Customs, Excise and Gold Tribunal - Tamil Nadu
Sharp Pumps (P) Ltd. vs Cce on 5 January, 2006
Equivalent citations: 2006(107)ECC343, 2006ECR343(TRI.-CHENNAI)
JUDGMENT P.G. Chacko, Member (J)
1. The appellant is engaged in the manufacture of water pumps. During 2003-2004, they took CENVAT credit of Rs. 2,87,231/- on their own final products (deemed inputs) returned by the buyers under Rule 16(1) of the Central Excise Rules, 2002?) One of the issues in this case is whether this credit is deniable to the assessee on the ground that it was taken on the basis of invalid documents. The credit was taken on the basis of triplicate copies of invoice issued by the assessee themselves at the time of original clearance of the goods. In the final order passed by me earlier today in Appeal No. E/283/05 (BAPL Industries Ltd v. CCE, Coimbatore), I have already held such documents to be Cenvatable. The relevant part of the said final order is reproduced below :
2. After giving careful consideration to the submissions, I am inclined to accept the arguments of ld. Counsel. Rule 16(1) of the Central Excise Rules. 2002 laid down that where any final product cleared by a manufacturer on payment of duty was returned by the buyer for being remade, refined, reconditioned etc., the former would be entitled to take CENVAT credit of such duty as if such goods were received as 'inputs' under the CENVAT Credit Rules, 2002. Admittedly, in the present case, the final products cleared by the appellant on payment of duty under the aforesaid invoices dated 04.03.2003 and 10.03.2003 were returned by the buyer and such duty was taken as CENVAT credit by appellant treating the goods as inputs. The only objection of the Department is that such credit was taken on the basis of allegedly inadmissible documents. These documents are triplicate invoices dated 04.03.2003 and 10.03.2003 originally issued by the appellant themselves. I find that, by virtue of deeming provisions of Rule 16(1), where the final product returned by the buyer was deemed to be input by the assessee, the duty paying document covering the goods should also be deemed to have been issued by input-manufacturer. In other words, when the appellant took CENVAT credit of the duty-paid by themselves on the goods in question, they were doing so on the basis of invoices of input-manufacturer. Rule 11(3) of the Central Excise Rules, 2002 laid down the manner in which the invoices should be prepared. Accordingly, an invoice should be prepared in triplicate viz., 'ORIGINAL FOR BUYER', 'DUPLICATE FOR TRANSPORTER' AND 'TRIPLICATE FOR ASSESSEE'. This provision did not specify as to which of these documents could be used for Cenvat purpose. In this context, CBEC's instructions would govern the field. After referring to the above 3 copies of an invoice, instruction No. (4.2) reads as under:
The above requirement is mainly for Central Excise purposes. However, the assessee may make extra copies of invoice for his other requirements. But such copies shall be prominently marked 'NOT FOR CENVAT PURPOSES.
According to the above instruction, any copy of invoice other than extra copy could be used for Cenvat purpose. Instructions of the Board issued under Section 37B of the Central Excise Act have the force of law. Hence it cannot be said that during the period of dispute there was no provision of law enabling the appellant to use triplicate copy of invoice for Cenvat purpose.
3. Ld. SDR has relied on a Trade Notice which apparently revised the procedure for receipt, by the manufacturer, of a final product returned by his buyer for the purpose of remaking, reconditioning etc., under Rule 16(1) of the Central Excise Rules. 2002. This Trade Notice inter alia provides as under:
The assessee shall not be entitled to CENVAT credit, since the goods received have not been accompanied by valid duty paying document prescribed under the CENVAT Credit Rules. 2002.
But I have already held in the light of Rule 11(3) of the Central Excise Rules, 2002 read with CBEC's Supplementary Instruction No.4 and Rule 7 of the Cenvat Credit Rules, 2002, that a triplicate copy of invoice was valid for CENVAT credit purpose during the period of dispute. Even otherwise the above provision of Trade Notice revising the procedure in Nov.'03 cannot affect the cenvatability of the "deemed inputs" received in the appellants' factory in Sept.'03.
Accordingly, it is held that the CENVAT credit of Rs. 2,87,231/- is admissible to the appellants.
2. The pumps returned by the buyer were received in the appellant's factory under cover of numerous invoices issued by the latter. During the earlier part of the period, during which these invoices were issued by the appellant (while clearing the goods to their buyers), the rate of duty was 'nil'. During the rest of the period, the rate was 4%. All these goods were received in the appellant's factory under Rule 16(1) ibid and were subjected to certain processes specified under the rule. By the time the processed goods were cleared from the factory, the rate of duly became 8%. At the time of this clearance, the assessee paid duty only at 'Nil' rate or at 4%, as the case may be. The department took the view that they ought to have paid duty on all the processed goods at the rate of 8%. This view took the shape of a demand of differential duty of Rs. 14,656/-. This demand was also incorporated in the show-cause notice issued to the party.
3. After examining the records and hearing both sides on the question whether the above demand of differential duty is sustainable in law, I find that the answer to this question would rest on Sub-rule (2) of Rule 16 of the Central Excise Rules, 2002 which reads as under :
If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to CENVAT Credit taken under, Sub-rule (1) and in any other ease the manufacturer shall pay duty on goods received under Sub-rule (1) at the rate applicable on the date of removal and on the value determined under Sub-section (2) of Section 3 or Section 4 or Section 4A of this Act, as the case may be.
According to the above provision, where final product returned by the buyer is subjected to a process amounting 'manufacture', the product so manufactured is chargeable to duty at the appropriate rate. If, on the other hand, the process is not one amounting to 'manufacture', clearance of the processed goods would be accompanied by payment of an amount equal to CENVAT credit taken under Sub-rule (1) of Rule l6. Obviously, the lower authorities considered the process as 'manufacture' and accordingly took the view that the processed goods removed From their factory during the period of dispute should have been charged to duty at 8%.
4. Learned Counsel submits that the department never had a case that the process to which the goods returned by the buyer was subjected amounted to manufacture. On the other hand, the show-cause notice chose, to mention that the goods were "cleaned and reconditioned". Reconditioning is one of the processes specified under Rule 16(1) while cleaning is a process covered by the expression "refining" specified under that provision. In the absence of any allegation in the show cause notice to the effect that these processes amounted to 'manufacture', the contra finding recorded by the lower authorities cannot be upheld. It was open to the assessee to reverse the CENVAT credit taken while clearing the processed (cleaned and reconditioned) goods. They were not liable to pay anything more. Consequently, the differential duty demand will get set aside. It is ordered accordingly.
5. In the result, the impugned order gets set aside and this appeal is allowed.
(Dictated and pronounced in open Court)