2013 (2) TMI 82 - AT - Central Excise

Non payment of excise duty and wrong utilization of cenvat credit on input packing material - demand confirmed and equivalent penalty u/s 11AC r.w.r. 13 of CCR 2002 - broken, damaged and wastage biscuits generated during the course of manufacture of biscuits were liable to excise duty - Held that - As decided in Commr. of Central Excise, Bhopal Vs. J.B. Mangharam Food Ltd. 1999 (8) TMI 267 - CEGAT, NEW DELHI broken/waste biscuits generated during the course of manufacture of biscuits are non excisable goods and hence not liable to excise duty. That in the show cause notice as well as in the impugned order, there is no allegation that biscuits of goods quality were manufactured and cleared during the said period. Similarly, it is also not in dispute that the input packing materials received by the appellant were used in the course of manufacture of biscuits but got damaged and the demand was also issued for reversal of cenvat credit availed on the input packing material on the basis of Variance statement. The appellant had claimed that the input packing materials were used in or in relation to manufacture of finished goods and during the course of manufacture of finished goods, got damaged and in that context, they have submitted that the entire quantity of input packing materials could not be found with the finished goods. There is no contrary evidence adduced by the Department that the input packing materials were not used in or in relation to the manufacture of finished goods except the Variance statement. In absence of evidences to the effect that these inputs were not used in or in relation to the manufacture of the final product and the claim of the appellant that these were used and got damaged during the process of manufacture of finished goods being plausible and acceptable and accordingly, CENVAT Credit cannot be denied on the same - Commissioner (Appeals) order is devoid of merit and accordingly the same is set aside - in favour of assessee.

Issues:
1. Allegation of removal of excisable goods without duty payment.
2. Wrong utilization of cenvat credit on input packing material.
3. Applicability of penalty under Section 11AC read with Rule 13 of Cenvat Credit Rules, 2002.
4. Treatment of broken and damaged biscuits as excisable goods.
5. Denial of Cenvat Credit on input packing material.
6. Applicability of the amendment to the definition of excisable goods.

Analysis:
1. The appellant appealed against the order passed by the Commissioner of Central Excise (Appeals) alleging the removal of excisable goods without duty payment. The appellant contended that excess raw materials were used in the manufacture of broken and damaged biscuits, which were considered non-excisable goods. Citing relevant judgments, the appellant argued that broken/waste biscuits are not liable for excise duty, as established in previous tribunal cases.

2. The issue of wrong utilization of cenvat credit on input packing material was raised. The appellant claimed that the input packing materials were used in the manufacturing process but got damaged, leading to wastage. The Department based its demand for reversal of cenvat credit on the Variance Report. However, the appellant argued that in the absence of evidence proving that the input packing materials were not used in the manufacturing process, the denial of Cenvat Credit was unjustified.

3. The penalty under Section 11AC read with Rule 13 of Cenvat Credit Rules, 2002 was imposed on the appellant for the period from June 2003 to March 2005. The appellant's consultant argued that the penalty was unjust as the broken and damaged biscuits were not excisable goods, citing relevant tribunal judgments to support this claim.

4. The treatment of broken and damaged biscuits as excisable goods was a crucial point of contention. The appellant's consultant referenced tribunal cases to establish that broken/waste biscuits are not subject to excise duty, emphasizing that the disputed goods were non-excisable.

5. The denial of Cenvat Credit on input packing material was challenged by the appellant, who asserted that the input packing materials were used in the manufacturing process but got damaged during production. The appellant's argument was supported by the lack of contrary evidence from the Department, leading to the conclusion that Cenvat Credit should not be denied.

6. The applicability of the amendment to the definition of excisable goods was debated, with the appellant arguing that the amendment, effective from May 2008, was not applicable to the period in question (June 2003 to March 2005). The tribunal upheld the appellant's arguments, citing previous judgments and dismissing the allegations made by the Department. The tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal filed by the appellant, granting consequential relief as permissible under the law.

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