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The Union of India & Others Versus M/s. Asahi India Safety Glass Ltd.

2015 (5) TMI 628 - SUPREME COURT

Validity of order of settlement of commission - MODVAT Credit - use of inputs for manufacturing activity or not - respondent made an admission to the extent that it had received the float glass in packaged form and on the opening of the wooden boxes, certain float lasses were found to be broken and they were not used as inputs while undertaking the manufacturing process - Held that:- High Court has not interfered with the facts which were recorded by the Settlement Commission. On the contrary, t .....

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) of the Income Tax Act. The principle of law remains the same and can be applied in case of orders passed by the Settlement Commission under the Central Excise Act as well - appeal is bereft of any merit - Decided against Revenue. - Civil Appeal No. 2381 of 2005 - Dated:- 7-5-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Petitioner : Mr Yashank Adhyaru, Sr Adv., Mrs B Sunita Rani, Mr Ritesh Kumar, Ms Shweta Garg, Mr B Krishna Prasad, Advs. For the Respondents : Mr V Lakshmikumaran, M .....

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the main raw material of the respondent's product. On this the respondent has also been availing claim of modvat credit of duty paid on the aforesaid raw material, under Rule 57A of the Central Excise Rules, 1944 (hereinafter referred to as 'Rules'). Show cause notices dated 1.9.2002, 4.12.2000 nd 29.6.2001 were issued by the Department to the respondent alleging therein that the respondent had availed Modvat credit of inputs that were inherently defective and were neither used nor .....

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or settlement filed by the respondent, the respondent made an admission to the extent that it had received the float glass in packaged form and on the opening of the wooden boxes, certain float lasses were found to be broken and they were not used as inputs while undertaking the manufacturing process. On that basis it was admitted by the respondent that the modvat credit availed on the aforesaid defective float glasses had to be reversed. Accordingly, the respondent agreed to pay back a sum of & .....

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d back by the respondent to the authorities. In this manner, the Settlement Commission arrived at a figure of ₹ 4,03,77,695 /- and directed the respondent to pay the balance amount of ₹ 3,47,38,325 /- towards the settlement of the said show cause notice. It may be significant to note here that the respondent had objected to the aforesaid approach adopted by the Settlement Commission during the hearings before the said Commission by pleading that once the float glass was used for manu .....

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of the Settlement Commission, the respondent filed WP (C)No. 669/2002 in the High Court of Delhi, questioning the said approach as legally erroneous and challenging the order of he Settlement Commission on that ground. The High Court has accepted the plea of the respondent herein and after straightening the legal position the case is remanded back to the Settlement Commission to consider the matter afresh in the light of the legal principle mentioned by the High Court in the impugned judgment. I .....

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atter afresh as if it was sitting in appeal over the order of the Settlement Commission, which was clearly impermissible. In support of this contention the learned counsel has referred the judgment of this Court in Union of India and other vs. IND. Swift Laboratories Ltd. 2011 (4) SCC 635 where the powers of the Settlement Commission are delineated in the following manner: "An order passed by the Settlement Commission could be interfered with only if the said order is found to be contrary t .....

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thereby arrived at an erroneous finding. So far as the second issue with respect to interest on ₹ 50 lakhs is concerned, the same being a factual issue should not have been gone into by the High Court exercising the writ jurisdiction and the High Court should not have substituted its own opinion against the opinion of the Settlement Commission when the same was not challenged on merits." After going through the record and perusing the order of the High Court, we are of the opinion tha .....

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mentioned by the Settlement Commission itself, are reproduced. This para reads as under: "Undisputed facts, according to the Commission in paras 11 and 12 are as under: (i) The main raw material for the manufacture of the tempered and laminated glass in the applicant's factory is float glass which is an eligible input under Rule 57A of the Rules in this case. (ii) The defects noticed in the float glass (input) at the stage of inspection thereof after subjecting it to the process of cut .....

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d on such float glass. (iv) The demand of duty made by Revenue is confined to the credit taken defective float glass for which the applicant has been reimbursed by the suppliers of such defective glass. The demand of duty does not include breakages or defects notice during the process of toughening, tempering on lamination. (v) Revenue have confirmed the correctness of the amount of duty accepted by the applicant in their applications, the accepted amount of duty is confined to breakages of floa .....

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arts as soon as the float glass is out on the float table and subjected to the aforesaid processes and that these processes are mandatory and integral to the process of manufacture of their final products. Revenue have disputed this claim of the applicant. The applicant rely on the production Manual of Ashai Glass Limited, Japan in support of their contention that world-over the process of manufacture adopted by their parent company is identical." On the aforesaid facts the approach of the .....

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said to be an eligible input of the applicant when it was defective at the supplier's end itself and accordingly could not have been used in the manufacture of the finished goods. As observed by us earlier, it is not in dispute that the defects may be in the float glass at the suppliers' end and that is the reason why the suppliers agreed to reimburse the applicant for the value of such defective inputs. This being the case, in our view, the applicant identified such defect at the stage .....

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ceipt of the goods in the factory of the applicant and before subjecting them to the various process of cutting, marking, breaking off, grinding etc. it is also not in dispute that the input float glass does not get rejected on account of any defects developed during any of the pre-processes to which it is subjected to. In view of this position, the reliance placed by the applicant on the following judgments of the Tribunal does not appear to be relevant." On that basis the High Court has c .....

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rks 1991 (55) E.L.T. 444 S.C. wherein this Court held as to when the manufacturing process starts. Final portion from the said judgment which is quoted by the High Court, is reproduced for proper understanding of the matter: "Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the .....

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