Denial of credit on the ground of recycled packing boxes used by supplier is not tenable.

PJ/Case Laws/2012-13/1534

Case:- COMMISSIONER OF C.EX., KOLKATA-III Versus KITCHEN APPLIANCES INDIA LTD.

Citation:-2013(288) E.L.T. 567 (Tri.-Kolkata)

Brief Facts:-The appellant are engaged in the manufacture of CTV, Refrigerator, Washing Machine Etc., falling under Chapter heading 84 and 85 of the First Schedule to Central Excise Tariff Act, 1985. The respondent were issued a demand notice dated 7-6-2006 alleging availment of irregular credit of Rs. 2,18,654.77 on the packing material received from the input supplier mainly Supreme Industries Ltd. which were old and recycled one but not new one. The said demand has been confirmed and penalty imposed by the adjudicating authority. The respondent filed the appeal before the Commissioner (Appeal). The ld. Commissioner (Appeal) allowed the appeal of the respondent by setting aside the impugned order-in-original. Hence the Revenue is in appeal.

Appellant Contentions:-The Appellant contentions is that the respondent had purchased from the input supplier viz. M/s. Supreme Industries Ltd., the front cover and back cover of T.V. manufactured by them on which duty was paid including the value of packing material in which the front cabinet and back cabinet were packed and delivered to the respondent. He has submitted that while packing the front and back cabinets no new packing boxes were used but old and recycled packing boxes were used by the raw materials supplier on which the duty was paid and the respondent wrongly availed the Cenvat credit of the duty paid. Further, he has submitted that accordingly Cenvat credit on the old and used packing materials were not admissible to the respondent.

Respondent Contentions:The Respondent Contention is that they filed a C.O. which is nothing but a written submission styled as cross objection. The respondent while filing the cross objection had submitted that the appeal be decided on the basis of their written submission and they were not interested in attending hearing. In the said cross objection, they have submitted that the Cenvat credit was availed by them on the basis of duty paid documents and there was no deviation from Rules 2 and 3 of Cenvat Credit Rules, 2004. Also there is no evidence that the input supplier, M/s. Supreme Industries Ltd. have ever claimed any refund of duty paid by them on the input supplied by them. He has submitted that if any valuation dispute arises with regard to the input supplied to them by M/s. Supreme Industries Ltd., it the concern of the jurisdictional Central Excise Authorities of the said unit to initiate action against them and not on the recipient of inputs namely the respondent. They have submitted that whatever duty shown on the invoices of the input viz. front cabinet and back cabinet includes the value of packing and they availed the credit on the said duty. In support of their submission they have relied on the decisions of the Tribunal in case of CCE v. M/s. Agarwal Iron Industries – 2005(184) E.L.T. 397 (Tri.-De.) and CCE v. M/s. Anand Arc Electronics Pvt. Led. (252)E.L.T. 411 (T).

Reasoning of Judgment:-We have considered the submission from both parties and perused the record, we find that the Revenue has filed this appeal against ld. Commissioner (Appeals) order on the ground that the input supplier M/s. Supreme Industries Ltd, has used the packing material repeatedly instead of supplying the new packing materials along with the inputs viz. Front cabinet and back cabinet , to the respondent. Undisputedly, the respondent availed credit on the invoices that was issued by the input suppliers for supply of the inputs viz, front cabinet and back cabinet received in packed condition and the value of packing is included in the value of the said inputs. The principal argument advanced by the respondent was that the inclusion of the cost of the packing material in the value of the inputs whether recycled or new one, is left to the jurisdiction of the concerned authorities where the raw material supplier is situated. The question of valuation and appropriate amount of duty paid on the input material cannot be raised at the end of the input receiver. He has placed reliance on the decision of the Tribunal in the case of M/s. Agarwal Iron Industries and M/s. Anand Arc Electronics Pvt. Ltd. (supra). It was found that the ld. Commissioner (Appeal) has recorded as follows:-

"After going through the records I find that the appellants took credit on the basis of the invoice issued by the supplier. There is no record or evidence that the duty paid by the supplier has been varied so that the effect could be imposed on the recipient of inputs while taking the credit. Hence the case laws cited are applicable to the defence of the appellants. For the sake of arguments, if the used packing boxes were sold to a different person and not to SIL, there would not have been any question. Also, if SIT, would have purchased used packing box from the market and packed FC and BC in it for supplying to the appellants, there would not have been any question. Analogically the matter is same in the instant case so far the question of taking Modvat credit is concerned. I do not find on record that the supplier and recipient are related to each other so to fetch the question of flow back of consideration. Hence the sales being at arm's length and on contract value, there should not arise any contradiction over valuation on the supplier's side. Since there is no allegation or variation of duty paid by the supplier, I observe that the case laws cited are applicable to the instant case. Accordingly, I do not find any logic behind the allegations of the department. The Order-in-original is, therefore, liable to be set aside."

Tribunal agrees with the above findings of ld. Commr. (Appeal). Also, the Hon'ble Supreme Court in the case of Service Refractory Ltd.- 2007 (218) E.L.T. 488 (S.C.) has held that the issue of classification of the input/raw materials supplied by the input supplier cannot be questioned in the hands of input receiver while allowing Modvat/Cenvat credit.

In these circumstances, Tribunal do not find merit in the Revenue's appeal and hence uphold the order-in-appeal passed by the ld. Commissioner (Appeal) and Revenue's appeal being devoid of merit is dismissed. Cross objection also disposed off.

Decision:- Revenue appeal dismissed.

Comment:- The crux of this case is that merely because used and recycled packing material was part of the inputs on which credit has been taken cannot be reason to deny availment of cenvat credit at the recipient’s end as far as the value of such packing material is part of the assessable value and duty stands paid on the same.

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PJ/Case Laws/2012-13/1534

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