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2026 (2) TMI 1334 - CESTAT HYDERABAD Central Excise

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Endorsed Bill of Entry accepted for Cenvat credit when duty-paid inputs were received and used in manufacture.
A Bill of Entry remains a valid document for Cenvat credit where the imported inputs are duty-paid, actually received, and used in manufacture, even if the document was originally not in the recipient's name but was endorsed by the importer. Endorsement does not, by itself, negate the evidentiary value of the Bill of Entry under Rule 9 of the Cenvat Credit Rules, 2004. On that basis, credit was allowed and the demand and penalty were set aside.

Cenvat credit - manufacturer/job worker - Endorsed Bill of Entry - contravention of Rule 9 of Cenvat Credit Rules, 2004 (CCR) - requirements of valid documents for availment of Cenvat credit - credit taken on the basis of endorsement - Bill of Entry as evidence of duty paid character - Bills of Entry in the name of the original importer but endorsed in favour of the manufacturer/job worker - effect of amendment to Rule 9 w.e.f. 01.04.2014 Endorsed Bill of Entry - Whether Cenvat credit can be availed by the appellant on the strength of Bills of Entry endorsed in their favour by the original importer. - HELD THAT: - The Circular No. 179/13/96 dated 09.02.1996, where, in view of certain difficulties in availment of credit due to different names etc., appearing on invoices, BoEs etc., a concept of endorsement of BoEs by importer was introduced for availing credit, subject to certain guidelines. Though, this was in the context of Rule 57G/57/T of erstwhile Central Excise Rules, but this is equally applicable in the context of BoEs under Rule 9 of CCR. This is a trade facilitation measure therefore when under erstwhile Rules endorsed BoE was a valid document then endorsed BoE even under Rule 9 of CCR can still be considered as a valid document for taking credit. Thus, the Tribunal found that Bills of Entry were expressly included within the list of documents under Rule 9 of the Cenvat Credit Rules and that, as a trade-facilitation measure, endorsed Bills of Entry have been recognised for availment of credit by earlier Board Circulars and decisions. Relying on the ratio of the Hon'ble Supreme Court in Union of India v. Marmagoa Steel Ltd.[2008 (7) TMI 95 - SUPREME COURT], the Tribunal held that a Bill of Entry, even if not originally in the name of the manufacturer seeking credit, cannot be denied effect so long as the duty-paid character of the goods and receipt/use of the inputs by the claimant are not in dispute. The Tribunal examined amendments to Rule 9 (w.e.f. 01.04.2014) introducing importer invoices and registration requirements, but concluded that the inclusion of importer invoices does not oust the continuing validity of Bills of Entry (including endorsed Bills of Entry) as permissible documents for taking Cenvat credit. The Tribunal further relied on coordinate decisions of the Bench and other Tribunals which have allowed credit on endorsed Bills of Entry where there is no doubt as to payment of duty or receipt/use of inputs by the claimant. Applying these authorities to the admitted facts (no dispute about receipt or use of materials), the Tribunal held that endorsed Bills of Entry constituted valid documents for availment of Cenvat credit in the present factual matrix. [Paras 8, 9, 10, 11, 12] Impugned order set aside; Cenvat credit legitimately availed on the strength of endorsed Bills of Entry and appeal allowed. Final Conclusion: In the factual matrix where receipt and duty-paid character of inputs were not disputed, the Tribunal held that endorsed Bills of Entry fall within the scope of Bills of Entry under Rule 9 of the Cenvat Credit Rules and accordingly allowed the appeal, setting aside the demand and penalty confirmed by the Adjudicating Authority.

2026 (2) TMI 1333 - CESTAT HYDERABAD Central Excise

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Issues: (i) Whether coal cleared to the captive power plant could be excluded from Clean Energy Cess on the footing that it was used for further raising of coal. (ii) Whether Notification No. 67/95-CE could be invoked to deny Central Excise Duty on coal consumed captively in the power plant. (iii) Whether discrepancies between ER-1 returns and Clean Energy Cess returns, by themselves, were sufficient to sustain the duty demand, or whether the matter required fresh reconciliation and recomputation.

Issue (i): Whether coal cleared to the captive power plant could be excluded from Clean Energy Cess on the footing that it was used for further raising of coal.

Analysis: Clean Energy Cess is leviable under section 83(3) of the Finance Act, 2010 and is payable on removal of coal from the mine. The definition of removal in Rule 2(g) of the Clean Energy Cess Rules, 2010 extends to dispatch for captive consumption within the mine only where it is for purposes other than raising of the goods. The claimed nexus between coal sent to the captive power plant and raising of coal was not established by direct evidence, and there was no sufficient correlation between power generation and the actual extraction process.

Conclusion: The exclusion from Clean Energy Cess was not available for coal sent to the captive power plant.

Issue (ii): Whether Notification No. 67/95-CE could be invoked to deny Central Excise Duty on coal consumed captively in the power plant.

Analysis: Central Excise Duty is chargeable under section 3 of the Central Excise Act, 1944 and, in the facts of the case, becomes payable at removal from the mines, the place of removal being governed by section 4 of the Central Excise Act, 1944. Notification No. 67/95-CE was found inapplicable because it is confined to goods manufactured within a factory and used within the factory in relation to the manufacture of final products, whereas the present clearance concerned coal from mines and use in power generation, which is not a dutiable final product for the claimed exemption purpose.

Conclusion: The exemption under Notification No. 67/95-CE was not available.

Issue (iii): Whether discrepancies between ER-1 returns and Clean Energy Cess returns, by themselves, were sufficient to sustain the duty demand, or whether the matter required fresh reconciliation and recomputation.

Analysis: The two levies operate under different statutory schemes and at the same time, the record showed staggered clearances, washery movements, rejects, slurry, and spillover effects that could create month-wise differences. Mere comparison of the two returns was held insufficient without a holistic verification of the actual quantities removed and the duty or cess already discharged. The proper course was to reconcile the entire set of clearances and verify whether any short payment existed on the total quantity produced in the mines.

Conclusion: The matter required remand for fresh computation and verification, and the demand could not rest on a bare comparison of the two returns alone.

Final Conclusion: Both sides succeeded only to the extent of obtaining a remand, and the adjudicating authority was directed to recompute the liability after a full reconciliation of clearances and payments.

Ratio Decidendi: Where a fiscal demand for coal is based only on discrepancies between two statutory returns, the authority must reconcile the actual removals and payments under the respective levy provisions before confirming any short payment; captive power consumption does not, by itself, establish entitlement to exclusion unless supported by the governing exemption or a clear statutory exclusion.

Coal cess and excise exemptions require statutory support, while return mismatches alone cannot confirm duty demand without reconciliation.
Coal cleared to a captive power plant was held not to qualify for exclusion from Clean Energy Cess, because the claimed link with further coal raising was not proved by direct evidence and the statutory removal rules did not support that treatment. Notification No. 67/95-CE was also found inapplicable to deny Central Excise Duty exemption, as it is confined to goods manufactured and used within a factory, not coal removed from mines for power generation. However, discrepancies between ER-1 and Clean Energy Cess returns alone were insufficient to confirm the demand, since the authorities had to reconcile actual removals, spillovers, rejects, and amounts already paid before recomputing any short payment.

Levy of Clean Energy Cess as duty of excise payable at time of removal - sale of raw coal to customers - paying Central CED (CED) on coal and also paying Clean Energy Cess (CEC) on coal - central excise duty leviable on coal payable at time of removal - definition of "removal" under CEC Rules - exclusion for captive consumption used for raising of goods - exemption notification 67/95-CE applicable to factory production not to mines - difference between distinct statutory returns cannot alone sustain duty demand; requires reconciliation and factual verification Definition of "removal" under CEC Rules - exclusion for captive consumption used for raising of goods - levy of Clean Energy Cess as duty of excise payable at time of removal - central excise duty leviable on coal payable at time of removal - exemption notification 67/95-CE applicable to factory production not to mines - Whether coal cleared to the appellant's captive power plant is excluded from CEC and CED as 'used for raising of such goods' or covered by exemption notification 67/95-CE. - HELD THAT: - There is no direct correlation between the coal cleared to power plant and coal raised from the mines. It cannot be said that coal is being used indirectly in raising coal. Therefore, this exclusion, which has been adopted by the appellant for non-payment of CEC on the raw coal cleared to captive power plant, is not tenable. Once the duty has been levied in terms of section 83(3), only the payment of duty has been deferred till the time of dispatch. Therefore, we do not find that activity of generating power from coal in their power plant can be considered as used for further raising of such goods i.e., coal. The exclusion of coal produced and cleared without payment of CEC is not correct. Admittedly, coal has been produced in India, therefore, the authority to charge CED is under section 3. However, the duty is required to be paid in accordance with manner of payment provided under Central Excise Rules and therefore, the duty is normally required to be paid at the time of removal. The term ‘place of removal’ has been defined under section 4 as, inter alia, a factory or any other place or premises of production or manufacture of excisable goods. Thus, in the present case, since the production of excisable goods has taken place in the mines, the CED would be payable at the time of removal from the mines. We also note that this definition is also consistent with the provision for payment of CEC, where also, the CEC is required to be paid at the time of removal from the mines. Thus, the CED and CEC, which are levied under different statutory provisions, are required to be discharged at the time of removal from the mines in the manner provided under respective statutory provisions. Once having discharged CEC on the entire quantity cleared from mines to the washery, apparently, within the mines, then there is no requirement for payment of CEC again thereon. All these factual matrix needs to be checked for reconciliation of the statements to establish that whatever coal has been produced in the mines, appropriate CEC and CED has been discharged at the time of removal from the mines and any removal without payment of either CEC or CED has to be covered either by way of exemption or in terms of statutory provisions warranting exclusion of said clearance for the purpose of payment of CEC. The leviability of both statutory duty and cess are on the same excisable goods, which have been produced in the same mines and the payment has to be made at the time of removal from the mines. Therefore, in case there is any discrepancy between these two figures, the appellant is required to explain in order to satisfy that CED and CEC leviable on entire quantity has been paid on such coal produced in the mines except to the extent permissible. This may require reconciliation of clearances over a larger period as there could be some spillover on account of accountal as well as payment of CEC and CED due to difference in the date of removal of the coal and slurry and rejects, etc. The principal is, however, to ensure that they discharge payment of both the cess and CED on the entire quantity of coal produced in the mines and cannot claim any exclusion on account of its consumption in the power plant for raising the coal or for captive consumption in the absence of any statutory provisions or notification. Exclusion of coal cleared to captive power plant from CEC and CED is not tenable on the material placed; notification 67/95-CE is not applicable to the facts and cannot justify non-payment. Discrepancy between returns is not by itself a sustainable basis for demand; matters remanded for factual verification and re-computation to determine any short payment of CEC or CED. Final Conclusion: The Tribunal rejected the appellants' legal pleas that coal sent to captive power plants is automatically excluded from CEC/CED or covered by notification No.67/95-CE, and held that discrepancies between CEC and ER1 returns cannot alone sustain a demand; both sets of clearances must be reconciled. Both the appellants' appeals and the Department's appeal were allowed to the extent of remanding the matters to the original adjudicating authority for factual verification and re-computation in accordance with the Tribunal's observations.

2026 (2) TMI 1332 - CESTAT BANGALORE Central Excise

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Issues: Whether the appellant is entitled to refund of unutilized CENVAT credit under Rule 5 of the Cenvat Credit Rules, 2004 and whether the limitation period under Section 11B of the Central Excise Act, 1944 bars the refund claim.

Analysis: Rule 5 of the Cenvat Credit Rules, 2004 permits refund of CENVAT credit where inputs or input services used in manufacture for export cannot be adjusted; Notification No. 5/2006-C.E. specifies safeguards including a reference to time limits in Section 11B. Relevant judicial precedents cited interpret Rule 5 and associated notifications to allow refund of accumulated CENVAT credit on closure/surrender where the credit was genuinely availed for export production and cannot be utilized. Where a factory surrenders registration and claims accumulated unutilized credit, the relevant date for limitation is the date of closure/surrender and claims filed within the prescribed period from that date are treated as within time. During remand adjudication authorities must confine themselves to grounds remitted and cannot raise fresh eligibility objections that were not part of the original adjudication if the earlier proceedings did not permit such examination. In the present case the appellant surrendered registration on 30.07.2013 and filed the refund claim on 12.04.2014; the claimed credit relates to input services used in manufacture/export though some service tax payments and credit availment occurred belatedly with interest. The Tribunal relied on binding and persuasive authorities holding that Rule 5 allows refund of accumulated CENVAT credit on closure and that limitation under Section 11B does not defeat genuine refund claims filed in the statutory window from surrender/closure.

Conclusion: The appeal is allowed and the impugned order rejecting the refund claim is set aside; the appellant is entitled to refund of the unutilized CENVAT credit in accordance with Rule 5 of the Cenvat Credit Rules, 2004 and applicable notifications and law.

Ratio Decidendi: Refund of accumulated unutilized CENVAT credit under Rule 5 of the Cenvat Credit Rules, 2004 is available where inputs or input services were used in manufacture for export and, on surrender/closure, the unutilized credit cannot be adjusted; such refund claims are not defeated by limitation under Section 11B when filed within the relevant period measured from closure/surrender.

Refund of Unutilized CENVAT Credit: permitted on closure when claimed within the statutory period measured from surrender.
Rule 5 of the Cenvat Credit Rules, 2004 permits refund of accumulated unutilized CENVAT credit where inputs or input services were used in manufacture for export and cannot be adjusted on closure or surrender; such refunds are claimable when filed within the statutory period measured from the date of closure/surrender and are not defeated by limitation under Section 11B if filed within that window. Remand adjudication must be confined to grounds remitted and cannot raise fresh eligibility objections absent earlier examination. The impugned refusal was set aside and the appellant held entitled to refund subject to applicable notifications and law.

Entitlement to refund of unutilized CENVAT credit under Rule 5 - Eligibility of input services used in manufacture of exported goods - Applicability of limitation under Section 11B to refund claims under Rule 5 - Relevant date for limitation upon closure and surrender of registration - Scope of remand and limits on raising new grounds in de-novo adjudication - HELD THAT:- In M/s. Gauri Plasticulture [2019 (6) TMI 820 - BOMBAY HIGH COURT], we find that refund pertains to inputs lying in stock without being used in the manufacture of products. Further we find that issue was considered by jurisdiction Hon’ble High Court of Karnataka in the matter of M/s. Slovak India Trading Co. Pvt. Ltd. [2006 (7) TMI 9 - KARNATAKA HIGH COURT], held that " There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for the purpose of rejection as rightly ruled by the Tribunal. The Tribunal has noticed that various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. " The issue was also considered by the Tribunal in the matter of M/s. ATV Projects India Pvt., Ltd., Vs. CC [2023 (9) TMI 802 - CESTAT MUMBAI], majority it is held that:- " availment of cenvat credit is an indefeasible right of an assessee and such right conferred under the statue cannot be taken away on the ground of limitation. Further, Rule 5 ibid does not prescribe any time limit for grant of refund of the cenvat credit. Even if the time limit under section 11B ibid is to be applied, then logically it should be effective from the date of surrender of the registration certificate upon closure of the factory. The appellant in this case, since has filed the refund application within a reasonable time frame, from the date of closure of the factory, in my opinion, the same should not be denied on the ground of limitation, inasmuch as the purpose of the cenvat scheme would be defeated, if the benefits accrued in lawful manner is denied.” We find in the present appeal, though the closure of export were done in June, 2008, it has exited from EOU in 2011 and closure of factory and surrender of Central Excise registration was done only on 30.07.2013 and refund claim was filed on 12.04.2014. Even if it is assumed that the provisions of Notification No. 27/2012-CE(N.T) dated 18.06.2012 are applied, refund cannot be denied, since it is filed within one year from the date of closure of the business activity. As regards other issues, it is well settled that eligibility of a claim cannot be questioned when refund claim is made under Rule 5 of CENVAT Credit Rules, 2004 for refund of the unutilized CENVAT credit lying in their books of account. Further as held in the matter of M/s. Simplex Engineering & Foundry Works Pvt., Ltd.[2019 (6) TMI 820 - BOMBAY HIGH COURT], such issues were not the matter of dispute when the first round of adjudication was conducted and Adjudication authority required to act within the scope of remand during the de-novo proceedings and they cannot reject the refund claim on a ground which was not part of the first adjudication / appellate proceedings. Thus, the impugned order is unsustainable and liable to be set aside.

2026 (2) TMI 1272 - CESTAT KOLKATA Central Excise

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Reliance on Unverified Transport Records insufficient to deny CENVAT credit or sustain penalties; appeals allowed.
Denial of CENVAT credit and imposition of penalties were found unsupported where revenue relied solely on VAHAAN portal checks and uncorroborated transporter statements; those statements were not verified under the required statutory procedure and suppliers were not investigated. It was an admitted fact that inputs were consumed in manufacture and duty was paid on clearances. Absent supplier-side enquiries or other corroborative documentary evidence establishing non-supply, the factual basis for denying credit and for penalties failed, and the impugned denial and penalties were set aside with the appeals allowed.

Denial of CENVAT credit - Imposition of penalty under Rule 26(1) of the Central Excise Rules, 2002 - Reliability of transporter statements - VAHAN portal verification as evidence - Obligation of Revenue to investigate supplier and trace procurement - Requirement of evidence beyond presumption - Verification under Section 9D of the Central Excise Act, 1944 - HELD THAT:- In the present case, no investigation has also been conducted by the Revenue to show that if the appellants have not procured the goods mentioned in the invoices in question, then from where have the appellants procured such a huge quantity of inputs as has been used by the appellants for manufacture of the final product, on which they have paid duty by utilizing CENVAT Credit as well as PLA. Merely on the basis of assumptions and presumptions, the demand has been made against the appellants, by alleging that their goods had not been transported to their premises. It is also a fact on record that the said statements of the transporters have not been verified in terms of Section 9D of the Central Excise Act, 1944 and no supporting evidence has been produced by the Revenue in support of the said statements. In these circumstances, we find that the said statements of such transporters are not reliable statements. In fact, the whole case is based on some verification from the ‘VAHAAN’ portal and from the statement of certain transporters, which cannot be the basis for denial of CENVAT Credit to the appellants. It is an admitted fact that the appellant/company has used these inputs in the manufacture of their final product, and paid duty on their clearances. Therefore, without establishing as to from where the appellants have procured inputs to manufacture such a huge quantity, the CENVAT Credit availed by them cannot be denied merely on the basis of the evidences as relied upon by the Revenue in support of their allegations, in the facts and circumstances of the case. We find that on the said allegation that one of the suppliers had not supplied goods to the appellant-company, a Show Cause Notice was issued, inter alia, to impose penalty on the appellant on the said allegation. Thus, we hold that the CENVAT Credit cannot be denied to the appellant. Therefore, the impugned order qua recovery of CENVAT Credit availed by the appellant, in question, along with interest, and imposition of penalty on all the appellants, is set aside.

2026 (2) TMI 1271 - CESTAT CHANDIGARH Central Excise

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Issues: (i) Whether sale value for computation of actual value addition under Notification No.19/2008-CE / Notification No.34/2008-CE should be taken as MRP under Section 4A of the Central Excise Act, 1944 or the actual sale value as per audited financial records; (ii) Whether foreign exchange loss relating to imported raw materials should be included in cost of raw materials for computation of actual value addition; (iii) Whether the adjudicating authority could reject value addition certificates issued by the statutory auditor without issuing a show-cause notice and without cogent reasons, and whether such rejection justified denial of fixation of special rates.

Issue (i): Whether sale value for computing actual value addition is MRP under Section 4A of the Central Excise Act, 1944 or actual sale value as per audited financial records.

Analysis: The notification prescribes calculation of actual value addition on the basis of financial records of the preceding financial year and defines sale value as sale value excluding excise duty, VAT and other indirect taxes. Prior tribunal precedent cited addressed the same interpretative point and supports using financial records/audited balance sheet figures rather than MRP under Section 4A. The statutory wording is plain and unambiguous, requiring adherence to the notification methodology.

Conclusion: Sale value for fixation of special rates must be the actual sale value as reflected in audited financial records (actual amount realized minus applicable taxes) and not the MRP under Section 4A of the Central Excise Act, 1944.

Issue (ii): Whether foreign exchange loss relating to imported raw materials is to be included in cost of raw materials for computing actual value addition.

Analysis: The foreign exchange loss in the relevant year is directly linked to the expenses incurred on imported raw materials. The notification requires inclusion of costs consumed in production; where such loss arises from procurement of raw materials, it is part of the cost in the hands of the manufacturer and must be accounted for in cost calculations.

Conclusion: Foreign exchange loss attributable to procurement of raw materials is to be included in the cost of raw materials for computation of actual value addition.

Issue (iii): Whether the adjudicating authority could reject statutory auditor value addition certificates without issuing a show-cause notice and without providing cogent reasons, thereby denying fixation of special rates.

Analysis: Value addition certificates certified by the statutory auditor based on audited balance sheets are ordinarily to be accepted unless the authority demonstrates credible, cogent reasons to displace them and follows principles of natural justice including issuing a show-cause notice where rejection is contemplated. In the present case, the adjudicating authority accepted that claimed rates exceeded the threshold for some items and his computed rates were substantially similar to the auditors' figures, yet proceeded to reject all applications based on queries deemed irrelevant and without adequate opportunity or reasons to displace the certificates. The authority also made proportional adjustments only where product-wise rebate/discount details were absent, and corrected perceived deficiencies; no sufficient basis was shown to wholly reject the certified calculations for eligible items.

Conclusion: The adjudicating authority's wholesale rejection of the statutory auditor certificates without issuing a show-cause notice and without cogent reasons was not sustainable; the certified calculations for eligible items must be accepted and special rates fixed accordingly in respect of those items where the value addition exceeded the prescribed threshold.

Final Conclusion: The impugned order rejecting the applications for fixation of special rates is set aside to the extent it refuses fixation of special rates for items and years where certified calculations met the eligibility criteria; the appeal is allowed and special rates shall be sanctioned for eligible items in accordance with the notification methodology and the audited records.

Ratio Decidendi: For fixation of special rates under Notification No.19/2008-CE and Notification No.34/2008-CE, sale value must be taken from audited financial records (actual sale value excluding indirect taxes), foreign exchange loss linked to imported raw materials must be included in raw material cost, and statutory auditor certificates based on audited balance sheets should be accepted unless the authority furnishes cogent reasons and follows principles of natural justice before rejecting them.

Sale value determination: use audited actual sale value, include forex loss in raw material cost, accept auditor certificates where justified.
For fixation of special rates under Notification No.19/2008-CE and No.34/2008-CE, sale value must be the actual sale value recorded in audited financial statements (net of indirect taxes) rather than MRP under Section 4A; foreign exchange loss attributable to procurement of imported raw materials must be included in raw material cost for computing actual value addition; and statutory auditor value addition certificates based on audited balance sheets are to be accepted unless the authority adduces cogent reasons and issues a show cause notice before rejecting them. The impugned wholesale rejection is set aside and special rates are to be fixed where certified calculations meet eligibility.

Actual value addition - special rate fixation - sale value versus MRP (Section 4A) - deduction of discounts/rebates for net sales value - inclusion of foreign exchange loss in cost of raw materials - reliability and acceptance of Chartered Accountant's certificate - principles of natural justice-requirement of show cause notice before rejection - HELD THAT:- We find that the value that needs to be considered for the purposes of the fixation of special rate as per the Notification Nos.19/2008-CE dated 27.03.2008 and 34/2008-CE dated 10.06.2008 is the actual sale value i.e. the actual amount realised by the appellants in the sale of the goods minus the taxes paid etc and not the MRP as per Section4A of the Central Excise Act, 1944. We find that the wordings of the Statute being plain and unambiguous, the same shall be read and construed strictly by the words and no intendment is allowed in interpreting the same as held in Dharmendra Textiles Processors [2008 (9) TMI 52 - SUPREME COURT]. As regards the Foreign Exchange Loss, we are in agreement with the logic of the impugned order that the same being occurred in respect of the imported goods, the same cannot be excluded from the cost of raw material. The commissioner proceeds to reject all the applications filed by the appellants. We find that Learned Commissioner ignores his own finding that the appellants are eligible for value addition in respect of some items. Interestingly, we find that the value addition decided by the commissioner (AA) does not vary much from the value addition claimed by the appellants, in respect of the said items in the said years. Interestingly, Commissioner does not even bother to sanction the Special Rate in respect of items for which he himself held that the value addition was more than 115% of 34% and he doesn’t even discuss the admissibility to additional refund in such cases. He pauses just before the conclusion and makes a U-turn and holds that the special rates cannot be sanctioned for extraneous reasons, which were effectively countered by the appellants as discussed above. Such an order cannot be sustained. Appellants have claimed a value addition, over and above 115% of 34% in respect of 4 items only, among many items they manufactured and cleared over the years. The calculations submitted by the appellants are duly certified by the Chartered Accountant. The Certificates are not countered by the Commissioner with any cogent reasons as discussed above. It is seen that the values arrived by Commissioner are not at variance with the values arrived by the Appellants. Its travesty of justice that the commissioner rejects the special rates even in respect of those items. There is hardly any difference in the Rates arrived by the Adjudicating authority and the Rates claimed by the appellant. We are of the considered opinion that the impugned order has not made out any case for rejection of the special rates. We find that because of this reason and the other legal infirmities, as discussed above, the impugned order cannot be sustained and needs to be set aside. Accordingly, the appeal is allowed.

2026 (2) TMI 1270 - CESTAT AHMEDABAD Central Excise

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Rule 6 inapplicable to waste by-products from sugar manufacture; credit reversal demand on bagasse, press mud and bio-compost was set aside.
Bagasse, press mud and bio-compost arising inevitably in sugar manufacture were treated as waste or residue, not manufactured final products. The Tribunal applied settled law that Rule 6 of the Cenvat Credit Rules, 2004 operates only where exempted final products are manufactured, and not where non-excisable by-products or waste emerge during production of dutiable goods. The amendment to section 2(d) of the Central Excise Act, 1944 and departmental circulars did not change that position, because saleability alone did not make such waste excisable goods. Rule 6 was therefore held inapplicable, and the demand for reversal of credit or payment of 5% was set aside.

Excisability of waste, residue or by products (bagasse, press mud, bio compost) - application of Rule 6 of the Cenvat Credit Rules, 2004 (reversal/pay 5%) - distinction between 'manufacture' and emerging waste/residue - effect of Explanation to Section 2(d) of the Central Excise Act, 1944 on marketability and excisability - withdrawal of Board Circular treating non excisable by products as 'exempted goods' for Rule 6 purposes - HELD THAT:- We agree with the learned Counsel for the appellant that issue involved in the present appeals is no more res-integra as the issue is well settled in favour of the appellant in view of various judgments and orders pronounced by CESTAT Delhi, Hon'ble Allahabad High Court and the Hon'ble Supreme Court. It is pertinent to mention here that by issuing Circular No. 1084/05/2022-CX dated 07.07.2022, the Circular No. 1027/15/2016-CX dated 25.04.2016 has been withdrawn by the Board. The issue raised in these appeals is finally settled in favour of the appellant. Therefore, in the light of law laid down by the Hon'ble Allahabad High Court in Balrampur Chini Mills Limited vs. Union of India & Ors. [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] and by the Hon'ble Supreme Court in UOI vs. DSCL Sugar Limited [2015 (10) TMI 566 - SUPREME COURT], The Hon'ble Supreme Court has held that in the present case it could not be pointed out as to whether any process in respect of bagasse has been specified either in the Section or in the Chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of Section 2(f) of the Act and the absence of manufacture, there cannot be any excise duty. Since it is not a manufacture, obviously Rule 6 of the Cenvat Credit Rules, 2004 shall have no application as rightly held by the High Court. And in view of the Circular No. 1084/05/2022-CX dated 07.07.2022 the impugned order passed by learned Commissioner cannot be sustained. Since the demand itself is not sustained, the penalty imposed on the appellant also cannot be sustained. Therefore, the appeals are liable to be allowed and the impugned orders passed by learned Commissioner/ Commissioner (Appeals) through which the demand of duty has been confirmed on the appellant and penalty was imposed upon them, are liable to be set-aside. Consequently, the appeals are allowed.

2026 (2) TMI 1269 - CESTAT HYDERABAD Central Excise

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Issues: (i) Whether Cenvat credit is admissible on cryogenic storage tanks (capital goods) acquired and used in relation to supply of tangible goods and erection/commissioning services; (ii) Whether Cenvat credit is admissible on SS coils, sheets, plates and similar items used for fabrication, installation or erection of storage tanks at customer sites; (iii) Whether Cenvat credit is admissible on cement and bars used for foundation and support structures; (iv) Whether extended period of limitation and penalty are invokable for the credit taken.

Issue (i): Admissibility of Cenvat credit on cryogenic storage tanks used in relation to supply of tangible goods and erection/commissioning services.

Analysis: The appellants held service tax registration and supplied storage tanks as part of supply of tangible goods and provided erection/commissioning services. Capital goods are in principle eligible when used for providing output service unless specifically excluded. The factual matrix shows tanks were used in provision of taxable services and not solely as factory assets for manufacture of excisable goods. Relevant provisions of the Cenvat Credit Rules were considered.

Conclusion: Cenvat credit on cryogenic storage tanks is admissible in favour of the assessee.

Issue (ii): Admissibility of Cenvat credit on SS coils, sheets, plates and similar items used for fabrication and installation of storage tanks at customer sites.

Analysis: The items were used for fabrication, erection and commissioning of specialized storage tanks which function as capital goods for the services provided. Precedent supports creditability of materials used in fabrication or repair of capital goods where they serve as inputs for provision of output service. The tanks in question are removable/dismantlable at contract end in the factual matrix and therefore are not permanently immovable so as to be excluded.

Conclusion: Cenvat credit on SS coils, sheets, plates and similar items used for fabrication and installation is admissible in favour of the assessee.

Issue (iii): Admissibility of Cenvat credit on cement and bars used for foundation and support structures for storage tanks.

Analysis: The Cenvat Credit Rules specifically exclude materials used for certain purposes like permanent foundations and support structures. The record indicates cement and bars were used for foundations/supports which fall within that exclusion.

Conclusion: Cenvat credit on cement and bars for foundation and support structures is not admissible; conclusion against the assessee.

Issue (iv): Invokability of extended period of limitation and penalty for the credit taken.

Analysis: The claims were filed in statutory returns, there is no evidence of deliberate evasion or suppression, and the issue involved unsettled and conflicting precedent at the relevant time. Extended period and penalty require specific proof of deliberate intent; absent such proof and given interpretational nature of the dispute, extended period and penalty are not invokable.

Conclusion: Extended period of limitation and penalty are not invokable; conclusion in favour of the assessee.

Final Conclusion: The appeal is allowed except insofar as Cenvat credit on cement and bars used for foundations/support structures is concerned; consequential reliefs granted as per law.

Ratio Decidendi: Capital goods and materials used in fabrication, erection or commissioning of capital goods are eligible for Cenvat credit when used for providing output services unless the Rules expressly exclude specific items or uses; exclusion for materials used in permanent foundations/support structures precludes credit for cement and bars.

Cenvat Credit eligibility for capital goods used in service supply affirmed; permanent foundations excluded and extended penalties not invokable.
Cenvat credit is admissible on cryogenic storage tanks treated as capital goods and on SS coils, sheets and plates used in fabrication, erection and commissioning where those goods function as removable capital assets for provision of taxable services; this follows application of the Cenvat Credit Rules allowing credit for capital goods and materials used to provide output services. Cenvat credit is not admissible for cement and bars used in permanent foundations or support structures because the Rules exclude such uses. Extended limitation and penalty were held inapplicable absent evidence of deliberate evasion and given the existence of conflicting precedent.

Cenvat credit on capital goods used for providing output service - Eligibility of inputs used in on-site fabrication and erection - Movable nature of site-erected specialised tanks and excisability - Exclusion of construction materials used for foundations from eligible inputs - Extended period of limitation and invocation of penalty in absence of deliberate evasion - Cenvat credit on capital goods used for providing output service - HELD THAT:- We find that the appellants are not only manufacturer of the industrial gas but they are also having Service Tax registration as is evident from the various ST-3 returns being filed and also they were providing certain services including supply of tangible goods, erection and commissioning service etc. There is no denial that Cryogenic Tank, per se, is a capital good and a capital good used for providing taxable service i.e. supply of tangible goods is an eligible capital good unless it is specifically excluded from the purview of the capital goods. We do not find any such exclusion in respect of storage tank. We also find that Department has clearly issued a Show Cause Notice dated 23.05.2014 for non-payment of Service Tax on supply of tangible goods service by the appellant. Thus, to that extent, they will be eligible for taking credit in respect of Cryogenic Tank, which is a capital goods, used for providing output service i.e., supply of tangible goods. Credit on SS Coils, Sheets and Plates used for fabrication and installation - We find that various Co-ordinate Benches have taken into account various case laws to come to the conclusion that items used for fabrication of capital goods and even for repairs and maintenance of such capital goods would be eligible for taking credit. Storage Tank, being a capital good is not in dispute. We also find that in the case of Kisan Co-operative Sugar Factory Ltd. [2023 (12) TMI 1303 - SUPREME COURT], Hon’ble Supreme Court, inter alia, held that various products like MS plates, used for repair and maintenance, fabrication etc., of capital goods would also be eligible for credit or otherwise. In the present appeal, such items were bought by the appellant and were taken to the customer site for fabrication as well as erection of a storage tank. In the present appeal, these are specialised tanks, which are attached to a foundation, but the same can be moved or dismantled at the end of contract period. The materials have been used for fabrication of such storage tanks and also for erection and commissioning of such tanks. Therefore, when they are providing the output services of supply of tangible goods and as also erection/commissioning service, such SS items will also be eligible as inputs used for providing output service. After examining the scope of Rule 2(a)(A) of Rule 2(k) of CCR in relation to eligibility of credit in respect of mobile towers, parts and PFB, it was held that they are goods and will be eligible for credit as “input” used for providing output service. Therefore, in view of discussion above, the demand on this ground will also not sustain. Demand on account of cement and bars used for erection of storage tanks, we do not find any reason to interfere with the findings on merits, as it is especially excluded under the CCR. However, insofar as demand on welding electrodes is concerned, the same stands settled by the Supreme Court in the case of Kisan Co-operative Sugar Factory Ltd., supra, therefore, it is an eligible input. To sum up, they are eligible to take credit in respect of the storage tank and MS items covered in the demand, except for Cenvat Credit on bars and cement used for making foundation and support structure for storage tank, both bought out as well as fabricated at site. The demand only to this extent will sustain. Limitation - We find that even the issue which has been the main ground for invoking demand i.e., the fabrication of storage tank at site and attached to earth being not excisable good is also not relevant anymore in view of subsequent judgments covering identical issues. There is also no specific evidence that it was attached to earth in such a manner that it could not have been removed, if it is so desired. We also note that the Department itself initially stated that they are not provider of output service. But later on they held that they were also providing output service. We also note that the whole issue is based on certain interpretations of Cenvat Credit Rules read with certain prevailing judgments in relation to factual matrix and hence it is an interpretational issue. In view of the same, extended period is not invokable and accordingly penalty is also not imposable. Therefore, the demand would not sustain both on merit as well as on limitation, except for cement and bars used for foundation and support structure, however, since demand on cement and bars is also beyond normal period, it would not sustain on limitation. The impugned order is therefore liable to be set aside.

2026 (2) TMI 1331 - CESTAT KOLKATA Central Excise

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Issues: Whether the demand of central excise duty, interest and penalties confirmed by the adjudicating authority-based on alleged undervaluation, alleged clandestine manufacture and removal, dual pricing and on the basis of average sale price computed from sample invoices-was legally sustainable, and whether denial of exemption under Notification No. 08/2003-CE dated 01.03.2003 for specified years was justified.

Analysis: Valuation for central excise where duty is charged with reference to value is governed by Section 4 of the Central Excise Act, 1944 and the assessable value is the transaction value, i.e., the price actually paid or payable for the goods sold, subject to statutory conditions. There is no statutory method permitting adoption of an average sale price of one period to revalue removals of another period. A subsequent reduction in price, by itself, does not establish evasion of duty if duties were correctly paid on the transaction value at the time of each removal. Allegations of clandestine manufacture and removal require tangible, direct and corroborative evidence such as unexplained receipt or consumption of raw materials, excess production corroborated by electricity or input consumption, discovery of unaccounted finished goods, proof of actual transportation and receipts of sale proceeds; mere sample invoices or internal records without further corroboration are insufficient. The evidence on record consisted primarily of 24 sample invoices and verification reports which did not establish existence of a separate unit at the Indore address, clandestine clearances, or dual invoicing substantiated by contemporaneous documentary proof. Bulk sales to the Government without MRP and instances of free supplies without MRP were factually shown and, in such circumstances, adoption of MRP for those clearances was not appropriate. Denial of SSI exemption under Notification No. 08/2003-CE dated 01.03.2003 was premised on the unsustained allegation of undervaluation and therefore lacked a proper evidentiary foundation.

Conclusion: The demand of central excise duty, interest and penalties-being founded on average prices derived from limited sample invoices and uncorroborated allegations of clandestine clearances and dual pricing-is not sustainable; the denial of exemption under Notification No. 08/2003-CE dated 01.03.2003 for the relevant years is unsustainable. The appeal is allowed and the impugned order confirming duty, interest and penalties is set aside with consequential reliefs as per law.

Ratio Decidendi: Where duty is leviable on transaction value under Section 4 of the Central Excise Act, 1944, retrospective revaluation by applying average prices from a different period is impermissible and allegations of clandestine manufacture or dual pricing must be proved by direct and corroborative evidence before demands and denial of statutory exemptions can be sustained.

Transaction Value must govern excise valuation; retrospective revaluation using average-period prices and uncorroborated clandestine claims is impermissible.
Valuation for central excise must follow the transaction value principle: the price actually paid or payable is the assessable value and cannot be retrospectively revalued by applying average prices from a different period; therefore revaluation based on average sale prices from sample invoices is impermissible. Allegations of clandestine manufacture, clandestine removals or dual pricing require direct, tangible and corroborative evidence (e.g., unexplained input consumption, excess production records, discovery of unaccounted goods, transport and sales proceeds); mere sample invoices or internal records without corroboration are insufficient. Application of MRP is inappropriate where bulk or free supplies lacked MRP. Denial of SSI exemption lacked evidentiary foundation and is unsustainable.

Valuation under Section 4 - transaction value at time of removal - prohibition on retrospective imputation of value by comparative averaging - clandestine manufacture and removal - burden of proof and corroborative evidence - dual pricing - allegation and evidentiary requirement - denial of SSI exemption consequent on unsustained undervaluation - consequences for interest and penalty where demand is unsustainable Valuation under Section 4 - transaction value at time of removal - prohibition on retrospective imputation of value by comparative averaging - Admissibility of adopting an average sale price computed for one period to revalue clearances for earlier or subsequent periods and to raise differential central excise duty. - HELD THAT: - The Tribunal held that valuation of excisable goods is governed by the transaction value at the time of removal; there is no method in the statute permitting adoption of an average sale price of one period to determine assessable value for different periods. Any subsequent reduction or inter-period fluctuation in prices, by itself, does not establish evasion of duty. Retrospective imputation of value on the basis of comparative analysis alone is impermissible; undervaluation must be supported by contemporaneous documentary evidence relevant to each removal such as invoices, agreements and flow of funds. [Paras 6] Demand founded on an average sale price across periods is legally unsustainable and cannot be sustained in absence of transaction-specific evidence. Dual pricing - allegation and evidentiary requirement - clandestine manufacture and removal - burden of proof and corroborative evidence - Whether the Department proved dual pricing or clandestine manufacture and removal sufficient to justify demand and denial of exemption. - HELD THAT: - The Tribunal found that the Department relied primarily on 24 sample invoices and that verification did not establish existence of another unit or clandestine unit at the Indore address. The Tribunal set out the established requirement that allegations of clandestine manufacture and clearance must be supported by tangible, direct and corroborative evidence (e.g., unaccounted raw material receipt/consumption, excess electricity usage, proof of transportation and receipt by consignees, flow back of sale proceeds). In the present facts none of the necessary ingredients were proved; dual pricing allegation was not substantiated by evidence of separate clearances or corroborative material. Reliance on internal or sample records without independent corroboration was held insufficient. [Paras 6] Allegations of dual pricing and clandestine manufacture/clearance were not proved; demand based on such allegations cannot be sustained. Denial of SSI exemption consequent on unsustained undervaluation - Validity of denying benefit of Notification No. 08/2003-CE to the appellant for the Financial Years 2013-14 to 2015-16 on the basis of alleged undervaluation. - HELD THAT: - Because the Tribunal concluded that the alleged undervaluation was not established by adequate evidence and that the Department's method of using an average sale price was legally impermissible, the consequent action of denying the SSI exemption for the stated years was held to be unsustainable. The denial was therefore set aside as it rested on unproven valuation adjustments. [Paras 6] Denial of SSI exemption for 2013-14 to 2015-16 is legally not sustainable and is set aside. Consequences for interest and penalty where demand is unsustainable - Whether interest and penalties confirmed by the adjudicating authority survive when the foundational demand is set aside. - HELD THAT: - The Tribunal held that where the primary demand of central excise duty is not sustainable for lack of evidence and incorrect valuation methodology, interest and penalty based on that demand cannot subsist. Applying this principle, the Tribunal set aside the imposition of interest and penalties as consequential to setting aside the demand. [Paras 7] Interest and penalties confirmed in the impugned order are set aside consequent to quashing the demand. Final Conclusion: The appeal is allowed: the demand of central excise duty (raised for the periods covered by the audit and for 2011-12 to 2015-16), the denial of SSI exemption for 2013-14 to 2015-16, and the consequential interest and penalties are set aside for lack of legally admissible valuation methodology and insufficient corroborative evidence of clandestine clearances.

2026 (9) TMI 82 - CESTAT CHENNAI Central Excise

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Issues: (i) Whether refund of accumulated CENVAT credit on admitted export clearances could be denied for delayed submission of supporting documents; (ii) Whether the refund claim was barred by limitation by treating its filing date as the date on which documents were subsequently furnished; (iii) Whether limitation could be invoked despite its absence from the show cause notice and despite a remand confined to verification of documents.

Issue (i): Whether refund of accumulated CENVAT credit on admitted export clearances could be denied for delayed submission of supporting documents.

Analysis: Refund under Rule 5 of the CENVAT Credit Rules, 2004 is intended to neutralise the tax burden on exports. Export of the goods, accumulation of unutilised credit, and the nexus of inputs and input services with exported goods were undisputed. The supporting documents sought during verification were evidentiary for quantification and verification, rather than conditions conferring substantive eligibility. Procedural deficiencies cured during verification could not defeat an otherwise valid export refund claim.

Conclusion: The refund claim was substantively admissible; delayed submission of supporting documents did not disentitle the assessee to refund.

Issue (ii): Whether the refund claim was barred by limitation by treating its filing date as the date on which documents were subsequently furnished.

Analysis: The original refund application was filed within the statutory period under Section 11B of the Central Excise Act, 1944. Subsequent furnishing of documents in response to departmental queries did not efface, postpone, or re-date the original filing. Administrative instructions requiring a complete claim could not override the statutory limitation framework, particularly where the claim had been accepted for verification rather than returned as incomplete.

Conclusion: The refund claim was within limitation; its filing date remained the date of the original application and not the later date of document submission.

Issue (iii): Whether limitation could be invoked despite its absence from the show cause notice and despite a remand confined to verification of documents.

Analysis: The show cause notice proposed rejection only for insufficiency of documents and did not put limitation in issue. Adjudication could not be founded on a new ground not notified to the assessee. Further, the unchallenged remand was limited to verification of documents, and its scope did not permit reopening limitation or other conclusively settled aspects of the refund claim.

Conclusion: Invocation of limitation was legally unsustainable, being beyond both the show cause notice and the limited scope of remand.

Final Conclusion: Entitlement to export refund and timeliness of the claim stood conclusively established, with only arithmetical verification and computation of the eligible amount remaining.

Ratio Decidendi: Where substantive eligibility for export refund is undisputed, curable documentary deficiencies do not alter the original filing date or defeat the claim; adjudication cannot proceed on grounds absent from the show cause notice or beyond the scope of a limited remand.

Export refund claims retain original filing dates despite curable document delays; limitation cannot exceed notice or remand scope.
Export refund claims under Rule 5 of the CENVAT Credit Rules, 2004 should not fail where export clearances, accumulated unutilised credit, and the nexus with exported goods are undisputed. Supporting documents sought during verification are evidentiary for quantification and may be furnished later without affecting substantive eligibility. A refund application filed within the statutory period retains its original filing date; later document submission does not re-date the claim. Limitation cannot be introduced through adjudication where it was absent from the show cause notice, and a limited remand for document verification does not permit reopening settled issues. Only verification and computation of the eligible refund remain.

Export refund of accumulated CENVAT credit - curable procedural deficiencies - Refund limitation - date of original filing - Adjudication beyond show cause notice and scope of remand Export refund of accumulated CENVAT credit-curable procedural deficiencies - Admissibility of refund of accumulated CENVAT credit attributable to admitted exports where supporting documents were furnished during verification - HELD THAT: - Refund under Rule 5 is intended to neutralise the tax burden on exports. Since the exports, accumulation of credit and nexus of inputs and input services with exported goods were undisputed, the supporting documents sought by the Department were evidentiary for verification and quantification, not conditions creating eligibility. Procedural deficiencies cured during verification could not defeat the substantive refund entitlement. [Paras 8, 9, 17] The refund claim was held admissible on merits, subject only to computation of the eligible amount. Refund limitation-date of original filing - Limitation for an export refund claim where additional supporting documents were supplied after the original application - HELD THAT: - The date of the original refund application is the relevant date for limitation under Section 11B. Furnishing documents in response to departmental queries neither effaces the original filing nor postpones the limitation period. Administrative instructions requiring a complete claim could not override the statutory right or re-date the claim, particularly when the Department treated it as filed by issuing a show cause notice. [Paras 10, 11, 12, 17] The claim was held to have been filed within limitation, and could not be treated as filed only when the requested documents were subsequently furnished. Adjudication beyond show cause notice - Scope of remand - Validity of rejection of the refund claim on limitation when limitation was not proposed in the show cause notice and the remand was confined to verification of documents - HELD THAT: - A show cause notice is the foundation of adjudication and the adjudicating authority cannot introduce a new ground not put to the assessee. Further, where the unchallenged remand order confined the inquiry to verification of documents, the adjudicating authority was bound by that scope and could not reopen limitation. [Paras 13, 14, 15, 17] The rejection on limitation was held legally unsustainable as being beyond both the show cause notice and the limited scope of remand. Final Conclusion: The appeal was allowed and the denial of refund was set aside. The matter was remanded solely for arithmetical verification and computation of the eligible refund, without reopening eligibility, limitation, admissibility or procedural compliance.

2026 (2) TMI 1268 - CESTAT CHENNAI Central Excise

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Issues: (i) Whether CENVAT credit of Rs.27,28,645/- on disputed input services is admissible under Rule 2(l) of the Cenvat Credit Rules, 2004 as amended w.e.f. 01.04.2011; (ii) Whether the disputed services satisfy the "nexus with manufacture" test or are barred by post-2011 exclusionary clauses; (iii) Whether credit can be allowed in absence of invoices and supporting documentary evidence or requires remand for verification; (iv) Whether waiver/quashing of interest and penalties can be considered at this stage.

Issue (i): Whether CENVAT credit of Rs.27,28,645/- on disputed input services is admissible under Rule 2(l) of the Cenvat Credit Rules, 2004 as amended w.e.f. 01.04.2011.

Analysis: The Tribunal examined categories of services claimed (pest control/housekeeping, gardening and cleaning, construction-related services, plant civil work, manpower services for factory maintenance, and membership services) against the inclusive limb and exclusionary clauses of Rule 2(l) as amended. Reliance was placed on Supreme Court and Tribunal precedents establishing a broad nexus test, and on prior Tribunal decisions including the appellant's earlier order. For multiple service categories the Bench found admissibility in principle but noted absence of invoices and supporting documents to finally quantify or allow credit; rent-a-cab services were specifically excluded under Rule 2(l)(B) and held inadmissible.

Conclusion: Credit on the disputed services is admissible in principle under Rule 2(l) of the Cenvat Credit Rules, 2004 subject to verification; credit on rent-a-cab services is inadmissible.

Issue (ii): Whether the disputed services satisfy the "nexus with manufacture" test or are barred by post-2011 exclusionary clauses.

Analysis: The Tribunal applied the nexus test and the explicit exclusionary provisions in Rule 2(l)(A) and Rule 2(l)(B). It held that pest control, housekeeping, cleaning, gardening (where for statutory compliance/green belt), repair/maintenance construction (if repair/renovation and not barred construction), plant civil work (depending on factual nature), manpower for factory maintenance, and corporate membership for business purposes may satisfy the nexus test and not fall within exclusions; rent-a-cab and clear construction services aimed at building/foundations fall within exclusion.

Conclusion: The services identified are capable of meeting the nexus test and not being hit by exclusions in principle; specific applicability of exclusionary clauses depends on factual verification (except rent-a-cab which is excluded).

Issue (iii): Whether credit can be allowed in absence of invoices and supporting documentary evidence or requires remand for verification.

Analysis: The Tribunal noted absence of invoices, work contracts and other supporting documents before both appellate and tribunal records. It held that CENVAT credit cannot be finally allowed without documentary verification of receipt, nexus and non-applicability of exclusions; while Commissioner (Appeals) remand powers are curtailed, the Tribunal may remit for limited factual verification where record is incomplete.

Conclusion: Credit cannot be finally allowed without documentary verification; the matter is remanded to the adjudicating authority for limited verification of invoices, nexus and eligibility strictly under Rule 2(l), 2004.

Issue (iv): Whether waiver/quashing of interest and penalties can be considered at this stage.

Analysis: Interest and penalty consequences depend on final factual finding on inadmissible credit and statutory provisions governing recovery and penalty (Sections 11A, 11AA/11AB and 11AC of the Central Excise Act, 1944). In absence of final adjudication the Tribunal declined to adjudicate waiver requests and remitted relevant aspects for verification.

Conclusion: Waiver or quashing of interest and penalties is not considered at this stage and stands remitted for decision by the adjudicating authority after verification.

Final Conclusion: The disputed input services (except rent-a-cab) are held admissible in principle under Rule 2(l) of the Cenvat Credit Rules, 2004 subject to documentary verification of receipt, nexus with manufacture/business and non-applicability of exclusion clauses; the matter of Rs.27,28,645/- is remanded to the adjudicating authority for limited verification and consequential determination of credit, interest and penalty within three months.

Ratio Decidendi: Services that have a direct or indirect nexus with manufacture or business and are not specifically excluded by the post-01.04.2011 clauses of Rule 2(l) of the Cenvat Credit Rules, 2004 are admissible in principle as input services, but final allowance requires documentary verification of receipt, nexus and non-applicability of exclusionary provisions.

Cenvat credit admissibility under Rule 2(l) upheld in principle but requires documentary verification; rent a cab excluded.
Cenvat credit on listed input services is admissible in principle under Rule 2(l) of the Cenvat Credit Rules, 2004 where services satisfy a direct or indirect nexus with manufacture or business and are not caught by post 2011 exclusionary clauses; rent a cab services are excluded. Final allowance requires documentary verification of invoices, receipt, nexus and factual classification against exclusionary limbs, and the matter is remanded to the adjudicating authority for limited verification and consequential determination of credit, interest and penalties within three months.

Admissibility of CENVAT credit on input services - Nexus with manufacture/business - Exclusionary clauses in the definition of input service (post-01.04.2011) - Remand for limited factual verification of invoices and nexus - Inadmissibility of rent-a-cab services - Consequential interest and penalty liability pending final verification - HELD THAT:- We hold that credit on pest control and housekeeping services is admissible in principle under the inclusive limb of the definition of “input service”. However, we also find that no invoices or supporting documentary material have been placed before this Bench to conclusively establish the nature of the services, their nexus with the manufacturing activity, and their non-coverage under the exclusion clause. In the absence of such evidence, we are unable to render a final determination on admissibility. Accordingly, remand is the only option available, and the issue is remanded to the adjudicating authority for the limited purpose of factual verification of invoices, nexus and eligibility, and to allow the credit if found in order. Gardening and cleaning services - In the appellant’s own case, M/s. 8CETEX Petrochemicals Limited v. Commissioner of CGST & Central Excise, Chennai, [2025 (1) TMI 1694 - CESTAT CHENNAI], this Tribunal has taken a similar view in respect of housekeeping and cleaning services relating to factory upkeep, subject to verification of documentary evidence. Respectfully following the aforesaid decisions, we hold that credit on gardening and cleaning services is admissible in principle under the inclusive limb of Rule 2(l), subject to verification that the services were actually used for factory upkeep/statutory compliance and are not hit by the exclusion clause. However, since no invoices or supporting documentary material have been placed before this Bench, the matter is remanded to the adjudicating authority for limited verification of nexus, eligibility and quantification. Construction services (commercial and industrial) - In the appellant’s own case [2025 (1) TMI 1694 - CESTAT CHENNAI], this Tribunal allowed credit after examining documentary evidence and concluding that the services were in the nature of repair/maintenance and not hit by the exclusion clause. Respectfully following the said decision, we hold that credit is admissible in principle if the services pertain to repair/renovation and are not barred construction. Since invoices and work documents have not been produced before this Bench, the issue is remanded for limited verification though the issue of eligibility of credit is decided in favour of the appellant. Cab services - We find that rent-a-cab services are specifically excluded under Rule 2(l)(B) post-01.04.2011 when used primarily for employee transportation or personal consumption. Accordingly, no credit is admissible on this component. As regards interest and penalty, we clarify that recovery is governed by Section 11A of the Central Excise Act, 1944, and interest is payable under Section 11AA/11AB as applicable, particularly where inadmissible credit has been taken and utilized. Penalty consequences arise under Section 11AC, subject to the statutory conditions prescribed therein. If reversal along with applicable interest is established prior to issuance of show cause notice under Section 11A(2B), penalty may not sustain. Since documentary evidence is not available on record, this limited aspect is remanded to the adjudicating authority for verification. Plant civil work services - We observe that admissibility of such credit depends entirely upon the factual nature of the activity undertaken. However, we find that no invoices, work contracts or supporting documents have been placed before this Bench to conclusively establish the scope and nature of the civil work services. In the absence of documentary evidence, we are unable to record a final finding. Accordingly, remand is the only option, and the matter is remanded to the adjudicating authority for limited verification of the nature of work, nexus with manufacturing activity, and applicability of the exclusion clause. Labour and manpower services - We find that manpower deployed for housekeeping, cleaning and maintenance of factory premises has nexus with manufacturing operations. Tribunal decisions including Ultratech Cement Ltd. v. CCE, Hyderabad [2016 (12) TMI 381 - CESTAT HYDERABAD], support eligibility of such services even post-01.04.2011, provided they are not exclusively used for excluded activities. Accordingly, credit is admissible in principle, subject to verification of invoices and nexus. Membership services - We note that the Chennai Bench in Trimble Information Technologies India (P) Ltd. v. Commissioner of GST [2021 (8) TMI 395 - CESTAT CHENNAI], held that corporate membership subscriptions incurred for business promotion and brand expansion are eligible input services. Following the ratio of the said decision, we hold that membership of CII may be admissible in principle as an eligible business-related input service. However, no documentary evidence has been placed before this Bench to conclusively establish the precise nature and purpose of the membership subscription. In the absence of such evidence, remand becomes unavoidable. Accordingly, the matter is remanded to the adjudicating authority for limited verification, and credit shall be allowed only if purpose of membership is not for recreation, but, for the business. Thus, we hold that the disputed input services, namely pest control/housekeeping, gardening and cleaning, construction-related services, plant civil work, manpower services for factory maintenance, and membership services, are admissible as input services in principle, being capable of falling within the inclusive part of Rule 2(l) of the CENVAT Credit Rules, 2004, even after the amendment w.e.f. 01.04.2011, subject to fulfillment of the statutory conditions of nexus with manufacture/business and non-applicability of the exclusion clauses. The disputed input services, namely pest control/housekeeping, gardening and cleaning, construction-related services, plant civil work, manpower services for factory maintenance, and membership services, are admissible as input services in principle, being capable of falling within the inclusive part of Rule 2(l) of the CENVAT Credit Rules, 2004, even after the amendment w.e.f. 01.04.2011, subject to fulfillment of the statutory conditions of nexus with manufacture/business and non-applicability of the exclusion clauses. No invoices or supporting documents have been produced either before the lower appellate authority or before this Bench to conclusively establish eligibility. It is settled law that CENVAT credit cannot be finally allowed without verification of documentary evidence. Therefore, remand is unavoidable for the limited purpose of verifying receipt, nexus, and exclusion applicability of the disputed services. Accordingly, the matter relating to credit of ₹27,28,645/- is remanded to the adjudicating authority for limited verification of invoices and eligibility strictly in terms of Rule 2(l), as amended. Credit on rent-a-cab services is held inadmissible being specifically excluded under Rule 2(l)(B). The plea of reversal prior to SCN, along with interest, shall be verified by the adjudicating authority, and penalty consequences shall follow accordingly. The appellant’s prayer for waiver of interest and penalty cannot be considered at this stage, as these are purely consequential and will depend upon the final determination of inadmissible credit, if any, after verification. Thus, the appeals are partly allowed by way of remand in the above terms and disposed of accordingly.

2026 (2) TMI 1267 - CESTAT CHENNAI Central Excise

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Issues: (i) Whether duty demand for the period prior to 15.05.2014 is sustainable in view of Board Circular No.924/14/2010-CX dated 19.05.2010; (ii) Whether duty demand for the period 15.05.2014 to July 2014 survives within the limitation period; (iii) Whether penalties under Section 11AC and Rule 26 are justified; (iv) Whether demand under Section 11D for amounts collected but not deposited survives and requires any further action.

Issue (i): Whether duty demand for the period prior to 15.05.2014 is sustainable in view of Board Circular No.924/14/2010-CX dated 19.05.2010.

Analysis: The Appellant classified goods under Heading 8437 relying on the Board circular dated 19.05.2010 which remained operative until rescission on 15.05.2014. Established legal principles treat Board circulars as binding on departmental authorities while operative. Precedents recognizing that beneficial circulars apply retrospectively and that revenue cannot repudiate its own operative clarification are applied to the facts. Identical tribunal and apex court rulings treating the same classification issue as covered by the operative circular are relied upon.

Conclusion: Demand for the period prior to 15.05.2014 is unsustainable and is set aside.

Issue (ii): Whether duty demand for the period 15.05.2014 to July 2014 survives within the limitation period.

Analysis: The show cause notice was issued on 24.06.2016. The normal limitation under Section 11A(1) had expired for the period 15.05.2014 to July 2014. Extended limitation under Section 11A(4) requires proof of fraud, suppression or wilful misstatement; here the facts show bona fide reliance on Board circulars and an interpretational classification dispute. Applicable authorities and the Board's own master circular on disputed interpretation indicate extended period is not invocable in such cases.

Conclusion: Demand for the period 15.05.2014 to July 2014 is barred by limitation and is set aside.

Issue (iii): Whether penalties under Section 11AC and Rule 26 are justified.

Analysis: Penalties are consequential on a sustainable duty demand. Where the underlying demand fails on merits and limitation, and the conduct stems from bona fide reliance on binding circulars in an interpretational dispute, imposition of penalties for deliberate or contumacious conduct is not justified. Authorities requiring more than lawful non-payment for penalty imposition are applied.

Conclusion: Penalties under Section 11AC and personal penalty under Rule 26 are not justified and are set aside.

Issue (iv): Whether demand under Section 11D for amounts collected but not deposited survives and requires further action.

Analysis: Records indicate amounts claimed deposited but the challans and breakup do not reconcile with sums confirmed. The need for verification and appropriation is confined to determining any unpaid shortfall; if full deposit including interest is established no further penal consequence arises. Recovery, if any, and any penalty must be limited to unpaid amounts found due after verification.

Conclusion: The Section 11D issue is remanded for limited verification and appropriation; any recovery or penalty shall be confined to any unpaid amount found due.

Final Conclusion: The appeals are allowed in part by setting aside the confirmed duty, interest and penalties to the extent indicated, and remanding only the limited Section 11D verification issue; consequential relief shall follow as per law.

Ratio Decidendi: Where a departmental board circular remains operative, revenue cannot raise retrospective demands contrary to that circular; adverse circulars affecting liability operate prospectively and extended limitation for recovery under fraud or suppression cannot be invoked in pure interpretational disputes where the assessee acted bona fide on a binding circular.

Binding Board Circulars bar retrospective duty demands; limitation and bona fide reliance defeat penalties, remand for limited deposit verification.
CESTAT considered whether duty demands and penalties could stand where the assessee relied on an operative Board circular. The tribunal held demands for periods before 15.05.2014 unsustainable due to the binding circular; demands for 15.05.2014-July 2014 were time barred as extended limitation for fraud/suppression did not apply to a bona fide interpretational dispute; penalties under Section 11AC and Rule 26 were set aside as unjustified; Section 11D recovery was remanded for limited verification and appropriation to determine any unpaid shortfall.

Binding nature of Board circulars - beneficial circulars applied retrospectively; adverse clarifications prospectively - extended limitation u/s 11A(4) invocable only on fraud, suppression or wilful misstatement - classification dispute arising from Board clarifications - penalty consequential on unsustainable duty demand - verification and appropriation of amounts collected u/s 11D - Binding nature of Board circulars - beneficial circulars applied retrospectively - Circular No.924/14/2010 - HELD THAT:- It is undisputed that during April 2012 to 14.05.2014, the Appellant classified the impugned goods under Heading 8437, claiming Nil rate of duty, strictly on the basis of CBEC Circular No.924/14/2010-CX dated 19.05.2010. The said circular clarified that rice par-boiling machinery and parts/accessories thereof merit classification under Heading 8437. It is well settled that circulars issued by the Central Board of Excise & Customs under Section 37B are binding on the Department. The Hon’ble Supreme Court in Ranadey Micronutrients v. CCE [1996 (9) TMI 124 - SUPREME COURT], held that consistency and discipline in tax administration require that circulars issued by the Board must be followed by the Department, even if the Department subsequently forms a different opinion. The binding nature of Board circulars has also been conclusively settled by the Constitution Bench of the Hon’ble Supreme Court in CCE, Bolpur v. Ratan Melting & Wire Industries [2008 (10) TMI 5 - SUPREME COURT], wherein it was held that circulars issued by the Board are binding on departmental authorities and must be followed in adjudication and assessment. The Court clarified that while circulars cannot override statutory provisions, so long as they remain operative, the Revenue cannot take a stand contrary thereto, and uniformity in tax administration demands strict adherence by field formations. The Apex Court reaffirmed the earlier ratio in Commissioner v. Mysore Electricals Industries Ltd. [2006 (11) TMI 202 - SUPREME COURT], that beneficial clarifications should be applied retrospectively but adverse clarifications should not be given retrospective effect merely because they are issued later in time. Therefore, a circular that adversely alters the duty liabilities of an Appellant, without express retrospective language, cannot be applied to past transactions prior to the date of issuance of the show cause notice. Thus, so long as the beneficial circular remained in force, clearances made thereunder cannot be subjected to duty retrospectively upon its withdrawal. Consequently, we hold that the duty demand for the period prior to 15.05.2014 is wholly unsustainable and liable to be set aside. Demand for the period 15.05.2014 to July 2014 - HELD THAT:- The present case is not one of clandestine removal or deliberate concealment. The entire dispute arises from classification governed by Board circulars and conflicting interpretations. The Appellant acted under a binding circular till its rescission. Such bona fide conduct cannot be equated with suppression with intent to evade duty. Department has failed to establish any positive act of suppression after 15.05.2014. Hence extended period is not invocable. Consequently, even the demand for the period 15.05.2014 to July 2014 is time barred. Thus, the entire demand of Rs.99,47,758/- fails on merits for the pre-15.05.2014 period and on limitation for the post-15.05.2014 period, along with demand of consequential interest. Penalties under Section 11AC and Rule 26 - HELD THAT:- Once the duty demand itself does not survive, the question of penalty under Section 11AC automatically does not arise. Penalty provisions are consequential and cannot stand independent of an unsustainable duty demand. Moreover, the dispute is purely interpretational, arising from Board circulars. The Hon’ble Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1969 (8) TMI 31 - SUPREME COURT], held that penalty cannot be imposed merely because it is lawful to do so, unless there is deliberate or contumacious conduct. Accordingly, penalty imposed on Appellant No.1 under Section 11AC and personal penalty imposed on Appellant No.2 under Rule 26 are liable to be set aside. Demand under Section 11D - HELD THAT:- In case the appellant has deposited the entire amount collected along with applicable interest, no further penal consequence would arise. However, if any shortfall remains unpaid, the adjudicating authority shall ensure recovery of the unpaid amount in accordance with Section 11D, and the question of penalty, if any, shall be examined strictly in accordance with law and confined only to the extent of any unpaid amount. Accordingly, the Section 11D issue is remanded only for the limited purpose of verification and appropriation as directed above. We find that the matter requires limited verification, since the records indicate certain deposits claimed to have been made, but the challans and exact break-up do not match the amount collected as duty. Therefore, this issue is remanded only for the limited purpose of verification and appropriation of the amount, and the adjudicating authority shall ensure that any recovery or penal consequence, if warranted, shall be confined strictly to the extent of any unpaid amount found due upon such verification.

2026 (2) TMI 1266 - CESTAT CHENNAI Central Excise

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Issues: (i) Whether the clearances of the two manufacturers from the same factory were liable to be clubbed under Para 2(vi) of Notification No. 08/2003-CE, (ii) whether invocation of the extended period under Section 11A(4) of the Central Excise Act, 1944 was sustainable, and (iii) whether the penalties under Rule 25 of the Central Excise Rules, 2002 and Section 11AC of the Central Excise Act, 1944 were justified.

Issue (i): Whether the clearances of the two manufacturers from the same factory were liable to be clubbed under Para 2(vi) of Notification No. 08/2003-CE.

Analysis: Para 2(vi) of the SSI notification provides that where specified goods are cleared by one or more manufacturers from the same factory, the exemption is available only on the aggregate value of clearances and not separately to each manufacturer. Both manufacturers cleared the same excisable goods from the same premises during the relevant financial year, so separate exemption limits were not available.

Conclusion: Clubbing of clearances was correctly applied and the exemption claim on a separate basis failed.

Issue (ii): Whether invocation of the extended period under Section 11A(4) of the Central Excise Act, 1944 was sustainable.

Analysis: The extended period was found to be attracted because one manufacturer did not obtain registration, file returns, or discharge duty, while the other did not disclose the leasing arrangement and continued clearances from the same premises. The omission was not treated as a mere inadvertence or as a case of full disclosure; instead, it was treated as non-compliance detected only through investigation, which justified invocation of the longer limitation period.

Conclusion: The extended period under Section 11A(4) was held to be sustainable.

Issue (iii): Whether the penalties under Rule 25 of the Central Excise Rules, 2002 and Section 11AC of the Central Excise Act, 1944 were justified.

Analysis: Penalty under Section 11AC follows where duty is not paid by reason of suppression of facts or contravention with intent to evade duty. Clearing excisable goods without registration and without duty payment was treated as conscious non-compliance rather than a procedural lapse, and the ingredients for penalty were held to be present.

Conclusion: The penalties under Rule 25 and Section 11AC were held to be justified.

Final Conclusion: The common order was upheld in full, with the duty demands, limitation finding, and penalty confirmation all sustained against the appellants.

Ratio Decidendi: Where SSI exemption conditions require aggregate treatment of clearances from the same factory, separate exemption cannot be claimed by different manufacturers operating from the same premises, and non-registration with non-payment of duty may justify extended limitation and penalty for suppression-related contravention.

SSI exemption clubbing, extended limitation, and penalty upheld for clearances from the same factory without registration or duty payment.
SSI exemption under Para 2(vi) of Notification No. 08/2003-CE requires aggregation of clearances where specified goods are removed by more than one manufacturer from the same factory, so separate exemption claims from the same premises fail. Non-registration, non-filing of returns, and non-payment of duty were treated as suppression and non-compliance, making invocation of the extended limitation period under Section 11A(4) sustainable. Those same facts also supported penalties under Rule 25 of the Central Excise Rules, 2002 and Section 11AC of the Central Excise Act, 1944, as the conduct was treated as conscious evasion rather than a mere procedural lapse.

2026 (3) TMI 348 - CESTAT KOLKATA Central Excise

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Issues: (i) Whether mines qualify as 'place of removal' for purposes of Notification No. 41/2007-ST (as amended) so as to permit refund of service tax paid on GTA services used for export; (ii) Whether the appellant established payment of service tax on GTA services and non-availment of cenvat credit such that refund is admissible; (iii) Whether the appellant is entitled to an enhanced refund claim submitted by letter dated 24.08.2016.

Issue (i): Whether mines constitute 'place of removal' under Section 4 of the Central Excise Act, 1944 for the purposes of the refund notification.

Analysis: The Notification permits refund where goods are transported from the place of removal to port. The term 'place of removal' is not defined in the Notification or Finance Act and reference is made to Explanation VI(c) to Section 4 of the Central Excise Act, 1944 which includes a factory or any other place or premises of production. CESTAT precedent treats mining as production/manufacture. The facts show removal of iron ore from mine areas to port for export.

Conclusion: Held in favour of the Appellant. Mines qualify as 'place of removal' and the condition is satisfied.

Issue (ii): Whether the appellant proved payment of service tax on GTA services and that cenvat credit was not availed.

Analysis: The appellant produced agreements, shipping bills, GAR-7 challans, and a CA certificate certifying payment of service tax and non-availment of cenvat credit. The impugned order did not identify specific missing documents. Board Circular No. 120/01/2010-ST permits a liberal approach to linkage where bulk exports and practical constraints are shown. A CA certificate examining books has evidentiary value and cannot be disregarded without reason.

Conclusion: Held in favour of the Appellant. The appellant established payment of service tax on GTA services and non-availment of cenvat credit; refund admissible for the claimed amount.

Issue (iii): Whether the enhanced refund claimed by letter dated 24.08.2016 is admissible in the present proceedings.

Analysis: The original claim of Rs. 1,12,49,745/- was the subject matter of adjudication and remand; the enhancement sought in 2016 related to additional invoices not part of the original claim and was filed after many years. The adjudicating authority was bound by the scope of the remand and the Commissioner (Appeals) directions to confine reconsideration to the original claim. Authorities cited by appellant were found distinguishable on facts.

Conclusion: Held against the Appellant. The enhanced claim is not admissible in the present proceedings and must be filed as a fresh claim if maintainable.

Final Conclusion: The appeal is partly allowed; the appellant's original refund claim of Rs. 1,12,49,745/- is allowed with interest under Section 11BB of the Central Excise Act, 1944, while the enhanced claim of Rs. 1,23,82,560/- is rejected and not entertained in these proceedings.

Ratio Decidendi: For refund claims under Notification No. 41/2007-ST (as amended), mining constitutes production so mines can be 'place of removal' under Section 4 of the Central Excise Act, 1944; a CA certificate and supporting export and payment records suffice to establish payment of service tax and non-availment of cenvat credit where specific missing documents are not identified; enhancements involving invoices not part of the original processed claim must be filed as a fresh claim and cannot be allowed in a remand confined to the original claim.

Place of removal includes mines; CA certificate can substantiate service tax payment and enhanced claims are barred on remand.
Mines qualify as 'place of removal' under Section 4 of the Central Excise Act for purposes of Notification No. 41/2007-ST because mining amounts to production/manufacture and goods were removed from mine to port, so the removal condition is satisfied and refund may be allowed; a chartered accountant certificate together with agreements, shipping bills and GAR-7 challans establishes payment of service tax on GTA services and non availment of cenvat credit where no specific documentary gaps are identified, so refund is admissible for the original claim; an enhancement based on invoices outside the original claim is not maintainable in the remand and must be filed afresh, so the enhanced claim is rejected.

Payment of service tax on GTA services procured for transportation of iron ore fines from mines to the port - Scope of term "Place of removal" - Activity of mining as production or manufacture - Benefit of Notification No. 41/2007-ST (as amended) so as to permit refund of service tax paid on GTA services used for export - refund of service tax on specified services - proof of payment of service tax - non-availment of cenvat credit - self-certification by chartered accountant - liberal linking of export consignments - Enhancement of refund claim. Place of removal - Whether the iron ore mines qualify as 'place of removal' for the purpose of refund under the Notification and Section 4 of the Central Excise Act. - HELD THAT: - The Tribunal held that the term 'place of removal' must be read with Explanation VI to Section 4 of the Central Excise Act, which includes a factory or any other place or premises of production. The activity of mining amounts to production/manufacture of excisable goods and therefore the mine areas constitute the place of production from where excisable goods are removed to the port. Reliance was placed on the CESTAT, Kolkata decision in Avian Overseas [2009 (3) TMI 141 - CESTAT, KOLKATA] On the facts, the iron ore was removed from the mines to the port for export and the condition in the Notification was satisfied; rejection solely because mines were not a 'place of removal' was unsustainable. [Paras 7] The mine areas qualify as 'place of removal' and the refund rejection on this ground is not sustainable. CA certificate - admissible evidence of payment of service tax - Whether the Appellant had established payment of service tax on GTA services and non-availing of Cenvat credit. - HELD THAT: - The Tribunal found that the impugned order did not identify any specific document which the Appellant failed to furnish. The Appellant had produced GAR-7 challans, agreements, shipping documents and a Chartered Accountant's certificate certifying that Cenvat credit was not availed and that service tax was paid under RCM. A CA certificate is a relevant evidentiary document and cannot be disregarded without justification. Applying this principle, the Tribunal accepted the CA certificate as proof of payment of service tax on GTA services and held that rejection on this ground was not supported by evidence. [Paras 8] Proof of payment of service tax and non-availment of Cenvat credit was established by the Appellant; the rejection on these grounds is unsustainable. Liberal approach to correlation requirement between lorry receipts and export invoices - Whether non-mention of exporter invoice details on lorry receipts and shipping bills disentitles the Appellant to refund. - HELD THAT: - The Tribunal noted the commercial reality of bulk continuous movement of iron ore to port where aggregation and later export occur, making pre printing of export invoice details on daily lorry receipts impractical. The Board Circular No. 120/01/2010-ST advocates a liberal approach to linkage/correlation. Given that there was no dispute on factum of export and that goods had to be brought to the port for export, the strict compliance contention could not be sustained. The Tribunal therefore held that rejection for non compliance with condition (iii) of entry no.11 was not tenable. [Paras 8] Rejection of the refund claim on account of non mentioning of exporter invoice details on lorry receipts/shipping bills is not sustainable; a liberalized correlation approach applies. Enhancement of refund claim in a denovo remand is restricted to the original claim; fresh claim required for new invoices - Whether the Appellant could enhance the refund claim years later in the denovo proceedings remanded by the Commissioner (Appeals). - HELD THAT: - The Tribunal observed that the original refund claim for a specified amount had been remanded for reconsideration and the adjudicating authority was bound to decide within the scope of directions given by the Commissioner (Appeals). The alleged enhancement by letter after more than six years sought refund in respect of additional invoices not part of the original claim. That enhancement did not arise from a mere clerical correction of the original claim but related to new invoices; therefore it could not be allowed in the denovo remand. The proper course for the Appellant was to file a fresh refund claim supported by documentary evidence for the additional invoices. [Paras 9, 10] The enhanced refund claim was rightly rejected; the Appellant must file a fresh claim for amounts arising from invoices not included in the original claim. Final Conclusion: The Tribunal allowed the refund claim as originally filed for the period January 2008 to March 2008 in the amount claimed, with interest under section 11BB of the Central Excise Act, 1944, but refused the enhanced claim made later; the appeal was disposed accordingly.

2026 (2) TMI 1077 - CESTAT ALLAHABAD Central Excise

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Issues: (i) Whether interest on the refunded amount is payable from the date of deposit or from the date immediately after the expiry of three months from filing the refund application; (ii) Whether interest at 12% per annum is payable instead of 6% per annum.

Issue (i): Whether interest commences from date of deposit or from the date after three months from filing the refund application.

Analysis: The question depends on whether the refunded amount is a "duty" within Section 11B/11BB of the Central Excise Act, 1944 or a revenue deposit. Section 11BB prescribes interest on delayed refunds of duty from the date after three months from receipt of the refund application. Where an amount was paid under protest during investigation and prior to any adjudication or quantified demand, it does not acquire the character of "duty" and remains a deposit. Judicial precedents and binding High Court authority have held that Sections 11B/11BB apply only to refunds of duty and not to refunds of revenue deposits; therefore the commencement rule in Section 11BB cannot be imported into cases of revenue deposits.

Conclusion: Issue (i) is answered in favour of the appellant; interest is payable from the date of deposit because the refunded amount is a revenue deposit and not "duty" under Section 11B/11BB.

Issue (ii): Whether interest at 12% per annum is payable instead of 6% per annum.

Analysis: There is no statutory rate prescribed for interest on refund of revenue deposits under the Central Excise Act. In absence of a statutory prescription, judicial practice and principles of equity govern the rate. Tribunal precedent, affirmed by the Hon'ble High Court, has awarded 12% per annum on refunds of revenue deposits as appropriate where no statutory rate is provided and where amounts were retained without lawful authority.

Conclusion: Issue (ii) is answered in favour of the appellant; interest at 12% per annum is payable on the refunded amount from the date of deposit until actual refund, with adjustment for interest already sanctioned.

Final Conclusion: The impugned appellate order denying interest from the date of deposit and awarding interest at 6% per annum is set aside; the matter is resolved by treating the refund as that of a revenue deposit, with interest awarded at 12% per annum from date of deposit until actual payment, and consequential reliefs directed to be given by the authority.

Ratio Decidendi: Where an amount is paid under protest during investigation and prior to any adjudication or quantified demand, it is a revenue deposit and not "duty" under Section 11B/11BB of the Central Excise Act, 1944; consequently Sections 11B/11BB do not govern commencement or rate of interest for such refunds and judicially determined interest (12% per annum) may be awarded in the absence of a statutory rate.

Interest on revenue deposit refunds runs from date of deposit and equitable rate may be awarded on absence of statutory rate.
Amount paid under protest during investigation before adjudication is a revenue deposit, not duty; therefore statutory refund rules for duty do not govern commencement of interest and interest on refund must run from date of deposit. In absence of any statutory rate for interest on revenue-deposit refunds, courts may apply equitable judicial rates; accordingly a 12% per annum rate was applied from date of deposit until actual refund, subject to adjustment for any interest already sanctioned.

Characterisation of payment as duty or revenue deposit - Interest on delayed refunds - Commencement point for interest where refund relates to revenue deposit - Rate of interest on refund of revenue deposit - Applicability of Section 11B/11BB to refunds of revenue deposits - Principle against unjust enrichment and Article 265 - Characterisation of payment as duty or revenue deposit - HELD THAT:- Once it is accepted that no duty was legally payable, the amount deposited under protest cannot be treated as “duty” so as to attract the provisions of sections 11B and 11BB of the Central Excise Act. The issue is no longer res integra in view of the decision of this Tribunal in Parle Agro [2021 (5) TMI 870 - CESTAT ALLAHABAD], which has been affirmed by the Hon’ble Allahabad High Court. It has been conclusively held therein that Section 11B/11BB of the Central Excise Act applies only to refunds of duty and has no application to refunds of revenue deposits. Consequently, the restriction contained in Section 11BB regarding commencement of interest after expiry of three months from the date of filing of the refund application cannot be imported into cases involving refund of revenue deposits. Therefore, the Appellate Authority, while passing the Impugned OIA, has failed to examine the applicability of Section 11BB of the Central Excise Act in the correct legal perspective and has mechanically denied interest from the date of deposit by treating the amount as duty, without recording any finding as to how the amount acquired the character of duty. Rate of interest on refund of revenue deposit - Principle against unjust enrichment and Article 265 - HELD THAT:- This issue is squarely covered by the decision of this Tribunal in M/s Parle Agro [2021 (5) TMI 870 - CESTAT ALLAHABAD] wherein, after examining the statutory scheme and the absence of any prescribed rate of interest for refund of revenue deposits, this Tribunal held that interest at the rate of 12% per annum is appropriate. The aforesaid decision of this Tribunal has been expressly affirmed by the Hon’ble Allahabad High Court in Principal Commissioner, Central Goods and Service Tax v. M/s Parle Agro Private Limited (supra). The Hon’ble High Court has approved the grant of interest at the rate of 12% per annum in cases involving refund of revenue deposits, thereby lending authoritative approval to the said rate. Appellant, wherein interest at the rate of 12% per annum has been granted on refund of amounts deposited during investigation or adjudication, on the ground that such amounts were not legally payable as duty or tax. Therefore, the reliance of the Revenue on the provisions of Section 11BB of the Central Excise Act and the corresponding Notification No. 67/2003-C.E. (N.T.) dated 12.09.2003, which prescribe a rate of interest at 6% per annum on delayed refunds of duty, are wholly inapplicable in the Appellant’s case, since the amount retained was never legally due as duty and was wrongfully withheld without authority of law. Accordingly, answered in favour of the Appellant, holding that interest of INR 59,37,701/- on the refunded amount is payable to the Appellant at the rate of 12% per annum from the date of deposit till the date of actual refund. Since the Impugned OIA has already sanctioned interest amounting to INR 2,72,786/-, the Revenue is directed to sanction and disburse the balance interest of INR 56,64,915/- to the Appellant, in accordance with law. Appeal is allowed, and the Impugned Order-in-Appeal No.29-CE/APPL-MRT/MRT/2023-24/ dated 08.02.2025, to the extent challenged by the Appellant, is set-aside, with consequential reliefs to the Appellant, as per law.

2026 (2) TMI 1007 - CESTAT AHMEDABAD Central Excise

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Evidentiary Corroboration required: handwritten bank annotations and third party notes cannot sustain clandestine removal demands without independent documentary links.
Departmental reliance on DGCEI records, bank statements with handwritten annotations and third party statements is insufficient to prove clandestine removal absent independent documentary corroboration; handwritten abbreviations and shroff notes do not identify recipients without proof of authorship or decoding, and testimonial or derived records require linking transport documents, stock discrepancies or direct production/receipt evidence to establish unaccounted removal. Where investigation fails to produce such documentary links or to properly verify annotations, evidentiary weight of diary/loose entries and hawala type records is limited. Operative effect: charges of clandestine removal cannot be sustained and corresponding demands and penalties should be set aside.

2026 (9) TMI 947 - CESTAT KOLKATA Central Excise

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Revenue neutrality in sister-unit stock transfers defeats central excise duty demands where recipients can claim CENVAT credit.
Central excise duty demands on stock transfers to sister units were unsustainable where the recipient units could avail CENVAT credit of the duty paid. Because the duty liability at the transferring unit was fully creditable to the receiving units, the transactions were revenue-neutral. Revenue neutrality therefore defeated the duty demands in respect of clearances to sister units.

2026 (5) TMI 864 - CESTAT BANGALORE Central Excise

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Exemption notification proviso governs DTA clearances, requiring duty on inputs used in manufacture of exempted goods.
A proviso in an exemption notification must be read as qualifying the main exemption and cannot be treated as independent unless the text clearly so provides. In the context of a 100% Export Oriented Unit clearing finished goods into the Domestic Tariff Area, the notification required payment of customs duty attributable to the duty-free imported or indigenous inputs used in manufacture. The Tribunal rejected the argument that the main clause alone governed the liability and held that the proviso controlled the scope of the exemption. On that basis, duty on the relevant inputs was payable at the stage of Domestic Tariff Area clearance.

2026 (5) TMI 863 - CESTAT BANGALORE Central Excise

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Issues: (i) Whether the buyer was a related person of the manufacturer so as to reject the sale price and determine assessable value under the valuation rules; (ii) Whether demand and penalty could be sustained by invoking the extended period of limitation.

Issue (i): Whether the buyer was a related person of the manufacturer so as to reject the sale price and determine assessable value under the valuation rules.

Analysis: The definition of related person under Section 4(3)(b) of the Central Excise Act, 1944 requires more than a common link between the entities. The decisive test is whether each concern has a direct or indirect interest in the business of the other. Mere common partnership, without evidence of financial flow back, control, or mutual interest in each other's business, is insufficient. On the record, no material beyond the common partner was shown to establish the statutory relationship needed to disregard the declared sale price and apply the related-person valuation method under the Central Excise Valuation Rules, 2000.

Conclusion: The buyer was not proved to be a related person, and the assessable value could not be re-determined on that basis.

Issue (ii): Whether demand and penalty could be sustained by invoking the extended period of limitation.

Analysis: The goods were cleared on payment of duty on the declared value, returns were filed, and the unit was subjected to periodic departmental audit. In the absence of established suppression or wilful misstatement, the basis for extending limitation was not made out.

Conclusion: The extended period of limitation was not invocable, and the demand could not be sustained on that ground.

Final Conclusion: The impugned orders were unsustainable and were set aside, resulting in allowance of the appeals with consequential relief.

Ratio Decidendi: A buyer cannot be treated as a related person merely because of a common partner; the Department must prove mutual interest in the business of each other before rejecting the transaction price and invoking related-person valuation, and extended limitation requires proof of suppression or similar conduct.

Related-person valuation rejected where common partnership alone was insufficient and extended limitation failed without suppression.
Common partnership alone does not make a buyer a related person under Section 4(3)(b) of the Central Excise Act; the Department must show direct or indirect mutual interest, such as financial flow back or control, before rejecting the declared sale price and re-determining assessable value under the Central Excise Valuation Rules, 2000. On the facts, no such material was established, so related-person valuation was not justified. Extended limitation also requires proof of suppression or wilful misstatement; where duty was paid on declared value, returns were filed, and departmental audits were carried out, the extended period could not be invoked. The impugned orders were therefore set aside and the appeals allowed with consequential relief.

Rejection of the sale price - Assessable value - Definition of related person under Section 4(3)(b) - Mutuality of interest - Extended period of limitation - Suppression of fact. Whether the appellant M/s. Neptune Industries (M/s. Jupiter Concrete blocks & Allied Products (P) Ltd., w.e.f. March 2016) and M/s. APCO Concrete Blocks and Allied Products (Apco) are related persons and the prices at which Apco sold the products be assessable to duty under Rule 11 read with Rule 9 and Rule 10 of the CEVR, 2000 ? - HELD THAT: - The Tribunal held that mere existence of a common partner in both firms and the fact that most of the production was sold to Apco were insufficient to establish relationship within the meaning of Section 4(3)(b). The determinative test was whether both entities had direct or indirect interest in the business of each other. Since the record disclosed no evidence of financial flow back, control of one firm over the other, or any other material showing mutuality of interest, the finding of related-person transactions could not be sustained. This Tribunal in the case of Ananthapuri Polymers Pvt. Ltd. Vs. CCE,C&ST [2025 (7) TMI 2013 - CESTAT BANGALORE], considering more or less in similar facts and circumstances, held that merely one of the Directors of the appellant company is related to a partner of the related company of the appellant could not be considered that the transaction is between the ‘related persons’. Further, the scope of ‘related person’ has been examined by the Tribunal in the case of Eastern Bakeries Pvt. Ltd. Vs. CCE, [2013 (5) TMI 322 - CESTAT KOLKATA]. Applying the principles laid down in the aforesaid case to the facts of the present case, thus except making allegation that one of the partners is common in both the firms, no other evidence has been brought on record to substantiate that the appellant - seller and the purchaser - Apco have interest directly or indirectly in the business of each other. The valuation adopted on the basis that the buyer was a related person was set aside. Extended period of limitation - Suppression of facts - HELD THAT: - The Tribunal found that the appellant had been paying duty on the value at which goods were sold to Apco and had been subjected to periodic departmental audits. In that background, the demand could not be sustained by invoking the extended period on the allegation of suppression. [Paras 9] The demand raised for the extended period was held unsustainable. Final Conclusion: The Tribunal held that the material on record did not establish that the appellant and Apco were related persons, and therefore the valuation based on Apco's sale price could not stand. The invocation of the extended period was also rejected, with the result that the impugned orders, including the remand and consequential de novo quantification, were set aside and the appeals were allowed.

2026 (3) TMI 406 - CESTAT KOLKATA Central Excise

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Cenvat credit reversal: supplying inputs to contractors for use in the assessee's own manufacturing activity does not trigger reversal.
Whether Rule 3(5) of the Cenvat Credit Rules, 2004 required reversal of credit on explosives supplied to contractors for use in the appellant's own mines was examined; the governing principle applied is that reversal is mandated only where inputs are not used in or in relation to manufacture or are removed as such. Supplies to contractors for mine development and extraction used to produce the assessee's final product do not constitute removal of inputs, so Rule 3(5) does not apply and the credit need not be reversed; the impugned demand was set aside.

2026 (2) TMI 1006 - CESTAT KOLKATA Central Excise

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Repacking of excisable goods: no sustained duty demand where goods are re-entered into DSA, properly recorded and cleared on payment.
Goods removed from factory DSA for re-packing and subsequently re-entered into DSA with contemporaneous RG-1/DSA entries, monthly returns and prior intimation, and later cleared on payment of duty, do not attract a sustained demand where there is no revenue loss or suppression. The Tribunal applied the principle permitting transfer of defective/damaged excisable goods for reprocessing/reconditioning without immediate duty payment when properly accounted for on re-entry, and set aside the confirmed demand for duty, interest and penalty, allowing the appeal in favour of the assessee.

Reprocessing within factory - repacking as part of manufacture to make goods marketable - removal from DSA without payment of duty - marketability test for levy of excise duty - exemption under Notification No. 67/95-CE - remission under Rule 21 of the Central Excise Rules, 2002 - invoice requirement and duty payment on removal from factory - Board Circular No. 22/71-CX.6 dated 30-10-1971 - requirement of proper accounting/entries in RG-1/DSA records - HELD THAT:- We find that the dispute in the present appeal relates to the goods taken out of DSA for the purpose of re-packing, which has been considered by the Revenue as marketable goods for the purpose of levy of central excise duty. Admittedly, the ld. adjudicating authority accepted the appellant’s explanation in respect of part of the goods, namely, the defective/slow/non-moving goods taken out of DSA for re-pulping/re-processing and manufacture afresh and held that such paper was not marketable. However, the explanation offered by the appellant in respect of paper taken out of DSA for the purpose of re-packing was not accepted by the authorities below on the ground that packed paper was marketable goods and not entitled to the same treatment. The case of the appellant is that they had taken the goods out of DSA for repacking, for reasons such as customised packing desired by the customer or rectification of the packing which wrongly mentioned the name of a party other than the actual buyer and till the goods were packed in a manner acceptable to the customers, they cannot be regarded as marketable; that although the Department was fully aware of all the facts and the practice followed by the appellant in relation to such reprocessing/repacking/rectification, no objections were raised as to the same. We find that the very same issue has been examined by this Tribunal in the appellant’s own case in ITC Ltd. v. Commissioner of C.Ex., Kolkata-IV [2025 (11) TMI 1877 - CESTAT KOLKATA]. The decision cited supra is squarely applicable to the present case. Accordingly, by following the above decision, we hold that the impugned demand, along with interest and penalty thereon, confirmed against the appellant vide the impugned order, is not sustainable in the eyes of law and therefore, the same is set aside.

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