The Customs, Excises, Service Tax Appellate Tribunal (CESTAT), Delhi Bench ruled that no Customs Duty can be demanded on containers used for the packing of inputs on which credit has been taken.
The Appellant, M/s.Sundaram Packaging India Pvt. Ltd. is engaged in the manufacture of PP woven fabrics and is also the recipient of few services as Goods Transport Agency Service, Manpower Recruitment Agency Service and Legal Consultancy Service, etc. They were also availing the benefit of Cenvat Credit on inputs, input services, and capital goods under Cenvat Credit Rules, 2004.
During the course of the audit for the period 2016-17, the department noticed that the appellant had cleared empty polythene bags of raw material, empty drum of power oil worth Rs.33,62,307/- in the name of waste sales without payment of duty, despite that the goods so cleared were non-excisable. Relying upon the Notification No.06/2015 dated March 1, 2015, which says that any non-excisable goods cleared from the factory will be treated as exempted goods and Cenvat Credit will be reversed on the same as per Rule 6 (3) of Cenvat Credit Rules.
Accordingly, vide Show Cause Notice No.1729 the appellant was required to reverse the amount at the rate of 6% of the value of goods so cleared along with applicable interest and penalty.
This proposal was initially confirmed by Order-in-Original and the appeal thereof was rejected.
The Show Cause Notice, as well as the orders of the adjudicating authority below, have stated that provision of Rule 6 (3) of Cenvat Credit Rules, 2004 are attracted, and accordingly, the appellant has been asked to pay an amount of 6% of the value of empty drums and bags cleared from the factory.
The coram of Rachna Gupta held that no duty could be demanded on the containers used for the packing of inputs on which credit has been taken when cleared from the factory of the manufacturer availing credit as these containers could not be treated as waste arising out of the manufacturing process.
The CESTAT observed that the Rule has wrongly been invoked in case of the appellant for demanding the reversal of Cenvat Credit availed by him at the rate of 6% of the value of empty packets of raw-material and empty drums of the oils used by the appellant in the manufacture of PP woven fabric when cleared for consideration.