Case Laws

Cenvat credit – Demand – Assessee after selling its factory got corrugated boxes manufactured on job work basis permissible under Notification No. 214/86-C.E. till it surrendered its Central Excise Registration – Demand on ground that credits had been used for making payments for finished products which had not been manufactured in the assessee’s factory – HELD : Assessee had observed all formalities required in terms of job work Notification No. 214/86-C.E. and had paid duty on such goods – Authorities below had not expressed any opinion that the amounts paid by way of Excise duty was not required to be paid – No justification demanding payment of same under Section 11D of Central Excise Act, 1944 – Under Section 2(f) ibid, “manufacturer” includes any person who gets goods manufactured outside factory – Demand for repayment of Cenvat credit alleged to have been utilised in contravention of Rules 3 and 4 of Cenvat Credit Rules, 2004, not sustainable. [paras 9, 10]

Demand – Limitation – No evidence or allegation that assessee indulged in the suppression of facts or wilful misstatement or contravention to statutory provisions – Department acquired full knowledge about facts at time of visit of factory by the officers on 17-3-2006 – Show cause notice, if any, ought to have been issued within a period of one year from that date – Show cause notice issued on 9-3-2009 time-barred – Section 11A of Central Excise Act, 1944. [1989 (40) E.L.T. 276 (S.C.) relied on].

Cenvat credit – Reversal of – Use of common inputs in dutiable and exempted product – Non-maintenance of separate records – Demand of 10% value of exempted goods – Since, appellant captively using part of electricity generated in their power plant within factory and reversing credit attributable to electricity sold to outside customers, demand of 10% of value of such electricity not sustainable – Rule 6(3) of Cenvat Credit Rules, 2004.

Interpretation of statute – Amendment to Rule 6(3) of Cenvat Credit Rules, 2004 – Amendment made to said Rule in year 2010 retrospective in nature in view of Section 73(1) of Finance Act, 2010.

Cenvat credit – Duty paying document – Credits availed on basis of debit notes received by assessee from service provider – Debit notes containing all requisite information as prescribed under Rule 9(1) of Cenvat Credit Rules, 2004 and to be considered on par with invoices – Credit cannot be denied.

Cenvat – Reversal of – Capital goods on which Cenvat credit taken used within factory for over three years sold and duty paid on transaction value – Demand on the ground that entire credit availed by assessee was to be reversed when capital goods cleared out of factory – HELD : Prior to amendment to relevant rules w.e.f. 13-11-2007, Cenvat credit availed at time of purchase of capital goods not required to be reversed when cleared after use. [2011 (268) E.L.T. 161 (P & H) & 2009 (234) E.L.T. A120 (Bom.) relied on].

Cenvat credit of Service Tax – Denial of – Input Service Tax credit paid by job worker/service provider on crossing charges of iron ore undertaken in its factory denied by Central Excise authorities as quantity of iron ore actually sent from factory to job worker were not received after its crossing by job worker – HELD : No provisions that services should be received in factory of manufacturer – Cenvat credit can only be taken on actual amount of Service Tax paid by service provider-job worker – Input service not specifically incorporated within ambit of Rule 3(5) of Cenvat Credit Rules, 2004 for reason that service not tangible like goods – Service attributable to goods actually received in factory after completion of job work process not ascertainable – Service Tax paid on job charges available to assessee and Cenvat credit not required to be reversed if lesser quantity of goods received in factory after completion of job work activity. [paras 5, 6]

Cenvat credit – Disallowance of – Input Service credit availed towards Service Tax on full value of crushing charges paid to job workers for entire crushing quantity of iron ore – Revenue alleging short receipt of iron ore thereby denying credit attributable to “input service” on shortage quantity – HELD : Impugned charges confirming to definition of “input service” – Service received by assessee and services duly accounted for based on valid Service Tax invoice – Statutory requirements contained in Cenvat statute for taking Cenvat credit duly complied with – Also, no stipulation or embargo created in Cenvat statute for dealing with such event for denial of Cenvat benefit – Denial not in conformity with Cenvat Credit Rules – Impugned order set aside – Rule 3 of Cenvat Credit Rules, 2004. [para 5]

Clandestine clearance – Evidence – Documents seized from office of appellant with remark ‘No invoice issued’ – HELD : In absence of any corroborative evidence and statement of any employee/director of company accepting clandestine removal of goods, merely on the basis of said papers allegedly containing production and dispatch of goods, it cannot be concluded that goods cleared without payment of duty – Appellant/Director denying said papers pertaining to accounts of his company – Far-fetched assumption that goods clandestinely removed under cover of invoices issued by Arhat Ltd., company eligible for exemption from payment of duty, owned by appellant’s father and looked after by appellant, merely on the basis of few invoices issued under same serial number by said company – Authenticity of said invoices not established or evidenced – As for some stock statement and entries in sales register of a third company allegedly matching that of appellant’s company, no panchnama drawn to prove as to from where said documents seized and proprietor of said third company denied that said records belonged to his firm – In absence of any corroboration of said stock statement with records of appellant and any other corroborative evidence as to excess receipt of raw material, transportation and receipt of goods by any consignee, etc., demand cannot survive – Impugned order set aside – Section 11A of Central Excise Act, 1944

Demand – Manufacture – Re-making of defected colour picture tubes and clearance thereof on payment of duty after using salvaged parts and fresh parts – Entire process of manufacturing undertaken on same production line – Process of re-making amounts to manufacture – No provisions in Rule 16 of Central Excise Rules, 2002 for denial of Cenvat credit in respect of inputs used in process of repairing/refining, when process amounts to manufacture – Credit not deniable – Demand set aside – Section 11A of Central Excise Act, 1944.

Demand – Limitation – Process undertaken by appellant for re-making of returned goods disclosed to Department – Suppression of fact cannot be alleged – Demand time-barred – Section 11A of Central Excise Act, 1944.

Refund – Permanent closure of Pan Masala/Gutkha unit due to ban on manufacture of Pan Masala/Gutkha by State Government – Due intimation given by manufacturer to jurisdictional Central Excise authorities regarding permanent closure of unit and surrender of registration – Machines also sealed by jurisdictional Range Officer – HELD : Assessee entitled to get refund of proportionate duty amount paid in advance for period of permanent closure in terms of Rule 16 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 – Section 11B of Central Excise Act, 1944. [paras 6, 7]

Cenvat credit – Availment of, on capital goods – Respondent was receiving rough castings under job work challans for subjecting the same to machining and was clearing the machined castings to be used for manufacture of motor vehicle parts, without payment of duty under job work challans under Notification 214/86-C.E. – Respondent took capital goods Cenvat credit which was challenged on ground that respondent was using the capital goods exclusively for manufacture of exempted final product – HELD : When in the course of machining of castings, waste and scrap of steel were also arising which were being cleared on payment of duty, it cannot be said that the capital goods in question were being used exclusively for the manufacture of final product and hence, Rule 6(4) of Cenvat Credit Rules, 2004 would not be applicable – Rule 6(4) ibid. [para 5]

Cenvat/Modvat – Waste/By-product – No liability to pay 8% amount on removal of waste/by-product arising during the course of manufacture of main product – Respondent, manufacturing and clearing ‘hydrol’, arising as a by-product in manufacture of its dutiable final product ‘anhydrous dextrose’, held, not liable to pay 8% amount as Rule 6 of Cenvat Credit Rules, 2004 not attracted thereto – Rule 6 ibid. [para 5]

Penalty – Imposition of – Partnership firm accused of availing fraudulent Cenvat credit on basis of bogus invoices without receiving any material – HELD : Availment of such bogus Cenvat credit by partnership firm made it liable to penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 – Though for same contravention, separate penalty on partner of partnership firm is not sustainable under above provisions, it can be imposed under Rule 26 of Central Excise Rules, 2002, if there is evidence of his activity in that regard – On facts, as there was no allegation against partner and nothing on record indicated that he had knowingly acquired possession of any goods or was involved in transporting, depositing, concealing, selling or purchasing or dealing with excisable goods which he knew or had reason to believe were liable for confiscation, partner could not be made liable to penalty under Rule 26 ibid. [paras 6, 7]

Penalty – Imposition of – On partnership firm as well as its partner – If its case of contravention of same provisions, separate penalties may not be called for – However, if contravention by partnership firm and partner is different, separate penalty can be imposed on partnership firm as well as partner. [para 6]

Cenvat – Input services – Wind Mill installed away from unit – Captive use – Credit would be available if inputs are used or input services are availed in respect of a captive power plant situated within the factory or adjacent to it – If the captive power plant is wind power generator, it may not be always possible to locate it in close vicinity of factory as wind power generators have to be located at places where wind with sufficient speed is available throughout the year – Appellant’s factories are situated far away from wind mills – Wind mills have been established with permission from M.P. State Electricity Board and in the permission, wind mills are mentioned as for captive use by appellants – Therefore it is held that wind mills are to be treated as captive plant and the services of erection, installation, commissioning, repair, maintenance and insurance used in respect of the same are eligible for Cenvat credit – Services received have clear nexus with the business of manufacture since the electricity generated by wind mill is used for running appellant’s factories – In view of this, services received by appellant have to be treated as input services eligible for Cenvat credit – Impugned orders set aside – Appeals allowed – Rule 3 of Cenvat Credit Rules, 2004. [para 4]