2013 (8) TMI 573 - AT - Central Excise

Packing material used outside factory i.e. Depot - packing material (extra carton etc.) not used in the factory of production - Cenvat Credit on extra (master or single) cartons would not be allowed as the same was not used in the factory of production, but are used in the depot of the appellant for packing of the cookers Held that - Apex Court has in the case of Vikram Cement 2006 (1) TMI 130 - SUPREME COURT OF INDIA very clearly held that the credit cannot be denied merely on the ground that the inputs are not used within the factory of the production and clearly stated that the definition under Rule 57AA and other rule nowhere places any such restrictions. Depot has been defined as place of removal only with effect from 13.5.2003 and prior to that the place of removal was factory only. Since prior to 13.5.2003 the goods were packed in primary cartons and transported in that condition only, the master cartons cannot said to be used in or in relation to manufacture of the final product - Credit in respect of these cartons will not be available prior to 13.5.2003. Period of limitation Held that - Extended period of limitation is not invocable As there is no case of any mischief, fraud or contumacious conduct made out on part of the appellant - and reliance was placed on the ruling of the Apex court in the case of Raj Bahadur Naryan Singh Sugar Mills Ltd. Vs. UOI 1996 (7) TMI 146 - SUPREME COURT OF INDIA and also on the ruling in the case of Centre of Development for Advanced Computing Vs. CCE, Pune -III 2002 (2) TMI 105 - SUPREME COURT OF INDIA - Demand notice was issued only on 8.2.2005 relating to the period April, 2001 to 12.5.2003 and the same is barred by limitation in view of the fact that Return for May, 2003 submitted on 10.6.2003 - Limitation expired on 9.6.2204 much before the date of issue of show-cause notice. Decided in favor of Assessee.

Summary

Issues Involved:
1. Eligibility of CENVAT Credit on packing materials.
2. Applicability of the extended period of limitation.
3. Imposition of penalty and interest.

Detailed Analysis:

1. Eligibility of CENVAT Credit on Packing Materials:
The appellant, engaged in manufacturing pressure cookers, availed input tax credit on packing materials (extra cartons) used for repacking cookers at their depots before dispatch to wholesalers. The department contended that CENVAT Credit on such packing materials was inadmissible as they were not used within the factory premises. The Tribunal previously ruled that credit could not be denied merely because inputs were not used within the factory, provided they were used in relation to the manufacture of final products. It was noted that after 13.05.2003, when the definition of 'place of removal' included depots, the master cartons were considered used in relation to the manufacture of final products, making the credit admissible. This interpretation was upheld by the Hon'ble Bombay High Court.

2. Applicability of the Extended Period of Limitation:
The appellant argued that there was no suppression of facts, manipulation, or intent to evade duty, as proper records were maintained, and returns were filed timely. The adjudicating authority, however, held that the extended period of limitation was applicable due to the appellant's awareness that CENVAT Credit on packing materials used at depots was inadmissible, as per Rule 2(f) of the Cenvat Credit Rules, 2001. The Commissioner (Appeals) supported this view, noting that the department only became aware of the facts during an audit. The Tribunal, however, found no suppression or contumacious conduct by the appellant, thus ruling that the extended period was not applicable and setting aside the demand for the period prior to 13.05.2003.

3. Imposition of Penalty and Interest:
The adjudicating authority imposed a penalty equivalent to the demand amount and ordered recovery of interest. The appellant contested this, arguing that there was no case of clandestine removal or mis-declaration. The Tribunal agreed, referencing the Apex Court's rulings in similar cases, and concluded that no penalty or interest was warranted. Consequently, the penalty and interest imposed were set aside.

Conclusion:
The Tribunal allowed the appeal, ruling that CENVAT Credit was admissible for packing materials used after 13.05.2003, the extended period of limitation was not applicable, and no penalty or interest should be imposed. The appeal was allowed with consequential reliefs.