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

(Arising out of OIA-SRP-146-DAMAN-2012-13 dated 07.11.2012, Passed by Commissioner (Appeals) Central Excise, & S.T., Daman)

M/s. Vividh Industries : Appellant (s)

VERSUS

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

Represented by :

For Appellant (s) : Shri V.S. Rane, Advocate For Respondent (s) : Shri J. Nair, 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 : 22.06.2015

ORDER No. A/10845/2015 Dated 22.06.2015

Per : Mr. H.K. Thakur;

This appeal has been filed by the appellant with respect to OIA No. OIA-SRP-146-DAMAN-2012-13 dated 07.11.2012 under which OIO No. 26/Assistant Commissioner/NDMN/DEM/11-12 dated 30.11.2011, dropping of demand of Rs. 1,94,206/-, was set-aside and the show cause notice demand was confirmed by the first appellate authority alongwith interest. An equivalent penalty was also imposed upon the appellant under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

2. Shri V.N. Rane (Advocate) appearing on behalf of the appellant argued that the issue involved in the present appeal is admissibility of CENVAT credit on rejected finished goods, under Rule 16 of the Cenvat Credit Rules, 2004, which are meant for repair and reconditioning. It was his case that such rejected goods are entered into the statutory CENVAT credit account and are cleared either as rejected and repaired goods or as waste by discharging duty liability on transaction value as per the provisions of Rule 16 of the Cenvat Credit Rules, 2004. Learned Advocate relied upon the following case laws to argue that CENVAT credit of rejected goods were rightly admissible under Rule 16:-

(a) CCE Meerut-II vs. Polyplex Corporation Limited  [2008 (224) ELT 46 (Uttarakhand)]

(b) Hitesh Plastics Pvt. Limited vs. CCE & Cus, Vapi  [2009 (243) ELT 419 (Tri. Ahmd.)]

(c) CCE, Jaipur vs. Amco India Limited  [2015 (316) ELT 525 (Tri. Del.)]

(d) Dhanuka Pesticides vs. CCE, Delhi-III  [2014 (303) ELT 90 (Tri. Del.)]

3. Shri J. Nair (AR) appearing on behalf of the Revenue argued that appellant has not maintained any record evidencing payment of duty on rectified goods as per the provisions of Rule 16(2) of the Cenvat Credit Rules, 2004. That original Adjudicating authority totally overlooked the provisions of Rule 16(2) of the Cenvat Credit Rules and that OIO dated 30.11.2011 has been correctly set-aside and demand correctly confirmed alongwith interest and equivalent penalty. Learned AR also made the Bench go through Para 10 of OIA dated 07.11.2012 passed by the first appellate authority that Commissioner (Appeals) has correctly relied upon the case laws mentioned in Para 10.

4. Heard both sides and perused the case records. The issue involved is whether appellant has correctly availed cenvat credit with respect to appellants own goods received back as rejected goods for repairs, rectification etc. Rule 16 of the Cenvat Credit Rules, 2004 is as follows:-

Credit of duty on goods brought to the factory - Rule 16. (1) Where any goods on which duty has 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 have CENVAT credit of the duty paid as if such goods are received as inputs under the Cenvat Credit Rules, 2002 and utilize 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.

4.1 It is observed that Rule 16(1) of the Cenvat Credit Rules, 2004 is not subject to the provisions of Rule 16(2) or maintenance of certain prescribed records. Rule 16(1) conveys that where any finished goods are received for remaking, refining, reconditioning or for any other reason than an assessee shall state the particulars of such receipt in his record and shall be entitled to CENVAT credit of duty paid on the returned goods. Since these conditions prescribed in Rule 16(1) are fulfilled, therefore, the credit taken can not be denied. On this issue observations made in of Para 6 of the case law CCE, Jaipur vs. AMCO India Limited  [2015 (316) ELT 525 (Tri. Del.)] relied upon by the appellant also support this view and is reproduced below:-

6. On going through the submission so made as also by the learned DR and after going through the impugned order of Commissioner (Appeals), I find no reason to disagree with the finding of the appellate authority. As rightly observed by him, Revenue on one hand, is contending that no records were being maintained by the assessee after receipt of the returned goods, so as to show the further process taken by them and on the other hand, they are contending that 80% of the receipt material was cleared as scrap. The said submission of the Revenue is based upon the statement of the employee, without verifying as to whether the waste and scrap so cleared by the appellant emerged during the course of remanufacture or not. The provision of Rule 16 does not require maintenance of any records. The returned goods have to be treated as inputs and the assessee having shown the issuance of the said inputs from their RG-I; had deemed to have manufactured their final product. In the absence of any documentary evidence in support of revenues stand, I find no justification for setting aside the impugned order of Commissioner (Appeals). Revenues appeal is accordingly rejected.

4.2 So far as Rule 16 (2) is concerned the same is procedural and does not indicate maintenance of special records. In Para 7 of the reply to the show cause notice, as reproduced by Commissioner (Appeals) in Para 9 of his OIA dated 07.11.2012, appellant has argued that the repaired containers or rejected and repaired containers or waste of such returned containers are all cleared on payment of duty. It is not the case of the Revenue that metal containers after repair were cleared clandestinely without payment of duty by the appellant. There is no shortage of metal containers brought out by Revenue. CENVAT credit can not be denied on procedural lapses when the rejected containers were duly reflected in the CENVAT credit account and shown utilised. One to one correlation of rejected containers received with subsequent clearances is not prescribed under Rule 16 of the Cenvat Credit Rules. In view of the above appeal filed by the appellant is allowed with consequential relief, if any.

(Order dictated and pronounced in the Court)

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

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