Burden to prove that input was capable to be used in manufacturing process lies on assessee.

PJ/Case law/2014-15/2211

Case:- SURYA FOOD & AGRO LTD. Vs COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD

Citation:- 2013 (297) E.L.T. 566 (Tri. - Del.)

Brief facts:- The appellant was a manufacturer of biscuits. During the period May, 2005 to February, 2006, they had taken Cenvat credit on an item described by them as “OCS-III” classified under Tariff Item No. 3814.0010. The said tariff item covers “Organic Composite Solvent and Thinner not elsewhere specified, prepared paints”. Revenue was of the view that the said item could not be considered to be input used in the manufacture of biscuits and for that reason, Revenue initiated proceedings for recovery of Cenvat credit availed. On adjudication and after first appellate stage, an amount of Rs. 3,86,782/- was confirmed against the appellant along with interest and penalty of Rs. 3,86,782/-.

Appellant’s contentions:- The Counsel for appellants submitted that the said item was used as fuel in the manufacturing process and this qualify to be input. It was his argument that Revenue had not been able to show that these items could not be used as fuel and Cenvat credit was denied on the ground that only furnace oil and light diesel was used for baking biscuits. Revenue had not demonstrated that the item in question could not be used as fuel.

Respondent’s contentions:-Opposing the prayer, the learned AR for Revenue submitted that from the description and classification of the goods, it was very clear that this was a material used as thinners along with paints and there was no instance where such items were used as fuel, in biscuit manufacturing factory. The appellant had not been able to give any incidence that these goods were used as fuel. His submission was basically that in the case the burden to prove that goods were used as fuel was on the appellant.

Reasoning of judgment:- The Hon’ble judge found that he issue that was being raised was basically one of burden of proof as to who had to prove that the item in question was used as fuel or not. Considering the fact that this was not an item which was normally used as fuel and also considering the classification under which supplier of the goods had classified the goods, it was very obvious that the goods in question was not meant for use as fuel. Therefore, he found merit in the submission of Revenue and he rejected the appeal.

Decision:-Appeal was rejected.

Comment:- The gist of the case is that if there is any doubt as regards usage of a particular input in the manufacturing process, the burden to prove that the same was capable of being used in the manufacturing activity lies on the assessee. In the present case, as “OCS-III” classified under Tariff Item No. 3814.0010 cannot be considered as an input used in the manufacture of biscuits and it is not an item which is normally used as fuel, it was concluded that the credit taken was irregular and improper. Also considering the classification under which goods are classified, it is very obvious that the goods in question are not meant for use as fuel. Hence, cenvat credit on “OCS-III” classified under Tariff Item No. 3814.0010 was disallowed to a manufacturer of biscuits.

Prepared by: Ranu Dhoot

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PJ/Case law/2014-15/2211

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