Whether credit deniable on the ground that supplier of inputs was not required to pay duty?

PJ/CASE LAW/2014-15/2433

Case:- COMMISSIONER OF C. EX., MUMBAI-III VERSUS GKW LTD.

Citation:- 2014 (308) E.L.T. 759 (Tri. - Mumbai)

Brief facts:-The respondent herein is M/s. GKW Pvt. Ltd., LBS Marg, Bhandup. They received duty paid on Steel Wire and Brass Wire during the period Sept., 2003 to June, 2004 and utilized the same in the manufacture of steel screw, cotter pins, safety pins and brass wire, etc. The Revenue was of the view that the duty on steel/brass wires have been wrongly paid during the impugned period and, therefore, the same cannot be considered as duty paid but should be considered only as deposit and, therefore, the appellant is not entitled for the credit of the duty paid on steel wire/brass wire and sought to deny the same. The original authority denied the Cenvat credit amounting to Rs. 6,07,187/- and Rs. 4,15,142/- along with interest thereon and also imposed equivalent amount of penalty. The respondent preferred an appeal before the lower appellate authority. The lower appellate authority held that inasmuch as the supplier has paid the duty on the goods supplied and the respondent has borne the incidence of the said duty, he is entitled for the credit of the same under the Cenvat Credit Rules and, therefore, the excise authority having the jurisdiction over the recipient of inputs cannot reopen the classification adopted by the officer having jurisdiction over the input supplier as held by the Tribunal in the case of Kerala State Electronic Corpn.- 1996 (84)E.L.T.44 (Tri.), Trinetra Texturise Pvt. Ltd. - 2004 (166)E.L.T.384 (Tri.-Mum.)and M/s. Beta Chemicals vide Order Nos. A/87-89/WZB/2005/C-I, dated 1-2-2005. Accordingly, the lower appellate authority allowed the appeal of the respondent. Aggrieved of the same, the Revenue is before court.

Appellant’s contention:-The learned Addl. Commissioner (AR) appearing for the Revenue, on the other hand, submits that in the present case the process of drawing steel/brass wire from wire rods does not amount to manufacture and, therefore, the supplier of raw material of steel/brass wire has paid the duty incorrectly and, therefore the said payment cannot be considered as duty. He also relies on the decision of the Tribunal in the case of Technoweld Industries- 2003 (155)E.L.T.209 (S.C.) and the Circular No. 720/36/2003-CX, dated 29-5-2003 issued by the CBEC clarifying that drawing of wire from wire rods would not amount to manufacture. Accordingly, he pleads that the impugned order be set aside and the appeal allowed.

Respondent’s contention:- None appeared for the respondent.

Reasoning of judgment:- It is true that in the case of Technoweld Industries (supra), the Hon’ble Apex Court had held that the process of drawing wires from wire rods not amount to manufacture. The issue dealt in the said decision is only whether the process of drawing wire from wire rod amounts to manufacture or not. The said decision did not deal with the case relating to availment of credit of duty paid wrongly. Therefore, the ratio of the said decision has no application to the facts before them in the present case.

In the case before them, the issue is whether the credit can be denied even if the duty has been paid wrongly by the supplier of inputs. This Tribunal in a number of cases cited supra relied upon by the lower appellate authority has clearly held that the excise authorities having jurisdiction over the recipient of inputs cannot reopen the classification adopted by the officer having jurisdiction over the input supplier. In the present case, it is not the case of the Revenue that the excise authorities having jurisdiction over the input supplier has questioned the classification and held that the payment of duty was incorrect. If that be so, the authorities at the receiver’s end cannot question the classification or payment of duty and deny the Cenvat credit in respect of the duty paid by the supplier of the goods and borne by the receiver.

Therefore, they do not find any merit in the appeal filed by the Revenue. Accordingly, the same is dismissed as devoid of merits.

Decision:- Appeal dismissed.

Comment:- The analogy of the case is that Cenvat credit in respect of the duty paid by the supplier of the goods and borne by the receiver can be taken irrespective of the fact whether the process undertaken by the supplier amounts to manufacture or not. This is for the reason that the excise authority having the jurisdiction over the recipient of inputs cannot reopen the classification adopted by the officer having jurisdiction over the input supplier. When the revenue department has not objected duty payment by the supplier, its credit cannot be disallowed to the purchaser of the goods.

Prepared by:- Monika Tak

Comments

PJ/CASE LAW/2014-15/2433

Post a Comment

Query