SUMITOMO CHEMICAL INDIA LIMITED VERSUS C.C.E & S.T. BHAVNAGAR

Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO.3

Excise Appeal No. 10194 of 2013

(Arising out of OIA-109/2012-BVR-/SKS/COMMR-A-/AHD dated 12/11/2012 passed by Commissioner of Central Excise-BHAVNAGAR)

 

SUMITOMO CHEMICAL INDIA LIMITED

VERSUS

C.C.E & S.T. BHAVNAGAR

APPEARANCE:

Ms. Shamita Patel, Advocate for the Appellant

Shri. V.G. Iyengar, Superintendent (AR) for the Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. RAJU

 

 

 

 

 

 

RAMESH NAIR

FINAL Order No. A/ 10875 /2023

DATE OF HEARING: 16.12.2022 DATE OF DECISION: 13.04.2023

 

This is an appeal filed by M/s. Sumitomo Chemical India Limited against the Order-In-Appeal OIA-109/2012-BVR-/SKS/COMMR-A-

/AHD dated 12.11.2012 passed by the Commissioner (Appeals-III), Central Excise, Rajkot.

2. The brief facts of the case are that the appellants had availed the modvat credit of Rs. 2,76,650/- under erstwhile Rule 57A ofCentral Excise Rules, 1944 on the purchase of item ‘Chloropyriphos’ falling under chapter heading 3808.10 of Central Excise Tariff Act, 1985 which is also one of the finished products. The said products was purchased in bulk and repacked in the factory of production in smaller packs of different sizes and had been cleared on payment duty. It appeared that the modvat credit availed by them was not admissible to them in terms of erstwhile Rule 57A of Central Excise Rules, 1944, as the process of repacking into smaller pack from bulk cannot be considered as manufacturing activity in terms of Section 2(f) of Central Excise and Salt Act,

 

1944 and the product ‘Chloropyriphos’ so purchased in bulk cannot be regarded as ‘input’ in terms of Rule 57 A of Central Excise Rules, 1944 and modvat credit was required to be recovered/ reversed under erstwhile Rule 57I of Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944.

 

3. Accordingly, appellant was issued show cause notice

28.12.1994 which was adjudicated by the lower authority vide his order dated 15/16.02.2012 vide which he disallowed modvat credit of Rs. 2,76,650/- and ordered reversal /recovery of the same under Rule 57 I (iii) of Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944. Being aggrieved with the order-in-original, appellant filed appeal before the Commissioner (Appeals), who vide impugned order –in-appeal upheld the order of lower authority, hence the present appeal before the tribunal.

 

4. Shamita Patel, Learned Counsel appearing on behalf of the appellant submits that it is settled law that when goods are cleared on payment of duty and such payment of duty is accepted by the department, modvat credit of duty on the inputs cannot be denied on the ground that the process undertaken does not amount to manufacture. He placed reliance on the following judgments.
   • Commissioner Creative Enterprises -2009(235)ELT 785
   • CCE Ajinkya Enterprises – 2013(294)ELT 203(Bom)
   • CCE Vishal Precision Steel Tubes and Strips Pvt. Ltd. – 2017(349)ELT 686 (Kar)
   • IVP Vs. CCE-2012-TIOL-1505-CESTAT-MUM
   • Commissioner of Central Excise & Customs Fine Packaging Pvt. Ltd. 2016(335)ELT 117
   • Commissioner of Central Excise Tata Steel Ltd. – 2017(349) ELT 783
   • PSLHolding  Vs. CCE 2003 (156)ELT 602
   • Ajay Ltd. Vs. CCE 2006-TIOL-667-CESTAT – MUM
   • OrionRopes  Ltd. Vs. CCE 2006-TIOL-391-CESTAT- MUM
   • Systematic Steel Inds Ltd Vs. CCE 2005-TIOL-272-CESTAT- MUM
   • StumppSchedule &Somappa  Vs. CCE 2005 (191) ELT 1085

 

• PerfoChem(I)  Ltd. Vs. CCE 2015(315) ELT 237

 

 

5. He also argued that in fact on account of value addition, the appellant had on the retail packs, paid an additional amount ofduty of Rs. 1,55,947/- over and above said Movat credit of Rs. 2,76,650/- and hence there was no loss to the revenue.

 

6. On the other hand, Shri V.G. Iyengar, Assistant Commissioner (Authorized Representative) reiterated the findings of theimpugned order.

 

7. Wehave carefully considered the submissions of both the sides and perused the records, we find that the undisputed fact in this case is that the appellant are engaged in the activity of repacking of the insecticide Chloropyriphos purchased in bulk, into smaller retails packs and cleared the same under the appellant’s brand on payment of excise duty. It is also not disputed that during the impugned period process of repacking of the said goods does not amount to manufacture. Therefore, the issue before us is that whether the MODAVT/CENVAT credit taken by the appellants on Chloroypyriphos which were cleared by them on payment of duty, after the process of re-packing and affixing their brands is legally correct or not.
8. The arguments of the revenue that as per law, the appellant was required not to take Modvat / Cenvat credit on said goods i.e. Chloropyriphosas their activity does not amount to manufacture. Therefore, the Modavt/ CENVAT credit taken by them is wrong and in that event, they are required to reverse the Modvat/ CENVAT credit. In this matter duty was paid by the appellant without any authority of law. Therefore, the question of allowing the credit on input /disputed goods does not arise.

 

 

9. In the matter in hand before us, we find that the appellant have paid more duty than the credit availed after value addition. When dutypaid at the time of clearance equal to or higher than the credit availed, the same is to be treated as reversal of credit. Therefore, no further reversal of credit is required as held by Tribunal in number of cases. Such payment of duty that too in excess of the credit availed tantamount to reversal of credit and there is no need to once again reverse the Modavt/Cenvat credit taken. In a similar situation, the Hon’ble Apex Court in the case of CCE, Vadodara Narmada Chemattur Pharmaceuticals Ltd. [2005 (179) E.L.T. 276 (S.C.)] held that when Cenvat credit wrongly availed is exactly equivalent to the amount of duty paid, the consequence is revenue neutral and hence the demand for such wrong availment of credit is not sustainable in law. The ratio of this judgment squarely applies to the facts of the present case.

 

10. We find that the duty paid by the appellants has been accepted by the department which is admittedly more than the Modavt/CENVAT credit availed by the appellant. Therefore, following the various judicial pronouncements as relied upon by the appellant herein above, we are of the view that the appellant are not required to reverse the credit. Accordingly, the impugned order is set asideand appeal is allowed with consequential relief.

(Pronounced in the open court on 13.04.2023)

 

(RAMESH NAIR) MEMBER (JUDICIAL)

 

Neha

(RAJU) MEMBER (TECHNICAL)