2013 (10) TMI 194 - HC - Central Excise

Supreme Court affirms Tribunal's decision on Cenvat credit for Welding Electrodes & input services

Commissioner, Customs & Central Excise Versus M/s Ace Glass Container Ltd.

The Supreme Court upheld the Tribunal's decision, affirming the respondent's entitlement to Cenvat credit for Welding Electrodes, Plastic Crates & ... Input Services - Welding Electrodes, Plastic Crates & Pallets as well as credit on input services viz. taxi service, mobile phones and telephones – Held that:- Plastic Pallets are used in or in relation to manufacture of final products, as it has been specifically accepted that the Plastic Pallets are required for warehousing of bottles to avoid seepage in the bottle cartons; in other words, to ensure that the bottle remains bottle until such time it is cleared from the factory or the manufacturing premises. As would be evident from the show-cause notice, since the Plastic Crates were taken out from the factory premises in order to enable printing on the bottles those were manufactured, it was thought that the user of Plastic Crates was not in relation to manufacture of final products - It has not been doubted that the manufacture of the final product comes to an end only after the printing is done - While formulating the show-cause notice, reference was made to Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Rule 8 makes it abundantly clear that, at the stage of complying with the provisions of Rule 8, excisable goods may be taken for in the production or manufacture of the other articles - The fact remains that the bottle, as was manufactured on being printed, becomes a printed bottle - The setup of the respondent is to manufacture printed bottle for the purpose of sale - there cannot be any dispute that the Plastic Crates are used in or in relation to manufacture of final product, i.e. the printed bottle. Insofar as the input services are concerned, as has been noted by the Tribunal, it was never contended that such services were not used by the respondent in relation to the manufacture of final products - In other words, while issuing the show-cause notice, the claim of the respondent that the subject input services are being used by the respondent in relation to manufacture of final products was not disputed and, accordingly, there is no scope of interference with the finding recorded by the Tribunal in relation to input services – Decided against Revenue. Issues:1. Cenvat credit entitlement for Welding Electrodes, Plastic Crates & Pallets, and input services.2. Interpretation of Rule 2(b) and Rule 2(g) of the Cenvat Credit Rules, 2002.3. Comparison of Rule 2(a), Rule 2(k), and Rule 2(l) of the Cenvat Credit Rules, 2004.4. Admissibility of Cenvat credit on Plastic Crates & Pallets.5. Usage of input services in relation to the manufacture of final products.Analysis:1. The respondent received a show-cause notice challenging their entitlement to cenvat credit for various items and services. The Joint Commissioner passed an order, leading to an appeal before the Commissioner of Appeals. The respondent succeeded in some aspects but failed in others. The Tribunal later allowed the respondent's claims related to Welding Electrodes, Plastic Crates & Pallets, and certain input services, prompting the appellant to appeal.2. The Tribunal justified the respondent's claim for Welding Electrodes citing a judgment from the Rajasthan High Court. The appellant's challenge to this judgment's validity before the Supreme Court remained unclear. The Tribunal also supported the claim for Plastic Crates & Pallets based on a decision from a larger Bench. The appellant's action regarding this decision's appeal was uncertain. The credit for input services was allowed as the show-cause notice did not dispute their use in manufacturing.3. The court delved into the definitions of inputs under the Cenvat Credit Rules, 2002 and 2004. While analyzing Welding Electrodes, the court found them to align with the definition of inputs as goods used in or in relation to the manufacture of final products. The court emphasized the distinct categories of goods within the definitions, supporting the Tribunal's decision.4. Regarding Plastic Crates & Pallets, the show-cause notice initially questioned their admissibility for cenvat credit. However, it inadvertently acknowledged the necessity of Plastic Pallets in the manufacturing process. The court determined that Plastic Crates were indeed used in relation to the manufacture of final products, contrary to the initial assessment.5. The court upheld the Tribunal's decision on input services, noting that their usage in the manufacturing process was never disputed. As the services were integral to the production of final goods, the court found no grounds for interference. Consequently, the court dismissed the appeal, affirming the Tribunal's findings on all contested issues.