Credit eligibility of duty paid on plastic granules used for making container for packing final products.

PJ/CASE LAW/2014-15/2296

Case:- COMMR. OF C. EX., MUMBAI-I VERSUS TAINWALA CHEMICAL & PLASTICS (I) LTD.

Citation:- 2011 (274) E.L.T. 357 (Tri. - Mumbai)

Brief facts:-Briefly stated facts of the case are that the respondent is engaged in the manufacture of wet detergent tissues falling under Chapter Heading 3402.30 of Central Excise Tariff Act, 1985. The respondent took MODVAT credit on duty paid on two of its inputs namely high density polyethelene powder and homopolymer crude polypropylene falling under Chapter 39 used in the manufacture of plastic containers. The allegation of the department is that the respondent did not file a proper declaration as required under Rule 57G(2) of the Central Excise Rules, 1944 and the respondent cleared the inputs to the job workers without obtaining permission from the concerned authorities. Accordingly, proceedings were initiated against them and the lower adjudicating authority confirmed the demand of Rs. 35,040/- and also imposed a penalty of Rs. 1,000/- under Rule 173Q under Central Excise Rules, 1944. The respondent challenged the same before the Commissioner (Appeals). The Commissioner (Appeals) allowed the appeal and set aside the lower adjudicating authority’s order. Aggrieved by the order, the Revenue filed an appeal before this Tribunal. The Tribunal vide Order No. C-II/1165/WZB/2001 dated 26-4-2001 dismissed the Revenue’s appeal on the ground that the mandatory words ”not legal and proper” were omitted in the authorization signed by the Collector in terms of Section 35B of the Central Excise Act, 1944. The department challenged the same vide Writ Petition No. 35 of 2002 and the Hon’ble High Court of Bombay has remanded the matter back to this Tribunal.

Appellant’s contentions:-The learned JDR produced a copy of the relevant ”Note Sheet” wherein the expression ”not legal and proper” is appearing. The learned JDR further submitted that they did not dispute the applicability of the decision of Hon’ble High Court of Madras in case of Ponds (India) Ltd. v. Collector of Central Excise - 1993 (63) E.L.T 3 (Mad.). Their grievance is that in the declaration the respondent did not disclose the final product i.e. container and the respondent did not take permission for removing the goods to the job workers under Rule 57 of erstwhile Central Excise Rules, 1944.

Respondent’s contentions:- The contention of the respondent is that the respondent’s final products are not plastic containers but wet detergent tissue papers which are clearly shown as final products in the Modvat declaration by the respondent as required under Rule 57G. In the manufacture of final products and while using packaging raw material namely polypropylene plastic containers emerges at intermediate stage as an intermediate product. It is not in dispute that these plastic containers are intermediate product and not final products. The learned Counsel further submitted that credit of duty paid on plastic granules used for making container for packing final products is admissible under Rule 57A. In support of their contention they placed reliance on the decision of Ponds (India) Ltd. (supra). They also placed reliance on the decision in the case of CCE, Bangalore v. Vijaya Seamless Containers Pvt. Ltd. - 2001 (135) E.L.T 107 (Tri. - Bang.).

Reasoning of judgment:- From the Note Sheet produced by the learned SDR it was found that the expression ”not legal and correct” forms part of the said note sheet. Therefore, the appeal cannot be dismissed on this count. Accordingly, Tribunal proceed to decide the case on its merits. The allegation of the department is that the respondent did not disclose the final products and permission was not obtained by the respondent for removing the goods to the job workers. From the perusal of para 3 of the order-in-appeal, it was found that the Collector (Appeals) has found that ”in the definition the high density Polyethelene powder and homopolymer crude polypropylene were declared as inputs in the final product shown as detergent paper.” The learned SDR pointed out that they had not declared the final product i.e. the container in the declaration under Rule 57G. In the case of Ponds (India) Ltd. (supra) the Hon’ble High Court held that the plastic container would be treated as intermediate products and in case the duty is payable on the final products then modvat credit on the inputs used by them for final product cannot be denied. The above decision has been relied on in the Tribunal’s decision in the case of Commr of Cus. & CCE, Mumbai-III v. Polyolefins Industries Ltd. - 2001 (138) E.L.T 567 (Tri.-Mumbai) and Vijaya Seamless Containers Pvt. Ltd. (supra). It was also found that it is no one’s case that input in the case sent for job work were not received back. It is also no one’s case that the final product were not cleared on payment of duty. Therefore, Tribunal did not find any merit in the appeal filed by the Revenue. Accordingly, the Commissioner (Appeals) order is upheld and the appeal is dismissed.

Decision:- Appeal dismissed.

Comment:- The crux of the case is that credit of duty paid on inputs that are used in making packaging materials is admissible as far as the final product is correctly declared in Cenvat declaration and final product is cleared on payment of duty. The fact that inputs were cleared to job workers without permission from concerned authority cannot be made a ground to deny rightly admissible cenvat credit when it is no one’s case that input sent for job work was not received back or that final product was not cleared on payment of duty. Therefore, credit is admissible if substantial conditions for availment are satisfied.

Prepared by: Monika Tak

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PJ/CASE LAW/2014-15/2296

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