M/S. Andhra Polymers Pvt. Ltd vs Commissioner Of Central Excise, ...

[Arising out of Order-in-Appeal No. 38/2007 (H-IV) CE dated 31/07/2007 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals-II), Hyderabad.]

For approval and signature:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

M/s. ANDHRA POLYMERS PVT. LTD. PLOT NO.2, PHASE-V,IDA, JEEDIMETLA,HYDERABAD Appellant(s)

Versus

Commissioner of Central Excise, Customs and Service Tax HYDERABAD-II L.B STADIUM ROAD, BASHEERBAGH, HYDERABAD, - 500004 ANDHRA PRADESH Respondent(s)

Appearance:

Mr. Raghavendra.B., Advocate For the Appellant

Mr. Mohd. Yusuf, Addl. Commissioner (AR) For the Respondent

Date of Hearing: 13/02/2015

Date of Decision: 05/06/2015

CORAM:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

Final Order No. 21235 / 2015

Per : ARCHANA WADHWA

The appellants are engaged in the manufacture of ceiling tiles falling under Chapter Heading No.6807.90 which attracted duty of excise at the rate of 16% advolrem. However, ceiling tiles having less than 25% by weight of fly ash content were exempt from payment of duty in terms of Notification No.6/2002. During the period December 2001 to September 2004, they received various capital goods and availed credit to the extent of Rs.19,60,869/-. They also informed the range office that they will be manufacturing both types of ceiling tiles i.e. exempted as also dutiable. However, on the audit conducted by the Revenue, it was found that the appellants were only manufacturing exempted ceiling tiles, in which case the benefit of CENVAT credit could not be available to them. On being brought the said fact to the knowledge of the appellant, they voluntarily reversed the CENVAT Credit availed by them up to 14.9.2005. Subsequently on 12.9.2006 they addressed a communication to the jurisdictional Central Excise Officer declaring their intention to reverse the debit entry made by them and to again take the credit of the said amount because the exemption available to ceiling tiles in question in terms of Notification No.6/2002 stands withdrawn in Budget of 2006. They also pleaded that the said letter be treated as a refund application in terms of Section 11B.

2. The original adjudicating authority vide his order dated 8.12.2006 rejected the appellants claim on the ground that inasmuch as capital goods received by them during the period in question were being exclusively used in the manufacture of exempted final product, the subsequent reversal of exemption and the said product becoming dutiable, would not revive their claim of CENVAT credit. For holding so, the original adjudicating authority relied upon the Tribunals decision in the case of Commissioner, Indore vs. M/s. Surya Roshni Ltd.: 2003 (155) E.L.T. 481 (Tri.-Del.).

2.1 The said order of the Assistant Commissioner was appealed against before the Commissioner (A), who observed that as the appellant had not manufactured any dutiable product till the Budget of 2006, on withdrawing the exemption, they would not be entitled to the credit of duty paid on capital goods already used by them for a period of more than four years for manufacture of the exempted final products, inasmuch as Rule 6(4) of CENVAT Credit Rules, 2001 debars taking of credit in respect of capital goods used exclusively for the manufacture of the exempted final product. Accordingly, he also rejected the appeal.

Hence the present appeal.

3. After hearing both the sides duly represented by Shri Raghavendra. B, Advocate for the appellant and Shri Mohd. Yusuf, Addl. Commissioner (AR) for the Revenue, I find that in terms of the provisions of Rule 6(4) of CENVAT Credit Rules, 2002, no CENVAT credit is available on capital goods which are used exclusively in the manufacture of exempted goods. The issue of availability of credit is to be decided at the time of receipt of the capital goods. As such the issue to be decided is as to whether the capital goods, which were received by the appellant, when their final product was exempt, would be eligible for the purpose of CENVAT credit or not. The assessees contention is that when their final product became dutiable in the year 2006, they would be entitled to avail the credit of duty paid on the capital goods.

3.1 I find that the Tribunal in the case of CCE, Indore vs. M/s. Surya Roshni Ltd.: 2003 (155) E.L.T. 481 (Tri.-Del.) has considered an identical position and it stands held that the eligibility to availment of credit has to be examined at the time of receipt of the capital goods in the factory. Subsequent becoming of the goods as dutiable would not revive the question of admissibility of MODVAT credit, if the same was not available at the time of receipt. Admittedly, in the present case when the capital goods were received, the final product was exempted. As such in terms of Rule 6(4) of CENVAT Credit Rules, 2004, the credit was not available. There is no other rule or provision of law laying that subsequently on such final product becoming dutiable, the credit would become available.

4. Learned advocate has drawn my attention to the Tribunals decision in the case of Brindavan Beverages Pvt. Ltd. vs. CCE: 2014 (310) E.L.T. 398 (Tri.-Del.). After going through the said decision of the Tribunal, I find that the appellant in that case was manufacturing exempted as well as dutiable products. It was only that the capital goods received by them were initially used for the manufacture of the exempted products and later on for dutiable products. In this scenario, the Tribunal observed that use of the machine first for exempted product and subsequently for the dutiable products would not result in denial of the credit inasmuch as the capital goods cannot be held to be used exclusively for the manufacture of the exempted products. It also stands that if the assessee is initially manufacturing exempted final product and is subsequently switching over the manufacture of dutiable final product, credit would not be admissible in terms of Rule 6(4) of the CENVAT Credit Rules, 2004. In the present case, the appellant had not even switched to manufacture of some dutiable products. It is only by operation of law that the exempt products become subsequently dutiable. Inasmuch as the availability of credit of duty paid on the capital goods is required to be judged at the time of receipt of the capital goods, subsequent becoming of goods as dutiable on account of withdrawal of exemption would not advance the appellants case of claim after such change in law. The appellant having used the capital goods for a period of more than four years for manufacture of exempted final products are admittedly not entitled to the CENVAT Credit of duty paid on such capital goods. As such, I find no reasons to interfere in the impugned orders of the lower authorities. Appeal is accordingly rejected.

(Order pronounced in open court on 05/06/2015.)

ARCHANA WADHWA JUDICIAL MEMBER rv 4