FACTS OF THE CASE

M/s Asahi India Safety Glass Ltd. (AISG) is inter alia engaged in manufacturing of Toughened (Tempered) and Laminated Safety Glasses for Automobiles falling under Chapter Heading No. 7004.10 and 7004.20 of the Central Excise Tariff Act, 1985. For manufacturing of final product, AISG was getting float glasses as the main raw material and accordingly was taking Cenvat Credit thereon. Since AISG was receiving float glasses in packaged form, some float glasses were found to be defective during the manufacturing process and could not be used for final production. The Department denied Cenvat Credit on float glasses alleging that the Inputs were inherently defective and were neither used nor usable in or ‘in relation to manufacture of final product’.

M/s AISG approached the Hon’ble Settlement Commission and in the Application, it was admitted by them that Cenvat Credit availed on the aforesaid defective float glasses had to be reversed. However, the Hon’ble Settlement Commission opined that, in addition to broken float glasses, parts thereof were also found to be defective and not used for the final production. Hence, Cenvat Credit availed by the AISG (additional) also had to be reversed.

APPEAL FILED BY AISG BEFORE HON’BLE DELHI HIGH COURT

Thereafter, on Writ Petition being filed before the Hon’ble High Court of Delhi, it was held that once the float glasses were used for manufacture and manufacturing process had started and thereafter, if some latent defect was found and said portion had to be discarded. Accordingly, the case was remanded back to the Hon’ble Settlement Commission to consider the matter afresh.

APPEAL FILED BY THE DEPARTMENT BEFORE THE APEX COURT

Being aggrieved, the Department preferred an appeal before the Hon’ble Apex Court pleading that the Hon’ble High Court had no extraordinary jurisdiction under Article 226 of the Constitution of India to tinker with Order of Settlement Commission and thus, the High Court has exceeded its limits of jurisdiction by examining the matter a fresh.

HELD

The Hon’ble Apex Court held that the High Court has not interfered with the factual aspects which were recorded by the Settlement Commission in its judgment. However, the High Court has stated the correct legal position where the Settlement Commission had gone wrong in law by concluding that Cenvat Credit cannot be claimed on the discarded material which was found to be defective during manufacturing process. Thus, the High Court acted well within its jurisdiction under Article 226 of the Constitution of India.

Accordingly, the Hon’ble Apex Court dismissed the appeal filed by the Department and directed the Settlement Commission to take up the application of AISG, in terms of the judgment passed by the High Court and decide the same as early as possible and preferably within six months.

Union of India v. Asahi India Safety Glass Ltd [(2015) 58 Taxmann.com 237 (SC)]

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(Source: Tax Guru)