Custom, Excise & Service Tax Tribunal
M/S. Aalidhara Texspin Engineers vs Commissioner Of Central Excise & S.T., ... on 5 January, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/605/2009 (Arising out of OIA-KRS/78/VAPI/2009 dated 27.02.2009 Passed by Commissioner (Appeals) Central Excise & Customs, Vapi) M/s. Aalidhara Texspin Engineers : Appellant (s) vs. Commissioner of Central Excise & S.T., Vapi : Respondent (s)
Represented by :
For Appellant (s) : Shri Paritosh Gupta, Advocate For Revenue : Shri J. Nagori, A.R. For approval and signature :
Mr. P.K. Das, Hon'ble Member (Judicial) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?3
Whether their Lordships wish to see the fair copy of the Order?
Seen 4 Whether Order is to be circulated to the Departmental authorities?
Yes CORAM :
Mr. P.K. Das, Hon'ble Member (Judicial) Date of Hearing / Decision : 05.01.2015 ORDER No. A/10025 / 2015 Dated 05.01.2015 Per : Mr. P.K. Das;
The relevant facts of the case, in brief, are that the appellants were engaged in the manufacture of Textile Machinery classifiable under Chapter 84 of the Central Excise Tariff Act, 1985. They availed CENVAT credit on inputs, capital goods and input services used in the manufacture of final product. The present appeal relates to eligibility of CENVAT credit of Rs. 23,85,798/- availed on Old Draw Texturising machine in dismantled condition, received under cenvatable invoices issued by the supplier M/s. Gokulanand Texturisers Pvt. Limited. The said supplier purchased the machineries in the year 1998 and after use, supplied to the appellant in dismantled condition under the cover of invoice Nos. 276 dated 08.4.2005, 643 and 644 both dated 17.4.2005 and 303 dated 22.6.2005. The adjudicating authority held that the machineries were very old i.e. purchased by M/s. Gokulanand Texturisers in the year 1998 and therefore, it is no longer remained in a position of being reused as fresh parts (inputs) for manufacture of new machines. The adjudicating authority confirmed the demand of CENVAT credit of Rs. 23,85,798/- along with interest and imposed penalty of equal amount under Section 11AC of the Central Excise Act, 1944. Commissioner (Appeals) upheld the adjudication order.
2. Learned Advocate on behalf of the appellant submits that they have received the duty paid inputs accompanied with the proper Central Excise invoices and utilised in the manufacture of final product i.e. Textile Machineries. He drew attention of the bench to the relevant invoices and RG 23 Pt.I and Pt.II to substantiate the use of these inputs. He further submits that the Commissioner (Appeals) passed the order beyond the scope of the adjudication order in so far as the adjudicating authority had not disputed the use of the machinery. He submits that the Commissioner (Appeals) had erroneously proceeded on the basis of that appellant has received dismantled machinery. It is also submitted that both the authorities below had not considered the RG 23 Pt.1 register for use of these machineries.
3. On the other hand, learned Authorised Representative for the revenue reiterates the findings of the Commissioner (Appeals). He submits that it has been alleged in the show cause notice that the appellant received old, used and dismantled parts as inputs for the manufacture of new machinery. He submits that the appellant had merely placed copy of the RG-23 Pt.I register without any corroborative evidence for use in the manufacture of final products. He submits that the adjudicating authority has clearly observed that the goods were old one and can not be used in the manufacture of final products and the order of the Commissioner (Appeals) can not be treated as beyond the scope of show cause notice. It is further stated that CENVAT credit is not available on the waste and scrap which can not be used in the manufacture of final product.
4. After hearing both sides and on perusal of the records, I find that the appellant received the goods accompanied with the Central Excise invoices and availed CENVAT credit as under:-
S/No. Invoice No./ Date Description shown in invoice (1) 276/08.04.2005 80 Position Air DT Machine assemblies in dismantled condition (2) 643/17.04.2005 80 Position Air DT Machine assemblies in dismantled condition (3) 644/17.04.2005 Yam Slug attachment assemblies in dismantled condition (4) 3032/22.6.2005 216 position Air DT Machine Assemblies in dismantled condition
5. It has been alleged in the show cause notice dated 06.4.2006 that the appellant failed to produce any documentary evidence the job cards or any other private records, if any maintained in respect of use of said items. According to learned Advocate, the goods in question to be treated as inputs in the Rule 2(k) of the Cenvat Credit Rules, 2004. The input means all goods used in the factory in the manufacturer of the final products. According to the Revenue, the goods in question, machine assemblies in dismantled condition that too old, can not be their inputs for use in the manufacture of new taxable machinery. The main issue is that as to whether these goods can be used in the manufacture of final products. For proper appreciation, the relevant paragraph from the order of Commissioner (Appeals) is reproduced below:-
5. I have gone through the case records, various submissions made by the appellants and case laws relied upon by them. The adjudicating authority confirmed the demand on two grounds. First that the invoices bear hand written Sr. Nos instead of pre-printed Sr. Nos and were therefore invalid documents. I find that it is a minor technical lapse on the part of the supplier and credit can not be denied for such minor lapses. The second ground for confirmation of demand is that the said goods were too old to be used as inputs in the new textile machinery and the said goods were therefore neither their inputs nor their capital goods entitling them to the CENVAT credit. I find myself in agreement with the above views of the adjudicating authority. I find that the said goods were almost seven years old and no prudent manufacturer will use such old parts in the new machines as the same will affect its efficiency and durability and will result in frequent repairs. Further in the units engaged in the manufacturer of machines the inputs are stocked and accounted for in terms of different parts. Even nut bolts are separately stocked and accounted for. Apparently, nothing of this sort has been done in this case. There is no detailed inventory of goods obtained after dismantling the same and the further use of the said parts obtained on dismantling. The appellants have will fully not shown records showing numbers of different components; parts etc. extracted from said machines and its further use. The different parts of the texturising machine runs in to hundreds and it is not known how many of these either one, two, ten or none have been used by the appellants in the manufacture of dutiable finished goods. Other parts which were never put into the use can not be said to be used in or in relation to the manufacture of dutiable finished goods. The appellants have themselves submitted that the said unused components parts were waste and scrap. I must state here that the said waste and scrap was not generated in the manufacture of finished goods as the same were never put into the use for manufacture of finished goods. Mere separation of old unusable components, parts etc. can not be said to have been an activity resulting in the use of unusable components, parts etc. in or in relation to the manufacture of dutiable finished goods. I also agree with the findings of the adjudicating authority that texturising machines are finished goods of the appellants and not their inputs. The entire exercise here appears to have been committed by the appellants to enable the supplier to use and encash the unutilised CENVAT credit which otherwise would have lapsed after the sale of the texturising machines. My above findings find support from the fact that since the said texturising machines were basically waste and scrap, the same should have been cleared on payment of duty equivalent to transaction value instead of the duty equivalent to the CENVAT credit taken as has been done in this case. It is worth mentioning here that the supplier in this case has paid the duty from their capital goods CENVAT credit account and not from PLA. The submissions made by the appellants are therefore vague and without any evidence. The said credit is thus found to have been taken with malafide intention with intent to evade payment of duty and as such confirmation of demand of duty, interest and imposition of penalty in the original order is therefore fair and just.
6. I do not find force in the submissions of the learned Advocate that the impugned order is beyond the scope of adjudication order. It has been alleged in the show cause notice that the appellant failed to produce any job card or any other private record to establish the use of these items in the final products. Learned Advocate during the course of hearing drew the attention of the bench only RG-23 Part-I register that the appellant have used the goods in question in and waste and scraps. Admittedly, the appellant received old and used machinery, apparently, which cannot be used in the final products. The appellant failed to produce any evidence of use of the items. So, I agree with the findings of the Commissioner (Appeals).
7. In view of the above discussions, I do not find any reason to interfere with the order of Commissioner (Appeals). Accordingly, the appeal filed by the appellant is rejected.
(Dictated and pronounced in the Court) (P.K. Das) Member (Judicial) ..KL 6