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TMI Blog2014 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... of 18,088 M.T. and 325.308 M.T. respectively of CRNGO steel sheets with export obligation of U.S. $ 19,83,000/- and U.S. $ 3,75,742/- respectively. Against these two advance licences, M/s Kelvinator of India Ltd. imported 1510.378 M.T. and 323.880 M.T. respectively of CRNGO steel sheets free of customs duty for use in the manufacture of finished goods for export. M/s Kelvinator of India Ltd. failed to meet the export obligation and for this default, two show cause notices were issued to them by the office of DGFT. Both the show cause notices asked M/s Kelvinator of India Ltd. to show cause as to why action should not be taken against them for forfeiture of the bank guarantee and enforce other conditions of the bond/LUT executed by them. Subsequently, the DGFT's office by two separate orders issued 'denied entry memo' in respect of above-mentioned advance licences putting the licences under abeyance. These 'denied entries memos' have been issued to 'M/s Whirlpool of India Ltd. formerly M/s Kelvinator of India Ltd.' as in 1995, M/s Kelvinator of India Ltd. had been taken over by M/s Whirlpool of India Ltd. and, as such, the two companies had merged. On representation of M/s Whirlpool ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 01/09/03 of the Settlement Commission, the appellant on 23/02/04 took Cenvat credit of Rs. 95,76,342/- in their Cenvat credit account and also informed the Department about this. However, the Department issued a show cause notice dated 17/12/04 for disallowing the Cenvat credit on various grounds including the ground that the appellant had failed to establish that the CRNGO steel sheets in respect of which this Cenvat credit had been taken were used by them in or in relation to manufacture of their final products. Another ground mentioned in the show cause notice was that this credit had been taken without the cover of any bill of entry and also that the same has been taken after a period of more than six months from the date of payment of duty. 1.5 The above show cause notice was adjudicated by Commissioner vide order-in-original dated 29/07/05 by which the Commissioner confirmed the above-mentioned Cenvat credit demand alongwith interest and imposed penalty of Rs. 5,00,000/- on the appellant. The Commissioner disallowed the Cenvat credit and confirmed its demand observing that as per the appellants contention - M/s Kelvinator of India ltd. had used the CRNGO steel sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actory cannot be construed to impose an arbitrary limit of six months for availment of Cenvat credit, that Rule 7 (1) (b) of the Cenvat Credit Rules, 2002 is also inapplicable, as this is not the case, where the duty had been evaded by the appellant, that mere filing of petition by the appellant before the Settlement Commission admitting their duty liability cannot be considered as admission of guilt so as to invoke the provisions of Rule 7 (1) (b) of the Cenvat Credit Rules, that in this regard he relies upon the judgment of the Tribunal in the case of Essar Steel Ltd. vs. CCE, Surat -I reported in 2008 (222) E.L.T. 154 (Tri. -Ahmd.), which had been affirmed by Hon'ble Gujarat High Court vide judgment reported in 2011 (269) E.L.T. 331 (Guj.), that the observations of the Commissioner that the appellant have failed to submit any proof regarding receipt of the goods in their factory at Ballabhgarh during 1993-1994 is also incorrect, as the receipt of the goods by the appellant in their factory in 1993-94 and their use in the manufacture of Rotors and Stators for compressors which had been cleared on payment of duty, is not disputed by the Department, that the Departments objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant for manufacture of Rotors and Stators/compressors/ refrigerators cleared on payment of duty, that if the use of the CRNGO steel sheets imported free of duty were not by the present appellant - M/s Whirlpool of India Ltd., they would not be eligible for Cenvat credit even if for failure to meet the export obligation, they have paid the duty on those goods, that Cenvat credit is available to a manufacturer only if the goods duty paid inputs are used by him in or in relation to the manufacture of final product, that in this case the Commissioner has correctly observed that the appellant have failed to produce the documents to show the receipt and use of the goods in respect of which the Cenvat credit had been taken in their factory, that in any case, the Cenvat credit is not available, as the same has been taken long after payment of duty while in terms of the Rule 4 of the Cenvat Credit Rules, the credit must be taken immediately, that in this regard she relies upon the judgment of the Tribunal in the case of Andhra Electro Galvanising Works vs. CCE, Hyderabad reported in 1995 (80) E.L.T. 322 (Tribunal) and also the Apex Court's judgment in the case of Osram Surya (P) Ltd. vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 13,98,36,515/- ; (i) the appellant paid the customs duty of Rs. 6,11,73,881/- on 28/10/02 and filed an application before the Settlement Commission admitting their above-mentioned duty liability and praying for waiver of interest and immunity from penalty, fine, and prosecution ; (j) the Settlement Commission vide final order dated 01/9/03 ordered that the duty of Rs. 6,11,73,881/- already paid by the appellant be treated as discharge of their customs duty liability and waived the interest on duty and also granted immunity from penalty final prosecution ; (k) the above order of the Settlement Commission also directed that if the appellant are eligible the Commissioner would consider permitting Cenvat credit of additional customs duty of Rs. 95,76,342/- ; and (l) while the customs duty alongwith the additional customs duty had been paid by the appellant on 28/10/02, in pursuance of the Settlement Commissions order they took its Cenvat credit on 23/2/04 under intimation to the Department. 6.1 The point of dispute is as to whether in view of the above factual ground, the appellant would be eligible for Cenvat credit. 6.2 The Department seeks to deny the Cenvat credit mainly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly if the stock of inputs lying unutilized as such or in process or the capital goods, in respect of which the Cenvat credit had been taken, are also transferred alongwith the factory. Thus, to the extent, the Cenvat credit lying unutilized in the account books of company A is in respect of the goods which had already been consumed by A prior to its take over and are not available for transfer, the credit cannot be transferred to the Cenvat credit account of company B which has taken over the company A. Rule 8 of the Cenvat Credit Rules, is in accordance with the general principle that Cenvat credit would be available to a manufacturer in respect of only those duty paid inputs which are actually used by him in his factory in the manufacture of final products. It is this principle which has to be applied for resolving the dispute in this case. 8. In the present case, as discussed above, the CRNGO steel sheets had been imported by the previous owner of the factory M/s Kelvinator of India Ltd. in 1993-94. At that time, the import was made free of duty against advance licences with export obligation. During 1995-96, the factories of M/s Kelvinator of India Ltd. were taken over by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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