sweepings the assessee is not entitled to take Cenvat Credit. Therefore, proceedings for the period April 2006  August 2011 were initiated against the assesee to deny Cenvat Credit on the inputs contained in these floor sweepings. The matter was adjudicated, Cenvat Credit was denied consequent demand on duty was confirmed along with interest and equivalent amount of penalty was imposed. On appeal before the Ld. Commissioner (A) the Ld. Commissioner (A) allowed the Cenvat Credit for the period April 2006  September 2007 on the premises that Rule 3(5)(c) of Cenvat Credit Rules 2004 was not in existent but for the period thereafter he denied Cenvat Credit as per Rule 3(5)(c) of the Cenvat Credit Rules 2004. Aggrieved from this order both are in appeal before me.

3. The Ld. Counsel for the assessee submits that in fact input has been taken into the process of manufacturing and during the course of manufacturing these floor sweepings arises. The floor sweepings is the input gone into the process of manufacturing. Therefore, these goods are not liable to duty. Consequently, these are waste arising during the course of manufacturing and they are not required to reverse the Cenvat Credit on these goods as held by Larger Bench of this Tribunal in the case of Grasim Industries Vs. CCE Indore-2007 (208) ELT 336 (Tri-LB). He further submits that in the case of Harinagar Sugar Mills Ltd. Vs. CCE Mumbai-III-2014 (310) ELT 775 (Tri-Mum) has taken the same view. The same view was taken by this Tribunal in the case of Kailash Soap Pvt. Ltd. Vs. CCE Bolpur-2008 (231) ELT 176 (Tri-Kolkata). He further submits that in the case of CCE Chennai Vs. Fenner India Ltd.-2014 (307) ELT 516 (Mad) the Honble High Court of Madras held that the assessee was not required to file remission claim under Rule 21 of the Cenvat Credit Rules 2002 for the goods destroyed as floor sweepings. Relying on the decision in the case of CCE Vs. Biopac India Corporation Ltd.-2010 (258) ELT 56 (Guj).

4. On the other hand the Ld. ARs oppose the contention of the Ld. Counsel and submits that as these goods are not dutiable, therefore, Cenvat Credit is not entitled to the assessee. It is further argued that as they are not entitled for remission claim under Rule 21 of the Central Excise Rules 2002 and these goods are not dutiable, therefore, Cenvat Credi is not available. To support this contention the Ld. ARs relied on the decision on the case of Gujarat Narmada Fertilizers Co. Ltd. Vs. CCE-2009 (240) ELT 661 (SC) and Virat Crane Agri-Tech Ltd. Vs. CCE Guntur-2011 (271) ELT 510 (AP) which has been affirmed by the Honble High Court of Rajasthan reported in 2013 (292) ELT A99 (Supreme Court). It is further submitted that as per Rule 3(5)(c) of the Cenvat Credit Rules 2004 the assessee is required to take Cenvat Credit on the inputs which have been lost during the process of floor sweeping etc.

5. The Ld. AR also relied on the decision in the case of Asian Paints (I) Ltd. Vs. CCE Mumbai-II-2004 (173) ELT 187 (Tri-Mumbai) in their support which has been mentioned in the show cause notice.

6. Heard the parties. Considered the submission.

7. In this case the short issue before me is that whether the assessee is entitled to take Cenvat Credit on the inputs which is gone in the process of manufacturer of final product and during the process some inputs have been lost as floor sweeping or not. To deny Cenvat Credit the Ld. ARs heavily relied on the decision in the case of Virat Crane Agri-Tech Ltd. (Supra). In that case the issue before the Honble High Court was that whether under Rule 21 of Cenvat Credit Rules 2002 the appellant was entitled to claim remission on duty which was denied by the Honble High Court observing as under:

It becomes clear that the Commissioner may remit the duty payable on the goods if they are lost or destroyed by natural causes or by unavoidable accident or claimed by the assessee as unfit for consumption or for marketing. In this case, the plea of the appellant is that the pulp manufactured at Berhampur, and transmitted to Vengalayapalem, became unfit for human consumption. Unless it is shown by the assessee to the satisfaction of the Commissioner that it is indeed unfit they cannot be destroyed. The Rule has to be interpreted strictly. The Commissioner can arrive at his satisfaction only when necessary evidence is produced by the assessee. Admittedly the analytical report covers 566 drums and there was no such analytical report for the other drums including 198 drums. It appears the adjudicating as well as appellate Commissioners left off the appellant in respect of 737 drums for which intimation was given. In so far as 198 drums were concerned, the appellate Commissioner as well as CESTAT came to the correct conclusion after appreciating the factual background. This appeal, therefore, does not involve any substantial question of law.

8. I have gone through these decisions and found that in this case the appellant has failed to satisfy the commissioner whether the goods destroyed were unfit for use or not. There was no issue before the Honble High Court that input lost during the process of manufacturing and the assessee has claimed Cenvat Credit which was denied by the Honble High Court. Therefore, said decision have no relevance to the facts of this case. I have gone through the decisions relied on by the Ld. AR in the case of Asian Paints (I) Ltd. (Supra) and found that decision is not applicable to the facts of this case. In the light of the decisions of Larger Bench of this Tribunal in the case of Grasim Industries (Supra).

9. Further, in the case of Gujarat Narmada Fertilizers Co. Ltd. (Supra) the issue before the Honble Apex Court was that when the final product was exempt from duty in that case of assessee is entitled to take Cenvat Credit or not. Admittedly, in this case final product is dutiable and assessee is not manufacturing any exempted goods. Therefore, the said decision have no relevance to the facts of this case at all. Further, I find that in the case of Fenner India Ltd. (Supra) the Honble High Court of Madras has examined the issue and thereafter observed in Para 9, 10, 11, & 12.

as under:

9. Coming to the facts of this case, it is not in dispute that the inputs on which the Cenvat Credit was availed were destroyed when the work was in progress. Once this fact is not disputed, then the assessee cannot be called upon to reverse the credit.

10. Ld. Counsel for the Revenue, by relying upon clause (5C) to Rule 3 of the Cenvat Credit Rules, 2004 submitted that the assessee is bound to reverse the credit taken on the inputs. Firstly, it is to be noted that the said clause (5C) was inserted to Rule 3 of the Cenvat Credit Rules, 2004, w.e.f. 07.09.2007. In fact, the High Court of Gujarat in the case of CCE Vs. Biopac India Corporation Ltd. has taken a similar view and held that goods destroyed in fire after being used for many years cannot be said as not used in the manufacture of final and finished product and the assessee need not reverse the Credit availed on inputs used in finished or semi-finished goods.

11. We are fully in agreement with the view taken by the Gujarat High Court. Further, clause (5C) to Rule 3 of the Cenvat Credit Rules, 2004 would be invoked where on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under Rule 21 of the Central Excise Rules 2002, the Cenvat Credit taken on the inputs used in the manufacture of production of said goods shall be reversed.

12. In view of the items referred to in clause (5C) to Rule 3 of the Cenvat Credit Rules, 2004 as above, the question of reversal would occur only when the payment of duty is ordered to be remitted under Rule 21 of the Central Excise Rules 2002. The said Rule deals with remission of duty. Admittedly, the assessee has not claimed any remission and no final product has been removed. Hence, for that reason also, reliance was placed on clause (5C) to Rule 3 of the Cenvat Credit Rules, 2004.

10. In this case the facts are that inputs on which Cenvat Credit was availed were destroyed when work was in progress. Exactly the facts of this case are similar to the facts of the case of Fenner India Ltd. (Supra) and in that case the Honble High Court has held that the assessee is not required to file claim of remission of duty under Rule 21 of Central Excise Rules 2002 and provisions of Rule 3(5)(c) of the Cenvat Credit Rules 2004 are not applicable. Therefore, following the decision in the case of Fenner India Ltd. (Supra) I hold that the provisions of Rule 21 of the Central Excise Rules 2002 and provisions of Rule 3(5)(c) and Cenvat Credit Rules 2004 are not applicable to the facts of this case. Consequently, the goods lost in work in process the assessee is entitled to take Cenvat Credit. Consequently, I hold that the assessee has correctly taken the Cenvat Credit on the inputs which has been lost during the work in progress and same has been affirmed by this Tribunal in the case of Harinagar Sugar Mills Ltd. (Supra).

11. In these circumstances, Revenues appeal is dismissed and assessees appeal is allowed with consequential relief.

(Dictated and pronounced in the open court.)

(Ashok Jindal) Member (Judicial)

Bhanu

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E/52566, 55536/2014-EX(SM)