TaxTMI 
TaxTMI 
2018 (1) TMI 1266
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....envat Credit availed earlier when as per provisions of Rule 3(5) of the Cenvat Credit Rules, 2004, when inputs on which Cenvat Credit has been taken are removed as such from the factory premises by the manufacturer of final product, the manufacturer is required to pay amount equal to the cenvat credit availed in respect of such inputs?" 4. Counsel for the appellant has taken us to the para 10 of the order of the Assessing Officer which reads as under :- "To further investigate the nature of such re-exports so as to verify whether the benefit under the above procedure is available or not, the officers of the division visited M/s. Ericsson India Pvt. Ltd., on 30-11-2009. During the visit it was found that the process of manufacture of finished goods in M/s. Ericsson India Pvt. Ltd., is assembly of the components. The components were issued from the store room to the production floor where assembly of the components/finished products takes place. It was stated by the assessee that the product is tested at the production floor. During testing it was known that a particular component is faulty and not functioning. Therefore a material return form is prepared in the production flo....
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....also submitted the copy of TR-6 dated 7-12-2009 intimating the deposit of Rs. 10,724,689/- as a differential customs duty along with the interest in respect of re-export of the components which were received under concessional rate of duty vide Notification No. 24/2005-Cus., dated 1-3-2005 as amended, and were not faulty." 5. Counsel for the appellant has further contended that : A. That the order passed by the Tribunal is illegal and is unsustainable in the eyes of law, and therefore, deserves to be set aside by this Hon'ble Court. It is submitted that the Hon'ble Tribunal has erred by taking the stand that inputs (components) issued from the store room for testing purposes was a part of manufacturing process. Whereas in fact, the assessee issued inputs (components) only for testing purpose to ascertain as to whether the same components are fit for further use or not, if the components are found fit in testing, then the components would be sent to manufacturing process otherwise the said components would be treated as defective or damaged and returned to the supplier. It is pertinent that testing of inputs (components) or raw material prior to its us....
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....nbsp; That CESTAT appears to have taken a contradictory stand with regard to the status of inputs, as on one hand the impugned defective inputs have been treated not cleared "as such" and thus Rule 3(5) of Cenvat Credit Rules, 2004 (for reversal of Cenvat credit) is not attracted whereas while extending the benefit available to exported goods the learned Tribunal considered them as cleared "as such". E. That the impugned order concluding that testing of inputs in question was done either during the manufacturing process or after the assembling of the components and therefore the findings that inputs were found defective or damaged prior to their issuance from the store is factually incorrect. F. That CESTAT order is against the very principle of scheme of CENVAT Credit which allows the credit only in respect of inputs used in or in relation to manufacture of final products as in this case neither the inputs gone into the manufacturing of final products nor the Cost of the same formed part of the final products (as the same were returned to the supplier on cost basis/replacement basis). G. &n....
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....terial on which no process was undertaken by the assessee unit and the same were re-exported as such to the supplier Co., which is the main Co. of the assessee unit, for which no payment was made by the recipient Co. to the supplier Co. For the sake of convenience, the provisions of Sec. 75 of the Customs Act, 1962 are being re-produced hereunder : "Section 75. Drawback on imported materials used in the manufacture of goods which are exported. - (1) Where it appears to the Central Government that in respect of goods of any class or description manufactured, processed or on which any operation has been carried out in India, being goods which have been entered for export and in respect of which an order permitting the clearance and loading thereof for exportation has been made under sec. 51 by the proper officer, or being goods entered for export by post under section 82 and in respect of which an order permitting clearance for exportation has been made by the proper officer, a drawback should be allowed of duties of customs chargeable under this Act on any imported materials of a class of description used in the manufacture or processing of such goods or carrying out any opera....
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....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 the whole of the duty of excise leviable thereon or chargeable to nil rate of duty or not specified as a final product under rule 57A. 33. Considering the stage-wise process indicated earlier, it is clear that the process commences with loading of the float glass sheet on the float table where cutter is used to cut the glass to size. The process of manufacturing commences at this stage. Therefore, if at a subsequent stage before the process of lamination, the defect is noted, it cannot be said that the process of manufacturing did not commence. In view of this, we find substance in the petition and we find no substance in the submission made by the learned counsel for the revenue that it is not open for the Court to examine the matter. The Apex Court has pointed out in Jyotendrasinhji v. S.I. Tripathi, (1993) 201 ITR 611 that fina....
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....ced the petitioner. 35. Thus, it is very clear that the Settlement Commission has misdirected itself in considering that the claims had been accepted by the manufacturer and settled by the supplier of the float glass for arriving at a conclusion that the float glass was not used as input, though, it is clear from the record that after the manufacturing process commenced, and, before the final product was obtained the part being noticed as not up to the mark for safety glass was rejected. The claim cannot be denied on this ground. 7. It is contended that the Supreme Court in Union of India v. Asahi India Safety Glass Ltd. - (2015) 11 Supreme Court Cases 451 = 2015 (320) E.L.T. 179 (S.C.) = 2017 (50) S.T.R. 122 (S.C.) while confirming the order has observed in para 7 which reads as under :- "7. In the instant appeal preferred by the Department against the aforesaid order, the main argument of the Department is that once the Settlement Commission had passed the orders under Section 32E of the Act, the High Court had no jurisdiction to tinker with the same, in exercise of its extraordinary jurisdiction under Article 226 of the Constitution. It is the submission of the....
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....stries v. CCE laying down the same proposition as noted in Rajasthan State Chemical Works. In the process, the High Court has also interpreted Rule 57D and Rule 57A(4) of the Rules. It would be pertinent to mention here that the aforesaid legal position, as stated by the High Court, could not be dislodged by the learned Senior Counsel for the appellant. 14. From the aforesaid it becomes clear that the High Court has not interfered with the facts which were recorded by the Settlement Commission. On the contrary, the facts noted above remained undisputed. On those facts the High Court has simply stated the correct legal position where the Settlement Commission had gone wrong in law. Thus, the High Court has simply applied the correct principle of law on the admitted facts. This, according to us, was well within the powers of the High Court while exercising its jurisdiction under Article 226 of the Constitution. Such remand of the High Court has been held permissible in Jyotendrasinhji v. S.I. Tripathi which was also concerning the powers of the Settlement Commission, albeit under Section 245D(4) of the Income-tax Act. The principle of law remains the same and can be applied in ....
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....l in para 8 of the judgment after considering the Delhi High Court judgment in the case of Asahi India Safety Glass Limited v. Union of India reported in 2005 (180) E.L.T. 5 (Del.) held that such components have to be treated as having been used and hence the assessee cannot be asked to reverse the cenvat credit. Following the judgments of the Tribunal, we hold that these components have to be treated as having been used for the intended purpose and hence the duty demand of Rs. 1,71,07,253/- would not be sustainable and has to be set aside. 8. As regards the duty demand of Rs. 94,29,117/- in respect of the surplus inventory which was re-exported and the duty demand of Rs. 23,15,901/- in respect of the components written-off admittedly these components have not been used for the manufacture of the finished products and, therefore, in our view the Department is justified in invoking Rule 8 of the 1996 Rules for recovery of duty. Therefore, the duty demand of Rs. 23,15,901/- & Rs. 94,29,117/- have to be upheld. 8.1 However, since the components in respect of which the duty demand of Rs. 94,29,117/- has been confirmed have been re-exported, in our view, the customs authorit....