2005 (98) ECC 463 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri P.G. Chacko, Member (J)

Commissioner of Central Excise, Pondicherry

Versus

Whirlpool India Ltd.

Appeals No. E/807 to 811/2003

[Arising out of Order-in-Appeal Nos. 324 to 328 (Pondicherry), dated 15.7.2003 and passed by Commissioner of Central Excise (Appeals), Chennai]

Final Order No. 837 to 841/2004, dt. 5.10.2004, Certified on 6.10.2004

Modvat Credit

Reversal -- Inputs for manufacture of Washing Machine Cabinet was "Pre-painted Stainless Steel in Coil form" -- Falling under Sub-Heading No. 7210.30 of CETA Schedule -- Revenue have conceded that Pre-painted Stainless Steel Coiled Sheets (input) were not removed as such by assessee -- Hence, there is no question of reversal of Modvat Credit taken thereon -- Demand in SCN is one for reversal of credit under Rule 57-I, based on a premise that input had been removed as such -- Demand cannot survive.

[Para 3]

PRESENT :

Shri C. Mani, JDR, for the appellant.

Shri M.R. Swaminathan, Cons. for respondent.

Cases Cited :

1. Ashok Leyland v. CCE, Chennai, 2002 (83) ECC 325 (T)................................... [Para 2]

2. Kirloskar Electric Co. v. CCE, Bangalore, 2002 (144) ELT 647 (T)...................... [Para 2]

3. Maruti Udyog Ltd. v. CCE, New Delhi, 2003 (86) ECC 608 (Tri.-Del).................... [Para 2]

4. UOI v. J.G. Glass Industries Ltd., 1998 (59) ECC 1 (SC)................................... [Para 2]

Per : P.G. Chacko (Oral)

In these five appeals filed by the Revenue, the issue to be settled is the same. The respondents were engaged in the manufacture of Washing Machines and parts thereof and were availing the benefit of Modvat credit on inputs under Rule 57A of the erstwhile Central Excise Rules, 1944. One of their inputs for the manufacture of Washing Machine Cabinet was "Pre-painted Stainless Sheet in Coil form" falling under Sub-Heading No. 7210.30 of the CETA Schedule. During the relevant period (Apr.`93 to Mar. 2000), some of the Washing Machine Cabinets manufactured from the said input happened to be rejected on account of irreparable defects that had emerged in the course of manufacture. This happened from time to time during the aforesaid period. Every time, the rejected Cabinets were cleared as Scrap under Sub-Heading 7204.90 on payment of appropriate duty. This was objected to in show-cause notices issued from time to time by the Department. All the notices maintained that the above clearances involved removal of input (Pre-painted Stainless Steel Coiled Sheets) as such and hence the Modvat credit taken thereon should be reversed under Rule 57-I. This demand was resisted by the assessee, who contended that there was no removal of input as such and that only Steel Scrap was removed on payment of appropriate duty. It was also claimed that the goods cleared as Scrap was neither used nor usable, at the buyer's end, as original Stainless Steel Coiled Sheets. The adjudicating authority rejected this contention and confirmed the demand as raised in the show-cause notices. The aggrieved party approached the Commissioner (Appeals) and the latter allowed the appeals. Hence, these appeals of the Revenue.

2. Heard both sides. Ld. DR has reiterated the grounds of these appeals. The main ground raised in these appeals is that the Stainless Steel Coiled Sheets in their conversion to cabinets had not undergone any process amounting to "manufacture" within the meaning of Section 2(f) of the Central Excise Act and, therefore, where the Cabinets were found defective and cleared as rejects, the sheets (original input) should be treated as having been cleared as such. The appellant has relied on the Supreme Court's decision in the UOI v. J.G. Glass Industries Ltd., 1998 (59) ECC 1 (SC) : 1998 (97) ELT 3 in support of his claim that the conversion of Stainless Steel Coiled Sheets into defective Cabinets did not pass the test of "manufacture". The appellant has also made an attempt to distinguish the case law relied on by the Commissioner (Appeals). Ld. Consultant for the respondents has argued in defence of the impugned order and has placed on record the Tribunal's decisions in the cases of Kirloskar Electric Company Ltd. v. CCE, Bangalore, 2002 (144) ELT 647 (Tri.-Bang.), Ashok Leyland Ltd. v. CCE, Chennai, 2002 (83) ECC 325 (Tri.-Chennai) : 2002 (149) ELT 1096 (Tri.-Chennai) and Maruti Udyog Ltd. v. CCE, New Delhi, 2003 (86) ECC 608 (Tri.-Del) : 2003 (153) ELT 78 (Tri.-Del).

3. I have considered the submissions. From the records and submissions, it appears to me that a significant finding of fact recorded in the impugned order has gone unchallenged in these appeals. Ld. Commissioner (Appeals) found thus: "The Coil (input) is subjected to various processes on the Cabinet Machine. However, the output (Cabinet) emerging from the machine is either defective or deformed and on that ground it is getting rejected. Hence, it is not a case of removal of inputs as such." The Revenue appears to have conceded that Pre-painted Stainless Steel Coiled Sheets (input) were not removed as such by the assessee. Hence, there is no question of reversal of Modvat credit taken thereon. The demand in all the show-cause notices is one for reversal of credit under Rule 57-I, which demand is based on a premise that the input had been removed as such. Now that the contra finding of fact by the lower appellate authority has been tacitly accepted by the Revenue, the demand cannot survive. It is not necessary to rely on any case law to reach this conclusion. In the result, the impugned order is affirmed and these appeals are rejected.

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