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CENVAT credit of inputs lost during manufacturing process as floor sweepings is allowed- CESTAT

The facts of the case are that assessee is a manufacturer of chocolates and coco products. During the course of the manufacturing final product certain floor spillage and sweeping arises which assessee is destroying.

Brief Facts of the case

The facts of the case are that assessee is a manufacturer of chocolates and coco products. During the course of the manufacturing final product certain floor spillage and sweeping arises which assessee is destroying. Revenue is of the view that on these sweepings the assessee is not entitled to take Cenvat Credit. Therefore, proceedings for the period April 2006 August 2011 were initiated against the assesee to deny Cenvat Credit on the inputs contained in these floor sweepings. The matter was adjudicated, Cenvat Credit was denied consequent demand on duty was confirmed along with interest and equivalent amount of penalty was imposed. On appeal before the Commissioner (A), the Cenvat Credit for the period April 2006 September 2007 has been allowed on the premises that Rule 3(5)(c) of Cenvat Credit Rules 2004 was not in existent but for the period thereafter he denied Cenvat Credit as per Rule 3(5)(c) of the Cenvat Credit Rules 2004. Aggrieved from this order both are in appeal before CESTAT.

Contentions of the Assessee

The assessee contended that input has been taken into the process of manufacturing and during the course of manufacturing these floor sweepings arises. The floor sweeping is the input that has gone into the process of manufacturing. Therefore, these goods are not liable to duty. Consequently, these are waste arising during the course of manufacturing and they are not required to reverse the Cenvat Credit on these goods as held by Larger Bench of this Tribunal in the case of Grasim Industries Vs. CCE Indore-2007 (208) ELT 336 (Tri-LB).

The assessee further contended that same view has been taken in the cases of Harinagar Sugar Mills Ltd. Vs. CCE Mumbai-III-2014 (310) ELT 775 (Tri-Mum), Kailash Soap Pvt. Ltd. Vs. CCE Bolpur-2008 (231) ELT 176 (Tri-Kolkata).

The Assessee further contended that in the case of CCE Chennai Vs. Fenner India Ltd.-2014 (307) ELT 516 (Mad) the Hon’ble High Court of Madras held that the assessee was not required to file remission claim under Rule 21 of the Cenvat Credit Rules 2002 for the goods destroyed as floor sweepings after relying on the decision in the case of CCE Vs. Biopac India Corporation Ltd.-2010 (258) ELT 56 (Guj).

Contentions of the Revenue

The Revenue contended that as these goods are not dutiable, therefore, Cenvat Credit is not entitled to the assessee. It is further contented that as they are not entitled for remission claim under Rule 21 of the Central Excise Rules 2002 and these goods are not dutiable, therefore, Cenvat Credit is not available. The revenue relied on the decision in the case of Gujarat Narmada Fertilizers Co. Ltd. Vs. CCE-2009 (240) ELT 661 (SC) and Virat Crane Agri-Tech Ltd. Vs. CCE Guntur-2011 (271) ELT 510 (AP) which has been affirmed by the Hon’ble High Court of Rajasthan reported in 2013 (292) ELT A99 (Supreme Court). It is further submitted that as per Rule 3(5)(c) of the Cenvat Credit Rules 2004 the assessee is required to take Cenvat Credit on the inputs which have been lost during the process of floor sweeping etc.

Held By Hon’ble CESTAT, New Delhi

The Hon’ble CESTAT, New Delhi stated that in the decisions relied by the revenue, the appellant has failed to satisfy the commissioner whether the goods destroyed were unfit for use or not. There was no issue before the Hon’ble High Court that input lost during the process of manufacturing and the assessee has claimed Cenvat Credit which was denied by the Hon’ble High Court. Therefore, said decision has no relevance to the facts of this case.

The Hon’ble CESTAT further stated that in the case of Gujarat Narmada Fertilizers Co. Ltd. (Supra) the issue before the Hon’ble Apex Court was that when the final product was exempt from duty in that case of assessee is entitled to take Cenvat Credit or not. Admittedly, in this case final product is dutiable and assessee is not manufacturing any exempted goods. Therefore, the said decision has no relevance to the facts of this case at all.

Further, in the case of Fenner India Ltd. (Supra), the facts are that inputs on which Cenvat Credit was availed were destroyed when work was in progress. Exactly the facts of this case are similar to the facts of the case of Fenner India Ltd. (Supra) and in that case the Hon’ble High Court has held that the assessee is not required to file claim of remission of duty under Rule 21 of Central Excise Rules 2002 and provisions of Rule 3(5)(c) of the Cenvat Credit Rules 2004 are not applicable.

Therefore, following the decision in the case of Fenner India Ltd. (Supra), the Hon’ble CESTAT held that the provisions of Rule 21 of the Central Excise Rules 2002 and provisions of Rule 3(5)(c) and Cenvat Credit Rules 2004 are not applicable to the facts of this case. Consequently, the goods lost in work in process the assessee is entitled to take Cenvat Credit.

In view of the above, Revenue’s appeal is dismissed and assessee’s appeal is allowed with consequential relief.

Categories: Excise Duty
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