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TMI Blog2018 (5) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been rejected, therefore, the same have not been used in manufacturing for final product, therefore, they are not entitled to take cenvat credit. In this background, a show cause notice was issued to the appellant to deny cenvat credit amounting to Rs. 67,16,069/- availed on the raw materials which was not received back from the job workers and the cenvat credit of Rs. 6,00,613/- was also sought to be denied as these inputs were sent to the job worker for processing but received back by the appellant as rejected/spoiled. The matter was adjudicated and the demand of duty on account of denial of cenvat credit was confirmed along with interest and equivalent amount of penalty was imposed. Aggrieved from the said order, the appellant is before us. 3. The Id. Counsel for the appellant submits that during the course of processing certain waste/scrap generated and the said waste/scrap cleared by the job worker on payment of duty, therefore, the cenvat credit cannot be denied to the appellant relying on the decision in the cases of Mahindra Hinoday Industries Ltd Vs. CCE 2014 (308) ELT 555 (Tri.-Mum), Fobes Aquatech Ltd. Vs. CCE 2008 (230) ELT 629 (Tri. Bang.), Voltamp Transformer Ltd, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uts later on found rejects/spoiled were sent for manufacturing to the job worker and used in manufacturing process, therefore, as per cenvat credit Rules, 2004, the appellant is entitled to avail cenvat credit in the light of the decision the Hon'ble Delhi High Court in the case of Asahi India Safety Glass Limited (Supra) wherein the Hon'ble Delhi High Court has observed as under: 30. If a sheet is rejected or a piece of sheet is rejected, it does not mean that the sheet was not used in the manufacture of safety glass. It is at this juncture again we emphasise that sub-rule(4) of Rule 57A points out that credit is to be allowed on inputs used in the final product and all inputs used in or in relation to the manufacture of the final products, whether directly or indirectly and whether contained in the final product or not the department cannot deny credit of specified duty or even can vary on the ground that part of the inputs contained in any waste, refuse or by-product arising during the manufacture of final product or when the inputs have become waste during the course of manufacture of the final product whether or not such waste or refuse or by-product is exempt from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f manufacture of sugar, it is not manufacture of exempted goods. 10. The said order of the Hon'ble High court has been affirmed by the Hon'ble Apex Court reported in 2015 (322) ELT 769 (SC), therefore, we hold that scrap generated at the end of the job worker is not manufactured for final product, therefore, the Rules 4(6) of the CCR, 2004 are not applicable to the facts of the case. 11. Now we came to the issue whether the appellant is entitled to avail cenvat credit on inputs used in waste and scrap generated at the end of the job worker or not? 12. The said issue is covered by the circular B-4/7/2000-TRU dated 03.04.2000 and various decisions namely in the case of Mahindra Hinoday Industries Ltd. (supra) wherein this tribunal has observed as under: 7. I find that the CBEC Circular has clarified that input contained in nay waste and scrap generated during the course of manufacturing of final product is admissible. Therefore, it is immaterial if the scrap has been generated at the end of job worker who is availing SSI exemption on the scrap. In these circumstances, the appellant is entitled for cenvat credit on inputs which contained in waste and scrap generated at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above decisions. 14. We hold that the appellant has correctly taken the cenvat credit, therefore, the impugned order is not sustainable in the eyes of law. 15. Accordingly, the impugned order is set aside, the appeal is allowed with consequential relief, if any. (Dictated and pronounced in the open court) Ashok Jindal Member (Judicial) Per: Devender Singh Having gone through the order of my learned brother Member (Judicial), I pass a separate order. Issue No.1 16. It has been alleged in the show cause notice that during the period 2004-05 and 2005-06 (upto January, 2006), the appellant received back material valued at Rs. 36,78,636/- sent to the job worker for processing as rejected/spoiled in number. The Cenvat credit of Rs. 6,00,613/- was not reversed by the appellant. The contention of the appellant is that they are not required to reverse the Cenvat credit on the inputs in process which were damaged/spoiled/rejected. They placed reliance on the following judgements: (a) Asahi India Safety Glass Ltd Vs. UOI-2005 (180) ELT 5 (Del.) (b) Ericsson India Pvt. Ltd. Vs. CCE-2005 (2016 (334) ELT 107 (Tri.-Del.) (c) Bakelite Hylam Ltd. Vs. CCE-2005 (192) ELT 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned Advocate submitted that there is no suppression on their part and there was delay in issuance of show cause notice when all the facts were in the knowledge of the department. 20. I find that the appellants have not been forthcoming with the information and were repeatedly seeking time which led to delay in issuance of show cause notice. This situation has been comprehensively elaborated by the Commissioner in para 13 of her order which is extracted below: "13.1 First issue to be decided before me is whether the instant SCN is barred by limitation of time. The record shows that special audit of the assessee was got conducted by the department as per the provisions contained in 14AA of the Central Excise Act, 1944 since the department had reasons to belief that the credit of duty availed by the assessee was not within the normal limits having regard to the nature of the excisable goods manufactured by the assessee. After receipt of special audit report, a copy of the same was forwarded to the assessee by the Range Officer, Range-XXIII, Faridabad vide letter C.No.20-CE/Audit/Escorts/R-XXIII/23/2006 dated 26.10.2006 as per the provisions contained in sub-section (5) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear from the above narration by the Commissioner that the information/reply to the special audit report was submitted by appellant in a procrastinated manner. It is evident that the material fact would not have come to light had verifications under special audit not been conducted by the department. In that background, extended period has been rightly applied by the Revenue. Issue No-2 22. On this issue, I agree with the Member (Judicial). 23. In view of foregoing, the order of the Commissioner pertaining to demand of Rs. 6,00,613/-, interest thereon and penalty of Rs. 6,00,613/- under Section 11AC ibid is upheld. The order pertaining to the remaining demand, interest and penalty is set aside. (DEVENDER SINGH) MEMBER (TECHNICAL) As there are contrary views and difference of opinion between the Members, the points of difference of opinion are framed as under, therefore, the Registrar is directed to place the matter before the Hon'ble President for nominating third Member to resolve the issue. Difference of opinion Where is the facts and circumstances of the case, the Cenvat credit of Rs. 6,00,613/- is required to be reversed by the appellant on the inputs rejected/spoi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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