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M/s VFC Industries Pvt. Ltd. Versus Commissioner of C. Ex. & S. Tax, Vadodara

2016 (9) TMI 1020 - CESTAT AHMEDABAD

Recovery of Cenvat credit - inputs and inputs contained in semi-finished goods - incident of fire took place in factory - destruction of plants and machinery, raw materials, stock of Work in Progress (WIP) goods and finished goods - Held that:- as far as the CENVAT Credit on inputs lying in stock, as such, destroyed in fire, it is crystal clear that the same had not been used in or in relation to the manufacture of final product in their factory; thus the criterion of use, the basis on which the .....

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n 07.12.2005, the Department was not categorically informed about the extent of damage of the inputs on which CENVAT Credit availed, and as such lying in stock destroyed in fire. It is not out of place to assume that the Appellant had informed the extent of damage of finished goods on 07th April 2006 when they filed remission application of the duty involved on the finished goods. The details of inputs destroyed in fire were furnished in May 2006. Therefore, the ld.Commissioner is right in consi .....

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ise duty by non-payment of duty by the due date and not applicable to the inputs destroyed. We find that the said reasoning of the Tribunal did not find support from Hon'ble Gujarat High Court in the case of CCE Vs Fleet Industries [2010 (12) TMI 420 - GUJARAT HIGH COURT]. Hence, appropriate interest is payable on the credit amount reversed by the appellant. - Imposition of penalty - Rule 15(1) of Cenvat Credit Rules, 2004 - Held that:- we are of the view that the inputs lying in stock were .....

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.04.2006. In view of the same, penalty is imposable under Rule 15(1) of the Cenvat Credit Rules, 2004 for contravention of any of the provisions of the said rules which invites liability to penalty under the provisions of the said Rule. Therefore, we find that the penalty is rightly imposed by the Commissioner (Appeals) in the impugned order under the said rule. However, we find that the penalty of ₹ 10 Lakh imposed by him is excessive and therefore, is reduced to ₹ 3,00,000/- (Rupee .....

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case are that the appellants were engaged in the manufacture of printed/unprinted flexible packaging materials, i.e. printed/plain plastic laminates, PVC shrink film etc falling under Chapter 39 of Central Excise Tariff Act, 1985. An incident of fire took place in the factory of the Appellant on 07.12.2005, resulting into destruction of plants and machinery, raw materials, stock of Work in Progress (WIP) goods and finished goods. On visit of the premises of the Appellant on 09.3.2006 and necess .....

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were confirmed and penalty of ₹ 10.00 lakhs was imposed under Rule 15(1) of CENVAT Credit Rules 2004. Aggrieved by the said order, the present appeal is filed. 3. The learned Advocate Shri Anand Nainawati had submitted that there is no dispute of the fact of incident of fire in the factory on 07.12.2005 and necessary intimation of fire was furnished to the Department. It is his contention that a conjoint reading of Rule 3 and Rule 2(k) of CENVAT Credit Rules 2004, it is clear that all tho .....

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Chennai-IV Vs Fenner India Ltd 2014 (307) ELT 516 (Mad.), Hon'ble Gujarat High Court in the case of CCE Vs Biopac India Corporation Ltd 2010 (258) ELT 56 (Guj). 4. Further, the learned Advocate has contended that the credit availed on the inputs as such lying in the factory before being used when destroyed in fire, the credit on such inputs cannot be recovered in absence of any mechanism for recovery of such credit. It is his contention that while availing CENVAT Credit, they were eligible f .....

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ced Materials Ltd 2011 (271) ELT 62 (Kar.). He has, however, straightening the facts, categorically submitted that the compensation allowed by insurance company on excise duty was only in respect of the claim against inputs in stock destroyed in fire and not towards the excise duty on WIP goods. Further, the learned Advocate has submitted that necessary intimation of fire was given to the Department on 08.12.2005 and the show cause notice was issued to them on 09.02.2007, hence the demand is bar .....

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e destroyed in fire, without being used in or in relation to the manufacture of the finished goods, no CENVAT Credit could be admissible to them. In support, he has referred to the decision of the Tribunal in the case of Golden Polymex India Ltd Vs CCE Patna 2003 (160) ELT 545 (Tri-Kol.). Further, he has submitted that the inputs contained in WIP goods destroyed in fire also not eligible to credit as the same cannot be said to be used in or in relation to manufacture of final product. It is his .....

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n fire, as the Appellants are not entitled to claim dual benefit. Further, rebutting the argument of the Appellant that the demand is barred by limitation, the learned Authorized Representative for the Revenue submitted that incident of fire occurred on 07.12.2005 but the Appellant with all particulars about the destruction intimated the Department only on 02.05.2006, after filing the remission application finished goods on 07.04.2005, whereas, the show cause notice was issued to them on 09.02.2 .....

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Credit Rules 2004 reads as follows:- Rule 3. CENVAT Credit - (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT Credit) of - (i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act; (ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act; (iii) the additional duty of excise leviable un .....

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vii) the additional duty leviable under Section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (V) and (vi); (viia) the additional duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act: Provided that a provider of taxable service shall not be eligible to take credit of such additional duty; (viii) the additional duty of excise, leviable under Section 157 of the Finance Act, 2003 (32 of 2003); (ix) the service tax .....

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ived by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004, including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.214/86-Central Excise, dated the 25th March, 1986, published in .....

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al Excise Rules 1944 observed as follows:- 10. Mr. Motwani s reliance on Rule 57A is also well placed inasmuch as what the legislature at that time envisaged was that so long as the goods styled as inputs have been brought in for the purpose of usage in or in relation to the manufacture of the said final products, the credit can be claimed and in terms of the Central Excise Rules, 1944, as applicable. There was nothing in the Rules which would mandate that the credit of duty can be claimed and i .....

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e present case, none could have predicted a fire occurring in the manufacturing plant of the assessee. That the fire occurred and at the relevant time but the goods were already utilized in the process of manufacturing of the final product, then the credit paid on those goods was admissible. There is no dispute about these facts, including the fire. In the circumstances, the Tribunal took the view that the language of the Rule does not permit it to agree with the Revenue and deny the credit. 9. .....

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manufacture of final product in their factory; thus the criterion of use, the basis on which the CENVAT Credit on inputs contained in WIP goods, has been allowed in the aforesaid cases, is undoubtedly not fulfilled. This Tribunal in the case of Golden Polymex India Ltd case (supra) observed as follows:- 7. As regards the reversal of credit in respect of the inputs which were lying in the appellants factory unutilised and got destroyed in the fire, it is seen that the said inputs were admittedly .....

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e admittedly not even issued for the manufacture. The appellants reliance upon the larger Bench decision in the case of Ashoke Iron is not appropriate inasmuch as the decision was given in the different set of facts and circumstances. The inputs were received by the appellants in that case, and were admittedly used in the manufacture of the final product, though no duty was paid on the final product. As such the facts and circumstances of that decision are distinguishable from the facts of the i .....

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that the Appellant had paid an amount of ₹ 54,50,000/- between 29.06.2006 and 29.11.2006 as detailed in Annexure B to the Show Cause Notice; and in their reply dt.03.04.2007 to the show cause notice while disputing the recovery of inputs contained in finished goods and in WIP, stated that the said amount reversed by them voluntarily before issuance of the show cause notice. In their appeal memorandum also, we do not find any serious argument on the said liability being barred by limitation .....

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hed goods on 07th April 2006 when they filed remission application of the duty involved on the finished goods. The details of inputs destroyed in fire were furnished in May 2006. Therefore, the ld.Commissioner is right in considering that the demand is within the normal period of limitation of one year prescribed under sec. 11A being issued in Feb.2007. 13. As far as the interest on the amount paid by the Appellant is concerned, the learned Advocate for the Appellant relied on the judgment of si .....

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