2015 (10) TMI 370 - AT - Central Excise

Manufacture of Plastic Pallets - Captive consumption of pallets - exemption under Notification No. 67/95-CE - Held that - the impugned Pallets are manufactured in the factory of the appellants and used within the factory of production in or in relation to the manufacture of final products. The said Pallets are also covered in the description of inputs, and final products manufactured by the appellants are also covered by the description of final products specified in the notification.Therefore, the impugned pallets are clearly eligible for exemption under Notification No. 67/95-CE dated 16.3.1995 for captive consumption within the factory of the appellants. - Decided in favor of assessee. Cenvat Credit in relation to defective goods and not fit for further consumption - debit notes were issued to supplier of inputs and recovered amount from suppliers. - Held that - the fact of the recovery of the cost of the wasted inputs should not be a ground for asking them to reverse the Cenvat credit availed, because it is not the Departments case that the inputs have been removed as such, without being put to use. There is no legal authority with the Department for such recovery. Also it is seen from the debit notes that the appellant has recovered only the cost of the material and not excise duty portion. - Decided in favor of assessee.

Summary

Issues:
1. Captive usage of plastic pallets and duty exemption.
2. Reversal of Cenvat credit on rejected inputs.
3. Recovery of freight charges and inclusion in invoices.

Issue 1: Captive Usage of Plastic Pallets and Duty Exemption:
The appellant, engaged in manufacturing plastic pallets, used them captively in the factory for handling goods. The Department demanded duty payment on pallets used captively, which the appellant contested, citing exemption under Notification No. 67/95-CE. The Tribunal analyzed the notification's provisions, determining that the pallets were eligible for exemption as they were used in or in relation to the manufacture of final products within the factory. Citing precedents, the Tribunal ruled in favor of the appellant, setting aside the demand.

Issue 2: Reversal of Cenvat Credit on Rejected Inputs:
The appellant raised debit notes to suppliers for defective inputs, seeking reimbursement for unusable materials. The Department argued that the Cenvat credit on these inputs should be reversed. However, the Tribunal agreed with the appellant, stating that recovering costs for defective inputs does not affect the eligibility for Cenvat credit. Citing relevant case laws, including the recovery of waste inputs' cost, the Tribunal held that the demand to reverse the Cenvat credit was unjustified and ruled in favor of the appellant.

Issue 3: Recovery of Freight Charges and Inclusion in Invoices:
The audit revealed that the appellant recovered freight charges from buyers but did not separately show them in the invoices. The Tribunal referenced legal precedents, including a Supreme Court decision, to establish that freight charges are not part of the assessable value of goods. Following established legal principles, the Tribunal held that freight charges should not be included in the assessable value, thereby ruling in favor of the appellant. Consequently, the Tribunal set aside the impugned orders and allowed the appeal filed by the appellant.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's reasoning and conclusions for each issue, ensuring a comprehensive understanding of the legal aspects addressed in the case.