Custom, Excise & Service Tax Tribunal
M/S J B Mangharam Foods Pvt. Ltd vs C.C.E. Indore on 9 November, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. E/3357/2010-[SM]
[Arising out of Order-In-Appeal No. IND/264/2010 dated 14.09.2010 passed by CCE Indore]
For approval and signature:
Honble Mr. S.K. Mohanty, Member (Judicial)
1
Whether Press Reporters may be allowed to see 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 of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s J B Mangharam Foods Pvt. Ltd. Appellant(s)
Vs.
C.C.E. Indore Respondent(s)
Appearance:
Mr. R. Krishnan (Advocate) for the Appellant Mr. M.R. Sharma (DR) for the Respondent CORAM:
Honble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing/ Decision. 09.11.2016 Final Order No. 55890 /2016 Per S. K. Mohanty:
This appeal is directed against the impugned order dated 10.09.2010 passed by the Commissioner (Appeals), Central Excise and Customs, Indore.
2. Brief facts of the case are that the appellant is engaged in the manufacture of Biscuits, falling under Chapter 19 of the Central Excise Tariff Act, 1985. During the course of Audit of records of the appellant for the period 2007-2008 and 2008-2009, the Central Excise officers observed that miscellaneous income towards sale of waste and scrap had been shown in the balance sheet for the respective years. Since the appellant avails cenvat credit on inputs and capital goods used in or in relation to manufacture of the final product, the department proceeded against the appellant for recovery of the cenvat credit, treating the removal of miscellaneous waste and scrap as cenvatable goods. The SCN issued by the department was adjudicated vide order dated 12.03.2010, confirming the Central Excise duty demand of Rs. 2,36,693/- along with interest and also equal amount of penalty was imposed on the appellant. In appeal, the Ld. Commissioner (Appeals) has upheld the adjudged demand. Hence, the present appeal is before the Tribunal.
3. Sh. R. Krishnan, the Ld. Advocate appearing for the appellant submits that the waste an scrap removed from the factory were broadly classified under four categories namely, waste packing material, wooden scrap/ plastic scrap, oily cotton canvas, Misc. items such as, wooden doors, windows, iron rods, angles, sheet bolts and nuts and MS aluminum scrap, SS steel Scrap. With regard to waste packing material, the Ld. Advocate submits that the appellant procured inputs in the packing material and after removal of inputs, the packing material were removed as scrap, on which no cenvat credit is required to be reversed in view of the judgment of Honble Supreme Court in the case of CCE vs West Coast Industrial Gases ltd. 2003 (155) ELT 11(SC). With regard to plastic scrap, the submissions of the Ld. Advocate are that during the course of packing of the finished products, the packing material at times got damaged which were removed by the appellant as waste and scrap. He submits that on removal of plastic scrap, no cenvat credit is required to be reversed and no duty is payable in view of the decision of Tribunal in the case of CCE vs Dhillon Kool Drinks & Beverages Ltd. 2001 (130) ELT 475 (Tri.). As regards oily cotton canvas and wooden furniture items, the appellant submits that those goods removed as waste and scrap were in fact not used as inputs in the manufacture of final product, thus the same cannot be considered as input for the purpose of taking of cenvat credit. With regard to generation of scrap on aluminum and steel items, the appellant submits that no cenvat credit has been taken by the appellant on initial procurement of those goods, and as such, reversal of credit is no required.
4. On the other hand, Sh. M. R. Sharma, the Ld. AR appearing for the revenue reiterates the findings recorded in the impugned order.
5. I have heard the Ld. Counsel for both the sides and perused the records.
6. I find that as regards the packing materials removed as waste and scrap by the appellant, the Honble Supreme Court in the case of West Coast Industrial Gases Ltd. (supra) have held that such waste cannot be treated as arisen out of any manufacturing process and no duty is required to be paid / cenvat credit to be reversed. Thus, I am of the view that duty demand on the packing material is liable to be set aside.
7. With regard to oily cotton canvas, which were removed in the form of scrap, cannot be considered as input for the appellant, who manufactures biscuits. Thus, I am of the firm opinion that said goods are not the input for the appellant. Thus, removal of such goods as scrap will not attract payment of central excise duty/ reversal of cenvat credit. Similar is the case with regard to the wooden scrap namely, doors, windows, iron rods etc., which have no relation with the manufacture of the final product and obviously there was no scope on the part of the appellant to avail the cenvat credit. Thus, duty liability cannot be fastened on removal of those goods as waste and scrap.
8. With regard to plastic scrap, the Ld. Advocate states that the same were generated during the course of manufacture/ packing of the final product. Since, initial procurement of plastic were not input as such and were not generated during the course of manufacture of the final product, on removal of the same as waste and scrap, no duty is required to be paid in view of the decision of this Tribunal in the case of Dhillon Kool Drinks & Beverages Ltd. (supra). The said decision was upheld by the Honble Supreme Court, reported in 2002 (144) ELT A-210 (SC).
9. However, I find that the appellant has not produced adequate documents to demonstrate that no cenvat credit on iron and steel items removed as scrap were taken by the appellant. Since, the Ld. Advocate submits that the appellant had maintained adequate records, I am of the view that the matter should go back to the original authority for verification of records/ documents maintained by the appellant. If the appellant able to convince the original authority that no cenvat credit has been taken on the aluminum/ steel items removed as scrap, no demand shall be confirmed against the appellant on removal of those goods.
10. The lower authorities have invoked Section 11AC of the Central Excise Act, 1944 for imposition of penalty. Since, the information were gathered by the department from the balance sheet of the appellant, no malafide can be attributed, justifying imposition of penalty under Section 11AC ibid. Therefore, the penalty imposed in the impugned order is set aside.
11. The appeal is disposed of in above terms.
(Dictated and pronounced in open court) (S. K. Mohanty) Member(Judicial) Neha 2 | Page E/3357/2010-[SM]