ORDER
S.L. Peeran, Member (J)
1. This is a Revenue appeal against Order-in-Appeal No. 317/2003, dated 5-12-2003. The Commissioner in Paras 5 to 7 has held, which is as follows:
5. I have gone through the grounds of appeal, submissions made at the time of hearing and all other evidence on record. From the facts as stated in the impugned order it is seen that the appellants had written to the Department seeking remission of the credit taken in respect of 193 CPTs which had become defective during the course of manufacture of the CTVs. It is also stated that CPTs which are found to be defective or damaged on receipt in the factory are not taken in stock. Nor is any Modvat/Cenvat availed in respect of these as the appellant lodges insurance claim with the insurance company. In other words, when the appellants received the CPTs in the factory and availed credit on these, such of the CPTs are in good condition. It is further stated in the impugned order that during the course of manufacture of CTVs, CPT may get damaged or may become defective while handling the picture tubes during the course of manufacturing process as scratches may arise on the front glass of the picture tubes or it may break during handling. The tubes may also get damaged while tightening the yolk over the neck of the tube, if excessive tightening takes place. Also the defect may occur on the phosphor coating on the front of the picture tube and during the aging and alignment due to heating of phosphor which may get burnt and black spots may appear. Other than this, the defect may also arise on account of heating filament inside the picture tube getting damaged. These facts were brought to the notice of the lower authority by the appellant and these have not been contracted by the lower authority. The damages in all the above cases arise after the CPTs have been issued for production of CTVs and during the process and manufacture of CTVs. Therefore, it is accepted that the CPTs got damaged during the course of manufacture of CTVs.
6. The short question for decision now is whether Cenvat credit taken on the input is required to be reversed if the input gets damaged or become defective during the manufacture process. In terms of Rules 2 and 3 of the Cenvat Credit Rules, 2001/2002, a manufacturer is eligible to take Cenvat credit of the duty paid on inputs, which are used in or in telation to the manufacture of the final product, whether directly or indirectly or whether contained in the final product or not. Therefore, the basic requirement for availing credit is that input should be put to use in the manufacturing process. In the present case there is no dispute about the fact that CPTs which were received in good conditions in the factory, were issued for manufacture of CTVs. It is only during the course of manufacture of the CTVs that some of the CPTs got damaged, the number in the present case being 193. This basic eligibility for availment of Modvat credit also existed prior to the coming into force of the Cenvat Credit Rules, 2001/2002. In the case of E.C.P. Ltd. v. CCE, Delhi , the CEGAT has also held that when colour picture tubes get damaged beyond repair in the process of manufacture of colour TVs, Modvat credit on the picture tubes is not liable to be reversed. Analogy of this could also be drawn from a decision of the CEGAT relating to breakage of glass bottles which occurs during the manufacture of the finished goods – Collector of Central Excise, Bangalore v. Eros Pharma (P) Ltd. . Therefore, applying the rules of the above decisions, the credit availed on 193 picture tubes is not liable to be reversed even under the Cenvat Credit Rules, 2001 /2002. 7. In view of the above reasons, the order of the lower authority is unsustainable and is set aside. The appeal is allowed accordingly.
2. None have appeared for Revenue. Respondent have sent written submissions and prayed for decision on merits. Hence, the matter was taken up for decision on merits.
3. As can be seen from the extract of the impugned order that the CPTs were damaged while testing and handling and it cannot be accepted as used in relation to manufacture. And further, it was damaged due to technical fault or by oversight, which seldom occurs in the standard manufacturing activity. Therefore, it is contented that grant of Modvat credit on the inputs should have been extended.
4. On a careful consideration, I notice that the Commissioner has applied the ratio of Tribunal rulings, which cannot be deferred by a coordinate bench. The Tribunal’s ruling in the case of CCE, Delhi-Ill v. Lifelong Appliances Limited reported in 2005 TIOL 483 (CESTAT-Delhi) has also held that when the inputs are rejected during the course of manufacture is known as line rejection. Then, the credit cannot be denied, as the inputs had already been issued for manufacture. A similar view was also expressed in the Maruti Udyog reported in 2000 (115) E.L.T. 433 where it has been held that inputs damaged during the process of assembling the motor vehicles are eligible for the credit. There is no infirmity in the impugned order. The order is correct and legal. Hence, the Revenue appeal is rejected.
(Pronounced and dictated in open Court)