Custom, Excise & Service Tax Tribunal
Apollo Tyres Ltd vs Calicut on 21 May, 2025
Central Excise Appeal Nos.21930,
21932, 21936-21938/2015,
20992 and 21139/2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Central Excise Appeal No. 21930 of 2015
(Arising out of Order-in-Original No.CAL-EXCUS-000-COM-007-
2015-16 dated 04.06.2015 passed by Commissioner of Central
Excise, Customs & Service Tax, Calicut Commissionerate).
M/s. Apollo Tyres Limited
Perambra,
Thrissur District - 680 689
Kerala . .......... Appellant
VERSUS
The Commissioner of Central Excise
Custom & Service Tax,
Calicut Commissionerate,
Central Revenue Building,
Mananchira,
Calicut-673 001,
Kerala. ....... Respondent
WITH i. Central Excise Appeal No. 21932 of 2015 (M/s. Apollo Tyres Limited Vs. Commissioner of Central Excise, Customs and Service Tax, Calicut).
(Arising out of Order-in-Original No.CAL-EXCUS-000-COM-003- 2015-16 dated 04.06.2015 passed by Commissioner of Central Excise, Customs & Service Tax, Calicut Commissionerate).
ii. Central Excise Appeal No. 21936 of 2015 (M/s. Apollo Tyres Limited Vs. Commissioner of Central Excise, Customs and Service Tax, Calicut).
(Arising out of Order-in-Original No.CAL-EXCUS-000-COM-006- 2015-16 dated 04.06.2015 passed by Commissioner of Central Excise, Customs & Service Tax, Calicut Commissionerate).
iii. Central Excise Appeal No. 21937 of 2015 (M/s. Apollo Tyres Limited Vs. Commissioner of Central Excise, Customs and Service Tax, Calicut).
(Arising out of Order-in-Original No.CAL-EXCUS-000-COM-005- 2015-16 dated 04.06.2015 passed by Commissioner of Central Excise, Customs & Service Tax, Calicut Commissionerate).
Page 1 of 15Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 iv. Central Excise Appeal No. 21938 of 2015 (M/s. Apollo Tyres Limited Vs. Commissioner of Central Excise, Customs and Service Tax, Calicut).
(Arising out of Order-in-Original No.CAL-EXCUS-000-COM-004-2015- 16 dated 04.06.2015 passed by Commissioner of Central Excise, Customs & Service Tax, Calicut Commissionerate).
v. Central Excise Appeal No. 20992 of 2016 (M/s. Apollo Tyres Limited Vs. Commissioner of Central Excise, Customs and Service Tax, Calicut).
(Arising out of Order-in-Original No.CAL-EXCUS-000-COM-078-2015- 16 dated 29.03.2016 passed by Commissioner of Central Excise, Customs & Service Tax, Calicut Commissionerate).
vi. Central Excise Appeal No. 21139 of 2016 (Commissioner of Central Excise, Customs and Service Tax, Calicut Vs. M/s. Apollo Tyres Limited).
(Arising out of Order-in-Original No.CAL-EXCUS-000-COM-078-2015- 16 dated 29.03.2016 passed by Commissioner of Central Excise, Customs & Service Tax, Calicut Commissionerate).
Appearance:
Mr. Joseph Kodianthara, Senior Advocate for the Assessee Shri P. Saravana Perumal, Addl. Commissioner Shri M.A. Jithendra, Assistant Commissioner, Authorised Representatives for the Revenue.
CORAM:
HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Final Order Nos. 20696 - 20702 / 2025 DATE OF HEARING: 25.11.2024 DATE OF DECISION: 21.05.2025 Per : D.M. MISRA These six appeals are filed against respective orders passed by the Commissioner of Central Excise (Appeals), Calicut Commissionerate and one appeal is filed by the Revenue. Since all these appeals involve common issues, they are taken up together for hearing and disposal.Page 2 of 15
Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016
2. Briefly stated the facts of the case are that the appellants were issued show-cause notices from time to time during the period from April 2011 to December 2014 alleging wrong availment of cenvat credit of duty paid on tubes and flaps cleared along with tyres manufactured by them and also credit of service tax availed on procuring the said tubes and flaps cleared later along with tyres;
consequently, demand notices were issued for recovery of the said credit totalling to Rs.45,35,52,712/- for the aforesaid period along with interest and penalty. The details of the appeals filed by the appellant-assessee and Revenue are tabulated below:
Sl. Appeal No. OIO/OIA Period Duty
No. demanded
(in rupees)
1 E/21932/2015 No.CAL-EXCUS-000- April 2011 to 5,35,31,904
COM-003-2015-16 September 2011
dated 04.06.2015
2 E/21938/2015 No.CAL-EXCUS-000- October 2011 to 5,67,24,796
COM-004-2015-16 March 2012
dated 04.06.2015
3 E/21937/2015 No.CAL-EXCUS-000- April 2012 to 6,20,42,868
COM-005-2015-16 September 2012
dated 04.06.2015
4 E/21936/2015 No.CAL-EXCUS-000- October 2012 to 4,67,76,213
COM-006-2015-16 March 2013
dated 04.06.2015
5 E/21930/2015 No.CAL-EXCUS-000- April 2013 to 23,39,84,531
COM-007-2015-16 February 2014
dated 04.06.2015
6 E/20992/2016 No.CAL-EXCUS-000- March 2014 to 4,92,400
COM-078-2015-16 December 2014
dated 29.03.2016
7 E/21139/2016 No.CAL-EXCUS-000- CCE vs. M/s. Apollo Filed by
COM-078-2015-16 Tyres Ltd. Revenue
dated 29.03.2016
3. In the impugned order dated 04.06.2015, the learned
Commissioner confirmed the demands of Rs.23,39,84,531/- for the period 01.04.2013 to 28.02.2014 along with interest and penalty (Appeals No. E/21930/2015); whereas in the subsequent order dated 29.03.2016 for the period March 2014 to December 2014 (Appeal No. E/20992/2016) against the demand of Rs.20,21,98,864/-, the learned Commissioner has denied credit of Rs.4,92,400/-; hence present appeals.
Page 3 of 15Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016
4. At the outset, the learned Senior Counsel for the appellant has submitted that appellants are engaged in the manufacture of tyres. The present dispute relates to whether duty paid tubes and flaps received at the appellant's factory and cleared along with manufactured tyres be considered as 'inputs' and eligible to cenvat credit for the period after 01.04.2011. He has submitted that for the period from 01.04.2011 to 31.11.2013, the issue of admissibility of cenvat credit on tubes and flaps relates to clearances to Original Equipment Manufacturers (OEM) based on separate purchase orders issued by OEMs for tyre, tubes and flaps and correspondingly, separate invoices were raised by the appellant for sale of manufactured tyres, tubes and flaps. It is his contention that even though separate invoices were raised at the time of clearance of manufactured tyres with tubes and flaps, they have substantially complied with the amended definition of 'input' under Rule 2(k) of Cenvat Credit Rules, 2004 made effective from 01.04.2011. He has submitted that in the case of 5 appeals involving the period from April 2011 to February 2014 (Appeal No. E/21932/2015; E/21938/2015; E/21937/2015; E/21936/2015; and E/21930/2015), the learned Commissioner has confirmed the demand raised in each of the show- cause notices along with interest and imposed penalty. However, the Commissioner for the period from March 2014 to December 2014 involved in Appeal No.E/20992/2016 even though held that tubes and flaps are not inputs by accepting the Chartered Accountant's certificate certifying that duty paid on tubes and flaps cleared along with manufactured tyres, held that it would involve double demand, hence, dropped the demand of Rs.20,21,98,864/- and confirmed only Rs.4,92,400/-. It is contended that even though the issue involved in both the impugned orders are substantially same, the Commissioner in one case reduced the demand drastically acknowledging the payment of duty on tubes and flaps cleared along with manufactured tyres; in the other case confirmed the entire demand.
Page 4 of 15Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 4.1 It is his further contention that the present dispute dates back to the year 2003 and the issue raised by the Department is contrary to the stand taken by the Calicut Commissionerate accepting that tubes and flaps are inputs and treated subsequent clearances of the same along with tyres 'as such clearances' and examined whether the duty paid on the transaction value was less than the credit taken at the time of receipt of tubes and flaps at the factory; accordingly, differential duty was demanded. No appeal was filed by the Department against the finding that tubes and flaps are inputs and allowed the benefit of cenvat credit. Further, the appellant went in appeal before the Tribunal against the confirmation of differential duty which was allowed by order dated 26.08.2009. Against the said order of the Tribunal, the Department filed appeal before the Hon'ble High Court of Kerala which led to the judgment dated 17.08.2010 setting aside the order of the Tribunal and holding that purchase and resale of tubes and flaps do not entitle appellant to claim cenvat credit being in the nature of trading. Against the said order of Hon'ble High Court, appellant preferred SLP before Hon'ble Supreme Court and by Interim Order dated 8.11.2011, the Hon'ble Supreme Court stayed the operation of the observation of the Hon'ble Kerala High Court that the appellant is not entitled to claim cenvat credit for purchase and resale of tubes and flaps and the matter is still pending before the Hon'ble Supreme Court. With regard to the appellant's factory at Kochi, show- cause notice was issued which was contrary and inconsistence to the view taken earlier and alleged that tubes and flaps are not eligible to cenvat credit. Against the confirmation of the demand, the appellant approached the Tribunal and their appeal was allowed by order dated 28.03.2014 taking note of the interim stay granted by the Hon'ble Supreme Court.
4.2 The learned Sr. Advocate has further submitted that the value of tubes and flaps stood included in the value of tyres which ought to be categorized as 'input' under Rule 2(k) of CCR, 2004. In any event, even if the appellant has treated tubes and flaps as inputs and discharged duty on the same at the time of clearance along with Page 5 of 15 Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 manufactured tyres, the appellants are eligible to avail cenvat credit on tubes and flaps as held by the Hon'ble High Court and Tribunal in a series of cases. In the order dated 29.03.2016 though the adjudicating authority observed that credit taken on tubes and flaps to the tune of Rs.20,21,98,864/- is inadmissible, however, confirmed duty only to the extent of Rs.4,92,400/- holding that the appellant had discharged duty more than the credit availed on the inputs at the time of its clearance from the factory along with tyres. However, this benefit has not been extended in the other 5 appeals for the period April 2011 to February 2014 despite production of certificate, statements and evidence of payment of duty at the time of clearance of tubes and flaps along with manufactured tyres before adjudicating authority.
5. Per contra, the learned Authorized Representative (AR) for the Revenue has reiterated the findings of the learned Commissioner in the impugned order dated 29.03.2016. The learned AR referring to the judgment of the Hon'ble Kerala High Court extensively has submitted that the tubes and flaps cleared along with the manufactured tyres cannot be considered as an accessory, hence the appellants are ineligible to cenvat credit as held in both the orders passed by the Commissioners. Further, reiterating the grounds of appeal filed by the Revenue against order dated 29.03.2016, the learned AR for the Revenue has submitted that the learned adjudicating authority has committed a grave error that the cenvat credit liability has been discharged when the appellant had paid the service tax on the tubes and flaps cleared from the factory along with manufactured tyres, while the CBEC Circular dated 26.07.2007 clearly held that if the process does not amounts to manufacture, duty is not required to be paid and hence, no cenvat credit of duty paid on inputs is admissible.
6. Heard both sides and perused the records.
7. The short issue involved in the present appeals for consideration is whether the appellants are entitled to avail cenvat credit of the duty paid on tubes and flaps received in their factory and cleared along with Page 6 of 15 Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 manufactured tyres during the period 01.04.2011 to 31.12.2014; also credit of service tax paid for inward transportation of tubes and flaps as input services.
8. Undisputed facts are that appellants are engaged in the manufacture of tyres at their various units all over India. The present dispute relates to the factory at Trissur. The appellants cleared the manufactured tyres to OEM as well as for replacement market during the relevant period. In both the cases, the tubes and flaps are cleared along with the manufactured tyres as a set. In the case of clearances to OEM, the tube is first inserted in the tyre, then the flap is placed on the tube, then the tube is slightly inflated so as to directly be fitted into the vehicle by the OEM. The tyre is tied with carry strap at three or four places so as to hold the tubes and flaps inside. Thus, the tubes and flaps are also protected during transportation. It is also not in dispute that in appellant's own case for earlier period i.e., prior to 01.04.2011, this Tribunal following the precedent in the case of Balakrishna Industries Ltd. vs. CCE, Jaipur: 2007 (217) ELT 228 (Tri.-Del.) held that the tubes and flaps cleared as a set of packing along with the manufactured tyres is an 'accessory', hence, appellant is entitled to take credit of duty paid on tubes and flaps; when value of tubes and flaps are included in the assessable value of "set packs / tyres". When the judgment of the Tribunal was carried before the Hon'ble High Court at Kerala, the Hon'ble Kerala High Court has held that tubes and flaps are accessories in the hands of the user; whereas the appellant is engaged in the activity of trading of tubes and flaps, therefore, not entitled to avail credit on tubes and flaps. The Hon'ble Supreme Court stayed the observation of the Hon'ble High Court of Kerala to the extent of holding that appellants are not eligible to the benefit of cenvat credit at all on tubes and flaps received and cleared from their factory along with manufactured tyres. Taking note of the order of the Hon'ble Supreme Court interim stay on the observation of the Hon'ble Kerala High Court, this Tribunal for the period prior to 01.04.2011 vide Final Order dated 28.3.2016 held that appellants are entitled to cenvat credit on tubes and flaps sold along with tyres.
Page 7 of 15Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 However, the present set of demands relate to amended definition of inputs with effect from 01.04.2011.
9. The learned Commissioner, in the impugned order referring to the observation of the Hon'ble Kerala High Court and the dictionary definition of 'accessory', recorded a finding that the tubes and flaps cannot be considered an accessory, hence not eligible to cevnat credit for the period after 01.04.2011.
10. Before analysing the issues raised, it is necessary to reproduce the definition of 'input' before and after 01.04.2011.
Definition of 'input' prior to 01.04.2011
(k) "input" means
(i) all goods, except light diesel oil, 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 as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;
Explanation 1. The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;
Definition of 'input' after 01.04.2011
(k) "input" means-
Page 8 of 15Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016
(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 for captive use; or (iv) all goods used for providing any output service; but excludes-
(A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol;
(B) any goods used for -
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a works contractor construction service as listed under clause (b) of section 66E of the Act; (C) capital goods except when used as parts or components in the manufacture of a final product;
(D) motor vehicles;
(E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; 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;)
11. A plain reading of the amended provisions, it is clear that any goods including accessory cleared along with final product and the Page 9 of 15 Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 value of which is included in the value of the final product, be considered as an input. In the present case, there is no dispute that when the goods are cleared to OEM for the period after 01.04.2011, separate invoices were raised in accordance with the purchase orders placed by OEM on the appellant for tubes and flaps; and separate invoice for tyres without including the value of tubes and flaps in the assessable value of tyres. It is the claim of the learned Senior Advocate for the appellant that this practice continued till 31.03.2013; whereas, in the impugned order dated 29.03.2016, the learned Commissioner referring to the invoice dated 01.03.2014 at para 6(iii) of the order recorded that the practice of raising separate invoices for tyres, tubes and flaps continued throughout the period.
"06(iii) In the case of clearance to the OEM segment, the Noticee has continued the practice of issuing three separate invoices. Now, I would like to take two sets of 3 invoices wherein the tyres, tubes and flaps are cleared to demonstrate a clear picture:
Invoice Consignee Item Chapter Qty. Purchase Order Vender No. Date Cleared Heading (nos) No. Date Code SET I 213112019 01.03.2014 Ashok Leyland Ltd. Tyre 4011 20 90 60 5010100649 05.11.2012 7200612 213112020 01.03.2014 Ashok Leyland Ltd. Tube 4013 10 20 60 5010100650 05.11.2012 7200612 213112021 01.03.2014 Ashok Leyland Ltd. Flap 4012 90 49 60 1044 SET II 214115647 30.09.2014 Tata Motors Ltd. Tyre 4011 20 90 123 3510068501 01.02.2007 AO6120 214115648 30.09.2014 Tata Motors Ltd. Tube 4013 10 20 123 3510068499 01.02.2007 AO6120 214115649 30.09.2014 Tata Motors Ltd. Flap 4012 90 49 123 3510068498 21.04.2014 AO6120 For a particular 'Set' of Tyres, Tubes and Flaps, there are 3 different invoices, clearing three different items falling under three different chapter headings and the three different goods have separate purchase orders and also separate valuation/pricing. The items are cleared in one transport but under separate invoices."
12. However, the learned Commissioner, in case of clearances to replacement segment, has observed that the value of tubes and flaps are included in the assessable value of tyres and in the relevant invoices it is reflected as "value inclusive of the value of the parts viz., tubes and flaps fitted with tyres". From the observation of the learned Commissioner, we find that even though he has recorded that the value of the tubes and flaps in case of replacement market are included in the assessable value of tyres, however, held that the Page 10 of 15 Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 appellants are not eligible to cenvat credit on tubes and flaps, even though the clearances were made to replacement market. In arriving at the said conclusion, the learned Commissioner has considered only the separate invoices raised by the appellant while clearing the flaps and tubes along with the manufactured tyres of OEM during the said period, and also referred to the precedents for the period prior to 01.04.2011 without applying the statutory meaning of 'input' under the amended provision
13. As mentioned above, a plain reading of the amended definition of 'input' makes it clear that any goods including accessory when cleared along with final product and the value thereof, included in the assessable value of the final product, such included value of accessory be considered as an input under Rule 2(k) of CCR, 2004. In the present case, undoubtedly in the case of clearances made to replacement market, where the assessable value of manufactured tyres includes the value of tubes and flaps, cenvat credit cannot be denied on tubes and flaps as it satisfies the definition of 'input' but when separate invoices are raised for manufactured tyres and for the purchased items viz., tubes and flaps, while clearing as per the purchase order raised by respective OEM, we are of the view that the Commissioner is right in holding that the tubes and flaps in such cases cannot be considered as an 'input', as the same does not satisfy the amended definition of 'input' effective from 01.04.2011. However, on the issue of confirmation of demand on the cenvat credit of tubes and flaps even though when they were cleared along with manufactured tyres on payment of duty, we find that the learned Commissioner in the order dated 29.03.2016 following the decision of the Tribunal and High Courts recorded as follows:
"12(i) It has been argued that there was no question of recovery of credit when the duty was again paid on the value of tubes and flaps while clearing the same along with tyres. In this regard, they have relied upon the decision of the CESTAT, Bangalore in their own case, i.e., Final Orders 20422-20424/2014 dated 28.03.2014, in appeals no. 8/263, 264 & 265/2009-DB On perusal of the said order it is seen that the appellant at Page 11 of 15 Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 Para 4 had contended that "Cenvat Credit reversal could not have been required in view of the fact that in all the cases of such clearances of tubes and flaps, value adopted for tubes and flaps are higher than the purchase value and therefore, Cenvat Credit availed was always less than the difference payable anal therefore, it can be said that entire amount of Cenvat Credit required to be reversed in the show-cause notice and in the order-in-original have already been paid at the time of clearance of the tubes and flaps with tyres". The Hon'ble Tribunal considered this contention and at Para 6 it has been held that "We have also found that the appellant's clam of reversal of Cenvat credit availed on the tubes and flaps also is valid".
12(ii) To my mind, there is considerable force in such contention. It is not in dispute that the Noticee cleared the inputs on payment of duty, albeit wrongly. Since no manufacturing activity was undertaken, question of collection of excise did not arise. However, since cenvat credit had been availed on the impugned goods as inputs, although wrongly, while clearing such goods, the Noticee had to follow the procedure laid down in Rule 3(5) of the Cenvat Credit Rules, 2004, Such rules required that on clearance of goods on "as such basis, the Noticee should have paid an amount equal to the credit availed in respect of such inputs and that such removal should have been made under the cover of an invoice referred to in Rule 9 ibid. Rule 9 of the Cenvat Credit Rules, 2004 provides that cenvat credit can also be taken by a manufacturer on the basis on an invoices issued by a manufacturer for clearance of inputs as such. It is not in dispute that the Noticee discharged duty liability on the activity undertaken by him by treating it as "manufacture" and the payment of duty so made was more than the amount of credit taken on the various inputs, except in the case of sale of Flaps to the OEM segment and also no duty was paid on export. In this regard, I would like to draw attention to the decision of the Hon'ble Apex Court in the case of C.C.E. & C, Vadodara u. Narmada Chematur Pharmaceuticals Ltd., 2005 (179) ELT 276 (S.C.) and CCE v. Creative Enterprises 2009 (243) E.L.T. (A-120/121) (S.C.) and the decisions of the Hon'ble Tribunal in the case of Ajinkya Enterprises V. CCE, Pune 2009 (243) E.LT. 566 (Tn. Mum.) and Perfo Chem (1) Put. Ltd. Vs. CCE Belapur 2015 (315) ELT 237 (T-Mum.). In all these decisions also on identical issue the Hon'ble Apex Court and the Hon'ble Tribunal held that even if the activity undertaken by the appellant Page 12 of 15 Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 did not amount to manufacture but if the duty liability had been discharged treating the activities as manufacture and such duty payment is equivalent to or more than the credit taken, the same would amount to non-availment of credit and consequently. no reversal of credit was required to be made. I would also like to draw attention to the decision in the case of Stumpp Scheule & Somappa Ltd. v. CCE, Bangalore - 2005 (191) E.LT. 1085 (Tri-Bang.) wherein at Para 6 it was held that:
'6. For purpose of disposal of these appeals, it is sufficient to refer to one the judgment on this point by the Delhi Bench of CESTAT in the case of CCE, Indore MP Telelinks Ltd. 2004 (178) ELT. 167 (Tri-Delj. It has been held by the Tribunal that if the department levies and collects Central Excise Duty on the goods cleared from the factory, they cannot claim for the purpose of allowing the Cenvat credit that the process of manufacture had not taken place". It has been further held that the process of manufacture had not taken place, the question of duty would not arise On this very issue of availing Modvat credit on the inputs on which no process has taken place amounting to manufacture, the Tribunal has held that credit has been utilised in removing the inputs as such under provisions of Rule 57AB(IC) of the Act. it is held that after knowing all the points that in whatever manner the issue is looked into, it is completely Revenue neutral and therefore, the Revenue appeal on this point was rejected. We are of the considered opinion that there is no legality in the appellants utilising Modvat credit solely on the ground that drawing of wire from wire rods did not amount to a process of manufacture, while utilising the credit for the manufacture of final product in each of the noted case.' Therefore, in view of the decision of the Hon'ble Apex Court and the Tribunals cited above, I hold that since the amount of duty paid is more than the credit taken, a situation of revenue neutrality arises and the payment of the duty tantamounts to reversal of credit. Therefore, the Noticee is not required to make any payments towards credit taken in such cases where the duty paid is more than the credit taken."
14. We do not find any error in the reasoning of the learned Commissioner in holding that once duty has been paid on tubes and flaps cleared along with manufactured tyre considering the process as Page 13 of 15 Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016 manufacture, even if later it has been found that the process does not amount to manufacture, cenvat credit cannot be denied in view of the judgment of this Tribunal in the case of Ajinkya Enterprises vs. Commissioner of Central Excise, Pune-III: 2013 (288) ELT 247 (Tri.-Mum.), which was affirmed by Hon'ble High Court of Bombay in Commissioner of Central Excise, Pune-III vs. Ajinkya Enterprises: 2013 (294) ELT 203 (Bom.-HC). It was latter followed by this Tribunal in series of decisions and endorsed by the Hon'ble Karnataka High Court in the case of CCE vs. Vishal Precision Steel Tubes and Strips Ltd.: 2017 (349) ELT 686 (Kar.).
Therefore, the learned Commissioner has rightly allowed the benefit and reduced the demand in case of Appeal No. E/20992/2016. Appeal No. E/21139/2016 filed by the Revenue challenging the said action of the learned Commissioner, in our opinion, is devoid of merit. Hence, liable to be rejected.
15. In case of the other five appeals pertaining to Order-in-Original No. CAL-EXCUS-000-COM-003 to 007-2015-16 dated 04.06.2015, the learned Commissioner failed to consider the principle that once the duty has been collected considering the process as amounting to manufacture, cenvat credit cannot be denied on the inputs used in the process of manufacture. Therefore, confirming the demand of credit availed on duty paid inputs viz., tubes and flaps cannot be sustained. However, the matter needs to be remanded to the adjudicating authority to compute appropriate amount payable by the appellant by applying the principle followed by the learned Commissioner in Appeal No. E/20992/2016.
16. In so far as the cenvat credit on service tax paid in bringing the input viz., tubes and flaps during the relevant period is concerned, the matters are remanded to the adjudicating authority to recalculate the admissibility of service tax credit by applying the principle discussed above in determining whether the tubes and flaps be considered as 'input' or otherwise.
Page 14 of 15Central Excise Appeal Nos.21930, 21932, 21936-21938/2015, 20992 and 21139/2016
17. On the issue of imposition of penalty on the appellant, we find that the Tribunal has consistently in their own case allowed the benefit of the credit availed on tubes and flaps prior to 01.04.2011 and therefore, imposition of penalty post-amendment to the definition of 'input' for the period after 01.04.2011 which involves interpretation of law, is unwarranted, hence, set aside.
18. To sum up,
(i) Revenue's appeal No. E/21139/2016 is rejected.
(ii) For computation of admissible service tax credit, appeals are remanded to the adjudicating authority.
(iii) Appeal Nos. E/21932/2015; E/21938/2015; E/21937/2015;
E/21936/2015 and E/21930/2015 are remanded to the adjudicating authority to re-compute liability taking into consideration the duty paid at the time of clearance of tubes and flaps along with manufactured tyres in accordance with observation in Order-in-Original dated 29.03.2016 in appeal No.E/20992/2016.
(iv) Penalty in all the assessee's appeals is set aside.
19. Appeals are disposed of accordingly.
(Order pronounced in open court on 21.05.2025.) (D.M. MISRA) Member (Judicial) (R. BHAGYA DEVI) Member (Technical) rv Page 15 of 15