M/S. Sona Udyog vs Commissioner Of Central Excise, ...

[Arising out of Order-in- Appeal No. NGP/EXCUS/ 000/APPL/811/ 13-14 dtd. 30/8/2013 passed by the Commissioner (Appeals), Central Excise & Customs, Nagpur]

For approval and signature:

Honble Mr Ramesh Nair, 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 : 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? =======================================================

M/s. Sona Udyog : Appellants

VS

Commissioner of Central Excise, Division Bhandara : Respondent

Appearance

Shri. N.M. Porwal, Consultant for the Appellants Shri. H.M. Dixit, Asstt. Commissioner(A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 25/6/2015 Date of decision: 25/6/2015

ORDER NO.

Per : Ramesh Nair

Appeal and stay application are arising out of Order-in- Appeal No. NGP/EXCUS/ 000/APPL/811/ 13-14 dtd. 30/8/2013 passed by the Commissioner (Appeals), Central Excise & Customs, Nagpur, wherein order in original was upheld and rejected appeal of the appellant.

2. The fact of the case is that the appellant are manufacturer of Snuff of Tobacco falling under Chapter 24 of the Central Excise Tariff Act, 1985. They are availing the Cenvat Credit on inputs, Capital goods & Inputs services. On scrutiny of records of the appellant it was noticed that, during the period November 2007 to October 2008 the appellant had availed and utilized Cenvat Credit of Rs. 1,34,374/- on flexible laminated film purchased from M/s. Packotech Industries, Saifabad, Haryana. It has been observed that the process of lamination carried out by the supplier did not amount to manufacture till 1/3/2008. Thus Central Excise duty paid on goods which does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944 is without authority of law and hence would not be considered as duty of excise and the same appeared to be recoverable. Therefore show cause notice dated 7/8/2012 was issued to the appellant and adjudicated wherein demand of Cenvat credit availed on invoices of M/s. Packotech Industries were confirmed. Being aggrieved, the appellant filed appeal before the Commissioner(Appeals), who rejected the appeal of the appellant therefore appellant is before me.

3. Shri. N.M. Porwal, Ld. Consultant for the appellant submits that they received the laminated film under cover of duty paying invoices and excise duty was admittedly pad on such inputs. He submits that on their part whether activity of the manufacturer or supplier is amount to manufacture or otherwise cannot be disputed. The appellant is recipient of the goods and for the purpose of taking credit only requirement is the input should be duty paid, it should be covered by duty paying documents and input should be received in the factory and the same is used in the manufacture of final product. These facts are not under dispute. The supplier irrespective whether legally was required to pay duty or otherwise, has admittedly paid duty under the head of excise duty to the Government Exchequer. The Government also accepted that payment an account of duty so paid is under the excise head as the assessment of payment of duty by supplier has not been altered or modified by any re-assessment in such situation at the appellants hand it cannot be said that duty paid by the manufacturer supplier is not duty hence credit is admissible.

He further submits that assessment and aspect of manufacture at manufacturer suppliers end has not been challenged or by the Jurisdictional Central Excise authority of the supplier therefore activity which bonafidely treated as manufacture and payment of excise duty thereon attained finality and without any modification in such assessment on the part of the appellant Cenvat credit benefit cannot be disputed. Even in normal course it is not provided in law to ascertain dutiability of the supplier at the end of the recipient of the input otherwise. On every receipt of input at the end of recipient merely by seeing the duty paying documents it cannot be ascertained whether activity carried out by the supplier is that of manufacture or otherwise. In absence of such provision aspect of dutiabitlity and manufacture it cannot be decided at the end of the recipient of the input. He further submits that as regard whether an activity lamination is manufacture or other wise in the case of Paper Products Ltd. Vs. Commissioner of Central Excise, Mumbai-III[2014(304) ELT 145(Tri. Mum)] division bench of this Tribunal held that laminating material use for packaging purpose can be considered as manufacture as per Section 2F OF Central Excise Act.

He also submits that the similar case was made against similar place assessee who have purchase the same input from the supplier M/s. Packotech Industries. He submitted that order in appeal dated 28/1/2014 wherein Ld. Commissioner(Appeals) rejected the departments appeal by allowing credit in respect of the same input i.e. plastic laminated film. Similarly, in case of another similar base assessee A.A. packers purchase the same input from M/s. Packotech Industries Commissioner(Appeals) by order No. 180/SVS/PK/2014 dated 22/4/2013 allowed the credit in respect of input. He further submits that even if it is presumed that manufacture activity is disputed, the Cenvat credit at the recipient end of the said supplier cannot be disputed. In this regard he placed reliance on the judgment of this Tribunal in case of Commissioner of C. Ex. Rajkot Vs. Advance Diesel Engines Pvt Ltd[2012(278) ELT 491(Tri. Ahmd.)]. He also submits that this Tribunal in case of Commr. of C. Ex. Hyderabad Vs. Deepthi Formulations Pvt. Ltd. [2012(286) ELT 396 (Tri. Bang)] held that Cenvat credit is allowed notwithstanding excisibility of the inputs at the suppliers end.

It was held that in the judgment that so long supplier paid duty and issue valid invoices, inputs were received in the assesses factory was used in or in relation to the manufacture their final product and it is duty paid character evidence by the invoices, assessee is entitle to take Cenvat credit on duty paid inputs. Question whether input had arising out of process of manufacture is irr-releanvat. The relevant question is whether input was duty paid. In view of the submissions, Ld. Counsel submits that Cenvat credit is admissible therefore appeal may be allowed.

4. Shri. H.M. Dixit, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that Cenvat credit is allowed only in respect of duty paid on the inputs. He submits that as regard the laminating process activity was not amount to manufacture and same has become manufacture only after 1/3/2008 by virtue of insertion of Chapter Note No. 16 in chapter 39 of the Central Excise Tariff Act. Therefore prior to this lamination of film was not amount to manufacture and therefore no duty was required to be paid. Duty was paid by the manufacture is not duty as good was not excisable therefore since credit is allowed only in respect of duty but in the present case payment made by the supplier is not duty therefore appellant cannot be allowed Cenvat credit of such amount paid by the supplier.

5. I have carefully considered the submissions made by both sides and perused the record.

6. The lower authority have denied the Cenvat credit to the appellant only on the ground that activity of supplier of input in respect of laminated film does not amount to manufacture. This view was expressed by the lower authorities mainly on the ground that lamination of film has become manufacturing activity only w.e.f. 1/3/2008 with chapter note 16 was inserted in chapter 39 of Central Excise Act. I do not agree with contention of the Revenue for the reason that in present case it is not mere lamination whereas input received by the appellant is packaging material which used for packaging of final product by the appellant. In case of paper product Ltd. division bench categorically held that despite not exist of chapter note 16 in chapter 39 that process of lamination of duty paid film used for packaging purpose can be considered as manufacture. As per Section 2F of Central Excise Act, 1944. With this judgment there is no activity carried out by the supplier is amount to manufacture therefore the duty payment by the supplier is as per the provisions of central Excise and it cannot be said that payment is not of duty. In view of this position since payment by the supplier is of excise duty and of the manufacture goods Cenvat Credit to the appellant cannot be denied. I am also impressed by the submission by the Ld. Counsel that in view of the judgment of Advance Diesel Engines Pvt Ltd(supra) even though there is dispute of manufacture at the supplier end no fault can be found in availment of Cenvat credit by the recipient of the input. Therefore even if it is presumed that activity of the supplier in respect to input supplied is not of manufacture even then Cenvat credit cannot be denied to the appellant. In this regard I have gone through provisions of Rule 16 of Central Excise Rules, 2002 which is reproduced below:-

RULE 16.?Credit of duty on goods brought to the factory.  (1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules.

(2)?If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.

[Explanation. - The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by the manufacturer who removes the goods.] (3)?If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (2), the assessee may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the [Principal Commissioner or Commissioner, as the case may be].

From the above Rule 16, it is very clear that taking the status of supplier, even if it is presumed that the activity of supplier is not of manufacture but by virtue of above Rule 16, he was permitted to receive the duty paid goods and taken credit and in case the said duty paid goods after under going the process can be cleared on payment of duty i.e. in case of non-manufacture of activity, equal amount of Cenvat credit to be paid and in case of manufacture duty, transaction value to be paid in terms of Section 4 and as per explanation given in the said rule, duty so paid, that means in case of manufacture or non manufacturing activity, the recipient is entitle for availing the Cenvat credit on such duty. In view of the said provisions, it is absolutely clear that even if the activity of supply is not amount to manufacture but he has paid the said duty is available as Cenvat credit to the appellant. In view of my above discussion, I am of the view that the appellant is legally entitle for Cenvat credit in respect of laminated film received by them for packaging purpose. Therefore impugned order is set aside, appeal is allowed.

(Operative part pronounced in court)

Ramesh Nair Member (Judicial)

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