P.S.Camshafts Pvt.Ltd vs Cce, Indore

(Arising out of OIA No.IND/CEX/000/APP/144 & 145/14 dt.18.7.14 passed by the CCE(Appeals), Indore)

Date of Hearing: 01.10.2015

Date of Order: 9.10.2015

For approval & Signature:

Honble Smt.Sulekha Beevi C.S., Member (Judicial)

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 would be released under Rule 27 of the 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 Department Authorities? Yes

P.S.Camshafts Pvt.Ltd. Appellant

Vs.

CCE, Indore Respondent

Appearance:

Present for the Appellant: Shri A.Upadhyay, Advocate

Present for the Respondent: Shri M.R..Sharma, AR

Coram: Honble Smt.Sulekha Beevi C.S., Member (Judicial)

Final Order No.53136/2015

Per: Sulekha Beevi C.S.

In the above appeal two issues arise for consideration. (1) Whether the credit availed on H.R.Sheets of thickness less than 4 mm is admissible or not (2) whether the appellant is liable to pay duty on scrap generated at the job workers end.

2. The appellants are engaged in the manufacture of parts of motor vehicles i.e. rear plate, front plate and camshaft etc and also availing credit on inputs used in the manufacture of parts of motor vehicles. It was observed by the department that the appellant was availing credit on HR sheets of thickness from 1.6 mm to 16 mm for the period 2008-09 to 2010-11. The department entertained a view that only HR sheets of 4 mm thickness are to be used as inputs for manufacture of final products and that the appellant has wrongly availed credit on HR sheets which are less than 4 mm thickness. The second allegation is that the appellant got the HR sheets cut into semi finished plates. During the cutting process waste and scrap are generated at the job workers end. The scrap is not returned to the appellant. The appellant did not pay duty on the scrap, but the value of scrap was adjusted in job charges. A show cause notice raising the above allegations of wrongful availment of credit against HR sheets for an amount of Rs.5,08,598/- and unpaid central excise duty on the scrap generated during job work amounting to Rs.1,34,053/- was issued to the appellant. The notice finalized in the order which confirmed the demand and penalty but dropped separate penalty proposed against the managing director. Aggrieved by the dropping of penalty, the department filed appeal before the Commissioner (Appeals). An appeal was preferred by the appellant also challenging the Order-in-Original. The Commissioner (Appeals) vide common impugned order dismissed both appeals and upheld the Order-in-Original. Aggrieved the appellant is before the Tribunal.

3. The first issue that arises for consideration is whether the credit availed against HR sheets of thickness less than 4 mm is admissible or not.

4. On behalf of the appellant, learned Counsel submitted that the appellant had from the beginning itself explained to the Central Excise Officers that HR sheet of 4 mm thickness is used by them as inputs in their plant. That, in case of shortage of HR sheets of thickness of 4 mm, they used HR sheets of less than 4 mm also by welding two sheets. They welded the sheets with less thickness so as to get the required thickness as per order of the customer. Learned Counsel submitted that department has come to the wrong conclusion that HR sheets less than 4 mm are not used in manufacture of their final products. In case HR sheets of 4 mm thickness is not available in the market, the appellant cannot stop production and lose market. The appellant then would procure HR sheets of less than 4 mm thickness and weld them suitably for manufacture of their final products. In such manner, if they are not able to procure sheets of 4 mm, they used HR sheets less than 4 mm thickness to convert them into customers requirement. Though there can be difference of cost of welding it is negligible. The appellant has also produced a certificate issued by the chartered engineer who has certified that HR sheets of less than 4 mm is used by appellant for manufacture of final products. Adverting to the statement recorded by the Central Excise Officers, the learned Counsel submitted that the Revenue has given much weight to the statement given by Shri R.K.Verma, authorized signatory of the appellant. That Shri R.K.Verma is not a technical expert and his statement that they did not have any use of HR sheets of thickness less than 4 mm cannot be given much weight. The Manager Director Shri E. Shunmukham has explained in detail the manner in which the appellant puts to use HR sheets less than 4 mm for manufacture of final products. The Revenue has given a goby to this statement given by the managing director.

5. Against this, learned DR submitted that Shri R.K.Verma has deposed that the appellant did not have any use of HR sheets of less than 4 mm. Moreover, Shri Bharat Bajaj, Manager (Material) of M/s.VE Commercial Ltd., Pithampur, who is the customer of the appellant stated that they did not accept any rear plates which were welded. But bought only single sheets. That these statements would establish that the appellant is not using HR sheets of less than 4 mm as inputs for manufacture of final products. The appellant have thus wrongly availed credit.

6. It is not disputed that the appellant procured HR sheets less than 4mm thickness by paying duty. According to the department, the HR sheets of less than 4 mm thickness are not used as input for manufacture of final products and therefore contends that the credit is not admissible. The receipt of HR sheets which thickness less than 4 mm is entered in the RG-23A Part-IV register of the appellants factory. The managing director of the appellant Shri E.Shunmukham has given statement explaining how they put to use HR sheet less than 4 mm. It is also seen that duty is paid by appellant on HR sheets based on weight and not on their thickness. Similarly, the final products (rear plates) are also cleared in regard to their weight and not by thickness. However, thickness of the final products is maintained by the appellant to meet requirement of the customers. The department has come to the conclusion that HR sheets of less than 4 mm thickness is not used in the manufacture of final products merely relying upon oral evidence tendered by Shri R.K.Verma, authorized signatory of the appellant. In my view, when the duty on HR sheets is not paid on the basis of thickness but on the basis of weight, the use of HR sheets of less than 4 mm thickness has no bearing on availing the credit. Revenue does not raise any discrepancy with regard to the weight of input used and weight of final product manufactured. Again, Revenue does not have any case that the HR sheets of less than 4 mm thickness procured by the appellant was diverted in any manner. The department has come to a conclusion without any basis that HR sheets of less than 4 mm thickness is not used by the appellant in manufacture of final products. It is immaterial whether the final product could be manufactured without actually using a particular input or not. What is actually material is whether the assessee has used the inputs in or in relation to manufacture of final products. I find that the assessee has been able to establish that they have used HR sheets less than 4 mm in the manufacture of final products by way of statement given by the managing director of the appellant and certificate issued by the chartered engineer. In view thereof, I hold that denial of credit on HR sheets less than 4 mm thickness is unjustified. The same is to be allowed.

7. Second issue to be considered is whether the appellant is liable to pay duty on waste and scrap generated at the job workers end. It is submitted on behalf of appellant, that to avoid unnecessary transportation expenses, the appellant made arrangement with the job worker about the scrap not to be received in the factory. Learned Counsel relied upon the judgement in Alucast Foundries Pvt.Ltd. vs. CCE, Mangalore-2009 (236) ELT 301 (Tri.-Bang.) and CCE vs.Rocket Engineering Corporation Ltd.-2008 (223) ELT 347 (Bom) wherein it has been held that when the waste and scrap is generated at the job workers premises and inputs are supplied by the appellants then the duty liability is not to be fastened on the principal manufacturer. Similar view has been taken in Mukand Ltd. Vs .CCE, Belapur-2015 (318) ELT 134 (Tri.-Mum.). Following the ratio laid in the above judgements, I am of the view that the appellant is not liable to pay duty towards waste and scrap generated at the job workers premises. Both issues are held in favour of the assessee.

8. In the result, the appeal is allowed with consequential relief, if any.

(pronounced in the open court on 9.10.2015)

(Sulekha Beevi C.S.)

Member (Judicial)

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