M/s. KCP Ltd. Versus Commissioner of GST & Central Excise, Chennai
Central Excise
2018 (12) TMI 845 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 16-11-2018
Appeal Nos. E/41444 to 41455/2017 – Final Order Nos. 42890-42901/2018
Central Excise
Ms. Sulekha Beevi C.S., Member (Judicial) AND Shri Madhu Mohan Damodhar, Member (Technical)
For the Appellant : Shri C. Manickam, Advocate
For the Respondent : Shri A. Cletus, Addl. Commissioner (AR)
ORDER
Per Bench
1.1 The facts of the case are that M/s. KCP Ltd., the appellants herein, are manufacturers of machinery and parts, inter alia, for sugar industry. They were also involved in fulfilling orders for installation of sugar plants located in Vietnam for which they export machinery and components of the plant manufactured in their factory, along with bought-out machinery, components and assemblies. The appellants had availed MODVAT / CENVAT credit on the bought-out components / assemblies. Department took the vie
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capital goods for availing MODVAT credit and sugar plant machinery installation has to be considered as immovable property and not goods. Based on these conclusions, the Tribunal set aside the impugned order and remanded the matter to the original authority with the following directions:-
“8. In view of our above discussion, we are of the considered opinion that the bought out items, both inputs and capital goods in question, cannot be considered as eligible inputs/capital goods for availing Modvat credit and the sugar plant machinery on erection has to be considered as an immovable property and it cannot be considered as goods on erection. We, therefore, hold that the order of the Commissioner dropping the proceedings against the respondents is not legal and proper. Accordingly we set aside the impugned orders and remand the matter to the original authority for computing and confirming the amount of irregularly availed Modvat credit including imposition of appropriate penalty,
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on which excise duty is paid must be used in the manufacture of the final product in the factory of the assessee. The machinery purchased by the appellant had not even been tested or was not even unwrapped in the factory of the appellant. In case of such an admitted fact, it cannot be said that the machinery so purchased from others was used by the appellant in the manufacture of the sugar plant.
25. In the instant case, the appellant had only acted as a trader or as an exporter in relation to the machinery purchased by it, which had been exported and used for setting up a sugar plant in a foreign country. In any case, it cannot be said to have manufactured that plant in its factory.
26. Moreover, it is also clear that the appellant-assessee did not pay any excise duty on the sugar plant set up by it in Vietnam and therefore, there cannot be any question of availing any MODVAT credit.
27. For the aforestated reasons as well as for the reasons stated by the Tribunal in the impugn
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014 dated 29.5.2014 along with imposition of penalties under various provisions of law. Aggrieved by these orders, the appellant once again approached the Tribunal, which vide Final Order No. 41389 to 41410/2015 dated 21.9.2015 remanded the matter relating to show cause notices No. 24/96 dated 29.3.1996 and Nil/97 dated 3.3.1997, inter alia with following directions / observations:-
The quantum of credit availed as inputs and capital goods to be segregated and correct provisions of law applied to each category of credit.
The applicability of interest provisions considering the plea made by M/s. KCP that the credit was not utilized
Penalty provisions under Rules 57I and 57U were incorporated only with effect from 23.7.1996 (wrongly mentioned as 23.6.1996) and no penalty under these rules can be imposed for the period prior to this date.
If any other penal provision is attracted M/s. KCP are to be given a reasonable opportunity of defense before imposition of such penalty
The p
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he assessee that these appeals are also on the similar plane like other appeals in the above batch of twenty appeals. Both sides agreed to dispose these 20 (twenty) appeals commonly by this order. The issue dealt in preceding paragraphs having been settled by Apex Court in the reported decision and both sides having adopted their argument as recorded herein before, our findings and directions on these appeals is same as aforesaid in the two appeals disposed as above. These twenty appeals are also remanded with the directions and observation as above.”
(Emphasis supplied)
1.5 In denovo adjudication, the Commissioner vide Order Nos. 1 to 22/2017 dated 29.3.2017, inter alia proceeded to examine the applicability of the judgment of the Hon'ble Supreme Court to the subsequent periods and also the argument of the appellant that the applicability of the judgment should be restricted only to the first two show cause notices namely SCN No. 24/1996 and Nil/1997. The adjudicating authority reje
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along with interest thereon as under:-
S. No.
SCN No. & date
Order-in-Original
Period
Appeal No.
Amount Involved
1.
24/1996 dated 29.3.1996
1/2017 dated 29.3.2017
July 1994 to Jan. 1996
E/41435/2017
67,67,884/-
2.
Nil/1997 dated 3.3.1997
2/2017 dated 29.3.2017
Aug. 1996 to Jan. 1997
E/41436/2017
18,81,113/-
3.
598/95 dated 30.5.1995
3/2017 dated 29.3.2017
Nov. 1994 & Dec. 1994
No appeal
1,31,519/DROPPED
4.
146/96 dated 2.9.1996
4/2017 dated 29.3.2017
Feb. 1996 to July 1996
E/41437/2017
1,36,203/-
5.
3/98 dated 19.2.1998
5/2017 dated 29.3.2017
Sep. 1997
E/41438/2017
4,16,000/-
6.
1007/98 dated 28.9.1998
6/2017 dated 29.3.2017
April 1998 to August 1998
E/41439/2017
27,89,277/-
7.
265/99 dated 17.2.1999
75/2017 dated 29.3.2017
Sep. 1998 to Jan. 1999
E/41440/2017
1,25,65,486/-
8.
936/99 dated 11.8.1999
8/2017 dated 29.3.2017
Feb. 1999 to July 1999
E/41441/2017
37,76,861/-
9.
118/2000 dated 3.2.2000
9/2017 dated 29.3.2017
Aug. 1999
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10
19/2017 dated 29.3.2017
April 2009 to Dec. 2009
E/41452/2017
21,53,426/-
20.
3/2011 dt. 14.1.2011
20/2017 dated 29.3.2017
Jan. 2010 to Dec. 2010
E/41453/2017
16,67,800/-
21.
3/2012 dt. 2.2.2012
21/2017 dated 29.3.2017
Jan. 2010 to Dec. 2011
E/41454/2017
12,34,437/-
22.
3/2013 dt. 24.1.2013
22/2017 dated 29.3.2017
Jan. 2012 to Nov. 2012
E/41455/2017
12,21,717/-
1.6 Nine appeals No. E/41435 to 41443/2017 arising out of the same impugned order (Sl. No. 1 and 3 to 10 in above table) have already been disposed by common order dated 41661 to 41669/2018 dated 31.5.2018, by this Tribunal, inter alia, dismissing the appeals on the ground that the issue involved therein had been agitated right upto the Hon'ble Supreme Court and had attained finality by the judgment of the highest court as reported in 2013 (294) ELT 353 (SC), wherein the appeals of the appellant had been rejected.. For these reasons, the Tribunal in the aforesaid order did not find any grounds to interfe
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o.8/2014 and 9/2014 (Here O-in-O No.01/2017 and 02/2017 dated 29.03.2017) and the same does not hold good as the provisions of law relating to MODVAT law had since then changed into CENVAT law, which resulted in issuance of CENVAT Credit Rules, 2001, CENVAT Credit Rules, 2002, CENVAT Credit Rules, 2004 and changes in Central Excise Rules, 1944 as Central Excise (no.2) Rules, 2001 and Central Excise Rules, 2002.
(iii) Not only the said Rules had undergone a sea change but also the definitions of ―inputs” and ―Capital Goods”, periodically underwent changes due to continued liberalization in Policy, which resulted in the broader definition of ―inputs” and ―capital goods”. Therefore, it is submitted that the Adjudicating Authority ought to have discussed the merits of the case particularly, in the context of the changed provisions of Central Excise and MODVAT/CENVAT law, which the authority had failed to do.
(iv) Commissioner (Appeals), Chennai in the case of the
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cannot be cited in revenue‟s favour.”
(v) When the erstwhile Central Excise Rules were replaced with new set of Rules from 2000, a separate set of Rules were issued under CENVAT Credit scheme as CENVAT Credit Rules, 2000. Rule 16A of the new Rules provided for credit of duty paid on the goods brought into the factory not only for the purposes of repair, refining, reconditioning etc., but also for other purposes by virtue of the wordings ―any other reason”. Initially, this was interpreted by the Department in a manner that only goods which were brought into the factory on return (meaning the final products manufactured, which otherwise would not qualify as inputs/capital goods). But the judicial forums had time and again clarified that the said rule applies to all duty paid goods brought into the factory provided the duty paid nature is satisfied. The Board had also issued a clarification in this regard and to avoid further mis-interpretations, amended the Rules itself in
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the duty paid goods the qualification of inputs by this deeming legal fiction in the Rule itself.
2)The words ―subsequently returned to the factory” led to department contending that the goods should be manufactured in the same factory to be returned under this Rule in some cases.
2
13.12.2001 Boards clarification vide Circular No.607/44/2001-CX. Dated 13.12.2001
Despite the wordings ―for any other reason”, there were representations from the Trade that they are no longer allowed to bring in duty paid goods of other manufacturers, the Board clarified vide Circular No.607/44/2001-CX. Dated 13.12.2001, that [para 2&3],”2….The said Rule 16 provides for return of duty paid goods to the factory for being re-made, refined, reconditioned or any other reason….3. Accordingly, the Board has decided that the word ―return” in Rule 16 referred above, need not be interpreted strictly. Receipt of duty paid goods in the factory of manufacturer for the purpose specified in sa
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ufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act as the case may be
Explanation: The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by a manufacturer who removes the goods.
(3) If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (2), the assesse may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the [Principal Commissioner or Commissioner, as the case may be]*-(this amendment was made in 2014)
(1) The words ―subsequently returned to the factory” was changed to ―brought to any factory” thus bringing the contents of clarification issued in December 2001 into effect in a proper manner.
(2) If the process does not amou
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icating authority. Hence the proceedings covered by these appeals should have been separately considered and adjudicated and the same yardstick need not necessarily apply as was done for the proceedings relating to earlier periods. It is also contended that the Tribunal should have restricted its decision in their final order dated 21.9.2015 only to the cases which were covered by the Hon'ble Supreme Court's decision as the remaining cases which do not pertain to the same statutory and legal provisions. However, in these cases, there has definitely been a change of definition and scope of inputs and Rule 16. It is therefore submitted that the decision of the Tribunal in respect of the remaining present cases with the same directions as was done for proceedings pertaining to earlier periods is not in order which is per incuriam.
3.1 The ld. AR Shri A. Cletus appeared and argued on behalf of the Department. He submitted that the issue whether the appellants are eligible for CENVAT credi
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ts has been dealt with by the Hon'ble Supreme Court and therefore the Tribunal only remanded the matter with directions to consider the pleas put forward by the appellant in respect of overlapping of the demand, depreciation etc. Thus, since the issue stands covered by the decision of the Hon'ble Supreme Court, the same has to be applied and the appeals therefore deserve to be dismissed.
3.2 On merits, he submitted that the argument of the ld. counsel that for the impugned period, in these appeals, the law has changed is without any basis. The adjudicating authority in para 4.3 of the impugned order had considered this plea of the appellant with regard to applicability of the amendment to the definition of inputs. The said amendments brought does not cause any substantial change in the statutory definition of ‗input' and therefore the judgment delivered by the Hon'ble Supreme Court is squarely applicable.
3.3 With regard to the contention of the appellant as to the applicabilit
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ible. He also adverted to the Tribunal's Final Order No. 41661 to 41669/2018 dated 31.5.2018, wherein the Tribunal had disposed nine appeals of the same appellant for the earlier periods and submitted that the Tribunal had therein observed that the facts being the same, the decision of the Hon'ble Supreme Court is applicable. He therefore prayed that the appeals may be dismissed.
4. Heard both sides and have gone through the case records.
5.1 The ld. AR has drawn attention to the fact that the identical dispute for earlier periods had been in litigation and had culminated in the judgment of the Hon'ble Supreme Court in the appellant's own case as reported in 2013 (295) ELT 353 (SC), wherein inter alia, the Hon'ble Apex Court had held that input credit would not be available on machinery bought out by the assessee which was not even unpacked or tested and exported in exact condition along with machinery manufactured by assessee. We first intend to examine this contention. The aforesai
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ven in respect of the goods in question.”
5.2 Based on these discussions, the Hon'ble Supreme Court had inter alia held as under:-
“24. It is also not in dispute that the appellant had purchased some machinery from others and such machinery had not even been unpacked by it and in the exact condition it had been transported along with the machinery manufactured by it to Vietnam. Thus, the appellant did not use the purchased machinery in its premises or in its factory and therefore, necessary condition incorporated in the Rules for availing credit of the MODVAT had not been complied with. To avail the MODVAT credit, the input on which excise duty is paid must be used in the manufacture of the final product in the factory of the assessee. The machinery purchased by the appellant had not even been tested or was not even unwrapped in the factory of the appellant. In case of such an admitted fact, it cannot be said that the machinery so purchased from others was used by the appellant in t
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as discussed supra, the Tribunal vide Final Order No. 41389 to 41440/2015 dated 21.9.2015 remanded the matter relating to show cause notices dated 29.3.1996 and 3.3.1997 with certain directions and in respect of the remaining 20 notices also, the Tribunal remanded the matters for denovo adjudication. Out of these 22 impugned orders (Order-in-Original No. 1 to 22/2017 dated 29.3.2017), appeals relating to Order-in-Original Nos. 1, 2 and 4 to 10/2017, also dated 29.3.2017 were separately taken up for hearing and vide Final Order Nos. 41661 to 41669/2018 dated 31.5.2018 were disposed. The dispute covered in these final orders was for the period from July 1994 to August 2001. In the said final order, the Tribunal had inter alia held as under:-
“6.7 We also have no quarrel with the contention of the ld. counsel that taxes cannot be exported; that it is not the intention or policy of the Government otherwise; that in such cases where the manufacturer procures some of the parts from other m
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The same ratio has also been followed in Flat Products Equipments (I) Ltd. – 2011 (272) ELT 104 (Tri. Mum.) where in fact the Tribunal had addressed similar issue of piecemeal export of voluminous size machinery and admissibility of credit on bought out items included therein.
7. Notwithstanding all these factoids, the undeniable fact is that the earlier order of this Bench, in the appellant‟s own case had concluded, “that bought out items both inputs and capital goods in question cannot be considered as eligible capital goods for availing MODVAT credit …..”. The remand directions given by the Tribunal in that order dated 2.5.2003 was only for „computing and confirming the amount of irregularly availed MODVAT credit …. etc.” based on the above conclusion reached by them. This decision has been upheld by the Hon‟ble Supreme Court reported in 2013 (295) ELT 353 (SC). On the subsequent occasion, when the same matter came up to this Tribunal, vide Final Order dated
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cause notices dated 29.2.1996 and 3.3.1997 and which had gone right upto the Hon'ble Supreme Court involved the definition of inputs under Rule 57A of the erstwhile Central Excise Rules 1944, with effect from 31.3.1997. For immediate reference, the relevant portion of the definition of inputs under Rule 57A is as under:-
―57A. Applicability. – (1) The provisions of this section shall apply to such finished excisable goods (hereafter, in this section, referred to as the final products) as the Central Government may, by notification in the Official Gazette, specify in this behalf for the purpose of allowing credit of any duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereafter, in this section, referred to as the specified duty) paid on the goods used in or in relation to the manufacture of the said final products where directly or indirectly and whether contained in the final produ
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products cleared along with such final product, the value of which is included in the assessable value of the final product.
But does not include –
(i) Machines, machinery, plant, equipment, apparatus, tools or appliances or capital goods as defined in rule 57Q used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products;
(ii) Packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging of any final products;
(iii) Packaging materials the cost of which is not included or had not been included during the preceding financial year in the assessable value of the final products under section 4 of the Act;
(iv) crates and bottles used for aerated waters;
(2) Notwithstanding anything contained in sub-rule (1), the Central Government may, by notification in the official Gazette, d
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” [INSERTED VIDE NOTN NO:14/96-C.E. (N.T.) DATED 23.7.1996]
Emphasis supplied
So also, the definition of ―capital goods” was defined in Rule 57Q of the same Central Excise Rules, 1944 read as under:-
“capital goods” means-
(a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products;
(b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and
(c) moulds and dies, generating sets and weighbridges used in the factory of the manufacturer.”
5.6 It was on these erstwhile prevalent definitions of ‗inputs' and ‗capital goods' and the then prevalent conditionalities for availing MODVAT credit on bought out items, both inputs and capital goods, had been dwelt into by the Tribunal in its Final Order No.301-302/2003 dated
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ntained in the final product or not, and includes accessories of the final products cleared along with the final product, goods used as paint or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production, and also includes lubricating oils, greases, cutting oils and coolants.
Explanation:- The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever”.
(Emphasis added)
We thus find that w.e.f. 31.3.2000, CENVAT scheme brought about a clear and distinct departure in the definition of inputs. Earlier, inter alia, inputs were required to be ―goods used in or in relation to the manufacture of the final products, whether directly or indirectly and whether contained in final product or not”. However, the new definition w.e.f. 31.3.2000 included within the scope of inputs, accessories of final products c
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e of final products or for any other purpose, within the factory of production.
Explanation 1. – the high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2. – Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;”
(d) With introduction of CENVAT Credit Rules, 2004, vide Notification No. 23/2004-CE(NT) dated 10.9.2004,, the definition of ‗inputs' was further tweaked and incorporated under Rule 2(k) as under:-
“input means:-
(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or
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(NT) dated 7.7.2009.
(Emphasis Supplied)
As is evident, w.e.f. 10.9.2004, not just accessories, but even other consumables like greases, cutting oils, lubricating oil, coolants etc. of final products cleared along with the final products, and further goods used as paint or as packing material or as fuel etc. were also brought within the ambit of ‗inputs'.
(e) The definition of ‗inputs' continued as above till its substitution with effect from 1.7.2011 when Rule 2(k) was further substituted as under:-
“input” means –
(i) all goods used in the factory by the manufacturer of the final product; or
(ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or
(iii) all goods used for generation of electricity or steam [or pumping of water] for captive use; or
(iv) all goods used for providing any output service, or;
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and
(F) any goods which have no relationship whatsoever with the manufacture of a final product.
Explanation. – For the purpose of this clause, “free warranty” means a warranty provided by the manufacturer, the value of which is included in the price of the final product and is not charged separately from the customer;”
(emphasis added)
Thus, the definition of inputs was even further widened and broad banded with effect from 1.7.2001. The requirement of inputs required ―to be used in or in relation to the manufacture of final products, whether directly or indirectly” etc. was done away with and instead the scope of inputs amplified to include even goods merely used in the factory by the manufacturer and / or any goods including accessories cleared along with the final product, the only requirement being the value of such goods should be included in the value of the final product and so on.
(f) So also, the definition of ―capital goods” under erstwhile Rule 57Q of Ce
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lling under Chapter 82, chapter 84, Chapter 85, Chapter 90, heading No.68.02 and sub-heading No.6801.10 of the First Schedule to the Tariff Act;
(ii) pollution control equipment
(iii) components, spares and accessories of the goods specified at
(i) and (ii) above;
(iv) moulds and dies;
(v) refractories and refractory materials ;
(vi) tubes and pipes and fittings thereof;
(vii) storage tank,
used in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office;”
(h) After introduction of CENVAT Credit Rules 2004, vide Notification No.23/2004-CE (NT) dated 10.09.2004, the definition of ―capital goods” was defined as under:-
(b) ―capital goods” means,-
(A) the following goods, namely:-
(i) all goods falling under Chapter 82, chapter 84, Chapter 85, Chapter 90, heading No.68.02 and sub-heading No.6801.10 of the First Schedule to the Tariff Act;
(ii) pollution control equipment
(iii) components
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s, where the period in dispute is from September 2002 to November 2012, various definitions of inputs that were in force during the said period did not have any requirement that inputs should be ―manufactured and used within the factory of production, in or in relation to the manufacture of final product” which was the prime conditionality in the definition of inputs prior to 1.6.2001, in particular, the definition under erstwhile Rule 57A as on 31.3.1997.
5.9 Further, in all these definitions, during the impugned period, post 1.6.2001, there is an inclusive part namely that the ―inputs ……. includes lubricating oil, grease, coolants etc. accessories of the final products cleared along with the final product”. As we have found above, the evolving definitions of inputs with effect from 1.4.2001 became broad based enough to include not only all goods used in the factory but also any goods including accessories etc. provided the value thereof is included in the value of th
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ner of Central Excise, Meerut – I as reported in 2016 (334) ELT 3 (SC), wherein the Hon'ble Supreme Court held as under:-
“We have heard the learned counsels for the parties. We have also read and considered the order dated 29th November, 2010 [2010 (260) E.L.T. 321 (S.C.)] of this Court referring the matters to a larger bench for a decision on the question as to whether the definition of the term “input” in Rule 2(g) of the Cenvat Credit Rules, 2002 is to be understood to include items beyond the six items mentioned specifically in Rule 2(g). The answer to the question referred, according to us, is self-contained in the order of reference which has referred, inter alia, to a three Judge Bench decision of this Court in Regional Director, Employees‟ State Insurance Corporation v. High Land Coffee Works of P.F.X. Saldanha and Sons & Anr. [(1991) 3 SCC 617]. There are other decisions of this Court by Coordinate Benches (three judge) on the issue which need not be adverted to speci
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n indirect significance depending on the context, see State Wakf Board v. Abdul Aziz (A.I.R. 1968 Madras 79, 81 paragraphs 8 and 10,following and approving Nitai Charan Bagchi v. Suresh Chandra Paul (66 C.W.N. 767), Shyam Lal v. M. Shayamlal (A.I.R. 1933 All. 649) and 76 Corpus Juris Secundum 621. Assuming that the investments in shares and in lands do not form part of the undertakings but are different subject matters, even then these would be brought within the purview of the vesting by reason of the above expressions. In this connection reference may be made to 76 Corpus Juris Secundum at pages 620 and 621 where it is stated that the term “relate”‟ is also defined as meaning to bring into association or connection with. It has been clearly mentioned that “relating to” has been held to be equivalent to or synonymous with as to “concerning with” and “pertaining to”. The expression “pertaining to” is an expression of expansion and not of contraction.
xxxx &nbs
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ections 7 and 8 of the Act on the well settled principles which we have reiterated before. The expression “in relation to” has been interpreted to be the words of widest amplitude. See National Textile Corporation Ltd. and Others v. Sitaram Mills Ltd. (supra). Section 4 appears to us to be an expanding section. It introduces a deeming provision. Deeming provision is intended to enlarge the meaning of a particular word or to include matters which otherwise may or may not fall within the main provisions. It is well settled that the word „includes‟ is an inclusive definition and expands the meaning. See The Corporation of the City of Nagpur v. Its Employee (1960 2 S.C.R. 942) and Vasudev Ramchandra Shelat v. Pranlal Jayanand Thakar and Others (1975 1 S.C.R. 534). The words „all other rights and interests‟ are words of widest amplitude. Section 4 also uses the words “ownership, possession, power or control of the Company in relation to the said undertakings”. The wo
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erum gathered of both self-manufactured and bought out items, all duty paid by the respective manufacturers, which was intended to constitute a complete sugar plant in Vietnam. The show cause notice dated 29.3.1996 at para 2.0, also narrates that the disputed bought out goods were “used only for receipt and export, as such”.
5.13 Obviously, the appellants have transported these machineries, both those manufactured by them and the other bought out inputs / goods removed as such, in various consignments for export purposes and eventual erection of a sugar plant in Vietnam. Having analyzed and understood the changed definitions of ―input” which were in force during the period impugned in the present appeals as also the settled interpretation of the word ―includes” and ―in or in relation to”, to credit of duty will be eligible in respect of inputs / all the goods exported by the appellant for eventual transformation into a complete sugar plant, both self-manufactured inc
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, it would be useful to examine the sequence of said Rule 16 of Central Excise Rules, 2001, the Board's clarification dated 13.12.2001 and the amended Rule 16 of Central Excise Rules, 2002 as under:-
(a) ―RULE 16 OF CENTRAL EXCISE (NO.2) RULES , 2001
The Central Excise (No.2) Rules, 2001 was introduced with effect from 01.07.2001 vide Notification No. 9/2001-CE(NT) dated 01.03.2001, wherein the Rule 16 of Central Excise Rules, 2001 stated that :-
“16. Credit of duty on goods returned to the factory.-
(1) Where any goods on which duty has been paid at the time of removal thereof are subsequently returned to the factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such return in his records and shall be entitled to have CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Rules.
(2) The assessee shall be liable to pay the duty on goods returned under sub-rule (1) when rem
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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 entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules.
(2) If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.
Explanation: The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by a manufac
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t of an amount equal to credit taken, of course, if the goods are exported under bond, in our view, there will be no requirement to reverse credit taken. The 2001 clarification given by the CBEC as also the amended provisions of Rule 16 of Central Excise Rules, 2002 will definitely support the contention of the ld. counsel that appellants are entitled to CENVAT credit on the bought out items even under Rule 16 since the same have been received in the factory and have been exported as such, of course, with the remaining machineries manufactured by the appellants themselves.
6.5 Rule 16 ibid has been the subject matter of a number of Tribunal decisions. We would like to examine some of these decisions as under:-
(a) In the case of M/s. Jayaswal Neco Industries Ltd. Vs. Commissioner of Central Excise, Nagpur – 2016 (44) STR 116 (Tri. – Mum.), it had been observed as under:-
“3. ……… He further submits that even assuming the activity of the appellant is not of manufacture, i
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; xxxxxx xxxxx xxxxxx xxxx
6. We find that the ld. counsel made various alternative submissions. We find that activity of the appellant, i.e., receipt of duty paid goods, i.e., Oil Slump Body, Cylinder Head & Rover Cylinder, availment of Cenvat credit thereon and reissue the same on payment of duty or for export is squarely covered by Rule 16 of the CER, 2002…….
From the
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ct of duty paid finished goods subject to condition that the said finished goods on which Cenvat credit was availed should be cleared on payment of excise duty i.e. in case of the said finished goods undergone manufacturing process in terms of Section 2(F)Central Excise Act, assesse is required to pay duty on the transaction value, and in other case where the goods does not undergo process which amounts to manufacture, then excise duty equal to Cenvat credit availed on such goods should be paid. In terms of Rule 16, if the condition of payment as discussed above is complied with the duty paid finished goods shall be treated as deemed input and Cenvat credit is admissible. In the present case as per the claim of the appellant which was not disputed by the lower authorities that appellant have paid the excise duty at the time of sale of such imported plastic closure. It is found that appellant have paid duty equivalent to the Cenvat credit availed, no further demand would exist. However
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he period 29-3-2000 to 28-5-2004. Therefore, the period from 29-3-2000 to 30-6-2001 is not covered by Rule 16. However, even if Rule 16 was not available, the respondents have taken credit on the input and cleared after the processing of drawing for export. As per this transaction, it is nothing but the availment of credit on the input and if at all the activity does not amount to manufacture it is removal of input as such. The removal of input either can be on the payment of duty which is equal to the Cenvat amount or can be cleared without payment of duty for export under bond. Therefore, the Cenvat credit availed by the respondents either before 1-7-2001 or thereafter and the processed goods have been cleared for export, the Cenvat credit is legally admissible. It is not the case of the Revenue that the respondent has cleared the goods in the domestic market without payment of duty. The dispute is only related to the availment of credit.”
(d) In the case of M/s. NCL Industries Ltd.
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under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.
Explanation. – The amount paid under this sub-rule shall be allowed as Cenvat credit as if it was a duty paid by the manufacturer who removes the goods.”
8. The above provision makes it clear that manufacturer can take credit of duty paid on the goods by treating them as inputs. It is seen from the above rule that if goods are brought for “any other reason” also, the manufacturer is entitled to take credit as if the goods are inputs. The learned counsel for appellant submitted that the appellant unit had railway sliding tracks and this is the reason that the cement was brought from Mattampally unit to the appellant unit and marked with ISI mark and dispatched to the buyer. The contention of Revenue is that the goods being cement/finished product, the credit is not admissible. Rule 16 does not requ
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very same impugned order No. 1 to 22/2017 dated 29.3.2017. We then found it proper and correct to reject the appeals by adhering to judicial propriety which required us to follow the Hon'ble Supreme Court's decision in the appellant's own case reported in 2013 (295) ELT 353 (SC). It is however pertinent to note that in all those nine appeals, the period of dispute covered by the said judgment of the Hon'ble Supreme Court pertained to a narrower definition of inputs which was analyzed and examined by the Apex Court. However, in these twelve appeals before us, as discussed supra, the period of dispute is after the amendment and enlargement of the definition of ‗inputs' w.e.f. 1.6.2001 and further amplification to that definition caused about by the subsequent amendments of 21.6.2001, 1.3.2002, 10.9.2004, 7.7.2009 and 1.4.2011 etc. We, therefore, have to conclude that the decision of the Hon'ble Supreme Court reported in 2013 (295) ELT 353 (SC) would not be applicable for the impug
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Thermax Babcock & Wilcox Ltd. (supra), has been followed by the Tribunal in Thermax Ltd. Vs. Commissioner of Central Excise, Pune – 2016 (337) E|LT 456 (Tri. Mum.) wherein it has been held that bought out items used in erection of boilers at customer's site are inputs and cannot be distinguished from inputs used in manufacture of components within the factory, as both have gone into manufacture of final product. The relevant portion of the order is as follows:-
“5. On behalf of the appellant, it was also contended, that the appellant is, indisputably, eligible for rebate of duty on inputs „bought-out‟ and supplied as exports. It was claimed that it is a well-settled principle of law that what is available as rebate can also be availed as credit. Further, the appellant-assessee, even if regarded as merchant exporter, was entitled to such rebate and hence denial to them as a manufacturer would be grossly inequitable; that the principle and policy of „non-exportabilit
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ible to export inputs, either under bond or claim of rebate, cannot be prevented from availing the benefit merely because of status as a manufacturer and allowed the input credit entitlement under Rule 57A of the erstwhile Central Excise Rules, 1944 and Rule 3 of the Cenvat Credit Rules, 2004.
7. Learned Authorised Representative, on the other hand, contends that the „bought-out‟ items are used as auxiliary equipment to the goods manufactured by the appellant and that as these are not required for manufacture of the pressure parts and since, as a matter of practice, these are not brought within the factory of manufacture which is an essential requirement to qualify as an „input‟, Cenvat credit could not have been availed of. Drawing attention to Rule 2k(i) of Cenvat Credit Rules, 2004 that defines „inputs‟ and to Rule 2(h) defining „final product‟ as „excisable goods manufactured or produced from input, or using input service̶
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have been used in the erection of boilers at the site of the purchasers for the period between 1st July, 2006 and 4th January, 2011. We notice from the records that the contracts for erection of boilers are executed at the site of customers owing to physical impossibility of assembling the same and transporting it in that form to the premises where it is to be finally installed. It is not in dispute that the assessee-appellant manufactures pressure parts of boilers in the factory and such other parts as required for the complete installation of the boiler in its functional form is procured from outside. In executing the contracts entered into with the domestic purchasers, the pressure parts are cleared from the factory and the other components are sourced directly for delivery at the erection site.
9. Identical matter had come up for decision before this Tribunal to determine whether the duty liability arises only on the pressure parts or on the boiler, as such, including the &bdquo
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brought into the factory and the appellant does not take credit on the same. That, however, is not the practice when it came to exports or supplies made to special economic zones. Under the contractual agreement, as well as for compliance with statutory requirement, the appellant stores „bought-out‟ components at the factory of manufacturer where these are tested and connected along with the parts manufactured in the factory and, thereafter, removed from the premises as boiler for erection and installation at Special Economic Zone or at the site of the purchasers abroad. In these circumstances there cannot be any conclusion other than that the manufacture of boiler in its final form is rendered at the factory of manufacturer and the clearance of boiler is, for all practical purposes, effected from the said factory gate. Since the boiler is the final product of the manufacturer, every component within it and every input that goes into the component manufactured in the facto
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about the fact that the bought out parts have been exported on payment of duty under claim for rebate and the jurisdictional Assistant Commissioner has also passed the claim for rebate vide his order dated 29-11-2007 holding that the bought out parts form part of the complete machinery. In the appellant‟s own case, referred to supra, it was held that even though the goods were cleared in piecemeal the goods were classifiable as rolling mills and galvanising lines and not as parts thereof. What was cleared by the appellant was the complete machine. Further, the Board‟s circular dated 3-12-2006 makes it abundantly clear that even if inputs are removed as such they could be exported either under bond or under claim for rebate of duty and the Cenvat credit on the parts would be available. In the case of Narmada Chematur Pharmaceuticals Ltd. (referred to supra) the Hon‟ble Apex Court has clearly held that when the amount of Cenvat credit wrongly availed is exactly equivale
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he service tax paid on input service. In the said case it was held that any input service that form part of the value of the final product should be eligible for Cenvat credit under Rule 2(l) of the Cenvat Credit Rules, 2004. This judgment also does not support the case of the department. In the instant case there is no dispute about the fact that the cost of the bought out parts have been included in the value of the machinery which has been ultimately exported and forms very much part of the machinery. Further, whatever credit has been taken, the duty liability has been discharged on a value inclusive of such bought out parts and on that ground also the demand for reversal of the Cenvat credit does not sustain. It should also be observed herein that the transaction in the instant case is that of exports and it is the avowed policy of the Government to promote export by relieving the burden of taxes on the products exported and also on the products consumed in the manufacture of the g
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gly dismissed. Cross-objection also disposed of.”
9. In the light of the discussions, findings, conclusions herein above, and also following the ratio laid down by the Hon'ble Apex Court in their subsequent judgments in Thermax Babcock & Wilcox Ltd. (supra) and BHEL (supra) as also the Tribunal's decision in Thermax Ltd. (supra), we hold / order as under:-
(i) The ratio of the Hon'ble Supreme Court's decisions in the appellant's own case for earlier period in respect of SCNs No. 24/1996 and Nil / 1997 disposed of on 03.09.2013 as reported in 2013 (295) ELT 353 (SC) need not be applied to the subsequent periods covered by these 12 appeals, not only on account of aforesaid change of definition of ―inputs” / ―capital goods” as also on account of subsequent decisions of the Hon'ble Supreme Court.
(ii) In view of the changed definitions and provisions of law during the period of dispute in these appeals, appellant are very much eligible to avail CENVAT credit of duty pa
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