M/S. Tipco Industries Limited vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIA-SRP-131-VAPI-2012-13 dated 08.11.2012, Passed by Commissioner (Appeals) Central Excise, & S.T., Vapi)

M/s. Tipco Industries Limited : Appellant (s)

VERSUS

Commissioner of Central Excise & S.T., Vapi : Respondent (s)

Represented by :

For Appellant (s) : Shri Vinay Sejpal, Advocate, For Respondent (s) : Shri Govind Jha, Authorised Representative

For approval and signature :

Mr. H.K. Thakur, Honble Member (Technical)

1 Whether Press Reporter 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 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

CORAM :

Mr. H.K. Thakur, Honble Member (Technical)

Date of Hearing / Decision : 30.06.2015

ORDER No. A/10944 / 2015 Dated 30.06.2015

Per : Mr. H.K. Thakur;

This appeal has been filed by the appellant against OIA No. SRP-131-VAPI-2012-13 dated 08.11.2012 under which the first appellate authority has upheld the OIO No. 37/AC/DEM/2011/Silavassa dated 29.12.2011. The issue involved in this appeal is admissibility of cenvat credit taken by the appellant with respect to rejected goods manufactured by the appellant which were received on rejection.

2. Shri Vinay Sejpal, (Advocate) appearing on behalf of the appellant argued that appellant is manufacturing Re-enforced Poly-Propylene Plastic Granules and clearing on payment of duty. That in certain cases the goods manufactured and cleared by the appellant on payment of duty are received back as rejected which are separately shown in the cenvat credit account and credit is taken by maintaining separate Section in the CENVAT credit account. That these rejected goods received are again used for manufacture of PP Co-Polymer granules for which necessary issue slips are maintained. That during remanufacture certain additives are added as per the specification of customers and are duly reflected again in RG-1 register. That the duty on such remanufactured granules is again paid at the transaction value. Learned Advocate made the Bench go through various documents maintained by the appellant in the factory premises. That show cause notice was issued only on the ground that appellant has not maintained any records for the receipt of rejected goods in the factory as per Rule 16(1) of Central Excise Rules, 2002. It was his case, whether the activity carried out by the appellant amounts to manufacture or not, has been discussed by the first appellate authority, which is beyond the scope of the show cause notice. That no such allegations were made in the show cause notice. Learned Advocate relied upon the following case laws to argue that process of remoulding and adding of certain additives to make PP Co-Poly Moulding again amounts to manufacture, as held by various judicial pronouncements:-

(a) CCE, Jaipur vs. Amco India Limited  [2015-TIOL-128-CESTAT-DEL/ 2015 (316) ELT 525 (Tri. Del.)]

(b) Sankhla Industries Unit III vs. CCE, Bangalore-III  [2013 (291) ELT 297 (Tri. Bang.)]

(c) Commissioner of Income Tax, Chennai vs. Shri Swasan Chem (M) Pvt. Limited  [2008 (232) ELT 401 (Mad.)]

(d) Circular Nos. 15/88-CX.3 dated 10.08.1988 and 92/10/92-CX.3 dated 13.07.1992

2.1 He also relied upon the CBEC Circular No. 15/88-CX.3 dated 10.08.1988 where it is clarified that conversion of LDPE/HDPE moulding powder (granules) into Moulding powder (powder form) would amount to manufacture in the light of note 6 of Chapter 39 of the Schedule to Central Excise Tariff Act, 1985.

3. Shri Govind Jha (AR) appearing on behalf of the Revenue argued that it has not been established that process undertaken by the appellant amounts to manufacture, therefore, appellant was required to reverse the cenvat credit taken at the time of receipt of the rejected goods. Learned AR therefore, strongly defended the order passed by the first appellate authority.

4. Heard both sides and perused the case records. It is observed from the show cause notice dated 31.01.2011 issued to the appellant that on the basis of audit it was observed that appellant has not followed the procedure and conditions laid down in Rule 16(2) and 16(3) of the Central Excise Rules, 2002. It was also mentioned in the show cause notice that appellant did not maintain any records/ registers for rejected and returned goods as provided under Rule 16 of Central Excise Rules, 2002. However, it is observed from RG 23A Pt.I maintained by the appellant that entries have been made in this register regarding receipt of rejected goods in spite of the fact that no record has been specified under Rule 16 to be maintained by an assessee. The documents on the basis of which CENVAT credit is taken is also available with the appellant. The records maintained by the appellant is showing the issue slips for remanufacture of the goods and end products are duly entered in the stock registered and cleared on payment of duty. As per column No. 8 and 9 of RG 23 Part-I register, issue slip number, date and quantity issued for use in relation to manufacture of final products is also indicated. There is no evidence on record that no process was carried out on the rejected goods received by the appellant where as, the appellant has produced documentary evidence to show that certain process were done which amounts to manufacture and cleared on payment of duty. It is not the case of the Revenue that the documents relied upon by the appellant were fabricated after the date of audit.

5. So far as the issue whether conversion of granules again into PP Granules by adding certain additives amounts to manufacture or not, though this was not the issue in the show cause notice but appellant has relied upon the case law of Snakhla Industries Unit-III vs. CCE, Bangalore III  (supra). Para 2 of this case law is relied upon and is reproduced below:-

2. After examining? the records and hearing both sides, I find that it is not in dispute that the goods returned by the assessees buyers were remelted by making use of the same machinery and fresh products viz. PVC compound, PVC Master Batch, etc., emerged. It is also not in dispute that these products were cleared on payment of appropriate duty. In this factual matrix, the appellant could not have been asked to reverse the CENVAT credit availed on the returned goods. This is because the returned, goods were subjected to the process of manufacture. As per Rule 16, as clarified in Chapter 18 of the Supplementary Instructions issued by C.B.E. & C., where the returned goods are subjected to a process amounting to manufacture, the manufacturer shall pay duty at the appropriate rate on the goods so manufactured, and for payment of such duty, the CENVAT credit of the duty paid on the returned goods could be utilized. 5.1 Further CBEC vide Circular No. 15/88-CX.3 dated 10.08.1988 also clarified that conversion of LDPE/HDPE moulding powder (granules) into moulding powder (powdered form) would amount to manufacture as per Note 6 of Chapter 39 of the Central Excise Tariff Act, 1985.

6. In view of the above factual position and the detailed accounts maintained by the appellant, it is held that CENVAT credit on rejected and returned goods was correctly availed by the appellant. Appeal filed by the appellant is allowed.

(Order dictated and pronounced in the Court)

(H.K. Thakur) Member (Technical) .KL

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