Whether input credit of repairing admissible?

PJ/CASE LAW/2015-16/2733

Case:-PREMIER CONVEYORS P. LTD. VERSUSCOMMISSIONER OF CENTRAL EXCISE, THANE-I

Citation:-2015 (38) S.T.R. 171 (Tri. - Mumbai)

Brief facts:-The appellant is in appeals against the impugned orders wherein ‘input credit’ as well as ‘input service credit’ have been denied.
The appellant in Appeal No. E/85141/2014 has also filed an application for condonation of delay in filing the appeal. The contention of the appellant is that as there is a composite order therefore, they have filed only one appeal. On pointing out by the Registry, the appellant filed a supplementary appeal hence the delay in filing the appeal. As the reason for causing delay has been explained satisfactorily, therefore, they condone the delay in filing the appeal.
After hearing both sides, they find that the appeals themselves can be disposed of at this stage. Therefore, after granting waiver of the requirement of pre-deposit, they take up the appeals themselves for final disposal.
Brief facts of the case are that the appellants are manufacturer of Rubber Conveyor Belts. During the course of manufacturing of Rubber Conveyor Belts, they procured Rubber Conveyor Belts (semi-finished goods) which was after carrying out process such as repairing, reconditioning, testing, etc., sold the Rubber Conveyor Belts (finished goods) to the buyers on payment of duty. On these Rubber Conveyor Belts they availed input credit which was denied on the premise that the process of repairing, reconditioning, etc., cannot be treated as manufacturing activities therefore, input credit is not admissible. The appellants were denied “input service credit” on CHA service on the premise that the service has been availed by the appellant beyond the place of removal. A show cause notice was issued to the appellant denying input/input service credit as discussed above. The adjudicating authority dropped the demand for “input service credit” but confirmed the demand of Cenvat credit availed on those conveyor belts by denying input credit. Although, the Revenue as well as the appellants filed appeals, the Commissioner (Appeals) rejected the appeal filed by the appellant and allowed the appeal filed by the Revenue. Therefore, the appellant is in appeals before them against both the orders.

Appellant’s contention:-The learned Counsel appearing on behalf of the appellant submits that they have taken credit on Rubber Conveyor Belts which were finished by them and were cleared on payment of duty. Accordingly, to the Revenue the input has been cleared “as such”. In these circumstances, if input has been cleared on payment of duty the same shall amounts to reversal of credit. To support his contention he placed reliance on the decision of this Tribunal in the case of Ajinkya Enterprises v. CCE, Pune-III - 2013 (288)E.L.T.247 (Tri.-Mum.)which was affirmed by the Hon’ble High Court of Bombay. He further submits that the CHA services have been availed by the appellant in the course of their activity of export of their goods and in case of export, the place of removal is the port from where the goods have been exported, therefore, the appellant is entitled for input service credit.

Respondent’s contention:-The learned AR supported the impugned order.

Reasoning of judgement:-It is not disputed that the Rubber Conveyor Belts in question have been cleared by the appellant on payment of duty. Therefore, the duty paid at the time of clearance amounts to reversal of Cenvat credit on inputs cleared “as such” or the activity of repairing, reconditioning, etc., does not amount to manufacture as per the decision in the case of Ajinkya Enterprises (supra). Therefore, they hold that the appellants are entitled to avail input credit on the Rubber Conveyor Belts in question. Further, they hold that in case of export, the place of removal is the port from where the goods have been exported. Therefore, the appellants are entitled to take input service credit on the CHA service. Accordingly, they hold that the appellants are entitled to take credit on input service in question.
In these circumstances, the impugned orders are set aside and the appeals are allowed with consequential relief, if any.

Decision:-Appeals allowed.

Comment:- The analogy of the case is that the credit of inputs used in the process of repair/re-conditioning of conveyor belts is admissible even if the said process does not amounts to manufacture because duty paid on clearance of conveyor belts amounts to reversal of Cenvat credit on inputs cleared “as such”. Moreover, the cenvat credit availed on CHA’s services was also held to be admissible because in case of export, ‘place of removal’ is not the factory but the port from where goods exported. Hence, assessee is entitled to input service credit on CHA service also.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2733

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