Sreepathi Pharmaceuticals Ltd vs Commissioner Of Customs, Central ...

[Arising out of Order-in-Appeal No. 115/2010 dated 27/12/2010 passed by the Commissioner of Customs, Central Excise and Service Tax, Hyderabad]

For approval and signature:

HON'BLE MRS ARCHANA WADHWA, JUDICIAL MEMBER

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

Sreepathi Pharmaceuticals Ltd. Plot No. 163, Phase V, IDA, Jeedimetla, Hyderabad  500 055 Andhra Pradesh Appellant(s)

Versus Commissioner of Customs, Central Excise and Service Tax Hyderabad-IV Posnett Bhawan, Tilak Road, Ramkoti, Hyderabad  500 001 Andhra Pradesh Respondent(s)

Appearance:

Mr. Rajesh Kumar, CA Hiregange & Associates, No. 1010, 26th Main, Above Corporation Bank, 4th T Block, Jayanagar, Bangalore  560 041 For the Appellant

Mr. S. Teli, AR For the Respondent

Date of Hearing: 26/05/2015 Date of Decision: 26/05/2015 CORAM:

HON'BLE MRS ARCHANA WADHWA, JUDICIAL MEMBER

Final Order No. 21183 / 2015

Per : ARCHANA WADHWA

After hearing both the sides, I find that the appellant is engaged in the manufacture of various types of bulk drugs. They avail the cenvat credit of duty paid on various inputs received by them and such inputs are further sent to their job-worker for manufacture of intermediate products, in terms of the provisions of Rule 4(5) (a) of Cenvat Credit Rules. The said goods are received back by them, in the normal course, for further manufacture of their final products.

2. In one such incident, during the period October to November 2009, the inputs sent by them to their job-worker got destroyed fully, in a fire accident. There is no dispute about the occurrence of fire in the job-workers factory and the consequent destruction of the inputs.

3. In the above scenario, Revenue sought to deny the cenvat credit of duty so availed by the assessee. Accordingly proceedings were initiated, resulting in passing of the present impugned orders, confirming the amount of Rs. 7,64,667/- (Rupees Seven Lakhs Sixty Four Thousand Six Hundred and Sixty Seven only) and interest of Rs. 19,100/- (Rupees Nineteen Thousand One Hundred only). The said confirmation of demand and interest by the original adjudicating authority stands confirmed by Commissioner (Appeals). Hence the present appeal.

4. The issue requires to be decided in the present appeal is as to whether the appellant is liable to reverse the credit so availed by him when the inputs were not actually used in the manufacture of the final product and were destroyed in the job-workers factory. Tribunal in the case of Dishman Pharm. & Chemicals Ltd. Vs. CCE, Ahmedabad [2006 (206) E.L.T. 254 (Tri.-Mum.)] has dealt with an identical situation i.e. where the inputs sent to the job-workers factory were destroyed in fire. The Tribunal relying upon some precedent decisions, as confirmed by Honble Supreme Court held that inasmuch as the inputs have been sent to the job-workers, they have to be considered as being issued for manufacture and entitled to the cenvat credit. As such the said decision fully covers the situation available in the present case.

5. On being questioned as to whether there was any amendment in law after the said decision of the Tribunal, learned advocate appearing for the appellant brings my attention to the provisions of Rule 3(5C) of Cenvat Credit Rules. In terms of the said Rule, an assessee is liable to reverse the cenvat credit of duty paid on the inputs, which have been used in the manufacture of the final product and which final product stands destroyed and remission of duty stands granted in respect of the said destroyed final product. However he submits that the said Rule is not applicable to the destruction of the inputs itself, which have not reached the stage of final goods. For the said proposition he relies upon the Tribunals decision in the case of Themis Medicate Ltd. Vs. CCE & S.T, Daman [2014 (303) E.L.T. 141 (Tri.-Ahmd.)]. The Tribunal, while considering the effect of Rule 3(5C) of the Cenvat Credit Rules 2004 observed as under:

7. On the background of such a factual matrix, it needs to be considered whether a denial of cenvat credit to the appellant on the inputs consumed during the course of manufacturing and got destroyed before reaching the stage of finished goods is liable to be recovered. On perusal of the provisions of Rule 3(5C) of the Cenvat Credit Rules, 2004, it is seen that the said rule envisages recovery of duty paid on inputs and availed as cenvat credit when as assessee seeks remission of duty under Rule 21 of the Central Excise Rules, 2002. In my considered view, the said Rule 3(5C) of the Cenvat Credit Rules, 2004, can be invoked as and when the assessee seeks remission of duty, which is not the case in hand. In the case in hand, there was no application filed by the appellant for remission of duty quite rightly so as the goods which were destroyed were semi-finished products or work in process and have not attained the stage of finished goods. As against the above decision of the Tribunal, learned DR appearing for the Revenue has not brought any contra decision to my attention. Admittedly in the present case the inputs have not reached the final stage and there is no remission of duty involved. In such a case, as held by the Tribunal the provisions of Rule 3(5C) would not be applicable.

6. In view of the foregoing discussions, I am of the view that the appellant is entitled to the cenvat credit of duty in respect of the inputs destroyed in fire at the job-workers factory. Accordingly the impugned order is set aside and the appeal is allowed with consequential relief to the appellant.

(Order pronounced in open court)

(ARCHANA WADHWA) JUDICIAL MEMBER

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