By TIOL News Service

NEW DELHI, AUG 24, 2015: THE appellant company at their factories at Sahibabad (U.P.), Khopoli (Maharashtra) and Angul (Orissa) manufacture precision pipes of steel.

The duty paid pipes cleared by Sahibabad unit, Khopoli unit and Angul unit of the appellant are sold from the depots(who are registered dealers) under cenvatable invoices issued by the depots.

However, since, the pipes are sold on the basis of length, some end cuttings are left which are not saleable and these end cuttings of pipes are sent by the depots to Sahibabad unit under invoices issued by the depots as registered dealer. In these invoices, the depots concerned mention the proportionate duty paid in respect of pipes. The Sahibabad unit on receiving the end cuttings of pipes availed CENVAT credit and re-melted the same for manufacture of ingots.

According to the Department, since although the pipes received by the depots had suffered duty on the value varying from Rs. 36/- to Rs. 42/- per kg, the depots, in the invoices issued for sending the end cuttings to the Sahibabad unit, had mentioned their value as Rs. 15/- per kgand, therefore, the Cenvat credit available to the Sahibabad unit would be restricted only to the duty payable on the value mentioned in the invoices i.e. Rs. 15/- per kg and not the duty originally paid in respect of the pipes at the time of their clearance from the respective factories.

Resultantly, the mighty department sought recovery of CENVAT credit allegedly incorrectly availed of Rs.1,20,48,313/- by the Sahibabad unit. There is also a miniscule demand of Rs.1,12,070/- being the CENVAT credit availed of the duty paid on welding electrodes used for repair and maintenance of plant and machinery and another of Rs.39,140/- being the credit taken on CI Slag Pots, which Revenue says is not covered by the definition of ‘capital goods'.

The CCE, Ghaziabad had no second thoughts in confirming the demand raised and also imposed penalty and interest.

The appellant is before the CESTAT.

After hearing the submissions of the appellant made with a sprinkle of case laws on the subject matter and the reiteration of the order by the AR, the Bench observed -

CENVAT - Welding Electrodes:

This issue stands decided in favour of the appellant by the judgments of - Hon'ble Rajasthan High Court in the case of Union of India vs. Hindustan Zinc Ltd. - 2006-TIOL-440-HC-RAJ-CX, civil appeal against which has been dismissed by the Apex court; Alfred Herbert (India) Ltd. - 2010-TIOL-427-HC-KAR-CX; Ambuja Cement Eastern Ltd. - 2010-TIOL-309-HC-Chhattisgarh-CX .

CENVAT - CI Slag Pot:

This issue also stands decided in favour of the appellant by the judgment of the Tribunal in the case of CCE, Delhi - III vs. Jindal Strips Ltd. 2000 (126) E.L.T. 631 (Tribunal) -Credit admissible.

CENVAT-End cuttings of pipes:

We find that the various depots had transferred the end cuttings of pipes under invoices wherein the proportionate duty paid on the pipes at the time of clearance from their respective factories had been mentioned. The Department seeks to re-calculate this duty on the basis of the scrap value of the end cuttings, as mentioned in the depot invoices and restrict the Cenvat credit to that amount. In our view this stand of the Department is not correct in view of the Apex court's judgment in the case of Commissioner of Central Excise & Customs vs. MDS Switchgear Ltd. - 2008-TIOL-245-SC-CX, wherein it has been held that the receiver manufacturer who had received the duty paid inputs from a supplier - manufacturer is entitled to Cenvat credit of the duty paid by the supplier manufacturer and the Central Excise Authorities having jurisdiction over the recipient manufacturer cannot review the assessment of the duty at the end of the supplier manufacturer. In view of this, the Cenvat credit demand of Rs. 1,20,48,313/- is also without any basis.

The order was set aside and the appeal was allowed.

(See 2015-TIOL-1772-CESTAT-DEL)