TMI Blog2023 (3) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... and oils was denied to the Respondent by the adjudicating authority. It is clear that Fuel and Oils are by-product that are inevitably required to be removed from the ship in the course of commencing the activity of breaking the ship and if that be so, there is no reason for denial of cenvat credit of CVD paid on any part of the Ship including its stores viz. fuel and oil on the ground that they do not form part and parcel of the ship or that they are removed at a stage before commencing the activity of breaking ship or that their classification is under different heading. It is settled law that in the course of manufacturing activity any by-product emerges; cenvat credit on that part which pertains to by-product cannot be denied on the ground that such by-products are non-excisable goods or that they are not used in or in relation to manufacturing activity of manufacturer of excisable goods. There can be no doubt that for the purpose of carrying out the manufacturing activity as envisaged under note 9 to section xv viz. obtaining goods and material by breaking of ship, the entire ship as imported is the input for a ship breaker. Ordinarily, ship when imported for breaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 and the eligibility of the said items for availment of cenvat credit is the subject matter of the present appeal. 2.1 Show cause notice no. V/15-200/Dem/AE/HQ/2015-16 dated 31.3.2016 was issued to Respondent calling upon to show cause as to why wrongly availed cenvat credit totally amounting to Rs. 50,49,578/- should not be demanded and recovered from them under Rule 14(1)(i) of the Rules read with sub-section (4) of Section 11A of the Act. It also proposed to impose penalty under Rule 15(1) of the Rules read with Section 11AC(1)(a) of the Act upon Respondent and Penalty under Rule 15A of the Rules upon Partner of the Respondent. 2.2 The said Show Cause Notice alleged that Respondent has wrongly availed cenvat credit of the CVD paid on Bunkers viz. Fuel Oil, Marine Gas Oil, Lube Oil etc. in violation of provisions of Rule 3 read with Rule 2 (k) and Explanation III to sub-rule (3) of Rule 6 of the Cenvat Credit Rules, 2004 as the same were not their input used in or in relation to manufacture of their final products. The said Show cause notice was adjudicated by the adjudicating authority who interalia held that Fuel oil, Marine Gas Oil and Lubricating Oil were not used, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 1st February 2016 in which it has been clarified that once the importer has paid CVD on import of ship, cenvat credit of that CVD cannot be denied for payment of central excise duty on breaking of that ship. 03. Shri G. Kirupanandan, learned Assistant Commissioner (AR) on behalf of Department while reiterating the grounds of appeal, submitted that impugned Order holding that when the ship imported for breaking up, the fuel and oils available on ship even as stores form part of the ship and is an input within the meaning of Cenvat Credit Rules, 2004 is incorrect. He submitted that such oils are considered as store only and by no stretch of imagination, a part of ship, because, once activity of breaking up of ship is commenced; such fuel oil are no longer required. He further submitted that impugned order allowed the cenvat credit holding that process of breaking up of ship starts with removing of fuel and oils from ship as well as other removable articles is also untenable as it is not in dispute that fuels and oils imported in a ship are removed without making any process and change in their form or characteristics and that such fuel and oil do not emerge out of break ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment mainly is that fuel and oils are removed as such from the ship before commencing the breaking activity and are not specified products of section XV amounting to manufacture and hence the same cannot be input for the Respondent for the process of obtaining goods and materials by breaking ship. However, as can be observed from the appeal memo itself fuel and oils for the use of ship, found as store in the ship when brought for breaking purposes are inevitably required to be removed for efficient and safe operation of breaking of ship. This position is also specifically admitted in the appeal memo in para 3.4.4. In this background, it is clear that Fuel and Oils are by-product that are inevitably required to be removed from the ship in the course of commencing the activity of breaking the ship and if that be so, there is no reason for denial of cenvat credit of CVD paid on any part of the Ship including its stores viz. fuel and oil on the ground that they do not form part and parcel of the ship or that they are removed at a stage before commencing the activity of breaking ship or that their classification is under different heading. It is settled law that in the course of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
