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TMI Blog2011 (12) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... availed and utilized by them later in the clearance of the finished excisable goods. 2. After importing the said raw materials namely, logs and timbers which are of 35 ft. to 40 ft. in length, are stored at their log-yard at Dostipur, which is located about 12 kms. away from their factory. At this log-yard, the imported wooden logs and timbers are immersed in water for a period ranging from 15 days to 2 months and thereafter, cut into the required sizes of around 6 ft. to 8 ft. in length so as to make it suitable for peeling in machines installed in their factory to be used in or in relation to the manufacture of the finished goods. It is the case of the Department that the appellant had wrongly availed the CENVAT credit on the Additional Duty of Customs (CVD) before receipt of the said inputs namely, wooden logs and timbers, in the factory, and had accordingly contravened the provisions of Rules 4(1) and 3(4) of the CENVAT Credit Rules, 2004. Consequently, the CENVAT credit of ₹ 1,72,88,203.00 on the CVD paid as reflected in the Bills of Entry during the period from April, 2006 to September, 2007 are inadmissible to them. It is also the case of the Department that as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtation. He has submitted that the imported logs are provided with an identification number on each log, its size etc., are mentioned in the packing list of foreign supplier. After the goods are unloaded from the ship, the same are surveyed by the independent surveyors and during such survey, they put their own log number on each log, and the said numbers are reflected in the Survey Reports. The Survey Report mentioned both the log numbers given by the surveyor and the corresponding log numbers provided by the foreign supplier. Each of the imported logs is normally of a length of about 35 ft. to 40 ft. and the weight of each of the logs varied from 2000 Kgs. to 10000 Kgs. approximately. 6. The ld. Sr. Advocate further submits that the factory premises of the appellant is situated in an area of merely 3.95 acres, which is almost fully equipped by various plants, machinery and equipments for its manufacturing activities carried on at the factory and there is hardly any space at the factory for storage and handling of such large sized imported logs and any such large quantities. Besides, the factory is not equipped with any water pond whereas the imported logs are required to be ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain proper correlation. The said blocks are later used in the manufacture of final products namely, veneers and plywood. 8. Learned Advocate contends that there is a systematic procedure of keeping account of each of the logs, and when it is converted into blocks, the same are also duly accounted for in the relevant registers maintained with the log-yard and also on the date of receipt at the factory premises. The only discrepancy that has been pointed out by the Department is that the CENVAT credit on the respective bills of entry ought to have been availed in the books of accounts, after receipt of the inputs in the form of blocks in their factory, but not on the date of receipt of the bills of entry without receiving inputs in their registered factory. 9. Learned Senior Advocate for the appellant has advanced a three-fold argument. At the first instance, he has submitted that the log-yard which is situated at about 12 Kms. away from the factory premises, could be treated as a factory for the purpose of CENVAT credit, inasmuch as certain pre-manufacturing processes were carried out in the said log-yard namely, softening the log and immersing in the water for a period rangi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit on the said inputs at their factory. Further, he has submitted that the whole process from the stage of importing the raw logs in their log-yard upto its receipt in the factory, had been duly accounted for and there is not a single whisper or allegation that all these inputs were cleared without payment of duty by the appellant. Hence, availing of CENVAT credit on the bill of entry at the factory at the same time when the inputs were received at their log-yard, cannot be considered as irregular and violative of the provisions of Rules 4(1) and 3(4) of the Cenvat Credit Rules. In support of his contention on the applicability of Rule 4(5), the learned Counsel has relied on the following judgments :- (a) 2007 (220) E.L.T. 471 (Tri.-Mum.) (Indorama Textiles Ltd. v. CCE) This judgment of the Hon ble Tribunal was approved by the Hon ble Bombay High Court in 2010 (260) E.L.T. 382 (Bom.) and the SLP filed by the Revenue was thereafter dismissed by the Hon ble Supreme Court in 2010 (260) E.L.T. A83. (b) 2011 (266) E.L.T. 217 (British Biologicals (Unit-II) v. CCE); (c) 2006 (197) E.L.T. 97 (Haldia Petrochemicals Ltd. v. CCE); (d) 2007 (220) E.L.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintained at the log-yard relating to the said inputs. 14. Learned A.R. has submitted that in view of the specific provisions contained at Rule 4(1) of the CENVAT Credit Rules, 2004, the credit in respect of the inputs may be taken immediately on receipt of the inputs in the factory and the said provisions should be read in its context and literal interpretation of the said Rule is warranted in view of the ratio of the Hon ble Supreme Court in the case of Trutuf Safety Glass Industries v. Commissioner of Sales Tax, UP [2007 (215) E.L.T. 14 (S.C.)] and in the case of Baidyanath Ayurved Bhawan (P) Ltd. v. Excise Commissioner, UP [1999 (110) E.L.T. 363 (S.C.)]. It is also his submission that CENVAT credit availed in contravention of the provisions of the CENVAT Credit Rules leads to penal consequence under Rule 15 of the CENVAT Credit Rules and therefore, it is mandatory in character in view of the judgments of the Hon ble Supreme Court in the case of State of Jharkhand v. Ambay Cements [2004 (178) E.L.T. 55 (S.C.)] and Vidushi Wires Pvt. Ltd. v. UOI [2003 (156) E.L.T. 168 (Bom.)]. It is his contention that the burden of proof in availing the CENVAT Credit always rests on the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to them, the offences under Rule 8 of the Central Excise Rules were automatic. Also he has submitted that the element of suppression and contravention of the Rules with intent to evade duty had been established being dealt with at length by the adjudicating authority. 15. In his rejoinder, learned Senior Advocate for the appellant has submitted that this is not correct to say that the inputs were first received by them in the log-yard and later, transferred after carrying out the process of curing and cutting, and they had not been duly accounted in both these places. He has categorically submitted that the receipt of inputs in the log-yard are duly accounted for and after carrying out the processes of curing and cutting, necessary identification marks as mentioned by him earlier, are provided. Further, the transfer of the semi-finished inputs from log-yard to their registered factory premises was made under challans, and the challans are duly entered in the Gate Register maintained at the registered factory premises. He has undertaken that the appellant are at all the time willing and prepared to correlate each of the logs received in the log-yard and later, transferred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the log-yard where the inputs are initially received though situated at a distance of 12 Km. away from the registered factory premises, ought to be considered as an extension of their factory, since the log-yard belongs to them and is exclusively meant for storage of the inputs and also used in carrying out certain manufacturing processes. Advancing reasons for the necessity of such additional premises (log-yard), the appellant has submitted that the existing registered factory premises become inadequate for storage of large quantity of inputs, and also in carrying out the process of curing and cutting which are part of manufacturing process. We find that there is no dispute on these facts. In this scenario, reading the definition of factory laid down at Section 2(e) of the Central Excise Act, 1944 reproduced below is relevant :- 2(e) factory means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on; 18. A simple reading of the said defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to be eligible to Cenvat credit if the definition of factory as argued by the Revenue is accepted. 19. In the present case, we find that the log wood imported by the appellant are initially subjected to the process of curing and cutting in their own premises, i.e. at the log-yard, dedicated only for the said purpose, later the processed inputs are transferred to the registered factory premises for use in or in relation to the manufacture of the finished goods. In the extreme case accepting for a while the plea of the Revenue that the factory referred in the rules is only a registered factory even then, in the facts and circumstances of the present case, at best it could be a procedural aberration of not getting the log-yard registered as factory under the relevant provisions of the Central Excise Act and the Rules made thereunder, but that would not result into denial of the CENVAT credit on the inputs duly received by the appellant later in their registered factory premises and used in or in relation to the manufacture of finished goods. Therefore, we are of the opinion that the definition of factory ought to be examined in the context and on the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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