2014 (9) TMI 635 - HC - Central Excise

CENVAT Credit - use of plastic crates - A.O. refused to allow the claim of the assessee-defendant by observing that plastic crates are not being used in or in relation to the manufacture of final products and hence not entitled for CENVAT credit - Held that - Plastic crates were being used for the safe transportation of the finished goods i.e. Auto Electric parts from the factory to the customers. The plastic crates were being used for the safe transportation of the goods from the place of the manufacture to the place of consignee and the cost of plastic crates is included on pro-rata basis in the assessable value of the finished excisable goods on which duty was being discharged. in the assessee-respondents own case, the MODVAT credit had been allowed by the Department in earlier assessment years on the packing material - no reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained along-with the reasons mentioned therein - Decided against Revenue.

Summary

Issues:
Department appealing against Customs, Excise & Service Tax Appellate Tribunal's order. Substantial questions of law regarding plastic crates as packing material, CENVAT credit eligibility, and lawfulness of penalties imposed.

Analysis:
The appeal was filed by the Department challenging an order passed by the Customs, Excise & Service Tax Appellate Tribunal. The substantial questions of law admitted by a coordinate Bench focused on whether plastic crates used for transporting auto parts and brought back for reuse could be considered packing material, and if the inclusion of their cost in assessable value qualified for CENVAT Credit. Additionally, the legality of penalties imposed on the respondents was questioned under relevant provisions of the Central Excise Act and rules.

During the relevant year, the assessee was involved in manufacturing Auto Electric Parts and had availed CENVAT credit on plastic crates used for packing the final products. The Assessing Officer denied the claim, stating that the plastic crates were not used in or in relation to the manufacture of final products. However, both appellate authorities ruled in favor of the assessee, allowing the claim of Rs. 4,96,015.

The Tribunal noted that the plastic crates were used for safe transportation of finished goods from the factory to customers, and their cost was included in the assessable value of the goods. Citing precedents, the Tribunal allowed MODVAT credit on packing materials if their cost was included in the final product's value. The Department had also allowed MODVAT credit on packing material in the assessee's previous assessment years.

Considering the facts and legal precedents, the High Court upheld the Tribunal's order, finding no reason to interfere. The judgment favored the assessee, leading to the dismissal of the Department's appeal. The decision was based on established legal principles and the specific circumstances of the case.

In conclusion, the High Court's judgment affirmed the Tribunal's decision, supporting the assessee's entitlement to CENVAT credit on plastic crates used for packing final products. The legal position and precedents cited in the judgment reinforced the reasoning behind upholding the Tribunal's order and dismissing the Department's appeal.