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2015 (5) TMI 628 - SUPREME COURT

2015 (5) TMI 628 - SUPREME COURT - 2015 (320) E.L.T. 179 (SC) - 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 whic .....

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wers of the Settlement Commission, albeit under Section 245(D)(4) 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 Kr .....

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d nature, the respondent has been supplying float glass which is 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 .....

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case in respect of the show cause notices. In the application for 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 rev .....

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e modvat credit availed by the respondent had to be reversed/paid 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 Co .....

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in the manner stated above. Aggrieved by the aforesaid approach 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 p .....

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Court has exceeded its limits of jurisdiction by examining the matter 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 .....

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ule 14 but the High Court wrongly interpreted the said Rule and 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 .....

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e. In para 15 of the impugned judgment those undisputed facts as 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 .....

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The cost reimbursed does not include the element of duty suffered 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 applicatio .....

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ring process for manufacture of toughened and laminated glass starts 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 .....

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e decided in this case is whether the float glass (input) can be 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 .....

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f the inspection and this could have been done even after the receipt 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 .....

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e of Collector of Central excise vs. Rajasthan State Chemical works 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 cha .....

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