Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S Pepsico India Holdings Ltd on 30 September, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. E/191/2009 (Arising out of Order-in-Appeal No. JAK(267)143/08 dated 12.11.2008 passed by the Commissioner of Customs & Central Excise (Appeals), Aurangabad). For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) ======================================================
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 : Yes 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? ====================================================== Commissioner of Central Excise, Aurangabad Appellant Vs. M/s Pepsico India Holdings Ltd. Respondent Appearance: Shri Ashutosh Nath, AC (AR) for Appellant Ms. Anjali Hirawat, Advocate for Respondent CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 30.09.2014 Date of Decision: 2015 ORDER NO. Per: Shri Anil Choudhary
The Revenue is in appeal against Order-in-Appeal No. JAK(267)143/08 dated 12.11.2008 passed by the Commissioner of Customs & Central Excise (Appeals), Aurangabad.
2. The brief facts are that the assessee M/s Pepsico India Holdings Ltd. is engaged in the manufacture of excisable goods viz. Aerated water with and without flavours falling under Chapter Heading No. 2202.21 of Central Excise Tariff Act, 1985. The assessee is also engaged in the manufacture of Mango Slice under their brand Slice (fruit pulp) falling under Chapter Heading No. 2202.40 of Central Excise Tariff Act, 1985. The assessee availed CENVAT Credit of duty paid on inputs and capital goods under Cenvat Credit Rules, 2002. During the period Nov. 2003 to May, 2004, the assessee have availed CENVAT Credit of duty paid on machinery which was used in the manufacture of exempted goods i.e. Mango Slice falling under Chapter Heading 2202.40, which was exempted under Notification No. 6/2002 dated 1.3.2002 from payment of duty. It appeared to the Revenue that as per provisions of Rule 6 of Cenvat Credit Rules, 2002, the CENVAT Credit of duty paid on capital goods which are exclusively used for manufacture of exempted finished goods, is not admissible. Therefore, a show-cause notice dated 16.3.2006 was issued to the assessee for recovery of CENVAT Credit of Rs.10,61,443/- on capital goods being used exclusively for manufacture of exempted goods, the same being inadmissible. The show-cause notice was adjudicated vide Order-in-Original dated 28.7.2006 and the proposed duty was confirmed under Rule 12 of Cenvat Credit Rules, 2002 read with Section 11A(1) of the Central Excise Act. Further, penalty of equal amount was also imposed under Rule 13 of Cenvat Credit Rules read with Section 11AC of the Act along with interest under Section 11AB.
2.1 Being aggrieved, the appellant preferred appeal before the Commissioner (Appeals), who vide is order dated 30.3.2007 remanded the case to the adjudicating authority directing to conduct necessary enquiry whether the said capital goods are used towards manufacture of dutiable and exempted products simultaneously, which is crucial to determine the legal outcome of the case. In fresh adjudication, vide Order-in-Original dated 28.2.2008, again the demand was confirmed along with interest and equal amount of penalty.
2.2 Being aggrieved, the appellant again preferred appeal before the Commissioner (Appeals) on the ground that the assessee had taken CENVAT Credit on capital goods at the time of installation during Nov. 2003 to May, 2004, but the said credit was utilized only from Nov, 2005 onwards i.e. only after commencement of manufacture of dutiable products like Lipton Ice Tea and Gatorade. Since the credit availed was utilized only after commencement of manufacture of dutiable goods, it cannot be said that the capital goods were used for the manufacture of exempted goods only and/or the credit was wrongly availed. The learned Commissioner (Appeals) held in favour of the assessee allowing the appeal holding that the assessee have utilized the machinery in question for manufacture of both exempted as well as dutiable products relying on the finding of the adjudicating authority. It was further observed that Rule 6 of Cenvat Credit Rules, 2002 provides that CENVAT Credit is not admissible on capital goods which are used exclusively in the manufacture of exempted finished goods, which are not the facts obtaining in the assessee case. Accordingly, it was held that the assessee have rightly taken CENVAT Credit on the capital goods in question and have used for manufacture of both the exempted and capital goods. The Commissioner (Appeals) has recorded the following findings, which are reproduced for ready reference: -
7. I have carefully gone through the case file and documents available on records. From the records, I find that my predecessor had remanded back the case with the direction to verify whether the appellants had utilized the said capital goods towards manufacture of dutiable i.e. Gatorade and Lipton Ice Tea as well as exempted goods i.e. slice as claimed by the appellants. The appellants also submitted the copies of ER-1 for the relevant period to the respondents in support of their claim. Respondent in the finding portion of the Order-in-Original has agreed that the appellants have manufactured both dutiable and exempted products during June, 2005. Also agreed that the said credit was utilized after November, 2005 but argued that initially the credit was availed during November, 2003 to May, 204 during which no dutiable product was manufactured by the appellants. The case was sent for de novo adjudication with limited purpose of ascertaining the fact from ER-1 that the appellants are manufacturing dutiable and exempted products with the said capital goods. The clearance of both the type of goods is evidence from the ER-1 for the month of November, 2005 and December, 2005. Moreover the credit so availed in November 2003 to May 2004 was kept unutilized till November, 2005 and the same was utilized only after the said capital goods had been sued towards manufacture of dutiable goods.
8. I find that appellants have availed credit on capital goods which was intended to be used for manufacture of both dutiable and exempted goods. Initially the capital goods were used in the manufacture of exempted goods and after commencement of production of dutiable goods, the said capital goods were used for dutiable goods. Since the capital goods were used for manufacture of both dutiable and non-dutiable goods, in view of the case law 2004 (169) ELT 328, which was also relied upon in earlier Order-in-Appeal, the credit cannot be denied. 2.3 Being aggrieved, the Revenue is in appeal before this Tribunal.
3. The learned AR, Shri Ashutosh Nath for the appellant-Revenue states that learned Commissioner (Appeals) by relying on the ruling of this Tribunal in the case of Balaji Mills Ltd. 2004 (169) ELT 328 (Tri-Chennai) has grossly erred inasmuch as, the facts in the case of the assessee, the capital goods received in Nov. 2003 were exclusively used for the manufacture of exempted goods namely, Mango Slice till May, 2005. Thereafter, the said machinery was used for manufacture of dutiable goods and exempted goods i.e. in June, 2005, whereas in the case of Balaji Mills, the situation was that the capital goods were used both for manufacture of dutiable and exempted goods. Hence, the ruling of Balaji Mills Ltd. does not squarely apply in the facts of this case and stands distinguished in the subsequent order of the Tribunal in the case of KS Oils Ltd. 2007 (216) ELT 267 (Tri-Del), wherein it has been held that in case of Balaji Mills ltd, the Modvat credit cannot be denied to the assessee when the capital goods are used both for manufacture of dutiable and exempted goods. In the instant case, the assessee utilized the capital goods exclusively for manufacture of exempted final products during the material period. Thus, it is not a case where the capital goods were utilized for manufacture of both dutiable and exempted products. Thus the question for determination before this Tribunal is whether the respondent assessee in view of the fact that it manufacture exempted goods till May, 2005 is entitled to CENVAT Credit under the fact that the dutiable goods are manufactured from June, 05, relying on the ruling in the case of Commissioner of Central Excise Vs. Surya Roshni Ltd. 2004 (177) ELT 986 (Tri-Del), wherein it has been held that availability of Modvat credit on capital goods, to be looked into at the time of receipt of capital goods in factory premises of the appellant. Capital goods were used for manufacture of exempted products at the time of installation of the machinery and its subsequent use after one year or more in manufacture of final products chargeable to duty will not make assessee eligible for Modvat credit. The said ruling of the Tribunal was appealed by the assessee before the Apex Court, which was dismissed as not maintainable. Thus, the order of the Apex Court confirmed that the eligibility to avail Modvat credit should determined at the time of the goods received by the manufacturer and therefore, the subsequent usage for manufacture of assessable goods should not revive the question of admissibility of Modvat credit.
3.1 The Revenue further relies on the ruling in the case of Spenta International Ltd. Vs. Commissioner of Central Excise, Thane 2007 (216) ELT 133 (Tri-LB), wherein the question before the Tribunal was eligibility of credit for capital goods will be determined whether from the date of receipt of capital goods or from the date of its utilization. Rule 6(4) of the Cenvat Credit Rules, 2002 not permitting CENVAT Credit on capital goods used exclusively in manufacture of exempted goods, it was held that credit eligibility to be determined with reference to their dutiability of the final product on the date of receipt of the capital goods. Accordingly, he prays for allowing the appeal.
4. The learned Counsel for the respondent assessee opposes the appeal and states that the appeal is not maintainable as the matter has traveled to the Commissioner (Appeals) in the earlier round of litigation, who vide order dated 30.3.2011 was pleased to remand by holding as under: -
On a reference to the field, it has been reported that the subject capital goods were also being used for manufacture of Gatorade and Lipton Ice Tea, both dutiable goods.
The factual aspects need to be verified at a preliminary level with reference to ER-1 and other statutory records. The use of the capital goods in the manufacture of various products also needs to be verified.
In case it is found that the appellants have used the capital goods for manufacture of both dutiable and non-dutiable goods, CENVAT Credit cannot be denied. It is further submitted that the Commissioner (Appeals) in the earlier round had clearly held that the credit would be admissible if it is found that the capital goods have been used both for manufacture of dutiable as well as exempted goods. It is further submitted that Rule 6(4) of Cenvat Credit Rules will not be applicable in case where capital goods will be used in manufacturing dutiable goods during their economic life time. Since the word excisable used under Rule 6(4) means that no expansion and through out its life time. In the facts of the present case, as the capital goods have used for manufacture of both exempted and dutiable goods as per the findings recorded by the adjudicating authority. Therefore, the disability in Rule 6(4) is not applicable.
4.1 The learned Counsel further distinguishing the ruling in the case of Surya Roshni (supra), states, as the said decision deals with admissibility of CENVAT Credit of duty paid on capital goods installed which were used in the production of non-dutiable goods at the time of receipt of such capital goods. Subsequently the goods in question become dutiable and accordingly, Surya Roshni availed CENVAT Credit on such capital goods, which are not the facts obtaining in the case of the respondent assessee. In the respondent assessee case, it is the fact apparent on the face of record that it had served intimation dated 8.4.2004 received by the concerned Inspector on 23.4.2004, wherein the assessee informed that they have installed the new line (hot fill line) in their factory. The said line is capable to produce varieties of beverages in pet bottles. The proposed line was being set up to manufacture and fill beverages - both taxable and non-taxable. At the relevant date the assessee had undertaken trial run and there after started commercial production of slice a mango fruit pulp based drink falling under Chapter 2202.40 w.e.f. 7.4.2004. It was further stated in the intimation that the assessee will be using the newly installed production line for manufacture of excisable product, which shall be intimated in due course. The learned Counsel further stated that the ruling of the Tribunal in the case of KS Oils Ltd. (supra) is per incurium and cannot be relied upon since the same has been passed without taking into consideration the existing rulings on the date of decision. The respondent further relies on the Tribunals decision in the case of Balaji Mills Ltd. (supra) and prays for rejecting the appeal.
5. Having considered the rival contentions, I hold that the expression exclusively used also includes intention to use as provided under Rule 6(4) of the Cenvat Credit Rules. As the appellant had admittedly informed the Revenue at the time of commencement of production that it will utilize the said machinery installed for manufacture of both dutiable and non-dutiable products, it cannot be said that the said machinery is exclusively used for manufacture of the exempted goods. Capital goods in question have a life over several accounting years and as such the intention at the time of installation is also the relevant factor. For the temporary use for few months in manufacture of only exempted goods will not disable the assessee in availing the CENVAT Credit and utilizing the same for manufacture of dutiable goods. It is also an admitted fact that the CENVAT Credit so availed have been utilized only after Nov. 05 whereas the production of dutiable goods started admittedly in June, 05. Thus, I hold that the respondent assessee is entitled to CENVAT Credit on the capital goods in question. The appeal of the Revenue is dismissed. The respondent assessee will be entitled to consequential relief, if any.
(Pronounced in Court on .) (Anil Choudhary) Member (Judicial) Sinha 1