Judgment:
P.R. Chandrasekharan
1. This appeal is directed against order-in-appeal No.SB/107/Th-II/09 dated 10/12/2009 passed by Commissioner of Central Excise (Appeals), Mumbai.
2. The appellant, M/s.Dicitex Dicor Pvt. Ltd., is the manufacturer of man made fabrics. For the purpose of manufacture of these final products, the appellant had imported hangers, sample booklets, etc. containing designs and drawings of the fabrics to be manufactured. The appellant availed Cenvat credit of the additional duty of Customs paid on the said inputs. After the manufacture, the appellant exported the goods under a claim for rebate of duty of the duty paid on the finished goods under Rule 18 of the Cenvat Credit Rules, 2002.
3. The department was of the view that the appellant is not entitled for Cenvat credit on the hangers and booklet inasmuch as they have not been used as inputs in or in relation to the manufacture of the final products and, accordingly the appellant is not entitled for the credit. The credit of Rs.1,06,069/- availed by the appellant was demanded along with interest thereon and equivalent amount of penalty was imposed on the appellant and, hence, the appellants are before me.
4. The Ld. Advocate made the following submissions. The hangers are in the nature of packing materials and as per the definition of inputs under Rule 2 (k) packing materials are also eligible for availment of Cenvat credit. As regards the booklets, the same contains designs for the manufacture of the fabrics and drawings, designs, etc. has to be considered as inputs in or in relation to the manufacture of final products. It is not necessary that the inputs should be physically contained in the final products. So long as the inputs are used in or in relation to the manufacture Cenvat credit cannot be denied. He further submits that both the hangers and booklet have been exported back along with goods. Therefore, even it is that they have been cleared as such, in respect of export goods, they are eligible for the credit taken. He relies on the judgment of the Hon’ble High Court of Bombay in the case of CCE, Raigad Vs. Micro Inks Ltd., reported in 2011 (270) ELT 360 (Bom). Accordingly he pleads that the appeal be allowed.
5. The Ld. DR appearing for the Revenue reiterates the findings of the lower authorities.
6. I have carefully considered the rival submissions.
7. As contended by the Ld. Advocate, the hangers are nothing but packing material in which the fabrics have been placed and, therefore, they are inputs as per Rule 2(k) of the Cenvat Credit Rules, 2004 and rightly eligible for the Cenvat Credit. As regards, the booklet containing the designs, the same has been used in the manufacture of fabrics exported; without the designs, the fabrics could not have been manufactured. Therefore, drawings and designs are essential inputs in or in relation to the manufacture of the final products. Therefore, they are qualify as inputs eligible for Cenvat Credit under rule 2 (k) of the Cenvat Credit Rules, 2004. Even it is held that they are not inputs, these goods have been exported along with fabrics as such on payment of duty and, therefore, on export of goods they are rightly entitled for. I have also gone through the judgement of the Hon’ble High Court of Bombay in the case of Micro Inks Ltd., supra. In the said case, the hon’ble High Court inter alia held that if duty is paid by reversing the credit, it does not lose the character of duty and therefore, if rebate is otherwise allowable, the same cannot be denied on the ground that duty is paid by reversing the credit. The ratio of the judgment would also apply to the facts of the present case. Accordingly, I set aside the impugned order and allow the appeal with consequential relief, if any.