2020 (1) TMI 421 - AT - Central Excise

CENVAT Credit - HDPE/PP Bags used for packing of their final product, i.e. cement, destroyed in the course of packing - HELD THAT - The claim of the appellant in respect of packing bags being destroyed in the process of packing and getting torn, is a routine feature and on going through the series of pictures filed along with the appeal paper book, it is observed that owing to various reasons i.e. use of high pressure, automatic rotary machine, which is used under compressor for packing cement in the packing bags and due to high pressure, some bags got torn/brust. Even, the temperature of the cement when it is being packing , is very high and the entire movement of the cement upto loading into the truck and wagons is automatic, which also results in damage of the cement bags in the process. The issue is no more res integra and is covered by the decision of the Tribunal in the case of MADRAS CEMENTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY 2010 (7) TMI 398 - CESTAT, CHENNAI where it was held that In the absence of any legal requirement to reverse credit, appellants cannot be asked to reverse the credit taken on the inputs which they have put to use for the intended purpose but which have become torn and non-useable in the course of manufacture/use as packing material. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Out of turn hearing of the appeal requested by the appellant.
2. Dispute over the availment of cenvat credit on HDPE/PP Bags used for packing cement destroyed during packing.

Issue 1: Out of turn hearing request
The appellant filed a Miscellaneous Application for out of turn hearing of the appeal, citing the recurring nature of the issue and the show-cause notice for the subsequent period. Both the Ld.C.A. for the Appellant and the Ld.D.R. for the Revenue had no objection to the request. The Tribunal allowed the out of turn hearing and proceeded with the appeal since the issue was narrow in scope.

Issue 2: Dispute over cenvat credit on HDPE/PP Bags
The appellant, engaged in cement manufacturing, availed cenvat credit on HDPE/PP Bags used for packing cement. A show-cause notice alleged wrong availment of credit on bursted bags destroyed during packing. The adjudicating authority confirmed the demand, imposed penalties, and the lower appellate authority upheld the decision. The appellant contended that they availed credit on bags received in good condition, not on burst bags. They explained the process of packing cement and how bags get damaged due to high pressure during packing. The appellant maintained records of burst bags in the RG-9 Register. The Revenue justified the denial of credit. Upon hearing both sides, the Tribunal observed the routine damage of bags during packing due to various reasons like high pressure and automatic packing processes. Citing a precedent, the Tribunal set aside the impugned orders, allowing the appeal with consequential benefits.

In conclusion, the Tribunal allowed the appeal, overturning the denial of cenvat credit on HDPE/PP Bags used for packing cement destroyed during the packing process. The decision was based on the routine nature of bag damage during packing and the absence of legal provisions requiring reversal of credit in such cases.