Shiv Auto Products vs C.C.E. Delhi-Iv

[Arising out of Order-in-Appeal No. 262/CE/Appeal/DLH-IV/2014 dated 8.10.2014 passed by the Commissioner (Appeals), Central Excise, Delhi-IV.]

Date of Hearing/Order: 15.10.2015

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

Shiv Auto Products Appellant

Vs.

C.C.E. Delhi-IV Respondent

Appearance:

Present for the Appellant: Shri Yuvraj Shekhar Kumar, Advocate

Present for the Respondent: Shri R.K.Mishra, DR

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

Final Order No.53214/2015

Per: Sulekha Beevi C.S.

1. The appeal is filed challenging the disallowance of Cenvat credit on bright bars used as inputs.

2. It was observed that the appellant had wrongly availed Cenvat credit on Steel Wires/Bright Bars, as the Honble Supreme Court in the case of M/s Vee Kayan Industries reported in 1996 (83) E.L.T. 262 (SC) held that no process of manufacture was involved during the transformation of Bright Bars from the round bars; as such Bright Bars not being an excisable commodity the credit was not admissible on Bright Bars. Accordingly, the appellants were issued show cause notice which after adjudication disallowed credit and also raised duty demand, interest and penalty. In appeal, the Commissioner (Appeals), upheld the same. Aggrieved, the appellant is before the Tribunal.

3. The credit on Bright bars used by the appellant for the manufacture of finished goods, is sought to be denied on the ground that Bright bars are not a commodity subject to excise duty as no process of manufacture is involved in the transformation of round bars into Bright bars. The short question involved is whether the appellants are entitled to credit on the duty paid on Bright bars used as inputs. According to Department the manufacturer who supplied the bright bars was not liable to pay duty on these items as no process of manufacture was involved and therefore the appellant cannot avail credit on these items. The payment of duty on bright bars by the appellant is not disputed. So also there is no dispute that bright bars where used by the appellant to manufacture their final product. Again there is no case that the inputs supplied were not covered by valid document prescribed under the Cenvat Credit Rules, for availing credit. The benefit of credit is sought to be denied on the ground that on the end of the supplier these goods were not excisable goods.

4. Interestingly, although the Apex Court in its judgment dated 20.09.1994 in CCE, Chandigarh Vs. Vee Kayan Industries, 1996 (83) ELT 262 (SC) held that the processing of round bars into Bright bars would not amount to manufacture, the Department by Trade Notice No. 18/2003 dated 14/08/2003 had clarified that the process of making bright bars from wire rods amounts to manufacture. Duty was being collected upon bright bars and credit was being availed on such goods. A further trade notice dated 16/06/2004 was issued as clarification to trade notice No. 18/2003 stating that there is no process of manufacture. The demand is raised for the period after 16.6.2004. It is discussed by the Commissioner (Appeals) that the issue was contentious and involved interpretation and therefore protective demands were issued during that time. It is seen that the cases were kept pending in the call books after issuance of show cause notices. Thereafter the matter has been adjudicated and order passed after many years. This goes to show that the Department itself was under much confusion as to whether excise duty is to be collected or not on bright bars.

5. In CCE, Hyderabad vs. Deepthi Formulations Ltd 2012 (286) ELT 396 (TRI- Bang) the Tribunal has taken the view that when the input is received in the factory and used in or in relation to manufacture of final product and payment of duty is evidenced by the invoices the credit cannot be denied. The question whether the input is a result of a process of manufacture is irrelevant. What is relevant is whether duty has been paid or not on such input. The Cestat in Neuland Laboratories Ltd. vs. Commissioner reported in 2015 (317) ELT 705 (Tri.-Bang.) while deciding similar issue held as under:-

When we take note of the fact that the assessee may receive inputs/capital goods/services classifiable under almost all the headings, it is difficult to imagine that legislature would require the assessee to determine whether duty is payable for all these items or not and then take credit. Even a jurisdictional Central Excise officer may not have all the items listed in the Schedule for assessment. In fact, assessment has been taken away even from the Central Excise officer. That being the case, the Boards Circular which has been issued without taking into consideration and considering the implications of the provisions and implications of the instructions on the assessees cannot be applied blindly to arrive at a conclusion against the assessee.

This view of the Tribunal was concurred by the Honble Andra Pradesh High Court and the appeal filed by Revenue was dismissed on 4.3.2014 (2015 (319) ELT A-140 (AP).

6. In view of the above, the impugned order is set aside. The appeal is allowed with consequential reliefs if any.

(Pronounced in the open Court)

(Sulekha Beevi C.S.)

Member (Judicial)

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