Whether credit admissible on plastic crates used for transportation of goods?

PJ/CASE LAW/2015-16/2583

Case:- COMMISSIONER OF CENTRAL EXCISE, NOIDA Versus DENSO INDIA LTD.

Citation:- 2014 (310) E.L.T. 487 (All.)

Brief facts:- The present appeal is filed by the Department against the impugned order dated 20-11-2003 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi in Appeal No. E/1539/2003-NB(S).
On 19-2-2007, a coordinate Bench has admitted theappeal on the following substantial questions of law : -
“(a) Whether ‘plastic crates’ used by the respondent for transportation of auto parts and brought back in the factory for reuse can be termed as ‘packing material’ without it being for packing of the final products/auto parts?
(b) Whether inclusion of cost of plastic crates in the assessable value would ipso-facto qualify for CENVAT Credit without establishing it to be ‘packing material’?
(d) Whether the penalty against the respondents was lawfully imposed vide Order-in-original dated 2-9-2002 (Annexure No. 3) under Section 11AC of the Central Excise Act, 1944 read with Rule 13(1) of the erstwhile CENVAT Credit Rules, 2001, CENVAT Credit Rules 2002 and Section 38A of the Central Excise Act, 1944.
(e) Whether under the facts and circumstances of the case the Respondent No. 2 was liable to penalty under Rule 209A of the erstwhile Central Excise Rule, 1944 read with Rule 26 of the erstwhile Central Excise (No. 2) Rules, 2001 and Section 38A of the Central Excise Act, 1944?”
The brief facts of the case are that during the year under consideration, the assessee-defendant was engaged in the manufacture of Auto Electric Parts falling under Chapter 85 of Central Excise Tariff Act, 1985. The assessee-defendant had availed CENVAT credit on plastic crates used for the packing material of the final products. The A.O. refused to allow the claim of the assessee-defendant by observing that plastic crates are not being used in or in relation to the manufacture of final products and hence not entitled for CENVAT credit. So, he rejected the claim of Rs. 4,96,015/- claimed by the assessee, but both the appellate authorities have allowed the claim of the assessee.

Appellant’s contention:- The A.O. refused to allow the claim of the assessee-defendant by observing that plastic crates are not being used in or in relation to the manufacture of final products and hence not entitled for CENVAT credit. So, he rejected the claim of Rs. 4,96,015/- claimed by the assessee

Respondent’s contention:-Assessee-defendant was engaged in the manufacture of Auto Electric Parts falling under Chapter 85 of Central Excise Tariff Act, 1985. The assessee-defendant had availed CENVAT credit on plastic crates used for the packing material of the final products.

Reasoning of judgment:- They have heard the learned counsel for the parties and perused the material available on record.
From the record, it appears that the said plastic crates were being used for the safe transportation of the finished goods i.e. Auto Electric parts from the factory to the customers. The plastic crates were being used for the safe transportation of the goods from the place of the manufacture to the place of consignee and the cost of plastic crates is included on pro rata basis in the assessable value of the finished excisable goods on which duty was being discharged.
The Tribunal has observed that in the following cases, it was observed that the MODVAT credit is allowable on packing materials/containers, if their cost had been included in the value of the final product : -
(i) Black Diamond Beverages Ltd., 1997 (91)E.L.T. 422;
(ii) Paras Pharmaceutical, 1999 (108)E.L.T.580; and
(iii) Eicher Motors Ltd. v. CCE, 1997 (95)E.L.T. 433.
Further, it appears that in the assessee-respondents’ own case, the MODVAT credit had been allowed by the Department in earlier assessment years on the packing material.
In view of the above and well settled legal position, they find no reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained along-with the reasons mentioned therein.
The answer to the substantial questions of law is in favour of the assessee and against the Department.
In the result, the appeal filed by the Department is dismissed.

Decision:- Appeal dismissed.

Comment:- The analogy of the case is that Plastic crates used for safe transportation of finished goods i.e. Auto Electric Parts from factory to customers is admissible if the cost of plastic crates is included on pro rata basis in the assessable value of finished excisable goods on which duty is being discharged.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2583

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