Custom, Excise & Service Tax Tribunal
M/S. Indira Sahakari Soot Girni ... vs Commissioner Of Central Exicse & ... on 5 October, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/124/97 [Arising out of Order-in- Appeal No. A/380/96 dated 14-10-1996 passed by the Commissioner (Appeals), Central Excise, Pune] 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 :
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. Indira Sahakari Soot Girni Maryadit
:
Appellant
VS
Commissioner of Central Exicse & Customs. Aurangabad
:
Respondent
Appearance
Shri. H.S. Shirsat, Consultant for the Appellants
Shri. Ashutosh Nath, Asstt. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr Ramesh Nair, Member(Judicial)
Honble Mr. C.J. Mathew, Member(Technical)
Date of hearing: 5/10/2016
Date of decision: 25/1/2017
ORDER NO.
Per: Ramesh Nair
The fact of the case is that appellant has availed the Cenvat credit amounting to Rs. 6,10,348/- on the Capital goods. The appellant is manufacturing intermediate goods such as silver which was further used in the manufacture of final product i.e. Cotton yarn which was cleared on payment of duty. The adjudicating authority denied the Cenvat credit on the capital goods on the ground that credit on capital goods is not available if it is used in the manufacture of finished excisable goods other than the goods specified in the annexure given under Rule 57Q of Central Excise Rules, 1945. One of the goods specified is appellants intermediate goods silver falling under Chapter 52.02, it was contended that since the capital goods was used in the manufacture of goods specified in the annexure to Rule 57Q the credit is not admissible. It was further contended that the said intermediate goods was excluded from the negative list given in the annexure vide notification no.60/94-CE(NT) dated 21-10-1994 therefore before this amendment credit on capital goods used in the manufacture of exempted goods as specified in annexure to the Rule 57Q was not admissible. Being aggrieved by the Order-in-Original dated 5-2-1996, the appellant filed appeal before the Commissioner(Appeals) which came to be rejected by upholding the Order-in-Original therefore the appellant is before us.
2. Shri. H.S. Shirsat, Ld. Consultant appearing on behalf of the appellant submits that Notification No. 60/94-CE(NT) dated 21-10-1994 is clarificatory in nature therefore the credit on the capital goods even if used for manufacture of exempted silver, cotton carded credit is admissible even prior to amendment also. He further submits that the goods silver cotton carded are intermediate goods and not finished goods which was further used in the cotton yarn and the same was cleared on payment of duty therefore as per provision under Rule 57Q finished goods is dutiable excisable goods and does not fall under exclusion category specified in the annexure of Rule 57Q, therefore credit is admissible. He further submits that demand is time bar as the show cause notice was issued after six months from the relevant date as there is no suppression of facts on the part of the appellant.
3. On the other hand, Shri. Ashutosh Nath, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that there is no dispute that capital goods on which credit was taken was used in the manufacture of silver cotton carded which exempted goods and in the exclusion list given annexure to the Rule 57Q, therefore the credit not admissible.
5. We have carefully considered submissions made by both sides.
6. We find that credit on capital goods was denied by holding that the capital goods is used for cotton carded, silver which falls under chapter 52.02 and is not excisable therefore as per annexure Rule 57Q capital goods used in the manufacture of such finished good is not eligible for the modvat credit. We find that the goods i.e cotton carded/silver manufactured by the appellant are intermediate product and not finished excisable goods. This intermediate goods were further used in the manufacture of cotton yarn which is excisable and cleared on payment of duty therefore the capital goods has been used in the part of process of manufacture of cotton yarn which is finished excisable goods and cleared on payment of duty, therefore in our view it cannot be said that capital goods were not used in the manufacture of excisable cotton yarn but it is used for intermediate goods. For the purpose of eligibility of modvat credit on capital goods excisability of the finished goods has to be considered and not of intermediate goods. Intermediate goods may or may not be excisable but if the final product is dutiable and does not fall under exclusion category, the credit of capital goods cannot be denied. This very same issue has been considered by the Honble Madras High Court in case of Commissioner of C. Ex. Tirunelveli Vs Sudarsanam Spinning Mills Ltd[2012(275) ELT 430(Mad)], wherein court passed following order:
In this civil miscellaneous appeal, the following substantial question of law was framed for consideration :-
Whether the CESTAT is correct in allowing Modvat credit of duty paid on capital goods/spares namely carding and combing machines producing final products namely Sliver/combed/carded cotton falling under Ch. 52.02 are eligible capital goods, when this heading remained specifically excluded from the purview of capital goods under erstwhile Rule 57Q as it stood during the material time, by overriding the legal provisions.
2.?Mr. P. Mahadevan, learned counsel for the appellant submitted that the authorities had failed to see that Cotton Carded or Combed falling under Chapter 52.02 is manufactured by carding and combing machinery and as per Rule 57Q as it existed at that time, carding and combing machinery could not be considered as capital goods for the period from 1-3-1994 to 20-10-1994 because the goods falling under the Heading 52.02 remained excluded from the list of eligible final products. Learned counsel therefore submitted that this question has to be answered in favour of the revenue.
3.?All the authorities found on facts that Sliver has no independent existence and has a transient character and therefore the processed cotton falling under Heading 52.02 during manufacture of cotton yarn are incomplete excisable goods and cannot be qualified as final products to deny MODVAT credit invoking Rule 57Q. The final product viz., cotton yarn was cleared on payment of duty. Thus carded/combed cotton/sliver came into existence at an intermediate stage. The Tribunal and the other authorities rightly held that the goods in question were not marketable and relying on the Circular No. 665/56/2002-CX., dated 25-9-2002 held that CENVAT Credit should not be denied on the capital goods used in manufacture of intermediate product exempt from payment of duty which are used captively in the manufacture of finished goods chargeable to duty held that MODVAT credit of duty paid on the capital goods cannot be denied.
4.?We find that in a writ petition filed before the Delhi High Court in Modi Carpets Limited v. Union of India [1997 (91) E.L.T. 285], the Division Bench had considered the nature of Sliver on the basis of expert reports and held as follows :-
Sliver obtained in the Petitioners factory as described above cannot be brought and sold in the market and is not a commodity which is know in the trade.
5.?The Supreme Court declined to grant leave [1996 (81) E.L.T. A47 (S.C.)] against the judgment of the Delhi Court in Modi Carpets Limited case [1997 (91) E.L.T. 285]. They also relied on Bhor Industries Ltd. v. Collector of Central Excise [1989 (40) E.L.T. 280], where it was held as follows :-
Therefore, it is necessary, in a case like this, to find out whether there are goods, that is to say, articles as known in the market as separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the Schedule. Simply because a certain article falls within the Schedule it would not be dutiable under excise law if the said article is not goods known to the market. Marketability, therefore, is an essential ingredient in order to be dutiable under the Schedule to Central Excise Tariff Act, 1985. ? ??????????????????(emphasis supplied) and the decision of the Supreme Court in Collector of Central Excise v. Ambalal Sarabhai Enterprises [1989 (43) E.L.T. 214], where the Supreme Court emphasised the requirement for any product to be called goods it must be something which can ordinarily come to the market to be brought and sold and is known to the market.
6.?In both the judgments viz., judgment of the Division Bench of the Delhi High Court Modi Carpets Limited v. Union of India - [1997 (91) E.L.T. 285], and the judgment of the learned Single Judge of the Bombay High Court [1992 (61) E.L.T. 566] (Gokalchand Rattanchand Woollen Mills Pvt. Ltd. v. U.O.I), we find a graphic description of the nature of Sliver and we think it might be useful to extract this :-
...........This sliver is very brittle in nature and is liable to fall apart by handling. It also get entangled if it is not handled gently, thus becoming unsuitable for spinning. If the Sliver falls apart or gets entangled, it becomes unfit for spinning and cannot be fed into ring frames for spinning. Moreover, it is important to maintain humidity condition in the spinning Section and the Sliver is not allowed to dry. If the moisture content is lost, Sliver dries and the fibre strands fall apart and collapse and become unfit for spinning. Sliver cannot be packed and transported in view of its non-cohesive and brittle nature. Any form of packing entailing even the slightest pressure would entangle the fibre and render it unfit for spinning. Upon such entanglement, it would cease to be Sliver. Because of the very nature of the Sliver, its non-cohesive and brittle property as described above, Sliver obtained in the Petitioners factory as described above cannot be brought and sold in the market and is not a commodity which is known in the trade.
7.?In view of the aforesaid reasons, the substantial question of law are answered against the revenue and the civil miscellaneous appeal is dismissed.
The similar issue was further considered by the this Tribunal in case of Commissioner of Vs. Narasus Spinning Mills[2005(128) ECR 187(Tri. Chennai)] and in case of Thuran Spining Mills Vs. Commissioner[2004(61) RLT 915(Cestat Che)] The Tribunal held that the Cenvat credit on capital goods used for producing silver cotton carded falling under chapter 52.02 is admissible under Rule 57Q. Both the above decisions of the Tribunal were upheld by the Honble Madras High Court reported as [2016(334) ELT A163(Mad.)] and 2016(335) ELT A76(Mad)].
7. As per above consistent decisions on the very same issue, the appellant is entitle for the credit on the capital goods used for manufacture of intermediate goods i.e. silver, cotton carded which was further used in the manufacture of dutiable cotton yarn. As per the above settled legal position, impugned order is set aside. Appeal is allowed.
(Pronounced in Court on ____________________ ) C.J. Mathew Member (Technical) Ramesh Nair Member (Judicial) sk 2 E/124/97