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Commissioner of Central Excise, Pune – I Versus Thermax Limited

2016 (7) TMI 797 - CESTAT MUMBAI

Denail of Cenvat Credit - whether bought out items are inputs - Held that:- Since the boiler is the final product of the manufacturer, every component within it and every input that goes into the component manufactured in the factory would an input in so far as CENVAT Credit Rules, 2004 is concerned. It is certainly not a tenable claim that Revenue can distinguish between an input of an input and an input itself when there is no dispute that the components manufactured from inputs and the compon .....

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-out parts used in the installation of boilers. We notice that some of the boilers have been erected at the Special Economic Zone at Jamnagar while others have been exported from India. Considering the decision of the Tribunal in re Flat Products Equipments (I) Ltd (supra) the demand of credit cannot survive. - Credit allowed - Decided against the revenue. - APPEAL NOS: E/1094 & 1191/2012 & CROSS-OBJECTION NO: E/CO-127/2012 - Final Order Nos. A/87400-87402/2016-WZB/EB - Dated:- 29-4-2016 - S .....

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ule 15(2) of the CENVAT Credit Rules, 2004 read with section 11AC of Central Excise Act, 1944. 2. Revenue, too, filed appeal no. E/1191/2012 challenging the impugned order to the limited extent of it having allowed appellant-assessee to file rebate claim. According to revenue, it is beyond the scope of the show cause notice and beyond the authority vested in the Commissioner of Central Excise. We do not find any merit in these contentions. A show cause notice is intended to notify the tax-assess .....

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In brief, the appellant-assessee, engaged in the manufacture of boilers falling under heading 8402 of the schedule to the Central Excise Tariff Act, 1985, had been clearing their products to customers in India, outside India and also to a special economic zone at Jamnagar. In relation to the clearance of 10 boilers to M/s Reliance Utility Limited, Jamnagar and exports effected, the case of Revenue is that, in addition to manufactured goods emanating from the registered factory, M/s Thermax Ltd s .....

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contracted site and that the boiler, using their own output and bought-out items, in assembled state is classifiable under 8402. Further contending that these goods being exported or supplied to special economic zones are not to be burdened with taxes and duties, it was submitted that credit was correctly taken. 4. Learned Counsel for appellant-assessee submitted that the Explanatory Notes to the HSN will enable an appreciation of their contention and that the contract is for supply of boiler w .....

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coils, super heater interconnecting pipe and that, for the final assembly, auxiliary parts and accessories viz., valves, pressure gauges, electric motors, air pre-heaters, electrostatic precipitators, burners, control panels, air modulators, blowers/industrial fans, turbines, de-aerator tank, silencer, et al are to be attached. It is also contended that the HSN Explanatory Notes of heading 8402 clearly bring out the functionality of a boiler only with conjoining of these items. It was also stat .....

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. 5. On behalf of the appellant, it was also contended, that the appellant is, indisputably, eligible for rebate of duty on inputs bought-out and supplied as exports. It was claimed that it is a well-settled principle of law that what is available as rebate can also be availed as credit. Further, the appellant-assessee, even if regarded as merchant exporter, was entitled to such rebate and hence denial to them as a manufacturer would be grossly inequitable; that the principle and policy of non-e .....

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al but, as long as value of the bought-out parts is also included in the value of machinery, credit of duty was permissible. In re Dicitex Dicor Pvt Ltd (supra), CENVAT credit taken on booklet containing designs, drawings, etc. of fabrics, even though not manufactured, was considered as essential inputs without which the fabrics could not be manufactured. This Tribunal in re Finolex Cables Ltd (supra) held that the appellant, being eligible to export inputs, either under bond or claim of rebate, .....

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practice, these are not brought within the factory of manufacture which is an essential requirement to qualify as an input, CENVAT credit could not have been availed of. Drawing attention to rule 2k(i) of CENVAT Credit Rules, 2004 that defines inputs and to rule 2(h) defining final product as excisable goods manufactured or produced from input, or using input service it was contended that applicability of rule 3 of CENVAT Credit Rules, 2004 fails in the case of the appellant. Reliance was place .....

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the appellant-assessee has no precedential value as that had been disposed off by noting that consideration of eligibility for CENVAT credit would have been merely an academic exercise in the absence of duty demand being invoked in the show cause notice. 8. The dispute relates to availing of CENVAT credit on bought-out items claimed to have been used in the erection of boilers at the site of the purchasers for the period between 1st July 2006 and 4th January 2011. We notice from the records th .....

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omestic purchasers, the pressure parts are cleared from the factory and the other components are sourced directly for delivery at the erection site. 9. Identical matter had come up for decision before this Tribunal to determine whether the duty liability arises only on the pressure parts or on the boiler, as such, including the bought-out parts. The Tribunal in Commissioner of Central Excise, Pune I v. Thermax Bobcock & Wilcox Ltd [2005 (182) ELT 336 (Tri-Mumbai)] decided that, in view of th .....

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manufacturer is compelled to assemble the product on-site, it is the boiler in complete form that is liable to duty including the value of the bought-out components. However, it has been pointed out, that in the matter of domestic clearance, the bought-out items are generally not brought into the factory and the appellant does not take credit on the same. That, however, is not the practice when it came to exports or supplies made to special economic zones. Under the contractual agreement, as wel .....

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of manufacturer and the clearance of boiler is, for all practical purposes, effected from the said factory gate. Since the boiler is the final product of the manufacturer, every component within it and every input that goes into the component manufactured in the factory would an input in so far as CENVAT Credit Rules, 2004 is concerned. It is certainly not a tenable claim that Revenue can distinguish between an input of an input and an input itself when there is no dispute that the components ma .....

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borately examined the applicability of various judgments cited. The decision of the Tribunal in Flat Products Equipments (I) Ltd v. Commissioner of Central Excise, Belapur [2011 (272) ELT 104) (Tri-Mum)] is that: 6. There is no dispute about the fact that the bought out parts have been exported on payment of duty under claim for rebate and the jurisdictional Assistant Commissioner has also passed the claim for rebate vide his order dated 29-11-2007 holding that the bought out parts form part of .....

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n the parts would be available. In the case of Narmada Chematur Pharmaceuticals Ltd. (referred to supra) the Honble Apex Court has clearly held that when the amount of CENVAT credit wrongly availed is exactly equivalent to the amount of excise duty paid by not availing the exemption the consequences is revenue neutral and hence the demand for such wrong availment of credit is not sustainable in law. 7. .. Although no manufacturing activity was involved in such goods, the Tribunal came to the co .....

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uch payments and no further duty is demandable. In the case of Coca Cola India Pvt. Ltd., referred to supra, relied upon by the department the issue relates to availment of CENVAT credit of the service tax paid on input service. In the said case it was held that any input service that form part of the value of the final product should be eligible for CENVAT credit under Rule 2(l) of the CENVAT Credit Rules, 2004. This judgment also does not support the case of the department. In the instant case .....

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