Custom, Excise & Service Tax Tribunal
M/S. Funskool (India) Limited vs Commissioner Of Central Excise & ... on 3 November, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. E/1343, 1708 & 1709/06 (Arising out of Order-in-Appeal No. Goa/Cex./SNS/52 to 54/2006 dt. 22.3.2006 passed by the Commissioner (Appeals) Central Excise & Customs, Goa ) For approval and signature: Honble Mr. Ramesh Nair, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
======================================================= M/s. Funskool (India) Limited :
Appellant VS Commissioner of Central Excise & Customs, Goa.
:
Respondent Appearance Ms. Anjali Hirawat, Advocate for Appellant Shri N.N. Prabhudesai, Supdt. (A.R) for respondent CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Honble Mr. C.J. Mathew, Member (Technical)
Date of hearing : 03/11/2016
Date of pronouncement : 15/12/2016
ORDER NO.
Per : Ramesh Nair
The appellants are engaged in the manufacture of toys and games classifiable under Chapter Heading 9504 and chargeable to excise duty at the rate of 16% Adv. The appellants are also manufacturing various toys, puzzles etc. classifiable under Chapter Heading 95.02 and 95.03 and availing the benefit of excise duty exempted under Notification No. 10/2003-CE dt.1.3.2003. The appellants did not avail Cenvat Credit on any of the inputs used in the manufacture either dutiable final product or exempted final product. The appellants are also manufacturing packing boxes for these toys and games and used captively. On this captive consumption of the boxes which are used for the manufacture of final product, the appellant is availing exemption under Notification No. 67/95-CE dt. 16.3.1995. In respect of these boxes the appellant also not taken credit in respect of the input used in the manufacture of the said boxes. The appellants were issued show cause notice proposing demand of excise duty on the boxes on the ground that the benefit of notification No. 67/95-CE is not available to boxes, since the final product is exempted from payment of excise duty and the appellants have not discharged their obligation under Rule 6 of Cenvat Credit Rules, 2000. The demand of duty was confirmed and the same was upheld by the Commissioner (Appeals) vide the impugned order. Therefore the appellant is before us.
2. Ms. Anjali Hirawat, Ld. Counsel appearing for the appellant submits that only ground for denial of the exemption Notification No. 67/95-CE dt. 16.3.1995 is that the appellant has neither paid the duty on the final product nor discharged the obligations under Rule 6 of Cenvat Credit Rules, 2001. She submits that the final products are cleared under exemption Notification No. 10/2003-CE dt. 1.3.2003. As regard obligation under Rule 6 of the Cenvat Credit Rules. She submits that the obligation have been discharged as much as the appellant have not availed Cenvat Credit in respect of any input used in the manufacture of final product. Therefore the exemption Notification No. 67/95-CE dt. 16.3. 1995 was correctly available to the intermediate product i.e. packing boxes. In this support she placed reliance on the following judgments:
(i) Commissioner of Central Excise, Goa Vs. Funskool India Ltd.
2009 (244) E.L.T. 591 (Tri.-Mumbai)
(ii) Ambuja Cement Ltd. Vs. Commissioner of C.Ex., Chandigarh 2015 (326) E.L.T. 13 (S.C.)
(iii) Godavari Sugar Mills Ltd. Vs. Commissioner of C. Ex., Belgaum 2007 (212) E.L.T. 234 (Tri.-Bang.)
(iv) Sakthi Sugars Ltd. Vs. Commissioner of Central Excise, Salem 2008 (230) E.L.T. 676 (Tri.-Chennai) Affirmed by Honble Supreme Court Commissioner V. Sakthi Sugar Ltd. 2016 (332) E.L.T. A194(S.C.]
(v) Commr. of Cus. & C. Ex., Tirupati Vs. Lanco Industries Ltd.
2008 (227) E.L.T. 395 (Tri.-Bang.)
(vi) Bhushan Steel & Strips Ltd. Vs. Commr. of C. Ex. (Appeals), Ghaziabad 2015 (326) E.L.T. 729 (Tri.-Del.)
(vii) Union of India Vs. Sonic Electrochem (P) Ltd.
2002 (145) E.L.T. 274 (S.C.)
(viii) Automobile Corporation of Goa Ltd. Vs. Commissioner of C. Ex., Goa 2006 (197) E.L.T. 564 (Tri.-Mumbai)
(ix) Msrtcs Central Workshop Vs. Commr. of C.Ex. Aurangabad 2012 (282) E.L.T. 101 (Tri.-Mumbai).
She submits that in the above judgments even though the credit was taken but the same was reversed and the said act was considered as discharge of obligation of Rule 6 and Notification No. 67/95-CE dt. 16.3.1995 was allowed. She alternatively submits that the boxes manufactured are meant for packing of exclusively their product. The said boxes cannot be sold or bought out sold in the market. Therefore the said boxes are not marketable, hence not excisable. In this regard she placed reliance on the following judgments:
(vii) Union of India Vs. Sonic Electrochem (P) Ltd.
2002 (145) E.L.T. 274 (S.C.)
(viii) Automobile Corporation of Goa Ltd. Vs. Commissioner of C. Ex., Goa 2006 (197) E.L.T. 564 (Tri.-Mumbai)
(ix) Msrtcs Central Workshop Vs. Commr. of C.Ex. Aurangabad 2012 (282) E.L.T. 101 (Tri.-Mumbai) She submits that for the above reason also, as held in the judgments cited above, the boxes cannot be charged with excise duty.
3. Shri N.N. Prabhudesai Ld. Superintendent (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He placed reliance on the following judgments:
(i) Mysore Metal Industries Vs. Collector of Customs, Bombay 1988 (36) E.L.T. 369 (S.C.)
(ii) Motiram Tolaram Vs. Union of India 1999 (112) E.L.T. 749 (S.C.)
(iii) A.P. State Electricity Board Vs. Collector of C. Ex. Hyderabad 1994 (70) E.L.T. 3 (S.C.)
(iv) Commissioner of Central Excise, Jaipur Vs. Hindustan Zinc Ltd.
2004 (166) E.L.T. 145 (S.C.)
(v) A.P. State Electricity Board Vs. Collector of C.Ex. Hyderabad 1994 (70) E.L.T. 3 (S.C.)
(vi) Aristo Pharmaceutical Ltd. Vs. Commissioner of C.Ex., Bhopal 2000 (121) E.L.T. 386 (Tribunal)
(vii) South Bihar Sugar Mills Ltd. Vs. Union of India 1978 (2) E.L.T. J 336 (S.C.)
(viii) Nestle India Ltd. Vs. Commissioner of C. Ex., Chandigarh II 2011 (270) E.L.T. 575 (Tri.-Del.)
(ix) Nicholas Piramal India Ltd. Vs. Commissioner of C. Ex., Mumbai 2010 (260) E.L.T. 338 (S.C.)
(x) S.S. Bedi & Sons Vs. Commissioner of Central Excise, New Delhi 2002 (144) E.L.T. 147 (Tri.-Del.).
4. We have carefully considered the submissions made by both the sides. From the original order, we find that the adjudicating authority denied the exemption Notification No. 67/95-CE in respect of packing boxes used captively for manufacture of exempted goods on the ground that the appellant have not fulfilled Rule 6(2) of Cenvat Credit Rules. Accordingly they have not discharged obligation provided under Rule 6 of Cenvat Credit Rules 2001/2002. For better understanding we reproduce the notification No. 67/95 as below:
C.?CAPTIVE CONSUMPTION (GOODS USED WITHIN FACTORY OF PRODUCTION) GENERAL EXEMPTION NO. 6 Exemption to all capital goods and inputs if captively consumed within the factory of production. In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance Act, 1957 (58 of 1957), (herein after referred to as the said Special Importance Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts -
(i)?capital goods as defined in rule 3 of the CENVAT Credit Rules, 2002 manufactured in a factory and used within the factory of production;
(ii)?goods specified in column (1) of the Table hereto annexed (hereinafter referred to as input) manufactured in a factory and used within the factory of production in or in relation to manufacture of final products specified in column (2) of the said Table;
from the whole of the duties of excise leviable thereon which is specified in the Schedules to the Central Excise Tariff Act, 1985 (5 of 1986) or additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act; Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of the duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty, other than those goods which are cleared,-
(i) to a unit in a Free Trade Zone, or
(ii) to a hundred per cent Export Oriented Undertaking, or
(iii) to a unit in an Electronic Hardware Technology Park, or
(iv) to a unit in a Software Technology Park, or
(v) under Notification No. 108/95-Central Excise, dated the 28th August, 1995, or
(vi) by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in rule 6 of the CENVAT Credit Rules, 2001.
TABLE Description of Inputs Description of final products (1) (2) All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than [light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol. All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following , namely :-
(i) matches;
(ii) fabrics of cotton or man-made fibres falling under Chapter 52, Chapter 54 or Chapter 55 of the First Schedule to the said Act;
(iii) fabrics of cotton or man-made fibres falling under heading No. 58.01, 58.02, 58.06 (other than goods falling under sub-heading No. 5806.20), 60.01 or 60.02 (other than goods falling under sub-heading No. 6002.10) of the First Schedule to the said Act.] From the plain reading of the above notification it is observed that in the proviso to clause (iv) the notification it is provided that the exemption shall not apply to inputs used in or in relation to the manufacture of final product which are exempt from the whole of the duty of excise or chargeable to nil rate of duty. However, though the exemption is not available to the intermediate goods used in the exempted goods but exception was provided that even if the final product is exempted and the assessee discharge the obligation prescribed in Rule 6 of Cnevat Credit Rules, 2001 then in spite of the final product is exempted, the exemption on the intermediate goods is available in terms of the aforesaid notification. Now we have to see whether the appellant have discharged the obligation under Rule 6 of Cenvat Credit Rules, 2000 which is reproduced below:
Rule 6. Obligation of manufacturer of dutiable and exempted goods.-
(1) The CENVAT credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2).
(2) Where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs intended to be used as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods.
(3) From the above Rule 6 it can be seen that a per Sub-Rule (1) of Rule 6, the asseessee is not required to avail the Cenvat Credit in respect of the inputs used in the manufacture of exempted goods. As per the fact of the present case it is undisputed fact that the appellant has not availed the Cenvat Credit in respect of any of the inputs used either in the final product or in the intermediate product i.e. packing boxes. Therefore the condition of Sub-Rule (1) of Rule 6 stands complied with. The finding of the lower authority that since the appellant have not fulfilled Rule 6(2). Therefore they have not discharged the obligation as required in the notification is misleading and absolutely incorrect for the reason that as per clause (vi) of the proviso to Notification, it does prescribe the obligation under Rule 6 only and Rule 6 (1) and Rule 6 (2) are alternative to each other. Therefore since the appellant have not availed Cenvat Credit it is squarely covered under Rule 6 (1). Rule 6(2) applies only in such cases where the assessee avails the cenvat credit and follows the condition of Rule 6(2) such as payment of 8% of the value of the goods or maintaining separate account in respect of dutiable and final product and reversal of proportionate credit etc. which is not applicable in the present case as the appellant have not availed the Cenvat Credit at all in respect of any of the inputs, therefore they have discharged the obligation as required under Rule 6 (1). We are therefore of the considered view that the appellant have discharged the obligation under Rule 6(1) accordingly they are legally entitled for the exemption notification No. 67/95-CE dt. 16.3.1995 in respect of their intermediate product i.e. packing boxes. The impugned order is set aside. The appeal is allowed.
(Pronounced in court on 15/12/2016)
(C.J.Mathew)
Member (Technical)
(Ramesh Nair)
Member (Judicial)
SM.
8
Appeal No. E/1343, 1708 & 1709/06