2020 (1) TMI 477 - AT - Central Excise

CENVAT Credit - inputs/capital goods - allegation that MS rounds, MS Tor, MS angles, MS channels, MS flat, MS joist, plywood lead scrap and aluminium scrap received in the factory which are neither inputs nor capital goods and which had not been utilized in or in relation to manufacture of final products - contention of the appellant is that they are exporting cast article of iron and steel and for that they require packing material which they are making from MS Rounds, MS Tor, MS angles, MS channels, MS flat, MS joist, plywood lead scrap and aluminium scrap. HELD THAT - The learned Commissioner in his finding has not disputed receipt of cenvatable material and their duty paying character. RG-23A Part-I/RG-23C Part-I Register maintained during the material period indicate that the duty paid on material was used entirely. Learned Commissioner has also recorded in his finding that against the spot memo issued to them in course of audit, the said assessee mentioned that the MS Rounds, MS Tor, MS angles, MS channels, MS flat, MS joist, plywood lead scrap and aluminium scrap has been utilized for manufacturing of packing material. Prima facie, we find that the contention is that during the material period, they have exported the quantity of 40,000 MT (Approx.) and the input utilized for the packing material was only 2,000 MT approx. which is only 2%, which is also not disputed by the Commissioner. In such a situation we do not find any substance in the charge that the inputs have not been used in the manufacture of packing materials, which were used as the packing material for export goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availing and utilization of Cenvat credit on certain materials
- Allegation of not utilizing materials in the manufacture of final products
- Confirmation of demand, imposition of penalty, and interest
- Dispute over the use of materials for packing material
- Lack of evidence of utilizing materials for packing material
- Discrepancy in the quantity of materials used for packing compared to export quantity
- Challenge to the impugned order

Analysis:

The appeal in this case was filed against an Order-in-Original passed by the Commissioner of Central Excise, Kolkata-IV. The appellants were engaged in manufacturing various products falling under specific Tariff Sub-headings. It was alleged that they availed and utilized Cenvat credit on certain materials, amounting to a specific sum, during a particular period. The dispute arose as the materials in question, such as MS rounds, angles, channels, lead scrap, and aluminium scrap, were claimed to be used for purposes other than in the manufacture of final products. The adjudicating authority confirmed the demand under relevant provisions and imposed a penalty equal to the amount.

The appellant contended that the materials were used for manufacturing packing materials for export goods. They argued that the inputs were duly recorded in their accounts and used exclusively within the factory premises for fabrication of crates. The appellant maintained that the goods were always exported in packed condition, emphasizing the necessity of packing materials for the safe transit of cast articles of iron. They presented evidence such as photos of packed goods and highlighted the practice of using specific materials for packing in the industry. The appellant also justified the use of aluminium and lead scrap in the manufacturing process for better casting results and accurate weight determination.

The Revenue representative supported the impugned order, while the appellant emphasized the necessity and utilization of the materials for packing purposes. The Tribunal examined the records and contentions of both parties. It was noted that the appellant had exported a significant quantity of goods during the material period, with only a small portion of the inputs utilized for packing material. The Commissioner did not dispute the quantity used for packing, leading the Tribunal to find no substance in the charge that the inputs were not utilized for manufacturing packing materials. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting the substantial utilization of materials for packing purposes in the context of exporting goods. The decision emphasized the importance of maintaining proper records and justifying the use of inputs for specific manufacturing processes, ultimately leading to the setting aside of the initial order.