CESTAT, BANGALORE BENCH
Wolfra Tech (P) Ltd.
Commissioner of Central Excise, Manglore
Final Order No. 407 of 2012
APPEAL NO. E/94/2010
JUNE 15, 2012
1. This appeal filed by the assessee is against demand of duty of Rs. 26,400/- on a D.G. set. The appellant-company has several manufacturing units in Hebbal Industrial Estate, Mysore. The main unit at B7, Hebbal Industrial Estate cleared a D.G. set to one of the other units located in Plot No.311, Part II, Hebbal Industrial Area under a delivery challan dt. 19/12/2003 and the same was installed in the premises of the latter unit. All the manufacturing units (including the main unit at B7 and the other unit at Plot No.311) of the appellant-company are separately registered with the Department. The manufacturing activity undertaken by all the units is the drawing of wires of Tungsten and Molybdenum from higher thickness to lower thickness, which activity is undertaken in different stages in different units of the appellant. The final products are Tungsten and Molybdenum wires drawn to the minimum thickness and cleared from the main unit on payment of duty. These facts are not in dispute. The issue arising in the present case is whether the main unit was liable to reverse the CENVAT credit taken on the capital goods at the time of its clearance under delivery challan to the other unit at Plot No.311. The adjudicating authority held in favour of the appellant. The Commissioner (Appeals) held that the main unit ought to have reversed the CENVAT credit taken on the D.G. set, at the time of its Credit Rules, 2004. Hence the impugned demand of duty equivalent to the CENVAT credit in question.
2. The learned consultant for the appellant submits that only the main unit has been clearing the final products on payment of duty and that all other units have been undertaking job work on the inputs and supplying semi-finished products to the main unit. Though the job-worker units are separately registered with the Department as manufacturing units, they are not independent manufacturers and hence not maintaining separate CENVAT credit accounts. These units do not have to pay duty on the job-worked goods which are supplied to the main unit. The job-worker units do not undertake any independent manufacturing activity either. On these facts, the learned consultant submits that the impugned demand is liable to be set aside on the ground of revenue neutrality. In any case, according to the learned consultant, the substantive benefit of CENVAT credit on the capital goods cannot be denied to the appellant on any procedural ground.
3. The learned consultant relies on CCE v. Krishna Engg. Co. (P) Ltd. 2011 (267) ELT 393 (Tri. Chennai), CCE v. Central Electronics Ltd. 2011 (271) ELT 586 (Tri. Delhi) and CC&CE v. DNH Spinners 2009 (244) ELT 65 (Tri. Ahmd.)].
4. Per contra, the Deputy Commissioner (AR) submits that the CENVAT Credit Rules require the appellant to reverse the credit taken on capital goods at the time of removal of the goods ‘as such’ from their factory. As this was not done by the main unit of the company at the time of removal of the capital goods to another manufacturing unit of the company, they are liable to pay duty equal to the CENVAT credit taken on the capital goods. This legal requirement, according to the learned Deputy Commissioner (AR), cannot be relaxed on any of the grounds stated by the appellant. In this connection, he has relied on Harsh International (P.) Ltd. v. CCE 2011 (269) ELT 225 (Tri. Delhi).
5. In his rejoinder, the learned consultant for the appellant seeks to distinguish the case of Harsh International (P.) Ltd. (supra).
6. Both sides are ad idem on one point – revenue neutrality.
7. I have considered the submissions. It is not in dispute that every stage of conversion of thicker to thinner wire is a manufacturing activity. If that be so, all the units of the company are undertaking a manufacturing activity. Admittedly, all the units are separately registered with the Department. Therefore, all of them are registered manufacturers of Tungsten and Molybdenum wires. Each unit, therefore, has to maintain the relevant statutory records including CENVAT credit accounts. Each unit is entitled to take CENVAT credit on the capital goods and inputs received by it from another unit and is liable to pay duty of excise on the manufactured products. Of course, such duty can be paid by utilizing CENVAT credit. In this scenario recognized by Central Excise law, if one unit clears its capital goods ‘as such’ to another, it has to reverse the CENVAT credit taken thereon. Of course, the recipient unit can take such credit. Ultimately, the situation emerges as revenue neutral.
8. In this case, the learned Deputy Commissioner (AR) has submitted that the option of all the units being brought under a single registration is available to the appellant, for which a proper application has to be made by the company to the Commissioner of Central Excise. It is submitted that, as all the units of the company are located within 1 km. radius, there can neither be any legal impediment nor any practical difficulty for all the units to work as a single factory under a single registration. I think, this would be the ideal option for the appellant. In this dispensation, there will be no question of individual units maintaining separate statutory records or paying duty on the manufactured intermediate product inasmuch as the final products will be cleared on payment of appropriate duty. But the fact remains that such a dispensation is yet to come true.
9. On the facts of the present case as already discussed, there is a revenue-neutral situation and, therefore, the Department will not be justified in enforcing the subject demand of duty against the appellant. In this view of the matter, the demand is set aside and the appeal is allowed.