TMI Blog2011 (6) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Shah, Advocate for appellant Shri.R.K. Mahajan, Jt. CDR, for respondent Per: Ashok Jindal 1. Heard both sides. 2. The appellants have filed this appeal against the order-in-original No.05/CEX/2009 dated 18/02/2009 passed by the Commissioner of Central Excise, Pune, confirming the demand of Rs.1,56,85,219/- under the provisions of Section 11A of Central Excise Act, 1944 read with Rule 12 of Cenvat Credit Rules, 2001/2002 along with interest at applicable rates in terms of section 11AB and a penalty of Rs.1,56,85,219/- under Section 11AC of Central Excise Act, 1944 against the appellants. 3. Brief facts of the case are that the appellants have a factory comprising two units/divisions i.e. Consumer Electronic Factory and Philips Speaker Systems for manufacture of various electronic goods such as colour television sets, audio systems, including arts components sub-assemblies. The appellants are availing Modvat/Cenvat credit of the Central Excise duty paid on the inputs used in the manufacture of its various said finished goods as per the erstwhile Rule 57A of the Central Excise Rules, 1944 and the Cenvat Credit Rules, 2002/2004. 4. On an intelligence that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould extend for years together inasmuch as the appellants wrote off these goods at the stage convenient to them as per its financial policies. In other words, as per its policies, even if the goods might be written off in stores account at any convenient time, these were deleted from the financial books of accounts as soon as rendered obsolete and accordingly, provided for such purpose. Therefore, an extract of books of accounts showing opening and closing stock of inputs are lying in their stores were prepared. Therefore, it appears that although the closing stock of obsolete inputs continue to be part of stores accounts the same is deleted from the financial books of accounts. Therefore, it appears that the appellants have a practice to identify the inputs eligible for obsolescence in quantity and value terms on periodical basis. The manner in which such identification is done to list out such inputs were produced by the appellants. 6. In view of the discussion made herein above, the removal of obsolete inputs from the stores/stores accounts, does not tantamount to their 'disposal/sale' as 'inputs as such' and that it only amounts to removal for disposal of assorted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial account in the year 1996 may continue to remain in stores account even today, awaiting its removal from stores account as well for reversal of credit as per practice, which the appellants have been following. Therefore, a show cause notice was issued to the appellants alleging that the appellants have contravened the provisions of Rule 57A of Central Excise Rules, 1944 inasmuch as it has availed Cenvat credit on Central Excise duty paid on inputs, which are not used in or in relation to the manufacture of final products, by virtue of the obsolescence provided for in its financial accounts, during the relevant period. Therefore, a duty demand of Rs.1,56,85,219/- was proposed to be recovered along with interest and a proposal of penalty under Section 11AC of Central Excise Act, 1944 was also proposed. The show-cause notice was adjudicated and demands proposed in show-cause notice were confirmed along with interest and a penalty of equivalent amount under Section 11AC was also imposed. Aggrieved by the said order, the appellants are before us. 7. On going through the facts of the case, the following issue has arisen before us to be decided: (a) prior to 11/05/2007, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng off the value of inputs in their books of accounts, they could not be denied the credit when the inputs are still lying in their factory premises. He also relied on Jindal Vijaynagar Steel Ltd., reported in 2006 (199) ELT 668 (Tri-Bang), Audco India Ltd., Vs. CCE, Chennai, reported in 2005 (184) ELT 77 (Tri-Mum). He also submitted that the Board's Circular No.645/26/2002-CX dated 16/07/2002 is contrary to the provisions of law and contrary to the decision of this Tribunal. Therefore, he relied on the decision of Indichem Vs. UOI, reported in 1996 (88) ELT 35 (Guj). He further submitted that in the case of CCE, Belapur Vs. Hindalco Industries Ltd., in CE Appeal No.73 of 2010, the Hon'ble Bombay High Court vide their order dated 07/06/2011 has held that prior to the insertion of sub rules (5B) and (5C) in Rule 3 of Cenvat Credit Rules, 2004, reversal of Cenvat credit is not required before removal following the decision in the case of CCE Vs. Indian Petrochemicals Corporation Ltd., reported in 2008 (226) ELT 339 (Bom). He further relied on the decision of Godrej Industries Ltd., Vs. CCE, Mumbai, reported in 2008 (229) ELT 484 (SC) to support the contention that the ground wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) of Cenvat credit Rules, 2004 deals with the situation, which is reproduced herein as under: (5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9: Provided that such payment shall not be required to be made where any inputs or capital goods are removed outside the premises of the provider of output service for providing the output service: Amended vide Notification No. 10/2008 -Central Excise (N.T.), dated 01/03/2008) Provided further that such payment shall not be required to be made when any capital goods are removed outside the premises of the provider of output service for providing the output service and the capital goods are brought back to the premises within 180 days, or such extended period not exceeding 180 days as may be permitted by the jurisdictional Deputy Commissioner of Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit on removal of inputs written off obsolete in their books of accounts. Rule 5 (b), which was inserted in the statute with effect from 11/05/2007, which provides that if the inputs on which Cenvat credit has been taken is written off fully or where any provision to write off fully has been made in the books of account, then the manufacturer or service provider as the case may be shall pay an amount equivalent to the Cenvat credit taken in respect of the said input or capital goods. Admittedly, these provisions have come into force on 11/05/2007. The period in the case in hand is prior to 11/05/2007 therefore, the provisions of Rule 3 (5) (b) of the Cenvat Credit Rules, 2004 are not applicable to the facts of this case as held by the Hon'ble Bombay High Court on Hindalco Industries Ltd. case cited supra. In case's of M/s.Kinetic Motor Co. Ltd., cited supra, Jindal Vijaynagar Steel Ltd., cited supra and Audco India Ltd., cited supra, this Tribunal has, time and again, held that demand of duty or reversal of Cenvat Credit cannot be made in respect of inputs or capital goods although they have become obsolete but lying in the said factory, duty is payable only at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
