2016 (12) TMI 980 - AT - Central Excise

Denial of CENVAT credit - waste products - Held that - I find that subject waste has arisen in the course of normal manufacturing process and the facts are covered by Hon ble Karnataka High Court decision in the case of Geltec Ltd. 2011 (4) TMI 212 - KARNATAKA HIGH COURT where the Revenue s appeal against the judgement was dismissed and it was held that it is clear that when inputs are removed as such from the factory or the premises of the factory then the Cenvat credit availed, should either be reversed or duty is paid by raising an independent invoice - Even if the said waste is excisable and duty is payable, that in no way enables the authorities to insist on reversal of Cenvat Credit or payment of excise duty - Though gelatin waste is also excisable, when it is destroyed the Commissioner has the power to waive the payment of excise duty payable on such excisable item. Considering the fact that waste has been destroyed in the course of normal manufacturing process and which is everyday occurrence and following the observations made by various higher judicial fora quoted above, the appeal is allowed with consequential relief - decided in favor of appellant-assessee.

Summary

Issues:
Appeal against denial of Cenvat credit for waste destruction.

Analysis:
The appellant challenged the denial of Cenvat credit by the Commissioner (Appeals-I) in the appeal against the Order-in-Original. The waste generated by the appellant, including floor waste, spillage, and rejected packing material, was argued to be destroyed daily and not fit for consumption or marketing. The appellant contended that the Cenvat credit linked to the raw material of the waste should not be denied, citing various case laws to support their position.

The Revenue, represented by the ld. AR, maintained the findings of the lower authorities, emphasizing that under Rule 21 of the Central Excise Rules, 2002, the appellant should have applied for remission of duty for the destroyed goods. The AR referred to a CESTAT decision in the case of Asian Paints to support their argument.

Upon careful consideration of the submissions and case laws cited by both parties, the Tribunal found that the waste in question arose during the normal manufacturing process. The Tribunal referenced decisions by the Hon’ble Karnataka High Court, CESTAT, and the Hon’ble Madras High Court to support its conclusion that the waste destruction was part of the manufacturing process and thus eligible for Cenvat credit. Notably, the Tribunal highlighted that the waste was destroyed in the course of manufacturing and that various judicial authorities had addressed similar situations favorably.

The Tribunal specifically cited the Geltec Ltd. case, where the High Court observed the conditions under which Cenvat credit should be reversed or duty paid, emphasizing that the waste generated in the manufacturing process need not be removed from the factory premises for the credit to be eligible. Furthermore, the Tribunal referenced the Joy Foam Pvt. Ltd. case, where the court approved the claim for remission of duty on goods destroyed due to unavoidable accidents during the manufacturing process.

Additionally, the Tribunal referred to the Fenner India Ltd. case, where it was established that the destruction of inputs during the manufacturing process did not require the reversal of Cenvat credit, especially when no remission of duty had been claimed. Based on these legal precedents and the nature of waste destruction in the appellant’s manufacturing process, the Tribunal allowed the appeal, granting consequential relief as applicable.