Input credit not deniable on procedural lapses.

PJ/Case Laws/2012-13/1409

Case:-COMMISSIONER OF CENTRAL EXCISE, BELGAUM Vs M/s SHREE RENUKA SUGARS LTD.

Citation:-2013-TIOL-106-CESTAT-BANG

Brief facts:- The respondents are manufacturers of sugar. They have received duty-paid PP/LDPE granules and taken credit of the duty paid on the said materials. They have sent the PP/LDPE granules to the job worker under Rule 4(5) of the CENVAT Credit Rules (CCR) without reversing the credit for getting the sacks manufactured and the sacks were received back in their factory and utilized for packing the sugar. The credit taken on the granules has been utilized for the payment of duty on sugar. The department issued show-cause notice alleging that the respondents have not paid duty on the sacks as they have availed the benefit under Notification No.67/95 CE dt. 16/03/1995 on the ground that they were captively consumed. Further, it was alleged that they have not fulfilled the conditions under the Notification No.214/86-CE dt. 25/03/1986. The original authority denied the credit availed on the granules on the above grounds. On appeal by the party, the Commissioner (Appeals) has set aside the order of the original authority. Hence, the Department is in appeal.

Appellant’s contention:- Appellantsubmits that the respondents have not fulfilled the conditions of NotificationNo.214/86 inasmuch they have not paid duty on the sacks received by them and, therefore, the denial of credit in respect of granules is correct.

Respondent’s contention:-The respondent relied on to the finding of the Commissioner (Appeals) that the violation, if any, of condition of Notification No.214/86 should result in demand of duty from the job worker and that there is no such demand on the job worker. Further he submits that if they have utilized the granules in their own factory for the manufacturing of sacks, there would be no denial of credit. He further submits that merely because they have sent the granules for manufacture of sacks to a job worker and received the same and utilized for packing the dutiable final products, they cannot be denied the credit. In this connection, he relies on para 3.3. of Supplementary Instructions (Board's Notification No.23/2004-CE(NT) dt. 10/09/2004 as amended) wherein the packing materials have been clearly held to be raw materials and have been treated as inputs in relation to the manufacture of final product and contended that credit was available.

Reasoning of judgment:- It is not in dispute that the impugned inputs for making packing materials have been sent to the job worker under Rule 4(5) of the CCR. The goods manufactured by the job worker viz. the sacks have been returned to the respondents without payment of duty. Apparently such clearances have been permitted at the hands of the job worker by allowing the benefit of Notification No.214/86. It is not in dispute that the respondents have received the goods viz. sacks and utilized the same for packing their final product viz. sugar on which duty has been paid. Merely because they have not paid the duty on the sacks which were manufactured in the factory of the job worker, there is no justification for denial of credit on the inputs which have gone into the packing materials.

Decision:-Revenue Appeal Dismissed.

Comment:-The analogy drawn from this case is that when the goods viz. sacks are utilised in packing the final product on which duty has been paid, cenvat credit of inputs used in the manufacture of sacks cannot be denied merely because duty was not paid on clearance of sacks from the factory of job worker.

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PJ/Case Laws/2012-13/1409

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