2018 (12) TMI 724 – CESTAT CHENNAI – TMI – CENVAT Credit – inputs – fireworks purchased from their other units – Rule 16(1) of Central Excise Rules 2002 – Held that:- The definition of input show that not only the inputs that is used for manufacture of final products but also those goods cleared whose value is included in such final product will come within the definition of inputs. Further, all goods used in the factory by the manufacturer of the final product would come within the definition. This means any goods used by manufacturer within the factory is input. The words used are ‘by the manufacturer’ and not ‘for the manufacture’.
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The authorities below have erred in interpreting that in order to qualify as inputs, the goods have to be used for manufacture.
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Rule 16 speaks about situation wherein duty paid goods are brought into factory for refine, reconditioned or for any other reason – In the present case, the goods are not brought to the factory but they have been bou
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rn when being packed, the activity did not amount to manufacture as per Chapter Note to third schedule to CEA 1944. Such goods do not qualify as inputs and therefore the credit availed is not eligible. Show cause notices were issued proposing to demand the wrongly availed credit on inputs for different periods from 2013 – 14 to 2014 – 15 and May 2015 to December 2015. After due process of law, the original authority confirmed the demand of ₹ 16,66,248/- and ₹ 9,74,075/- for the respective periods along with interest and also imposed penalties. In appeal, Commissioner (Appeals) upheld the same. Hence this appeal. 2. On behalf of the appellant, Shri S. Ramachandran, ld. consultant appeared and argued the matter. He submitted that the appellant is engaged in manufacture of fireworks. They also purchase fireworks from their sister units and combine different varieties into a single gift pack‟ and are cleared as a single item by payment of excise duty. They availed credit
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hmd.) b. Manik Machinery Manufacturers Pvt. Ltd. vs. Commissioner of Central Excise, Mumbai – 2016 (339) ELT 334 c. Commissioner of Central Excise Vs. Prime Healthcare Products – 2011 (272) ELT 54 (Guj.) d. G.S. Enterprises Vs. Commissioner of Central Excise, Jaipur – 2014 (313) ELT 340 (Tri. Del.) 3. The ld. AR Shri L. Nandakumar supported the findings in the impugned order. He argued that since the goods were purchased from other manufacturers and brought into the factory for repacking, such unpacking or repacking does not amount to manufacture and therefore as per Rule 16(1) and (2), the appellants are not eligible for credit. 4. Heard both sides. 5. The allegation is that the appellants are not eligible for credit on the fireworks purchased from their sister concern / outside manufacturers. It is not disputed that the appellants after purchasing the fireworks from other manufacturers are packing it into a single unit / gift boxes along with their own manufactured fireworks. It is a
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authorities below have erred in interpreting that in order to qualify as inputs, the goods have to be used for manufacture. The said issue has been decided in the case of Manick Machinery Manufacturers P. Ltd. (supra), the relevant portion of which is reproduced as under:- 6. I find that the whole concept of Modvat/Cenvat scheme to avoid cascading effect of tax suffered on input. In that stream whatever input is going into final product either directly or indirectly, duty suffered on that input should be set off and only on value addition duty is levied. In the present case the playing cards even though it does not participate directly in the manufacture of final product i.e. spray guns but undisputedly the same is purchased by the appellant and expenditure of the same stands absorbed in the cost of the final product which ultimately suffered the duty as a whole, therefore in my considered view the playing cards which is supplied along with final product should be eligible for input c
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d by the assessee. The Hon ble High Court has allowed the Cenvat credit on the tooth brush considering it as input. As regard the judgments relied upon by the Ld. AR, I find that since there is reasoned judgment of the Hon ble High Court of Gujarat, it prevails over all the decisions given by the Tribunal, therefore following the Hon ble Gujarat High Court judgment, I am of the considered view that Cenvat credit in respect playing cards supplied by the appellant along with spray guns is admissible. The impugned order is set aside. Appeal is allowed. 6. The invocation of Rule 16 does not appear to be proper in the given set of facts of the case. Rule 16 reads as under:- RULE 16. Credit of duty on goods brought to the factory. – (1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be enti
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s subsequently subject to such conditions as may be specified by the [Principal Commissioner or Commissioner, as the case may be]. The said Rule speaks about situation wherein duty paid goods are brought into factory for refine, reconditioned or for any other reason. In the present case, the goods are not brought to the factory but they have been bought by the manufacturer and the value of such goods have been included in the assessable value of the final product. The situation does not give raise to invoke Rule 16(1) at all. 7. In the other decisions relied by the appellant, the very same issue has been considered. After appreciating the facts of the case and the decisions cited by the appellant, I am of the view that the demand cannot sustain and requires to be set aside, which I hereby do. The appeal is allowed with consequential relief, if any. (Pronounced in court on 10.12.2018) – Case laws – Decisions – Judgements – Orders – Tax Management India – taxmanagementindia – taxmanage
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