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CX - Denial of CENVAT - Merely because they have not paid duty on sacks which were manufactured in factory of job worker, there is no justification for denial of credit on inputs which have gone into packing materials - Order of Commissioner (Appeals) is legal and proper: CESTAT

By TIOL News Service

BANGALORE, JAN 17, 2013: THIS is an appeal by the Department against the order of the Commissioner (Appeals). The respondents are manufacturers of sugar and received duty-paid PP/LDPE granules and taken credit of the duty paid on the said materials. They have sent the PP/LDPE granules to the job worker without reversing the credit for getting the sacks manufactured and the sacks were received back in their factory and utilized for packing the sugar. The credit taken on the granules has been utilized for the payment of duty on sugar. The department issued SCN alleging that the respondents have not paid duty on the sacks as they have availed the benefit under Notification No.67/95-CE dt. 16/03/1995 on the ground that they were captively consumed. Further, it was alleged that they have not fulfilled the conditions under the Notification No.214/86-CE dt. 25/03/1986. The original authority confirmed the SCN. However, the Commissioner (Appeals) has set aside the order of the original authority.

++ The Revenue Representative submits that the respondents have not fulfilled the conditions of Notification No.214/86 inasmuch they have not paid duty on the sacks received by them and the denial of credit in respect of granules is correct.

++ The respondents strongly pleaded that the violation, if any, of condition of Notification No.214/86 should result in demand of duty from the job worker and that there is no such demand on the job worker; that if they have utilized the granules in their own factory for the manufacturing of sacks, there would be no denial of credit and that merely because they have sent the granules for manufacture of sacks to a job worker and received the same and utilized for packing the dutiable final products, they cannot be denied the credit. In this connection, the appellants relies on para 3.3. of Supplementary Instructions (Board's Notification No.23/2004-CE(NT) dt. 10/09/2004 as amended) wherein the packing materials have been clearly held to be raw materials for making packing materials have been treated as inputs in relation to the manufacture of final product and that credit was available.

The Tribunal observed as -

It is not in dispute that the impugned inputs for making packing materials have been sent to the job worker under Rule 4(5) of the CCR. The goods manufactured by the job worker viz. the sacks have been returned to the respondents without payment of duty. Apparently such clearances have been permitted at the hands of the job worker by allowing the benefit of Notification No.214/86. It is not in dispute that the respondents have received the goods viz. sacks and utilized the same for packing their final product viz. sugar on which duty has been paid. Merely because they have not paid the duty on the sacks which were manufactured in the factory of the job worker, there is no justification for denial of credit on the inputs which have gone into the packing materials. We find that the order of the Commissioner (Appeals) is legal and proper.

The Tribunal finally rejected the appeal filed by the Revenue.

(See 2013-TIOL-106-CESTAT-BANG)


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