Custom, Excise & Service Tax Tribunal
M/S. Bharat Forge Ltd vs Commissioner Of Central Excise, Pune ... on 31 August, 2016
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
E/3912/05
(Arising out Order-in- Appeal No. P-III/274/05 dated 23.08.2005 passed by the Commissioner of Central Excise (Appeals), Pune III)
For approval and signature:
Honble Shri M.V. Ravindran, Member (Judicial)
Honble Shri 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 Yes
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
M/s. Bharat Forge Ltd.
Appellant
Vs.
Commissioner of Central Excise, Pune III
Respondent
Appearance:
Shri S. Narayanan, Advocate for the appellant Shri V.K. Shastri, AC(AR) for the respondent CORAM:
Honble Shri M.V. Ravindran, Member (Judicial) Honble Shri C.J. Mathew, Member (Technical) Date of hearing : 31-08-2016 Date of decision : 31-08-2016 O R D E R No: ..
Per: M.V. Ravindran This appeal is directed against Order-in- Appeal No. P-III/274/05 dated 23.08.2005.
2. Relevant facts that arises for consideration are appellant herein manufactures steel forgings, forged articles, machine shaft, crank shaft etc. and cleared the same on payment of appropriate duty. Some of the customers rejected the said goods brought back to the appellants factory and appellant availed the cenvat credit on the same. In some cases, the rejected goods are modified/ rectified and resent back to the customers and in some cases the modification is not possible they are scrapped and cleared as scrap on payment of appropriate duty. It is the case of the revenue that since the appellant has cleared the rejected finished goods as scrap he has to reverse the cenvat credit availed on such rejected goods for which they are relying upon the fact that provision of Rule 16 of Central Excise Rules, 2002 will apply.
3. Ld. counsel would take us through the entire case records and submit that the finished products cleared by the appellant are rejected by the customers which are rectified and sent back but in some cases such rectification does not take place and hence these items needs to be scrapped and cleared as the melting scrap on payment of appropriate duty as a scrap. It is the submission that the departments stand seeking to reverse the entire cenvat credit is incorrect as when the products are received back into the factory premises they incur a process due to which the technical team comes to a conclusion whether rectification is possible or otherwise. He would submit that identical issue has been decided by this bench in the case of Mega Rubber Technologies P. Ltd. 2016-TIOL-737-CESTAT-MUM and in the case of Tube Products of India 2016-TIOL-597-CESTAT-MAD.
4. Ld. Departmental Representative reiterates the finding of the lower authorities.
5. We find that the issue lies in a narrow compass inasmuch the revenue seeks to reverse the cenvat credit availed on the finished goods received by the appellant from the customers for rectification of the errors. It is also noticed from the records that only few of the products returned back are not rectified and resulted in scrap which was cleared as moulding scrap on payment of duty on the scrap value. In our considered view, the provisions of rule 16 of Central Excise Rules, 2002 are applicable in the case only if the products are not manufactured and cleared as such. In the case in hand, there is no dispute that finished goods which are received back by the appellant were put to some process for rectification of the errors pointed by the customers. Since it is not possible to rectify and it seems that during the rectification process the finished goods may have got damaged, the claim which is not controverted by the revenue.
6. In the above factual matrix, we do find that this bench in Mega Rubber Technologies (supra) in para 6 has recorded the following:-
At given point of time the process undertaken by the assessee-respondent does not amount to manufacture, the assessee is required to reverse the amount of CENVAT Credit availed on such goods. In the case in hand as seen from the records, it is very clear that the assessee had tried to reprocess the finished goods received and in few cases no duty was paid. The finished goods received back resulted in scrap. The assessee has discharged the duty liability on scrap on the value of the invoices raised by them. In our considered view, this is a correct position of the law and if any inputs are issued to the job-worker for manufacturing and manufacturing activity undertaken on such inputs, the resultant product cleared as scrap and no input as such. Applying the same analogy, we hold that the first appellate authority was correct in setting aside the order of the adjudicating authority, which confirmed the demands raised on this count.
7. We also note that the Tribunal in the case of Tube Products of India (supra) has gone into this very same issue and has held that the duty discharged on the scrap value of the finished goods which are not rectified is the correct proposition of the law.
8. In view of the foregoing, in the facts and circumstances of this case, we hold that the impugned order is incorrect and liable to be set aside and we do so. The impugned order is set aside and the appeal is allowed.
(Operative part pronounced in Court) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) //SR
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