Sri Eswari Auto Components (P) Ltd vs Commissioner Of Central Excise

[Arising out of Order-in-Appeal 191/2013 (M-IV) dated 8.5.2013 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Chennai]

Sri Eswari Auto Components (P) Ltd. Appellant

Versus

Commissioner of Central Excise, Chennai-IV Respondent

Appearance:

Shri G. Natarajan, Advocate For the Appellant Shri L. Paneer Selvam, AC (AR) For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing/decision :18.6.2015

FINAL ORDER No.40670/2015

The appellant filed appeal against Order-in-Appeal dt.8.5.2013 passed by Commissioner (Appeals).

2. The brief facts of the case are that appellant are procuring machines viz. Grinding Machine, Thread Rolling, Air Compressor, Power Press hydraulic Cutting etc. from various suppliers and installed in their Unit-II and Shop-II. These capital goods were installed in their unit-II and Shop-II for executing job work for the appellant's unit-I. Since the capital goods were not returned within 180 days as per the CCR, the adjudicating authority demanded and confirmed the amount of Rs.9,81,806/- as ineligible credit availed on capital goods and also imposed penalty. The appeal was rejected by LAA.

4. Ld. counsel appearing for the appellant submits that the capital goods were installed in their own units for job work and they are entitled to avail capital goods credit. The only condition is that capital goods should be returned to the appellants factory within 180 days. He further submits that Shop-II of their factory is located opposite to their appellants main unit and the Unit-II 5 Kms. away from the main unit and Shop-II can be considered as same as appellants main unit. It is revenue-neutral as the appellants are eligible to take credit when they receive capital goods. Further he submits out of 13 machines installed, three were installed in Shop-II and 5 machines were installed in Unit-II. Another 5 machines were subsequently received back and cleared to their new plant on payment of duty of Rs.5,80,885/- and submits a worksheet. Since they have already paid duty on these capital goods, duty cannot be demanded. He further submits that the period involved in this case is Feb95 to March09 and there was no provision built in CCR for recovery of capital goods credit removed as such and it was introduced only w.e.f. 1.3.2013. He relied on the following citations :-

(i) Madras Cements Ltd. CCE Chennai 2010-TIOL-59-SC-CX

(ii) Zenith Machine Tools Pvt. Ltd. Vs CCE Belgaum 2010 (255) ELT 83 (Tri.-Bang.)

5. On the other hand, Ld. A.R reiterates the findings. He submits that appellants not followed the procedure set out under Rule 4 (5) (a) of CCR for removal of capital goods and not filed any declaration. The Director of the company had admitted their liability. He further submits that job worker's unit is not registered. He relied on Tribunal's decision in Harsh International Pvt. Ltd. Vs CCE Delhi-II - 2011 (269) ELT 225 (Tri.-Del.).

6. After hearing both sides, I find that the short issue in the present case relates to reversal of cenvat credit availed on the capital goods installed in their own units for job work and not returned within the stipulated period. I find that appellant had installed the capital goods at Shop-II situated opposite to the appellants premises and their Unit-II is which located 5 kms. away from the main unit. There is no dispute on the fact that these units exclusively carry out the job work only for the appellants. The Rule 4 (5) (a) of CCR provides for supply of capital goods for job work for manufacture of intermediate goods with the condition that it should be returned within 180 days failing which appellants have to pay equivalent amount of credit availed on the capital goods. It is seen from the worksheet submitted by the appellants, out of 13 machines, 5 machines listed at Sl.No.6,7,8,9 & 13 were returned and subsequently cleared to new plant on payment of duty and remaining 8 were installed in Unit II (5 nos.) and Shop-II (3 nos.) of the appellant. I find from letter dt. 1.2.2011 addressed to the Commissioner of Central Excise, Chennai IV wherein they have requested for inclusion of the premises of Shop-II with the appellants main unit which is still pending . Prima facie, I find that the main unit and the two units belong to the appellant and exclusively used for carrying out job work only for them. The Honble Supreme Court in the case of Madras Cements Ltd. Vs CCE Chennai (supra) held that capital goods credit which are installed in the captive mines are eligible for the entire capital goods credit even though they are located outside the factory. In the present case, there is no dispute that these two units belong to them and exclusively doing the job wok for main unit and they are not independent job workers. Therefore, by respectfully following above Apex Court decision and considering the fact that there was no recovery mechanisms built in CCR for recovery of capital goods credit prior to 1.3.2013, I hold that appellants are eligible for capital goods credit installed at their own units for job work purpose. Accordingly, impugned order is set aside and the appeal is allowed.

(Dictated and pronounced in open court)

(R. PERIASAMI) TECHNICAL MEMBER

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