M/S. K G Petrochem Ltd vs Commissioner Of Central Excise

[Arising out of Order-in-Appeal No. 228 (GRM) CE/JPR-I/2006 dated 25.09.2006 passed by the Commissioner of Customs and Central Excise, (Appeals I), Jaipur ].

For approval and signature:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

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?

M/s. K G Petrochem Ltd. Appellants

Vs.

Commissioner of Central Excise Respondent

Jaipur I

Appearance:

Shri Bipin Garg, Advocate for the Appellants

Shri Govind Dixit, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Mr. B Ravichandran, Member (Technical)

Date of Hearing /decision: 03.09.2015

FINAL ORDER NO. 52808 /2015-EX(DB)

Per Ashok Jindal:

The appellant is in appeal against the impugned order demanding duty on account of under-valuation as well as denial of cenvat credit on plastic crates.

2. Brief facts of the case are that the appellant is engaged in the manufacture of HDPE /PP woven sacks of their own raw material as well as on job work basis for M/s. Aditya Cement Ltd. The appellant is availing cenvat credit on inputs used for manufacture of final product and paying duty on their clearances. In respect of clearances made to M/s. Aditya Cement Ltd., the appellant is paying duty on the basis of cost construction method. The investigation took place and it was observed that the appellant was supplied with raw material for manufacture of sacks and the waste and material generated during the manufacture of such sacks was retained by the appellants and sold at the rate of Rs.6/- per Kg. on payment of duty. The Revenue was of the view that as per the decision of Apex Court in the case of M/s. Ujagar Prints, the appellant was required to pay duty on the assessable value arrived at by adding the landed cost of raw materials plus the job charges plus any other additional consideration received in relation to the goods cleared. As appellants has not included the sale value of waste and scrap in the assessable value of HDPE bags cleared to M/s Aditya Cement Ltd., therefore, appellant is required to pay duty on the value of scrap retained by the appellant as the same form additional consideration. It was also revealed that appellant has availed cenvat credit of duty paid on plastic crates and as per Rule 2 of Cenvat Credit Rules, 2004, the plastic crates are not covered under the definition of capital goods. Therefore, appellant is not entitled to avail cenvat credit on plastic crates. In these set of facts, a show cause notice was issued to the appellant to demand duty along with interest and for imposition of penalty. Both the lower authorities have confirmed the allegations made in the show cause notice consequently, demand of duty along with interest and penalty was also imposed. Aggrieved from the said order, appellant is before us.

3. Heard the parties. Considered the submissions.

4. After hearing the parties, the following issues have emerged from the facts of the case:

A) Whether the appellants is required to pay duty on the value of scrap as additional consideration for job work goods? ; and

B) Whether the appellant is entitled to avail cenvat credit on plastic crates?

5. On the issue of waste and scrap arising during the job work goods, we find that issue has been settled by this Tribunal in the case of P R Rolling Mills Pvt. Ltd. vs. CCE, Tirupathi [2010 (249) ELT 232 (Tri-Bang)] which has been affirmed by the Honble Apex Court [2010 (260) ELT A84 (SC)], wherein it has been held that value of scrap retained by job work and cleared on payment of duty is not includible in assessable value of job work goods which has been cleared to principal manufacturer. In these circumstances, we hold that as the appellant has paid duty on waste and scrap arising from job work goods, the appellant is not liable to pay duty or required to add the same in the assessable value of job work goods.

6. The availment of cenvat credit on plastic crates was dealt by the Larger Bench of this Tribunal in the case of Banco Products (India) Ltd. vs. CCE, Vadodara-I [2009 (235) ELT 636 (Tri-LB)] wherein this Tribunal held that cenvat credit is available on plastic crates used as material handling equipment in the factory premises as capital goods as also as inputs. Therefore, issue is no more res integra in the light of decision of Banco Products (India) Ltd.(supra) and in the case of Pallipalayam Spinners Pvt. Ltd. vs. CCE, Salem [2008 (231) ELT 495 (Tri-Chennai)] which has been affirmed by Honble Madras High Court as reported in [2015 (318) ELT A 180 (Mad)], we hold that appellant is entitled to take cenvat credit on plastic crates used for transfer of intermediate product in the factory as capital goods.

7. With these observations, we hold that the allegations made in the show cause notice are not sustainable. Consequently, impugned order deserves no merits, hence set aside by allowing the appeal filed by the appellants.

(Dictated and pronounced in the open court )

( Ashok Jindal) Member(Judicial)

( B Ravichandran )

Member(Technical)

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