Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise vs Habasit Kakoka (P) Ltd. on 12 March, 2004
Equivalent citations: 2004(169)ELT237(TRI-CHENNAI)
ORDER Jeet Ram Kait, Member (T)
1. In both the Revenue appeals the issue involved is common, they are taken up together for disposal in terms of law.
E/650/2001/MAS This appeal arises against the order in appeal No.23/2001 (CBE)(GVN) Dated.12.02.2001 by which the Commissioner (Appeals) has held that Modvat credit was admissible on the returned goods. Aggrieved by this order, Revenue has come in appeal on the ground that Counter veiling duty of Rs. 86,355/- availed by the Respondents/assessees on re-imported rejected goods was not legal and proper as the final product namely SSS Tapes and the goods which were reimported due to rejection are different product. The said returned goods were slit into smaller width/size to the requirement of the customers and again the same were cleared on payment of duty. Revenue further contended that since the inputs (Synthetic Sandwich Spindle tapes) and final product (Synthetic Sandwich Spindle tapes) after such slitting remains one and the same falling under the sub heading 4010.10 and no new excisable product comes into existence. Revenue further contended that the assessees' reliance on case law 1994 (74) ELT, 918 (T) does not hold good as there is no apparent change in the final goods and the re-imported goods (inputs) after slitting and such process does not amount to "manufacture". Therefore, they are not entitled for the input credit on such final product. Revenue has also submitted that for the purpose of manufacturing there should be some change and new and different articles must emerge having distinct qualities. Therefore, they have submitted that the impugned order may be set aside and order-in-original C.No. V/40/30/28/2000 C.F. Dated 26.06.2000 passed by the Deputy Commissioner of Central Excise, Coimbatore II Division, Coimbatore should be restored.
2. Appearing on behalf of the Revenue Ld. DR shri A. Jayachandran reiterates the grounds of the appeal.
3. Appearing on behalf of the Respondents Ld. Consultants Shri S. Kandaswamy and Shri Balagopal submit that initially the goods were exported and some portions of the goods were rejected by the overseas buyer and that rejected. material was cleared by them on reimportation and they had paid counterveiling duty accordingly. He further submits that they have processed the rejected spindle tapes and the reimported spindle tapes were input for them and therefore, Modvat credit on the CVD of Rs. 86,355/- cannot be denied to them.
E/651/01/MAS
4. This appeal arises against the order in appeal No.40/2001 (CBE)(GVN) Dated 28.02.2001 by which the Commissioner (Appeals) has held that Modvat credit was admissible on the returned goods. Aggrieved by this order, Revenue has come in appeal on the ground that Counterveiling duty of Rs. 2,32,804/- paid by the Respondents/assessees on re-imported rejected goods was not legal and proper as the final product namely SSS Tapes and the goods which were reimported due to rejection are different product. The said returned goods were slit into smaller width/size to the requirement of the customers and again the same were cleared on payment of duty. Revenue further contended that since the inputs (Synthetic Sandwich Spindle tapes) and final product (Synthetic Sandwich Spindle tapes) and final product (Synthetic Sandwitch Spindle tapes) after such slitting remains one and the same, falling under the sub heading 4010.10 and no new excisable product comes into existence. Revenue further contended that the assessees' reliance on case law 1994 (74) ELT 918 (T) does not hold good as there is no apparent change in the final goods and the re-imported goods (inputs) after slitting and such process does not amount to "manufacture". Therefore, they are not entitled for the input credit on such final product. Revenue has also submitted that for the purpose of manufacturing there should be some change and new and different articles must emerge having distinct qualities. Therefore, they have submitted that the impugned order may be set aside and order-in-original No.140/99 Dated. 24.9.99 passed by the Assistant Commissioner of Central Excise, Coimbatore II division, Coimbatore must be restored.
5. Appearing on behalf of the Revenue Ld. DR Shri A. Jayachandran reiterates the grounds of the appeal.
6. Appearing on behalf of the Respondents Ld. Consultants Shri s. Kandaswamy and Shri Balagopal submit that initially the goods were exported and some portions of the goods were rejected by the overseas buyer and that rejected material was cleared by them on re-importation and they had paid counterveiling duty accordingly. He further submits that they have processed the rejected spindle tapes and the reimported spindle tapes were input for them and therefore, Modvat credit on the CVD of Rs. 2,32,804/- cannot be denied to them.
7. I have carefully considered the submissions made by both sides and find that the Commissioner (Appeals) has dealt with the whole issue very thoroughly and his order-in-Appeal No.23/3001 Dated. 12.01.01 is extracted herein below.
"This is an appeal filed by M/s. Habasit lakoka pvt. Ltd., Coimbatotre against the order-in-original No.43/2000 Dated 26.06.2000 issued from file C.No. V/40/30/28/2000-CF Dated 26.06.2000 passed by the Deputy Commissioner of Central Excise, Coimbatore II Division. The brief facts of the case are that the appellants manufacturers of Transmission belts, Conveyor Belts and Synthetic Sandwish Spindle Tapes etc. falling under Chapter Nos. 40 and 59 of Central Excise Tariff Act, 1985. They are availing Modvat credit on the inputs and capital goods under Rule 57 G and 57 Q of the Central Excise Rules, 1944. They have taken credit of Rs. 86,355/- in their RG 23 A Part II based on the Bill of Entry on the ineligible input and thus contravened the provisions of Rule 57A read with rule 57 G of the CER, 1944. They have exported SSS tapes under AR 4 No.11/99-2000 dated 8.08.99 falling under sub-heading No. 4010.10 under Bon and they got the proof of export admitted by the Assistant Commissioner of Central Excise, Coimbatore-II division. subsequently, a part of the consignment has been rejected by the overseas buyer and the same was reimported vide Bill of Entry 29860 Dated 11.11.99 on payment of countervailing duty of Rs.86,355/- The consignments were received at their premises on 6.1.2000 and took credit of duty of Rs. 86,355/- in their RG 23 A Part II on 13.1.2000. In as much as the final products and the goods (inputs) on which the appellants availed Modvat credit is one and the same and there is no further manufacturing process taken place the lower authority denied the credit under 57 I of the CER, 1944. However, he has not imposed any penalty.
2. In the grounds of appeal the appellant submitted that they have exported quantity of 3285 sq. mtrs., valued at Rs. 14,63,216/- The buyers have returned a quantity of 2928.450 sq.mtrs. for reprocessing and return the same to them. The Customs authorities permitted them to import 2378.250 sq.mtrs. without payment of duty and collected BCD, CVD and SAD on 550.200 sq.mtrs. of SSS tapes. So they have taken credit of Rs. 86,355/- paid by them as Modvat credit. The goods in question had been re-exported after processing. There is no dispute about the eligibility of modvat credit on the inputs. The only objection is that the description of goods received and cleared after reprocessing remains the same. There are no restrictions from taking of modvat credit on this ground. The conditions putforth in the rules are both input and final products should be specified, there should be proper duty paid documents, declaration should be filed etc. The appellants have satisfied all these conditions and there are no dispute on those grounds. The conditions putforth in the rules are both inputs and final products should be specified. Under the modvat rules, the modvat credit taken on inputs brought inside the factory can be cleared as it is on payment of duty without any manufacturing process and also can be cleared for export. Under Rule 57 F of CER, 1944 modvat credit materials can be cleared as it is without any processing or even can be cleared for export. They relied on the case laws reported in 1994 (74) ELT 918(T). They further stated that the case law ICI India Ltd., reported in 1997 (89) ELT 216 (T) relied upon by the Deputy Commissioner is not applicable since in that case the party has mixed the defective paints manufactured in their factory. But in their case, the goods received had been processed separately in such a sway that it can be marketable and acceptable by the buyer. Moreover, the lower authority relied upon the case law of Delhi cloth and General Mills Ltd. reported in 1977 ELT J 199. This case law is not at all applicable since this relates about the issue of manufacture for the purpose of collection of excise duty. But their case is about availing of modvat credit and the eligibility has to be determined based on the rules 57 A to 57 H of CER, 1944.
3. I have given my careful consideration to the facts and circumstances of the case and the submissions made during the personal hearing. The point to be decided in this appeal; is whether the appellants are eligible for the modvat credit or not. They have exported 3285 sq.mtrs. of synthetic sandwich spindle tapes. The buyers returned 2928.450 sq.mtrs. for reprocessing and returned the same to them. The appellants have paid BCD, CVD and SAD on 550.200 sq.mtrs. They took modvat credit on the same. In the case law of Alcobex Metals Ltd. reported in 1998 (68) ELT 146 (T) it is held by the Tribunal that the defective final products which have ceased to be final products are to be regarded as inputs under Rule 57 A. In case of Udasee Stampings Private Limited reported in 1997 (93) ELT 283 (T), the Tribunal has held that a defective goods cleared by customer under Rule 57 F (1)(ii) received by the appellants under the cover of gate pass on payment of duty used as inputs in manufacturing of final products Modvat credit is available of such defective goods used as inputs and not considered as final product. The case law 1997 (91) ELT 174 (T) relates to the issue pertaining to Hirsch Watch Straps Private Limited. In that case, the Tribunal held that both the returned goods and product made out of that goods were notified goods and inputs, the credit was admissible. Once an item is a notified input, while it might have a character of finished product by itself, could be an input for the final product manufactured by the assessee. There was no danger to revenue. Hence, the credit was admissible on the returned goods. In this case, there was no malafide intention on their part in taking modvat credit. IN fact there was no dispute about duty paid nature. Therefore, if there are any lapses they are of technical nature and the same is condoned. Hence, following the ratio as discussed above, I allow modvat credit on the goods.
4. In view of the above discussions, the appeal is allowed and the order passed by the lower authority is set aside."
8. I am in agreement with the orders passed by the Commissioner (Appeals) inasmuch as both the returned goods and the products made out of the imported goods were notified goods and the credit on the inputs was admissible and cannot be denied to them. I, therefore, reject the appeal filed by the Revenue and impugned orders passed by the Commissioner (Appeals) are upheld as I do not find any infirmity in the orders. The cross objections are also disposed of. Ordered accordingly.