Commissioner Of Central Excise, ... vs M/S Ecoboard Industries Ltd

IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. IV

APPEAL NO. E/1076/08 Mum

(Arising out of Order-in-Appeal No. PII/PAP/133/08 dated 31.07.2008 passed by the Commissioner of Central Excise (Appeals) Pune-II.)

For approval and signature: Honble Shri Anil Choudhary, Member (Judicial)

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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 : Yes 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? =====================================================

Commissioner of Central Excise, Pune-II

: Appellant Versus

M/s Ecoboard Industries Ltd. : Respondent

Appearance Shri V.K. Agrawal, Addl. Commissioner (A.R.) : For Appellant None : For Respondent

CORAM: HONBLE SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL)

Date of Hearing : 24.04.2015 Date of Decision: 24.04.2015

ORDER NO.......................................................

Per: Anil Choudhary:

The Revenue is in appeal against order of the Commissioner (Appeals) whereby it has been held that although the capital goods on the date of receipt, being utilized for manufacture of exempted goods, CENVAT credit was not available, but subsequently the finished products became taxable and accordingly the assessee was entitled to take CENVAT credit in the second year, as the end product was taxable.

2. The respondent-assessee is absent in spite of notices served. The assessee had filed a request for adjournment on 13/2/15, same was allowed and next date was fixed on 20/3/15 on which date the appeal was restored to its original number, as the earlier final Order No. A/763/209/SMB/C-IV dated 3/12/09 was set aside by the Honble Bombay High Court, in Central Excise appeal No. 141 of 2010, remanding the issue to the Tribunal for a fresh decision in accordance with law. The Honble High Court in its order dated 9/12/10 have taken note that this Tribunal vide the final order in the matter had dismissed the appeal of Revenue, relying on the ruling of this Tribunal in the case of Ace Timez Vs. Commissioner of Central Excise, Bangalore reported in 2004 (170) ELT 371 (Tri.-Bang.), which order has been over ruled by the Larger Bench of this Tribunal in the case of Spenta International Ltd. Vs. Commissioner of Central Excise, Thane reported in 2007 (216) ELT 133 (Tri.-LB), order dated 01.08.2007.

3. Heard the learned A.R. and perused the records, I find that the respondent-assessee is a manufacturer of plain & pre-laminated particle boards falling under chapter 44 of the Central Excise Tariff Act, 1985. Prior to 1/3/2006 the respondent-assessee was availing full exemption on their products under Notification No. 4/2005 dated 1/3/05. In the budget of 2005, duty of 8% ad valorem was imposed on the said products vide Notification No. 4/2006 dated 01.03.2006. Accordingly, the respondent-assessee started availing CENVAT credit facility from 1/3/06, that is the date of notification, and paying duty at 8% on the final products. The respondent-assessee filed the transitional claim for availing credit on stock of inputs as well as on capital goods, lying in the stock vide their letters dated 31/3/2006, in view of the notification number 4/2006. The respondent-assessee also started paying Central Excise duty on their final products with effect from 1/3/06. During the scrutiny by the Revenue of the transitional claim it was noticed that the assessee have taken initial 50% CENVAT credit of Rs. 76,153/ on capital goods which was received in the factory premises on 30/6/04, as appeared from GRN and mentioned in the statement prepared by the respondent-assessee for claiming the transitional credit.

The respondent-assessee imported the said capital goods under bill of entry No. 13321 dated 11/3/2003, for clearance for home consumption, on which it had paid Customs duty on 4/06/2004. Accordingly, the Revenue found that the respondent-assessee had received the capital goods in the factory of manufacture before 10/9/2004, when CENVAT Credit Rules, 2004 became effective. The capital goods, namely S.S. Caul Plates, were received within the factory on 30/6/2006 which was prior to the date, that is 10/9/04, and hence the credit on the said goods was not admissible and accordingly was required to show-cause to why not the amount of CENVAT credit Rs. 76,153/- should not be disallowed and recovered along with interest & penalty. The respondent-assessee appeared and contested the show-cause notice and also filed written submissions stating that as per Rule 4(2)(a)&(b) the CENVAT Credit Rules, 2004, in respect of capital goods received in the factory or in the premises of the providers of output service at any point of time in a given financial year, credit can be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the same financial year and balance 50% in subsequent years.

The goods were received in the year 200405 and they had not taken credit during the first year, i.e. 200405. They are legally entitled to take for 100% credit in any of the subsequent financial years like 200506 or 200607. As the respondent-assessee have taken only 50% credit, as an abundant precaution, there is no illegality. Further, the respondent-assessee is relying on the ruling of this Tribunal in the case of Ace Timez Vs. Commissioner of Central Excise, Bangalore reported in 2004 (170) ELT 371 (Tri.-Bang, wherein this Tribunal had held that credit on capital goods not taken during the period when final product was exempted, could be taken when the exemption was withdrawn and final products becomes dutiable subsequently. There was no time limit prescribed for taking such credit and the assessee was permitted by law from taking the credit, during the relevant period.

4. The show-cause notice was adjudicated holding that the eligibility of CENVAT credit has to be decided on the date of receipt of the capital goods in the factory of production and accordingly the proposed demand was confirmed along with equal amount of penalty under Rule 15(2) read with section 11AC. Being aggrieved the appellant had preferred appeal before the Commissioner (Appeals) who was pleased to allow the appeal relying on the ruling of this Tribunal in the case of Ace Timez Vs. Commissioner of Central Excise, Bangalore (supra). Being aggrieved the Revenue had preferred appeal before this Tribunals and vide final order as mentioned hereinabove the appeal was dismissed, which now stands restored in view of the order of the Hon'ble High Court.

5. On examining the Larger Bench view of this Tribunal, in the case of Spenta International Ltd. Vs. Commissioner of Central Excise, Thane reported in 2007 (216) ELT 133 (Tri.-LB) order dated 1/8/2007, I find that under similar facts and circumstances wherein the assessee Spenta International manufacturing socks was exempted from payment of duty prior to the 2003 budget. The goods became dutiable with effect from 1/4/03. Certain capital goods were received by the respondent-assessee during June, 2002 and September, 2002 and installed in March, 2003. Some of the capital goods were used in March, 2003. CENVAT credit on the goods had been denied on the ground that final products  socks, were exempt at the time of receipt of capital goods, on the basis of the Tribunals decision in Commissioner of Central Excise, Indore Vs. Surya Roshni Limited reported in 2003 (155) ELT 481. The Larger Bench of this Tribunal took notice of the ruling of the Honble Supreme Court in the case of Commissioner Vs. Surya Roshni Limited 2003 (158) ELT A273 (S.C.), holding that availability of MODVAT credit is to be looked into at the time of receipt of capital goods and that MODVAT credit will not be available if capital goods are exclusively used in the manufacture of exempt products.

The appeal against the order before the Hon'ble Apex Court was dismissed. The Larger Bench also took notice of the earlier decision by this Tribunal (affirmed by Hon'ble Supreme Court) in the case of Grasim Industries Ltd. Vs. Commissioner  2005 (179) ELT A38 (S.C.) which was affirmed by the Honble Apex Court, held, the relevance of the date of receipt of capital goods for the purpose of availment of credit has been already recognised by the Tribunal. The Tribunal held that credit to the extent of 75% of CVD on capital goods alone was permissible, as this was the percentage of admissibility of credit on the date when the capital goods were received under project import regulations in the factory of the manufacture, that is, on 29/2/2000, although installed in the factory on 1/3/2000 and used subsequently, rejecting the argument of the assessee that the restriction to the extent of 75% of credit admissibility having been removed by issue of Notification No. 11/2000, 100%, credit was admissible, as capital goods where installed only post 1/3/2000. Having considered the issue at length, Larger Bench of this Tribunal have held in favour of the Revenue  holding that CENVAT credit eligibility is to be determined with reference to the dutiability of the final product on the date of receipt of capital goods.

6. Having considered the rival contentions, I find that the facts herein is squarely covered by the ruling of the Larger Bench of this Tribunal in the case of Spenta International Ltd. (supra). Accordingly the impugned order is set aside and the appeal of the Revenue is allowed. As the issue is interpretational in nature, I set aside the penalty imposed on the respondent-assessee under Rule 15(2) read with Section 11AC of the Central Excise Act.

7. Thus, the appeal is allowed in part.

(Pronounced in open Court)

(Anil Choudhary)

Member (Judicial)

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