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2026 (1) TMI 712 - CESTAT CHENNAI Central Excise

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Cenvat credit on capital goods sent directly to job worker permitted; clarificatory amendment and revenue neutrality sustain credit.
Cenvat credit on capital goods sent directly to a job worker is allowable where the assessee remained owner and the goods were exclusively used in manufacture; this follows from a clarificatory amendment permitting credit without physical receipt at the factory, and thus credit retention was justified. Procedural non-compliance alone cannot forfeit substantive credit rights, applying the principle that procedural infractions do not deny substantive benefit. Time-bar arguments fail because there was no suppression and the matter is revenue-neutral; however, where capital goods are not returned within 180 days the credit must be reversed and reclaimed upon receipt.

Availability of Cenvat credit on capital goods which were sent directly to a job worker and not brought to the appellant's factory premises - denial of credit only on the ground that Kink Bending Machine is that the machine was not received in the factory of the Assessee - Rule 4(5)(a) of CCR - Time limitation - HELD THAT:- In terms of Rule 4(5)(a), amended vide Notification No. 6/2015-CE dated 01.03.2015 by insertion of a new proviso, an Assessee can take cenvat credit on the goods sent directly to the job worker's premises without being brought to the factory of the Assessee. Hence, this amendment is clarificatory in nature and so this position is to be taken as it existed even prior to the insertion. It remains uncontroverted that owing to the size and weight of the machines in question they were not brought to the Appellant’s factory premises, there is no dispute as to the Appellant being the owner of said machines and also to the fact that the same were used exclusively for the manufacture of chassis frames, for the Appellant. Hence, there may not be any issue as to the Appellant’s eligibility for taking and retention of credit as per Rule 4(5)(a) ibid. Even otherwise, it is found that if at all, it was only a procedural infraction for which, a substantive benefit could not be denied. This view has ben laid down by the Hon’ble Apex Court in the CCE Vs. Home Ashok Leyland Ltd. [2007 (3) TMI 257 - SUPREME COURT] In any case, it is not the case of the Revenue that the goods in question ‘Kink Bending Machine’ was ineligible capital goods per Rule 2(a) of the CCR. Time limitation - HELD THAT:- No case is made out for invoking the larger period since there was nothing that was suppressed - Even otherwise, there cannot be any room to allege duty evasion as it’s clearly a Revenue-neutral situation - Tribunal is agreed with the Revenue-neutral situation because, going by Rule 4(5)(a), if the said capital goods are not received back within 180 days after being sent for job work, then the Appellant has to reverse the amount equal to the credit taken and take the credit when the capital goods are received in their factory. There are no merit in the impugned order, the Order-in-Original was in order both on merits as well as on limitation and hence, the impugned Order-in-Appeal does not sustain - appeal allowed.

2026 (1) TMI 777 - CESTAT HYDERABAD-LB Central Excise

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Issues: (i) Whether the product 'Kopiko' Cappuccino and Espresso is classifiable under Heading 1704 9090 as sugar confectionery or under Heading 2101 1200 as preparations with basis of coffee. (ii) Whether, for such classification, recourse was properly taken to Rule 2 and Rules 3(a), 3(b) and 3(c) of the General Rules for the Interpretation of the First Schedule to the Central Excise Tariff Act, 1985.

Issue (i): Whether the product 'Kopiko' Cappuccino and Espresso is classifiable under Heading 1704 9090 as sugar confectionery or under Heading 2101 1200 as preparations with basis of coffee.

Analysis: The product was found to be predominantly composed of sugar and liquid glucose, with coffee extract present only in a very small proportion and used as a flavouring agent. On common trade parlance, packaging, commercial identity, and the food-regulatory description, it was treated as a sugar boiled confectionery or candy. Heading 1704 specifically covers sugar confectionery not containing cocoa, whereas Heading 2101 applies to preparations with a basis of coffee, which requires coffee to form the principal basis of the product. The presence of a small quantity of coffee extract did not alter the essential character of the product, and the classification evidence, including the comparable customs classification and FSSAI description, supported the assessee's case.

Conclusion: The product is classifiable under Heading 1704 9090 as sugar confectionery and not under Heading 2101 1200.

Issue (ii): Whether, for such classification, recourse was properly taken to Rule 2 and Rules 3(a), 3(b) and 3(c) of the General Rules for the Interpretation of the First Schedule to the Central Excise Tariff Act, 1985.

Analysis: Classification was held to be determinable at the stage of Rule 1 itself by reference to the terms of the headings and relevant chapter descriptions. Heading 1704 was found to be the more specific description for the product, while Heading 2101 was regarded as more general. Since the product was capable of classification under Rule 1 and, in any event, under Rule 3(a) as the more specific heading, there was no occasion to invoke Rule 3(c). The essential character and commercial understanding of the product did not justify departure from the specific heading for sugar confectionery.

Conclusion: Rule 1 and Rule 3(a) apply, and recourse to Rule 3(c) was unwarranted.

Final Conclusion: The reference was answered in favour of the assessee on classification, with the product held to fall under Heading 1704 9090 as sugar confectionery and the contrary view under Heading 2101 1200 rejected.

Ratio Decidendi: Where a product is commercially understood and described as sugar confectionery, and the alleged coffee component is only a minor flavouring ingredient, classification must follow the more specific heading for sugar confectionery under Rule 1 and Rule 3(a), rather than a more general heading for preparations based on coffee.

Sugar confectionery classification prevails where coffee is only a minor flavouring ingredient, not the product's principal basis.
A product marketed as Kopiko Cappuccino and Espresso was held classifiable as sugar confectionery under Heading 1704 9090 because its predominant constituents were sugar and liquid glucose, while coffee extract was present only in a minor quantity as flavouring. Commercial identity, trade parlance, packaging, and the food-regulatory description supported treatment as candy rather than a preparation with a basis of coffee under Heading 2101 1200, which requires coffee to be the principal basis. Classification was found to be resolvable at Rule 1, or alternatively under Rule 3(a) as the more specific heading, so recourse to Rule 3(c) was unwarranted.

Classification of goods - Kopiko - classifiable under Heading 1704 9090 or under Heading 2101 1200 or otherwise? - applicability of Rule 2 and Rule 3(a) are applicable or Rule 3(b) or Rule 3(c) are applicable for determining the correct classification? - HELD THAT:- If the Department intends to classify the goods under a particular heading or sub-heading, different from that claimed by the assessee, the Department is required to adduce proper evidence and thereby discharge the burden of proof. Reliance is placed on the decision of the Apex Court in HPL Chemicals Ltd versus CC Ex, Chandigarh [2006 (4) TMI 1 - SUPREME COURT], which relied on the earlier decision of the Apex Court in Union of India & others versus Garware Nylon Ltd & Ors [1996 (9) TMI 123 - SUPREME COURT] and Hindustan Feredo Ltd versus Central Excise, Bombay [1996 (12) TMI 49 - SUPREME COURT]. The respondent in support of their claim that the product ‘Kopiko’ is classifiable under CH 1704 9090 has produced sufficient evidence whereas the revenue while deviating from the said classification has not produced any evidence and have therefore not discharged the burden. The product being a food item has necessarily to be in conformity with the provisions of FSSAI and FSSR, whose primary objective is to regulate and monitor the manufacture, processing, distribution, sale, and import of food and to ensure that regulations have been framed governing the various food products with addition of even small doses of extracts, so as to enrich food products. Under FSSR, the candy manufactured is classified under Rule 2.7.1 as a sugar boiled confectionery and, therefore, the same is a relevant factor in determining the classification of sugar based confectionary with 2.5%/4.5% of coffee extract under Heading 1704, which is specifically for sugar confectionary and cannot be considered as a preparation with coffee extract or essence as the basis to be classified under Heading 2101. Further, the manufacturing process of the product as noted by the Commissioner conforms to Regulation 2.7.1 of FSSR to be called as sugar boiled confectionary. The Hyderabad Bench accepted that certification by FSSAI as a sugar confectionary does have persuasive value, but on the other hand, observed that it does not have binding effect on Central Excise Authorities, which actually is contrary to the principles laid down in this regard. The Apex Court in Kirloskar Oil Engines Ltd. versus Union of India [1995 (5) TMI 30 - SUPREME COURT] and National Sales Corporation versus Customs, Madras [1995 (5) TMI 31 - SUPREME COURT] held that IS specification is not ignorable in the absence of any material. Similarly, the Commissioner after quoting the information available on the website with reference to the subject product, took note of the specific description under Kopiko Cappuccino and Kopiko Espresso as ‘Candy’. The description of the two products specifically refers to it as a candy, which actually imparts its true characteristics as a sugar confectionery. Had it been a description with the basis of coffee extract, essences or concentrates, there would have been no relevance to incorporate the term ‘candy’ and the mixture would be quite unpalatable and unmarketable. The description of the product as ‘candy’ basically means a confectionary, which cannot be ignored, and it is where the Hyderabad Bench has fallen in error in agreeing with the Revenue. Both the advertisement as well as the website data has consciously used the term ‘candy’ and that is how it is known to the public at large. The discussion above leads to the determination that sugar forms the major ingredient which renders the main taste i.e., sweetness to Kopiko. Thus sugar constitutes the basis and coffee cannot be said to be the basis of preparation of sugar boiled confectionary as it just gives an aromatic effect in view of the decision of the Apex Court in Satnam Overseas [2015 (4) TMI 356 - SUPREME COURT] that mere addition of certain items would not change its essential character. The law laid down by the Ahmedabad Bench in the case of the appellant themselves [2024 (8) TMI 1668 - CESTAT AHMEDABAD] that the product ‘Kopiko’ Cappuccino and Kopiko Espresso is classifiable under Tariff Heading 1704 9090 as ‘sugar confectionery’ is the correct law and the same is hereby affirmed. The view taken by the Hyderabad Bench that the impugned goods are preparations based on coffee extract/essence and is, therefore, classifiable under chapter heading 2101 1200, has no merit and is, therefore, not sustainable - In determining the classification, it is Rule 1 and Rule 3(a), that is applicable. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal on merits.

2026 (1) TMI 642 - CESTAT NEW DELHI Central Excise

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Issues: (i) Whether the demand for central excise duty, interest and penalty based on alleged clandestine manufacture and clandestine removal of Pan Masala and Zafrani Zarda can be sustained where the department primarily relies on diaries and registers seized from third parties and statements recorded during investigation.

Analysis: The Tribunal examined the essential ingredients required to establish clandestine removal, namely procurement of raw materials, manufacture of finished products, clandestine removal, and receipt of consideration. It reviewed the evidence relied upon by the Principal Commissioner — diaries/registers seized from transporters and distributors, statements recorded under section 14 of the Central Excise Act (including statements later retracted), and material seized from various third parties. The Tribunal applied established legal principles that private/internal records or third-party loose sheets cannot be the sole basis for a demand without independent corroboration such as discovery of finished goods outside the factory, parallel records at the manufacturer's premises, evidence of procurement of requisite raw materials, proof of receipt of sale proceeds, or demonstration of manufacturing capacity (including electricity consumption). The Tribunal considered cross-examination answers that undermined the reliability of many prosecution witnesses and noted absence of incriminating or parallel records at the appellant's premises, lack of proof of receipt of consideration, inconsistencies within seized diaries, failure to record statements of purported diary authors, and absence of consignment notes/bilties naming the appellant. On these facts, the Tribunal found the four essential ingredients were not satisfied and that the departmental material lacked the required corroboration.

Conclusion: The Tribunal concluded that the department failed to establish clandestine manufacture and clandestine removal against the appellant; the impugned order confirming duty, interest and penalty is set aside and the appeal is allowed in favour of the assessee.

Clandestine removal of goods allegations rejected due to inadequate corroborative evidence, resulting in set aside of duty demand.
The text addresses standards for establishing clandestine removal of goods, identifying four essential ingredients: procurement of raw materials, manufacture of final products, clandestine removal, and receipt of consideration; each must be proved with tangible corroboration and cannot rest solely on third-party diaries or witnesses. Statements recorded during investigation were discredited by cross-examination and alleged coercion, transport documents and consignment notes did not link the appellant, no cash trail or stock evidence was found, and manufacturing capacity was unproven. For these reasons the departmental demand based on third-party evidence was unsustainable and the impugned order was set aside.

Demand of central excise duty u/s 11A with interest u/s 11AA and penalty - documents show illicit clearance of the goods manufactured by the appellant and cleared clandestinely - Relevance of statements recorded during investigation under section 14 - cross-examination of the witnesses - burden of proof - essential ingredients that required to be established for establishing clandestine removal of goods - Evidentiary value - third party documents and statements in the absence of any tangible or corroborative evidence - HELD THAT:- It is seen that the four essential ingredients that required to be established for establishing clandestine removal of goods are: (a) Procurement of raw materials; (b) Manufacture of final products; (c) Clandestine removal of goods; and (d) Receipt of consideration against such removal. In the present case, findings have been recorded against the appellant on the basis of Diaries recovered from the premises of the third parties and the oral statements of the witnesses. The demand cannot be sustained merely on the basis of third-party documents and statements, in the absence of any tangible or corroborative evidence. There is nothing on the record which may establish procurement of raw materials for the manufacture of goods in the factory of the appellant. There is also no proof of receipt of consideration against the alleged illicit clearance by the appellant. Even in respect of transportation, no incriminating evidence was found in the premises of the appellant. The documents recovered from transporters do not establish any case of clandestine removal of goods by the appellant. Thus, neither of the four conditions enumerated above are satisfied. It would be pertinent to state that the appellant cross-examined persons whose statements were recorded under section 14D of the Central Excise Act. Such persons, in their cross-examination, stated that their statements were recorded under duress and coercion. It needs to be noted that none of the alleged dealers or buyers were questioned regarding receipt of goods from Data Goods Carrier or Sarco Roadlines nor were they shown any of the Diaries allegedly recovered from the premises of the transporters. The names of the alleged dealers or buyers also do not appear in any of the said Diaries. The Diaries and the entries therein do not pertain to the appellant. Thus, the statements made under section 14D of the Central Excise Act cannot be considered as reliable. Neither consignment notes/bilties mentioning the names of the alleged buyers/dealers as consignees were recovered either from the premises of the appellant or from the alleged premises of the transporters. The name of the appellant or that of any of the alleged buyers/dealers does not appear in any of the entries of the Diaries recovered from the premises of the transporters, which form the sole basis of the impugned demand. Parallel invoices, vouchers, or challans for purchase of raw materials were not found, nor has the department explained the alleged source of procurement of raw materials necessary for such voluminous production. There is, therefore, substance in the submission advanced by the learned counsel for the appellant that the allegations levelled in the show cause notice and the findings recorded in the impugned order are factually incorrect. The demand has been confirmed on the basis that the appellant supplied total 17,346 green jhal of Zafrani Zarda and 61,234 white jhal of Pan Masala during the period from September, 2019 to November, 2020. The average of the above comes to around 200 jhals per day during the disputed period. If stock of at least 4-5 days is to be kept, there would be a requirement of around 800-1000 jhals but there was no stock of such empty jhals at the premises of the appellant. The entries in the Diaries recovered from the premises of the transporters have been incorrectly attributed to the appellant. Neither any cash was found or recovered nor has any trail been established by the department. The impugned order has failed to appreciate this vital fact and has merely brushed it aside by observing that it is an “ongoing process”. It was for the department to have ascertained how the goods were transported to the particular place as mentioned in the Diaries and recorded statements of the consignees to whom the goods were transported as per the entries. There is also no evidence of transfer of funds to the appellant against the said clandestine removal of goods. It needs to be noted that during the search of the premises of the appellant, no incriminating material was found. The search at the premises of sub-distributors does not show that any incriminating material against the appellant was recovered. The Principal Commissioner relied upon statements recorded under section 14 of the Central Excise Act but correct facts were stated in the cross-examination. According to the appellant, the machines installed in the factory as recorded in the Panchnama, lacked the capacity to manufacture the quantities, more particularly when they are compared with the actual electricity consumption. No evidence has been adduced regarding use of generators, additional premises or other machines that may have been used to achieve the excess production. In the absence of proof of manufacturing capacity, the unaccounted production cannot be established and, therefore, the allegation of clandestine approval cannot be sustained. It, therefore, clearly transpires from the aforesaid discussion that the charge of clandestine removal of goods by the appellant has not been substantiated by the department. The Principal Commissioner, therefore, committed an error in holding that the charge of clandestine removal of goods by the appellant stood proved. The inevitable conclusion, therefore, that follow is that the impugned order dated 28.06.2024 passed by the Principal Commissioner in so far as it concerns the appellant deserves to be set aside and is set aside. The appeal is, accordingly, allowed.

2026 (3) TMI 587 - CESTAT BANGALORE Central Excise

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Input Service eligibility under Rule 2(l) upheld; demand for disclosed CENVAT credit held time barred due to limitation.
Whether CENVAT credit on service tax paid for lease cancellation qualifies as an input service under Rule 2(l) was answered by applying the limb covering services in relation to setting up/expansion of premises; the invoice and settlement for the proposed premises met that limb and credit was allowed. Whether a demand for credit availed in September 2010 is sustainable was resolved by factual findings that the credit was declared in ST-3 and departmental action was delayed until 2015, treating the matter as not suppressed and rendering the demand time barred; appeal allowed for the assessee.

Eligibility of CENVAT credit for input services relating to setting up or expansion of business premises - time-bar of demand where credit was disclosed in statutory return and scrutiny initiated after normal limitation period - Whether the credit availed by the appellant in respect of service tax paid towards lease of the premises from where no taxable service was provided can be considered as ineligible CENVAT credit to confirm demand with interest and to impose penalty. Eligibility of CENVAT credit for input services relating to setting up or expansion of business premises - HELD THAT:- The Tribunal applied the limbs of the definition of input service and accepted that services relating to setting up or expansion of business premises constitute an independent category of input services. The invoice from the service provider evidenced that the payment related to modernization/expansion of the appellant's business premises; accordingly the credit availed on the service tax component qualifies as CENVAT credit under the limb dealing with setting up/expansion and is therefore allowable. The Tribunal relied on the reasoning in M/s. Coco Cola India Pvt. Ltd. Vs. Commissioner of C. Ex., Pune-III[2009 (8) TMI 50 - BOMBAY HIGH COURT] that each limb of the definition operates independently and satisfaction of one limb suffices for availment of credit. [Paras 9] CENVAT credit on the payment to the lessor for setting up/expansion of premises is admissible and not an ineligible credit. Demand barred by limitation - HELD THAT:- The Tribunal found that the disputed credit was disclosed in the ST-3 return filed in October 2010 for the period April 2010 to September 2010. The Department commenced scrutiny only in 2015, nearly five years later and close to expiry of the extended limitation period. That delayed scrutiny, initiated well after disclosure in the statutory return, did not constitute suppression by the assessee; consequently the show cause notice issued on 24.09.2015 alleging ineligible credit for September 2010 was beyond the normal limitation and the demand is time-barred. [Paras 10, 11] The demand is barred by limitation and cannot be sustained. Final Conclusion: The impugned order confirming demand and imposing penalty is set aside: the CENVAT credit in question is admissible as an input service for setting up/expansion of premises and the departmental demand is time barred; the appeal is allowed with consequential relief in accordance with law.

2026 (2) TMI 898 - CESTAT BANGALORE Central Excise

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Issues: (i) Whether the demand for CENVAT credit attributable to trading activity prior to 01.04.2011 (including invocation of extended period of limitation) is sustainable; (ii) Whether the various services on which CENVAT credit was disallowed are ineligible as input services; (iii) Whether penalties imposed on the appellant, its ISD and its Director are sustainable.

Issue (i): Whether the demand for CENVAT credit attributable to trading activity prior to 01.04.2011 and the invocation of extended period of limitation are sustainable.

Analysis: The Tribunal examined divergent authorities on inclusion of trading in turnover and the temporal effect of the amendment; considered principles that value of traded goods should be excluded when determining value of non-taxable trading services for apportionment; noted that the appellant had dealer registration, filed returns and that disputes existed on the legal interpretation, and found persuasive precedents holding that extended period cannot be invoked where facts were in departmental knowledge or where complex disputed questions exist.

Conclusion: Demand confirmed by invoking the extended period of limitation is unsustainable; the apportionment for the normal period must exclude the value of goods and be recomputed by the adjudicating authority following the principles indicated. This conclusion is in favour of the assessee.

Issue (ii): Whether the various services on which CENVAT credit was disallowed are ineligible as input services.

Analysis: The Tribunal reviewed coordinate decisions and held that the categories of services claimed by the appellant are covered as eligible input services under the Cenvat Credit framework, and that the authorities' disallowance was contrary to the Tribunal precedents requiring eligibility for a broad set of business-related input services and appropriate apportionment rules.

Conclusion: The disallowance of the impugned input services is unsustainable; the services are eligible for CENVAT credit. This conclusion is in favour of the assessee.

Issue (iii): Whether penalties imposed on the appellant, the ISD and the Director are sustainable.

Analysis: Given the existence of conflicting decisions, the complexity of legal questions on apportionment and eligibility, and the Tribunal precedents indicating that penalties are not imposable where reasonable controversy and legal uncertainty exist, the Tribunal found penalty imposition inappropriate in the circumstances and noted the requirement for recomputation and re-adjudication for the normal period.

Conclusion: Penalties imposed on the appellant, the ISD and the Director are set aside. This conclusion is in favour of the assessee.

Final Conclusion: The impugned order is modified by setting aside demands raised by extended limitation, directing recomputation for the normal period excluding value of traded goods and remanding for verification on the basis of a CA-certified worksheet; penalties are quashed and the appeals are partly allowed accordingly.

Ratio Decidendi: For apportioning CENVAT credit in relation to trading activity prior to 01.04.2011, the value of the traded goods must be excluded from the value of non-taxable trading services when computing attributable common input service credit; invocation of the extended period of limitation and imposition of penalties are not sustainable where facts were in departmental knowledge or where bona fide legal disputes and divergent authorities exist.

Cenvat credit apportionment: exclude traded goods value and quash extended period demands; recompute normal period credit.
Apportionment of CENVAT credit for pre 01.04.2011 trading requires excluding the value of traded goods from non taxable trading services when computing attributable common input service credit; the extended period of limitation cannot be invoked where facts were within departmental knowledge or bona fide legal disputes existed, so demands raised under extended limitation are set aside and normal period apportionment must be recomputed. Services disallowed as inputs are held eligible and creditable. Penalties on the taxpayer, its ISD and director are quashed due to reasonable controversy and legal uncertainty, and matters are remanded for recomputation with a CA certified worksheet.

CENVAT credit eligibility of input services - Apportionment of CENVAT credit between manufacturing and trading activities (exclusion of cost of goods) - Input Service Distributor (ISD) distribution limitations - Extended period of limitation - invocation where complex legal dispute/divergent decisions - Penalty relief where bona fide or arguable legal issues exist - Apportionment of CENVAT credit between manufacturing and trading activities (exclusion of cost of goods) - Input Service Distributor (ISD) distribution limitations - HELD THAT:- Considering the trading activities as exempted goods prior to 01.04 2011, we find that divergent views are taken by different Tribunals and Hon’ble High Courts. However, it is considered that amendment would be considered with retrospective effect but should exclude the cost of purchase of goods and not on the total turnover. As regards invoking the demand by confirming extended period of limitation, we find that the Appellant have a strong case specifically since the disputes were pending regarding the trading activity. Further as evident from the registration, the premises were registered and returns were filed for the relevant period. Considering the submissions, the demand confirmed by invoking the extended period of limitation is unsustainable. CENVAT credit eligibility of input services - HELD THAT:- Demand against ineligible CENVAT credit against ineligible inputs used, we find that that issue is also covered under various decisions of the Tribunal. Accordingly, all the inputs services as claimed by the Appellant are eligible inputs for availing CENVAT credit. Extended period of limitation - invocation where complex legal dispute/divergent decisions - HELD THAT:- The demand confirmed by the Adjudication authority by invoking the extended period of limitation is unsustainable. Further as regards demand for the normal period, though there are various conflicting decisions it is settled that the amendment brought in April 2011 is only clarificatory in nature and trading activities have to be included in the turnover. However following the ratio of the above, the entire value of the goods cannot be included as consideration for ascertaining the service tax. Since the disputes are involved in the above issue, penalties imposed on Appellant and Co-Appellants are also liable to be set aside. Appellant is directed to produce the worksheet certified by Chartered Accountant confirming the consideration involved in trading of goods excluding the value of the goods as held in the matter of M/s. Mercedes Benz [2020 (3) TMI 146 - CESTAT MUMBAI] and thereafter Adjudication authority shall verify the records and finalize the demand, accordingly. Impugned order modified: demands confirmed by invoking extended limitation set aside.

2026 (1) TMI 1343 - CESTAT BANGALORE Central Excise

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CENVAT credit recovery on written-off inputs rejected where no evidence of physical removal; demand set aside.
Demand for recovery of CENVAT credit alleged as written off inputs is analysed on the basis that mere accounting diminution or write-down for tax or accounting purposes does not establish that inputs were physically removed or rendered unusable; absence of evidence of physical removal defeats invocation of an extended limitation for recovery. Consequently, an order seeking reversal of credit on that basis cannot be sustained and is liable to be set aside, applying the principle that evidentiary proof of removal, not mere bookkeeping adjustments, is essential for credit reversal and extended period invocation.

2026 (1) TMI 1281 - CESTAT BANGALORE Central Excise

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Issues: (i) Whether the goods produced at the batching plants are "Ready Mix Concrete (RMC)" liable to excise duty or are "concrete mix" exempt when produced/used at construction site; (ii) Whether the appellant is the manufacturer liable to duty or the subcontractor who installed and operated the batching plants is the proper person to be held liable;

Issue (i): Whether the impugned product is classifiable as Ready Mix Concrete (RMC) attracting excise duty or as concrete mix manufactured at site and exempt under the notifications.

Analysis: Classification hinges on the process and features of production: RMC conforms to IS 4926 and requires integrated automated batching, quality controls, and factory production/transport; concrete mix as per IS 456 is conventionally produced and used at the construction site and is the subject of Notification No. 04/1997-CE. Circular No. 368/1/98-CX and Board Circular No. 237/71/96-CX provide that the process of preparation determines whether the product is RMC or on-site concrete mix. Absence of admissible evidence as to the manufacturing process and compliance with RMC standards precludes treating the product as RMC. Substitution in Notification No. 12/2016-CE extended exemption to RMC, and amendments by substitution apply retrospectively where applicable.

Conclusion: The product cannot be held to be RMC in the absence of evidence that it was manufactured as per RMC standards and process; classification as RMC is unsustainable and the impugned finding is set aside.

Issue (ii): Whether the appellant, having subcontracted the work, can be held as manufacturer liable to excise duty for production at the subcontractor's plants.

Analysis: Liability to excise as manufacturer depends on who undertook and controlled the manufacturing activity. Contractual allocation of responsibilities to the subcontractor and statements indicating that subcontractor installed and operated the plants are material. In the absence of evidence demonstrating that the appellant controlled or carried out the manufacture, duty cannot be confirmed against the appellant.

Conclusion: The appellant is not the maker of the goods for excise liability on the available evidence; any demand should be directed to the entity that actually manufactured the product.

Final Conclusion: The impugned order confirming excise duty and penalties is unsustainable for want of admissible evidence on process-based classification and for lack of basis to fasten manufacture liability on the appellant; the appeal is allowed with consequential relief in law.

Ratio Decidendi: Classification between RMC and on-site concrete mix is determined by the manufacturing process and compliance with applicable IS standards; absent admissible evidence that production met RMC process standards, excise duty cannot be sustained and liability cannot be imposed on a party who did not demonstrably undertake the manufacture.

Classification of Ready Mix Concrete versus concrete mix for excise liability requires proof of manufacturing process and standards compliance
Classification of ready mix concrete versus concrete mix for excise liability is the central issue. The legal basis was that exemption was extended to ready mix concrete by a substitution in the exemption notification, but classification requires admissible evidence of manufacturing process and compliance with applicable IS standards. The respondent failed to verify contractual terms and technical compliance, and the adjudicator erred in presuming the product was RMC without proof; accordingly the confirmation of excisability as RMC was unsustainable for lack of evidentiary foundation and proper verification.

Classification of Ready Mix Concrete (RMC) versus concrete mix - manufacture for excise liability - excisability of Ready Mix Concrete - exemption under Notification No. 04/1997-CE and substitution in Notification No. 12/2012-CE by Notification No. 12/2016-CE - Circular No. 368/1/98-CX - Retrospective application of substitution in notification - Site manufacture vs factory manufacture - Applicability of IS standards - HELD THAT:- We find that inspite of giving clear clarification vide Circular No.368/1/98-CX dated 06.01.1998, no attempt was made to verify the process of preparing 'concrete mix' to allege that the impugned goods are 'Ready Mix Concrete (RMC)' and the Commissioner (Appeals) has completely ignored the submissions made by the appellant and has proceeded on a completely unrelated discussion and consequent findings. Whether the goods manufactured by the sub-contractor of the appellant is 'concrete mix' or 'ready mix concrete (RMC)' - HELD THAT:- We find that vide Notification No. 12/2016-CE dated 01.03.2016, Sl. No. 144 of Notification No. 12/2012-CE dated 17.03.2012 has been substituted to extend the benefit of exemption to 'Ready mix concrete' as well. Further no attempt was made by the respondent to verify the contracts entered by Appellant with National Highway Authority of India (NHAI) in September 2008 to execute the 2(two) projects and the sub-contract agreement dated 21.07.2009 and 17.04.2010 by Appellant with sub-contractor M/s. Deepika Infratech Pvt Ltd (DIPL) to confirm that the contracts are for manufacture of 'Ready Mix Concrete (RMC)' as per ISI standard, IS 4926:2003 or 'Concrete Mix' as per ISI standard, IS 456-1978 for the projects. Thus, in the absence of any admissible evidence, duty cannot be confirmed by presuming that the Appellant had manufactured 'Ready mix concrete (RMC)' and not 'concrete mix'. Therefore, in the absence of any evidence to the effect that the sub-contractor has manufactured 'Ready Mix Concrete (RMC) as per the detailed features, requirements, compliances discussed, the impugned order confirming that the impugned product / goods as 'Ready mix concrete (RMC) cannot be sustained.

2026 (1) TMI 650 - CESTAT NEW DELHI Central Excise

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Rectification of mistake is not a rehearing on merits where the original order already addressed limitation and record-based findings.
Rectification under the CESTAT's limited correction power is confined to mistakes apparent from the record and cannot be used as a substitute for appeal or review. A debatable issue, or one requiring reappreciation of evidence or elaborate argument, falls outside that scope. Non-dealing with every submission or cited case law does not by itself create a rectifiable error, especially where the original order had already addressed limitation on the basis of departmental knowledge, recorded statements, and documents on record. The Revenue's applications therefore sought a rehearing on merits rather than correction of any patent or clerical mistake, and were not maintainable to reopen the earlier final order.

Rectification of mistake - error apparent on the face of the record or not - non consideration of the submission of the department and judgement relied upon - Non-consideration of the decision of the Higher Court - HELD THAT:- The Department was made aware that PPJ (petitioner) had not paid the central excise duty on the manufacturing and sales made by them and had also not filed the central excise returns. In fact, both Shri R.R. Singla and Shri Pawan Gupta accepted that they would deposit the central excise duty as early as possible, also a sum of Rs 2 crores was also deposited as per the statement of Shri Pawan Gupta on 20.11.2016. Under the circumstances, it cannot be said that the Department did not have any knowledge as early as on 19/20.11.2016. For that reason, there cannot be any quarrel with the proposition laid down by the Apex Court that the demand can be raised from the date of the knowledge. Considering the argument that as per the decision of the Tribunal in Satya Power and Ispat Limited [2024 (11) TMI 200 - CESTAT NEW DELHI], “once accepted, need not be proved”, from the statements made by Shri R.R. Singla and Shri Pawan Gupta on 19.11.2016 and 20.11.2016 respectively, there is no reason for the Revenue not to issue the show cause notice within the normal period of two years. Distinction is also made out by reason of the fact that the said decision related to clandestine removal. For all justification, it is a settled principle of law that so far as the aspect of limitation is concerned, it is a mixed question of law and facts and is mainly based upon the facts of individual cases. From the facts of the present case, it is evident that in so far as the knowledge was concerned, the Department was aware that the appellant was clearing the articles of jewellery manufactured by them without payment of excise duty as early as in November, 2016 and it was incumbent upon them to have issued the show cause notice within the normal period of two years, more particularly when all the documents and the transaction details were made available by the appellant and duty was paid by 28.11.2017. The Apex Court in Master Construction Co. (P) Ltd. vs. State of Orissa [1965 (12) TMI 108 - SUPREME COURT] was pleased to observe that an error which is apparent from record should be one which is not an error which depends for its discovery on elaborate arguments on questions of fact or law. The scope of rectification of mistake application is very limited and certainly cannot call upon an appeal to be heard afresh - the rectification of an order does not result into obliteration of order originally passed and its substitution by a new order - the Rectification of Mistake applications filed by the Revenue are rejected.

2026 (1) TMI 649 - CESTAT BANGALORE Central Excise

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CENVAT credit on courier licence services reversed before use - demand and penalty under r.15(5) CCR set aside
Whether CENVAT credit availed for service tax on a courier licence was legally taken and liable to demand and penalty. The tribunal applied the principle that reversal of unutilized CENVAT credit before utilization amounts to non-availment; therefore a subsequent show cause notice demanding the credit and levying penalty under r.15(5) CCR, 2004 read with s.11AC, CEA, 1944 could not stand. Reasoning: evidence showed credit was reversed prior to use and audit, so there was no surviving credit to be recovered. Outcome: demand and penalty confirmed by the adjudicating authority were set aside; appeal allowed in part.

2026 (1) TMI 648 - CESTAT KOLKATA Central Excise

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Issues: (i) Whether Rule 8 of the Valuation Rules could be applied to value clearances to the appellant's own units for captive consumption when part of production was sold to third parties; (ii) Whether the case is revenue neutral; (iii) Whether the extended period of limitation is invokable.

Issue (i): Whether Rule 8 of the Valuation Rules applies to value clearances to the appellant's own units for captive consumption, despite part sales to independent buyers.

Analysis: The legal framework comprises Section 4(1) of the Central Excise Act, the Valuation Rules (Rules 4, 8, 9, 10, 11) and relevant Board circulars and CAS-4 guidance. The issue was examined in light of precedents and the Board circulars requiring cost determination for captively consumed goods in accordance with CAS-4 and recognizing Rule 8 for captive consumption. Distinctions in facts from decisions applying Rule 4 or Rule 9 were considered where transfers were not for captive consumption or where factual comparability of "such goods" to independent sales was absent. The Tribunal's prior decisions applying Rule 8/CAS-4 to captively consumed intermediate products were followed.

Conclusion: Valuation in terms of Rule 8 (using CAS-4) for goods cleared to the appellant's own units for captive consumption is correct. The demand based on Rules 4 and 11 is not sustainable. Conclusion in favour of the assessee.

Issue (ii): Whether the matter is revenue neutral.

Analysis: The statutory and rule framework on CENVAT credit (Rule 3 of Cenvat Credit Rules, 2004) and authorities holding that duty paid on inter-unit transfers that is fully available as credit at the receiving unit results in revenue neutrality were applied. Prior tribunal decisions on analogous facts where recipient units availed full credit were relied upon to determine effect on revenue realization.

Conclusion: The transaction is revenue neutral because duty paid on clearances to the receiving sister units was fully available as CENVAT credit to those units. Conclusion in favour of the assessee.

Issue (iii): Whether invocation of the extended period of limitation is permissible.

Analysis: The applicable limitation principles under Section 11A and judicial guidance on invocation of extended period where facts were disclosed to revenue during periodic audits were considered. The existence of departmental audits and prior audit observations addressing valuation meant the department had knowledge of relevant facts within the normal limitation period; precedents establishing that extended period cannot be invoked where facts were within departmental knowledge were applied.

Conclusion: The show cause notice issued invoking the extended period is time-barred. Conclusion in favour of the assessee.

Final Conclusion: The demand of duty, interest and penalty is set aside on merits and limitation/revenue neutrality grounds and the appeal is allowed with consequential reliefs.

Ratio Decidendi: Where excisable goods are cleared to a manufacturer's own units for captive consumption and the receiving units avail full CENVAT credit, valuation of such captive clearances is to be determined under Rule 8 using CAS-4, and related differential demands are unsustainable; further, extended limitation cannot be invoked where the department had knowledge of the relevant facts through audits.

Valuation of captive clearances under Valuation Rules: Rule 8 valuation upheld, CENVAT credit ensures revenue neutrality and limitation bars demand
Valuation of clearances to related in-house units was contested between applying Rule 8 of the Central Excise Valuation Rules or pricing on the basis of Rule 11 read with Rule 4; the Tribunal held that valuation under Rule 8 for stock transfers to captive units was correct, so demands founded on Rules 4 and 11 were unsustainable. The Tribunal recognised that duty paid on such stock transfers is available as CENVAT credit to the receiving unit, producing a revenue neutral effect. The show cause notice covering the period in question was found barred by limitation and the demand was wholly time-barred, resulting in setting aside of the impugned order.

Method of valuation - clearances made by the appellant to its own units for captive consumption - to be valued in terms of Rule 8 of the Valuation Rules, or on the basis of the price at which sales are made to independent third-party buyers, in terms of Rule 11 r.w. Rule 4 of the Valuation Rules - revenue neutrality - invocation of extended period of limitation. Whether the appellant is correct in following Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 [“the Valuation Rules” for short] for arriving at the value in respect of clearances of goods to their own units at Angul and Raigarh, when most of the quantity of such goods manufactured by them is cleared to their own units and part of the quantity is cleared to third party buyers, or not? - HELD THAT:- The case of the appellant is squarely covered by the decision in the case of OCL India Ltd. v. Commissioner of Central Tax, G.S.T. & C.E., Rourkela [2024 (6) TMI 1463 - CESTAT KOLKATA] where it was held that 'On stock transfer of clinker, the Appellant paid excise duty at 110% of cost of production in accordance with Rule 8 of the Central Excise Valuation Rules, 2000 ('Valuation Rules'). The Kapilas and Bengal units availed Cenvat Credit of the excise duty charged and paid by the Appellant.' As the issue is squarely covered by the decision in the case of OCL India Ltd, in view of this, the appellant has correctly valued their goods in terms of Rule 8 of the Valuation Rules and therefore, the demand of central excise duty by adopting Rules 4 and 11 of the Valuation Rules is not sustainable. Whether it is a case of revenue neutrality? - HELD THAT:- Admittedly, in this case, the appellant has been clearing the goods to their own units, for further manufacture. In that view, the issue that arises is whether the duty paid by the appellant is available as CENVAT Credit to their own unit which is using these goods for further manufacture and clearing on payment of duty, resulting in a revenue neutral situation, or not - the same issue has been examined by this Tribunal in the case of Britco Foods Company Ltd. v. Commissioner of C.Ex., Pune [2000 (10) TMI 76 - CEGAT, MUMBAI] wherein it was held that such a situation is revenue neutral. The said decision has been affirmed by the Hon’ble Apex Court in COMMISSIONER OF C. EX., PUNE VERSUS COCA-COLA INDIA PVT. LTD. [2007 (4) TMI 17 - SUPREME COURT] - thus, in that view, if duty is paid by the appellant, the same would be available as CENVAT Credit to the appellant in their own unit and in these circumstances, it is a revenue neutral situation. Whether the extended period of limitation can be invoked in the facts and circumstances of the present case, or not? - HELD THAT:- Admittedly, in the facts of this case also, audits took place, on 16.05.2012 and 14.08.2013, but the valuation arrived at by the appellant by adopting Rule 8 of the Valuation Rules and payment of duty as per CAS-4 has never been disputed. In these circumstances, the Show Cause Notice, issued to the appellant for the period from January, 2010 to November, 2013, is barred by limitation. Therefore, the whole of the demand against the appellant is barred by limitation. The impugned order is set aside and the appeal is allowed.

2026 (1) TMI 511 - CESTAT NEW DELHI Central Excise

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether CENVAT credit was admissible on service tax paid for outward transportation of finished goods where sales were on FOR destination basis and freight was included in the assessable value on which duty was paid.

(ii) Whether the adjudicating authority's finding that delivery and transfer effectively occurred at the buyer's doorstep (and not at the factory gate), based on contractual terms and invoicing/valuation practice, justified treating outward transportation as eligible input service for CENVAT credit during the relevant period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Admissibility of CENVAT credit on outward transportation under FOR destination contracts

Legal framework (as discussed/applied by the Court): The Tribunal treated eligibility of credit on outward transportation as turning on whether, under FOR destination sales, the customer's premises could be regarded as the effective place up to which responsibility for delivery continued, thereby making the outward transportation integrally connected with the sale and clearance. The adjudicating authority also relied on a Board circular dated 08.06.2018 (as applied to the facts) supporting credit availability in such circumstances.

Interpretation and reasoning: The Tribunal affirmed the adjudicating authority's core factual inference that inclusion of transportation cost in the assessable value and payment of duty on that enhanced value was strong evidence that the goods were to be delivered at the buyer's doorstep under the contractual terms. The Tribunal accepted that, if the place of removal were at the factory gate, there would be no requirement to include freight in the assessable value in the manner shown by the invoices relied upon by the adjudicating authority. The Tribunal further held that the matter was covered by its decision in Mangalam Cement, which upheld credit on outward transportation where sales were on FOR destination basis and the seller remained responsible for delivery up to the buyer's premises; accordingly, the Principal Commissioner's approach was consistent with the Tribunal's settled view on the point.

Conclusions: The Tribunal held that there was no illegality in allowing CENVAT credit of the service tax paid on outward transportation for the relevant period where the assessee sold on FOR destination basis and included freight in assessable value while discharging duty. The departmental appeal was dismissed.

CENVAT credit on GTA outward freight for FOR destination goods to customs premises allowed for 2013-2017
The dominant issue was whether CENVAT credit was admissible on service tax paid on GTA services used for outward transportation of goods during 2013-14 to June 2017. Applying its prior rulings that outward transportation on FOR destination basis qualifies as an input service, and that credit is available where freight forms part of the assessable value up to the place of removal, the Tribunal held that credit on outward transportation to customs premises was permissible. Consequently, the departmental challenge to the allowance of CENVAT credit was rejected, and the appeal was dismissed.

2026 (1) TMI 510 - CESTAT CHENNAI Central Excise

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, in alleged FOR destination sales, the "place of removal" can be treated as the factory gate without examining contractual and transactional documents, or whether it must be determined through a fact-based inquiry into sale terms, transfer of title, risk, and freight inclusion.

(ii) Whether CENVAT credit on GTA services for outward transportation from factory/depots to buyers' premises is admissible for (a) the period prior to 01.04.2008 and (b) the period after 01.04.2008, depending on the "place of removal" so determined.

(iii) Whether, in light of binding precedent (including decisions in the assessee's own matters) and the requirement of judicial discipline, the impugned denial of credit can be sustained despite absence of mandatory factual verification.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Determination of "place of removal" in FOR destination contracts

Legal framework: The Court treated determination of "place of removal" under the Central Excise law as a mixed question of fact and law, requiring examination of relevant contractual and transactional parameters (sale terms, transfer of title, assumption of transit risk, and whether freight forms part of the assessable/value basis), and noted that it cannot be fixed by presumption.

Interpretation and reasoning: The Court held that the adjudicating authority's approach-treating the factory gate as the place of removal on a blanket basis-was legally flawed because it did not examine sale contracts, purchase orders, invoices, transport documents, or allied records. The Court accepted that, in principle, where clearances are on FOR destination basis and property/risk passes only on delivery, the buyer's premises can constitute the place of removal. It emphasized that such a conclusion can be reached only after a factual verification of the governing documents for the disputed period.

Conclusions: The Court conclusively held that (a) "place of removal" cannot be mechanically fixed at the factory gate, and (b) if factual verification establishes FOR destination sales with freight integral to price and title/risk passing on delivery, the buyer's premises shall be the "place of removal". The matter was remanded solely for this limited factual determination.

Issue (ii): Eligibility of CENVAT credit on GTA outward transportation (pre- and post-01.04.2008)

Legal framework: The Court treated eligibility of outward GTA credit under Rule 2(l) of the CENVAT Credit Rules, 2004 as consequential to the "place of removal" determination. It recognized that outward transportation qualifies as "input service" up to the "place of removal" and applied this principle for both periods, subject to the factual finding on where the place of removal lies.

Interpretation and reasoning: For the period prior to 01.04.2008, the Court held the legal position to be settled that outward transportation up to the place of removal qualifies as input service. For the period after 01.04.2008, the Court held that even after amendment, credit remains admissible up to the place of removal; therefore, if the buyer's premises are found to be the place of removal in FOR destination transactions, GTA services up to such premises remain eligible. The Court repeatedly linked admissibility to the outcome of the remanded factual verification.

Conclusions: The Court conclusively held that GTA services used for outward transportation up to the place of removal qualify as "input service" both prior to and after 01.04.2008; consequently, if (on verification) buyer's premises are the place of removal in FOR destination clearances, credit is admissible up to that point for the disputed period.

Issue (iii): Effect of binding precedent/consistency and sustainability of the impugned order

Legal framework: The Court applied the principle of judicial discipline and consistency, noting that where identical issues have been settled in principle by binding precedent and the same approach has been followed in later matters involving identical facts/contracts, the adjudicatory outcome should align-subject to satisfaction of factual prerequisites.

Interpretation and reasoning: The Court found that while the issue stands settled "in principle" by binding decisions and consistent approach in later periods, the adjudication for the present period still required factual establishment of FOR destination sales and the attendant elements (freight integral to price; transfer of ownership/risk upon delivery). Because the impugned order denied credit without undertaking this mandatory factual exercise, it was held to be legally unsustainable.

Conclusions: The Court set aside the impugned order as unsustainable for failure to conduct the required fact-based inquiry, and remanded the matter strictly for limited verification of documents to determine FOR destination nature/place of removal and then re-determine admissibility of credit accordingly. It directed that the remand be confined to this verification, that no fresh issues be raised, and that penalty not be imposed without independent findings in accordance with law.

FOR destination sales and outward GTA transport CENVAT credit hinged on "place of removal" u/s4(3)(c); denial remanded.
CENVAT credit on outward transportation (GTA) turned on correct determination of the "place of removal" under s. 4(3)(c) of the Central Excise Act, 1944 in FOR destination sales. The Tribunal held that place of removal is a mixed question of fact and law and cannot be presumed as factory gate; it must be determined from contracts/invoices on transfer of title, passing of risk, and whether freight is integral to assessable value, consistent with SC jurisprudence and the CBIC circular requiring fact-based adjudication. Since the authority failed to undertake this mandatory verification, the denial of GTA credit beyond factory gate was unsustainable; the impugned order was set aside and remanded for limited factual verification and fresh decision on credit, interest, and penalty.

Recovery of CENVAT credit availed on outward transportation (GTA) services along with interest and penalty - demand confirmed holding that the place of removal was the factory gate and that GTA credit beyond such point was inadmissible - place of removal in the case of FOR destination sales. Determination of Place of Removal in FOR Contracts - HED THAT:- The determination of the “place of removal” under Section 4(3)(c) of the Central Excise Act, 1944 is a mixed question of fact and law and cannot be mechanically or presumptively fixed at the factory gate in all cases. The Larger Bench of this Tribunal in Ramco Cements Ltd. v. CCE, Puducherry, [2023 (12) TMI 1332 - CESTAT CHENNAI-LB], has authoritatively held that the “place of removal” must be determined by examining the terms of sale, transfer of title, assumption of risk during transit, and inclusion of freight in the assessable value, applying the principles laid down by the Hon’ble Supreme Court in Emco Ltd., [2015 (8) TMI 200 - SUPREME COURT] and Roofit Industries Ltd., [2015 (4) TMI 857 - SUPREME COURT], the judgment of the Hon’ble Karnataka High Court in Bharat Fritz Werner Ltd., [2022 (7) TMI 352 - KARNATAKA HIGH COURT], and CBIC Circular No. 1065/4/2018-CX dated 08.06.2018. CBIC Circular No. 1065/4/2018-CX dated 08.06.2018 also mandates that adjudicating authorities must determine the “place of removal” based on factual parameters emerging from contracts and invoices, and not by applying a uniform presumption. In the present case, such an exercise has admittedly not been undertaken - It is considered appropriate to remand the matter for a limited factual verification to ascertain: i). Whether the clearances during the disputed period were effected on FOR destination basis; ii). Whether freight formed an integral part of the sale price; and iii). Whether ownership and risk in the goods were transferred only at the buyer’s premises. Upon such verification, the adjudicating authority shall determine the “place of removal” strictly in accordance with the law laid down by the Hon’ble Supreme Court, the Hon’ble Karnataka High Court in Bharat Fritz Werner Ltd., the Larger Bench of this Tribunal in Ramco Cements Ltd., and CBIC Circular dated 08.06.2018 - Accordingly, if it is found that the clearances were effected on FOR destination basis and that ownership and risk passed only at the buyer’s premises, such buyer’s premises shall constitute the “place of removal”. Eligibility of CENVAT Credit on GTA Services - HELD THAT:- For the period prior to 01.04.2008, the law stands conclusively settled by the Hon’ble Supreme Court in Vasavadatta Cements Ltd., [2018 (3) TMI 993 - SUPREME COURT] and Andhra Sugars Ltd., [2018 (2) TMI 285 - SUPREME COURT], holding that outward transportation up to the “place of removal” qualifies as “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004 - Even after the amendment to Rule 2(l) with effect from 01.04.2008, the Larger Bench in Ramco Cements Ltd. has held that where sales are effected on FOR destination basis and the buyer’s premises constitute the “place of removal”, GTA services used up to such place remain eligible for CENVAT credit - GTA services used for outward transportation up to the buyer’s premises shall be eligible for CENVAT credit subject to factual verification that such premises constitute the “place of removal”. The determination of the “place of removal” is a fact-based exercise and cannot be mechanically fixed at the factory gate - In cases where sales are established to be on FOR destination basis and ownership and risk pass only upon delivery, the buyer’s premises constitute the “place of removal” - GTA services used for outward transportation up to such place qualify as “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004, both prior to and after 01.04.2008 - The impugned Order-in-Original, having been passed without undertaking the mandatory factual examination, is unsustainable in law. Accordingly, the impugned Order-in-Original is set aside, and the matter is remanded to the adjudicating authority solely for the limited purpose of examining the sale contracts, purchase orders, invoices, transport documents and allied records to determine whether the disputed clearances were effected on FOR destination basis and whether the buyer’s premises constitute the “place of removal” - Upon such verification, the adjudicating authority shall re-determine the admissibility of CENVAT credit on GTA services strictly in accordance with the law laid down by the Hon’ble Supreme Court, the Hon’ble Karnataka High Court in Bharat Fritz Werner Ltd., the Larger Bench of this Tribunal in Ramco Cements Ltd., and CBIC Circular dated 08.06.2018. Appeal allowed by way of remand.

2026 (1) TMI 509 - CESTAT HYDERABAD Central Excise

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether "waste mud / spent earth (spent fuller earth)" arising involuntarily during bleaching of crude palm oil is chargeable to central excise duty as "excisable goods" on the basis of the post-Budget 2008 amendment to the definition in Section 2(d) of the Central Excise Act, 1944, when the departmental case rests primarily on the CBIC circular dated 28.10.2009.

(ii) Whether the demand treating such waste/by-product as excisable is unsustainable in view of the subsequent withdrawal/rescission of the CBIC circular dated 28.10.2009 and the Tribunal's acceptance that similar demands were dropped after such rescission.

(iii) Whether, even otherwise, the said waste mud/spent earth is covered by the exemption for waste under Notification No. 89/1995-CE dated 18.05.1995, thereby negating duty liability.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Excisability of waste mud/spent earth based on Section 2(d) amendment and reliance on CBIC circular dated 28.10.2009

Legal framework (as discussed by the Tribunal): The Tribunal noted that the department's case proceeded on the amendment in Section 2(d) of the Central Excise Act, 1944 (Budget 2008), read with departmental reliance on the CBIC circular dated 28.10.2009 for treating such waste/by-product as "excisable goods". The Tribunal also considered the Board's subsequent circular dated 25.04.2016 stating that certain by-products/waste cleared for consideration are "non-excisable goods" and that earlier circular directions including the circular dated 28.10.2009 stood withdrawn/rescinded.

Interpretation and reasoning: The Tribunal found that the adjudicating authority's conclusion of excisability was founded on the clarification in the CBIC circular dated 28.10.2009. It recorded as undisputed that the spent fuller earth/waste mud did not emerge by any "conscious effort" and arose involuntarily during the bleaching process. The Tribunal further treated as material that the Board itself later rescinded the earlier circular guidance, and that the subsequent Board position (circular dated 25.04.2016) treated comparable by-products/waste as "non-excisable goods". The Tribunal accepted the appellant's reliance on decisions where similar demands were dropped considering the rescission of the 28.10.2009 circular, and held that the departmental foundation for the demand (the rescinded circular-based approach) could not sustain the levy.

Conclusion: The Tribunal held that the demand premised on treating waste mud/spent earth as excisable goods on the strength of the circular dated 28.10.2009 was not sustainable, particularly in light of the circular's withdrawal/rescission and the fact that the waste arose involuntarily without conscious manufacture.

Issue (iii): Applicability of exemption for waste under Notification No. 89/1995-CE dated 18.05.1995

Legal framework (as discussed by the Tribunal): The Tribunal identified an "omnibus" exemption under Notification No. 89/1995-CE dated 18.05.1995 exempting "all waste, parings and scrap" arising in the course of manufacture of exempted goods and falling within the relevant Schedule, from the whole of the duty of excise.

Interpretation and reasoning: Having found the waste mud/spent earth to be a waste arising during the manufacturing process, the Tribunal treated the existence of this omnibus waste exemption as reinforcing the lack of duty liability on the impugned clearances. The Tribunal expressly relied on this notification as an additional decisive consideration supporting the appellant.

Conclusion: The Tribunal concluded that the waste mud/spent earth was covered by the waste exemption under Notification No. 89/1995-CE dated 18.05.1995, providing an additional ground to set aside the duty demand.

Final determination

On the above grounds, the Tribunal found merit in the appeal and set aside the impugned order, allowing the appeal and holding that excise duty demand on waste mud/spent earth was unsustainable.

Waste mud from crude palm oil bleaching-whether "excisable goods" for central excise duty; demand set aside, appeal allowed.
The dominant issue was whether waste mud (spent fuller earth) arising during bleaching of crude palm oil was "excisable goods" liable to central excise duty. The Tribunal held that the waste emerged involuntarily without any conscious manufacture, and the demand was founded on a CBIC circular later withdrawn/rescinded; subsequent Board instructions treated comparable by-products/waste as non-excisable for duty purposes, with only Rule 6 CCR consequences. Further, a general exemption notification covered waste/scrap arising in manufacture of exempted goods. Consequently, the impugned duty demand and order were set aside and the appeal was allowed.

Chargeability to Excise Duty - waste mud (spent earth) - applicability of amendment in section 2 of Central Excise Act, 1944, whereby, certain explanation was inserted to decide as to what would be treated as ‘excisable goods’ - HELD THAT:- It is found that the department has mainly relied on the circular dt.28.10.2009 issued by the CBIC to treat such goods as excisable goods, whereas, the Board themselves have, vide their circular dt.25.04.2016, inter alia, directed that certain items like bagasse, dross and skimming’s of non-ferrous metals or any such by-product or waste, which are non-excisable goods and are cleared for a consideration from the factory need to be treated like exempted goods for the purpose of reversal of credit of input and input services, in terms of Rule 6 of Cenvat Credit Rules (CCR), 2004. This was in view of certain amendments made in Rule 6 of CCR, 2004 w.e.f. 01.03.2015. Therefore, it is an undisputed fact that the directions contained in various circulars including Circular No.904/24/09-CX dt.28.10.2009, were withdrawn and rescinded. In the present case, it is not in dispute that the spent fuller earth has not emerged by way of any conscious effort and it has emerged involuntarily in the process of bleaching the crude palm oil and that the said emergence called waste mud (spent earth) during the course of bleaching. It is also not disputed that the adjudicating authority has relied on clarification issued vide circular dt.28.10.2009 to hold said waste mud as excisable good - there are also force in the judgments cited by the appellant, wherein, the demands have been dropped taking into account the rescindment of said circular. There is an omnibus N/N.89/1995-CE dt.18.05.1995, which exempts all waste, parings and scrap arising in the course of manufacture of exempted goods and falling within the Schedule to the Central Excise Tariff Act, 1985, from the whole of the duty of excise. There are merit in the appeal filed by the appellant and accordingly, the impugned order is set aside - appeal allowed.

2026 (1) TMI 1008 - CESTAT MUMBAI Central Excise

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Issues: (i) Whether CENVAT credit could be validly availed during the period after omission of Rule 12B of the Central Excise Rules, 2002; (ii) Whether the addendum to the show cause notice was legally sustainable.

Issue (i): Whether CENVAT credit could be validly availed during the period after omission of Rule 12B of the Central Excise Rules, 2002.

Analysis: Rule 12B had provided a special job-work procedure for textile traders and the accompanying facility was withdrawn by the amending notification. The governing circular issued by the departmental authority treated the omission as a transitional issue and clarified that persons who had operated under the erstwhile rule could continue to clear goods lying with them, including for export, and that the job worker was not to bear the duty burden. The reasoning was supported by earlier tribunal and High Court decisions recognising that a statutory facility already availed cannot be taken away retrospectively unless the law clearly so provides.

Conclusion: CENVAT credit was held to be admissible for the disputed period, in favour of the assessee.

Issue (ii): Whether the addendum to the show cause notice was legally sustainable.

Analysis: The addendum introduced a fresh allegation of fraudulent availment on the basis of fake or bogus invoices, which was not part of the original notice. Such a new ground required separate invocation within the period prescribed under Section 11A of the Central Excise Act, 1944. As the addendum was issued long after the original notice and beyond the permissible period, it could not be sustained either on limitation or on merits of procedure.

Conclusion: The addendum was held to be unsustainable, in favour of the assessee.

Final Conclusion: The demand and consequential confirmation against the appellant were set aside and the appeal succeeded.

Ratio Decidendi: A statutory credit-linked facility already accrued under a transitional job-work regime cannot be denied retrospectively in the absence of clear authority, and a later addendum introducing a new allegation must independently satisfy the statutory limitation for issuance of a demand notice.

Transitional CENVAT credit and fresh show-cause allegations cannot be withdrawn or added retrospectively without clear authority and limitation compliance.
CENVAT credit under the transitional job-work regime was treated as admissible after omission of Rule 12B of the Central Excise Rules, 2002, because the withdrawal of the special procedure was read as not retrospectively taking away a facility already availed absent clear legislative intent; the assessee therefore succeeded on the credit issue. A later addendum to the show cause notice introducing a fresh allegation of fraudulent availment on the basis of fake invoices was held unsustainable, as it was a new ground requiring independent compliance with the limitation requirements for a demand notice under the Central Excise Act; the assessee also succeeded on this procedural issue.

Availability of CENVAT credit after omission of Rule 12B - Job work in textiles and textile articles - Fraudulent availment (bogus invoices) - Transitional relief and protection of accrued rights - Remand for de novo consideration by High Court - Limitation on issuance of addendum to Show Cause Notice - Requirement of separate adjudication under Section 11A - Penalty and interest provisions under Section 11AB and Section 11AC - Procedural provisions for CENVAT credit under Rule 4(5)(a) and rebate under Rule 18 - Whether the appellant is eligible to avail CENVAT Credit during the disputed period from 09.07.2024 to 30.06.2005, when Rule 12B Rules of 2002 was omitted from the statute book by notification No.11/2004-C.E. (N.T.) dated 09.07.2004? - HELD THAT:- On plain reading of the procedure prescribed under Rule 12B ibid, it transpires that the government had prescribed a detailed procedure for enabling the textile processors who had to depend upon job workers for undertaking various activities before the final products are manufactured by them, which could be cleared for home consumption on payment of duty or exported under claim for rebate. It also provided for availing CENVAT credit facility by complying with various requirements of law such as, issuance of invoice, documentation of movement of goods, maintenance and accounting of goods including generation of waste/scrap, accountability of the entire process of sending goods for job work and their return to the factory, furnishing of information to the jurisdictional Central Excise authorities etc., The said facility was withdrawn by issue of Notification No.11/2004-C.E. (N.T.) dated 09.07.2004, which came into effect immediately on the date of its issue i.e., on 09.07.2004. Thus, we are of the considered view that the appellants are eligible to CENVAT Credit during the disputed period from 09.07.2024 to 30.06.2005. It is not in dispute that the SCN for recovery of CENVAT credit was issued on 09.08.2005. Further, the addendum was issued after a lapse of more than two years i.e., on 17.09.2007. Since, the addendum had considered entirely a new ground, which was not canvassed in the original SCN dated 09.08.2005, such fresh grounds urged cannot be addressed to by the judicial forum inasmuch as the said addendum is not in continuance with the original SCN containing the same allegations. Therefore, we are of the considered view that the grounds under addendum dated 17.09.2007 is required to be issued separately under the legal provisions of Section 11A of the Central Excise Act, 1994. Thus, the demand of CENVAT Credit on account of additional ground, even though such amount is already covered under the SCN issued earlier, is required to be issued separately within the normal time limit provided under Section 11A ibid. Since, the original SCN dated 09.08.2005 was issued by invoking the extended period of limitation, the addendum thereto cannot be further issued beyond the period of two years thereto. Therefore, both on account of limitation of time as well as on merits, the addendum issued on 17.09.2007 is not legally sustainable. Thus, we do not find any merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellant M/s Venus International. Therefore, the impugned order is set aside and the appeal is allowed in favour of the appellant. As discussed, since the other appeals as per the preamble have already been disposed of, the same become infructuous.

2026 (1) TMI 574 - CESTAT CHENNAI Central Excise

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether CENVAT credit is admissible under Rule 2(l) of the CENVAT Credit Rules, 2004 on service tax paid for maintenance and repair of windmills located outside the factory premises, where the electricity generated is wheeled through the State grid and equivalent units are consumed in manufacture.

(ii) Whether suo motu re-credit taken in January 2017 of CENVAT credit earlier reversed under protest is legally sustainable when the substantive dispute on eligibility of such credit has been decided in favour of the assessee and there was no stay of the appellate order.

(iii) Whether, in view of binding precedent settling the credit entitlement, the adjudicating authority was justified in dropping the demand, and consequently whether interest and penalty proposals could survive.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Admissibility of credit on maintenance/repair services for off-site windmills

Legal framework: The Court examined Rule 2(l) of the CENVAT Credit Rules, 2004 defining "input service", which includes services used "directly or indirectly, in or in relation to manufacture".

Interpretation and reasoning: The Court rejected the Department's objection based on geographical distance of the windmills and the fact that electricity is first fed into the grid. It accepted that Rule 2(l) does not impose a condition that the input service must be received within factory premises. The Court applied the principle that inputs/services need not be used within the factory so long as they are integrally connected with manufacturing activity. It also held that wheeling through the electricity board grid does not sever nexus when equivalent electricity is drawn and used in the manufacture, and the fact of such equivalent consumption was undisputed.

Conclusions: Credit of service tax paid on maintenance and repair of windmills located outside the factory premises is admissible as "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004, notwithstanding grid wheeling of the generated electricity.

Issue (ii): Validity of suo motu re-credit of amounts earlier reversed under protest

Interpretation and reasoning: The Court found that the assessee had reversed the credit under protest during pendency of litigation, and that once the Tribunal decided the eligibility issue in favour of the assessee, the right to restoration/re-credit accrued as a natural consequence. It held that restoration follows when reversal was under protest and the assessee succeeds on merits, and that pendency of departmental appeal does not dilute the binding nature of the Tribunal's order in the absence of any stay.

Conclusions: The suo motu re-credit taken in January 2017 of credit earlier reversed under protest was held lawful and sustainable on merits.

Issue (iii): Propriety of dropping the demand; effect on interest and penalty

Interpretation and reasoning: The Court held that the adjudicating authority was justified in relying on binding decisions to drop proceedings, and that quasi-judicial authorities are bound by appellate decisions and cannot insist on "independent findings" to take a contrary view once the legal issue is settled. Applying the settled position that such windmill-related maintenance services qualify as input services where the electricity forms part of the manufacturing unit's energy requirement and grid wheeling does not break nexus, the Court found continuation of the recovery proceedings to be futile.

Conclusions: Dropping of the demand was upheld. Since the credit itself was found admissible, recovery did not arise; consequently, interest under Rule 14 and penalty under Rule 15 read with Section 11AC also failed and were held unsustainable.

CENVAT credit for windmill maintenance services affirmed; re-credit upheld and SCN proceedings rightly dropped, demand dismissed
CENVAT credit for service tax on maintenance and repair of windmills located outside factory premises is admissible because such services bear an integral nexus to manufacturing activity, and denial based on geographical distance or wheeling of electricity through the grid does not sever that nexus; consequence: credit is permitted. Re-credit taken in January 2017 is valid where credit was earlier reversed under protest and the taxpayer subsequently prevailed, restoring the credit automatically; consequence: re-credit upheld. Continuation of show-cause proceedings was unnecessary once identical legal position was settled in favour of the assessee; consequence: demand, interest and penalty set aside.

CENVAT credit of service tax paid on maintenance and repair services of windmills located outside the factory premises - re-credit taken in January 2017 pursuant to the Tribunal’s Final Order dated 25.02.2015 is legally sustainable or not - correctness in dropping the proceedings initiated by the Show Cause Notice dated 05.02.2019. Eligibility of CENVAT Credit on Windmill related Services - HELD THAT:- The Hon’ble Supreme Court in Vikram Cement v. CCE [2006 (1) TMI 130 - SUPREME COURT] has clearly held that inputs or services need not be used within the factory premises so long as they are integrally connected with the manufacturing activity - The Hon’ble Bombay High Court in Endurance Technology Pvt. Ltd. [2015 (6) TMI 82 - BOMBAY HIGH COURT] and the Hon’ble Madras High Court in Ashok Leyland Ltd. [2019 (1) TMI 430 - MADRAS HIGH COURT] have affirmed the Larger Bench view, holding that denial of credit merely on the ground of geographical distance would defeat the objective of the CENVAT scheme and renewable energy policy. The Department’s argument that electricity is routed through the grid does not dilute the nexus, since the fact of equivalent electricity being consumed in the factory is undispute - CENVAT credit of service tax paid on maintenance and repair of windmills located outside the factory premises is admissible under Rule 2(l) of CCR, 2004. Validity of Re-credit Taken in January 2017 - HELD THAT:- It appears that the respondent reversed the credit under protest during the pendency of litigation. Once the Tribunal decided the issue in favour of the respondent, the right to re-credit accrued - It is a settled legal position that when duty or credit is reversed under protest and the assessee succeeds on merits, restoration of credit follows automatically - The Substantial questions of law were answered in favour of the taxpayer affirming that maintenance services for windmills are eligible as input services. Legality of Dropping SCN Proceedings - HELD THAT:- The identical issue, earlier relied upon by the Department as pending, has now been conclusively decided by the Hon’ble Gujarat High Court in Ajanta Transistors Clock Mfg. Co. [2025 (11) TMI 1936 - GUJARAT HIGH COURT]. In paragraph 21 of the said judgment, the Hon’ble High Court has categorically held that services availed for installation, operation and maintenance of windmills located away from the factory premises qualify as input services, once the electricity generated therefrom forms part of the energy requirement of the manufacturing unit. The Court has further held that wheeling of electricity through the State Electricity Board does not sever the nexus with the manufacture. Therefore, once the legal issue itself stands settled in favour of the assessee, continuation of proceedings would be futile. The adjudicating authority was fully justified in dropping the proceedings. The impugned Order-in-Original does not suffer from any legal infirmity and warrants no interference - Since the credit itself is held admissible on merits, the question of recovery does not arise - Consequently, interest under Rule 14 of CCR and penalty under Rule 15 read with Section 11AC automatically fails. The demand of CENVAT credit, interest and penalty is unsustainable in law. All questions framed are answered on merits in favour of the respondent and against the Department - Appeal of Revenue dismissed.

2026 (1) TMI 508 - CESTAT CHENNAI Central Excise

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether CENVAT credit is admissible under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 in respect of 1%/2% Additional Duty of Customs (CVD) paid on imported steam coal at concessional rates under the relevant Customs notifications.

(ii) Whether conditions of non-availment of CENVAT credit contained in Central Excise exemption notifications can be imported into, or superimposed upon, a Customs exemption notification to deny credit of CVD paid on imported goods.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Admissibility of CENVAT credit of 1%/2% CVD paid on imported steam coal under Rule 3(1)(vii)

Legal framework (as discussed by the Court): The Court examined Section 3(1) of the Customs Tariff Act, 1975 providing for levy of additional duty of customs (CVD) on imported goods, and Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 permitting credit of "the additional duty leviable under Section 3 of the Customs Tariff Act". The Court noted that although CVD is measured by reference to excise duty on a like domestic article, it retains its character as a customs duty.

Interpretation and reasoning: The Court found that Rule 3(1)(vii) contains no qualification that credit is available only where CVD is paid at the full tariff rate and not where paid at a concessional rate. The Court rejected the Department's contention that the expression "equivalent to the duty of excise" in Rule 3(1)(vii) imports all excise-side restrictions into CVD credit, holding that this interpretation finds no support in the statutory text. Since the additional duty was admittedly paid under Section 3(1) on the imported coal and there was no allegation of diversion or non-use in manufacture, the levy satisfied the Rule's description for credit.

Conclusion: CENVAT credit of 1%/2% CVD paid on imported steam coal at concessional rates under the Customs notifications was held to be admissible under Rule 3(1)(vii).

Issue (ii): Whether Central Excise notification conditions can be imported into a Customs notification to deny credit

Legal framework (as discussed by the Court): The Court analysed the proviso to Rule 3(1)(i) of the CENVAT Credit Rules, 2004 and held that it expressly operates with reference to duty of excise and specified excise notifications. The Court separately considered the Customs exemption notification governing concessional CVD on imported coal, issued under the Customs law, and observed that it did not stipulate any condition barring availment of CENVAT credit of the additional duty paid.

Interpretation and reasoning: The Court held it impermissible to read into a notification a restriction that is not present, and further held that conditions embedded in central excise exemption notifications cannot be implied into a customs exemption notification "by implication", particularly when the customs notification itself is silent on credit restriction. The Court applied the principle that exemption notifications are to be interpreted strictly and additional conditions cannot be implied, and relied on consistent judicial authority (including a binding High Court decision) that CVD under Section 3 retains the character of customs duty and restrictions in Central Excise notifications do not apply to customs duties. On judicial discipline, the Court followed the uniform line of decisions holding such credit admissible and rejecting the Department's approach of superimposing excise-side conditions onto customs notifications.

Conclusion: Conditions of non-availment of credit contained in Central Excise exemption notifications cannot be imported into the relevant Customs notification to deny CENVAT credit of concessional CVD paid on imported coal; denial on that basis was held legally unsustainable.

Disposition (material to the decision): Having conclusively decided the merits in favour of admissibility of credit and illegality of importing excise-conditions into customs notifications, the Court set aside in toto the demands of ineligible credit along with interest and equal penalties and allowed the appeals with consequential relief in accordance with law. The Court expressly declined to examine the separately framed issues on extended period and penalty as unnecessary once the merits were decided.

CENVAT credit on 1%/2% CVD for imported steam coal u/r 3 denied, then allowed as no credit bar
CENVAT credit on 1%/2% Additional Duty of Customs (CVD) paid on imported steam coal under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 was denied by applying the proviso to Rule 3(1)(i) and alleged excise-side restrictions. The Tribunal held that the proviso to Rule 3(1)(i) governs only duties of excise, while the relevant customs exemption notifications issued under s.25 of the Customs Act, 1962 did not prescribe any credit bar; no conditions could be implied into a notification. Relying on binding HC authority that CVD under s.3 of the Customs Tariff Act retains the character of customs duty and excise notification conditions cannot be imported, the denial was set aside and credit was allowed.

Availment of CENVAT credit of Additional Duty of Customs (Countervailing Duty – CVD) paid at the concessional rates of 1% and 2% on imported steam coal, under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004 - period April 2012 to May 2015, and June 2015 to January 2016 - invocation of extended period of limitation - levy of penalty under Rule 15(2) read with Section 11AC. HELD THAT:- The proviso to Rule 3(1)(i) applies exclusively to duty of excise. Customs Notification No. 12/2012-Cus is issued under Section 25 of the Customs Act, 1962 and does not impose any restriction on credit. It is settled law that conditions cannot be read into a notification when none exist. The Hon’ble Supreme Court has held in the case of Hansraj Gordhandas v. H.H. Dave, [1968 (9) TMI 112 - SUPREME COURT] that exemption notifications must be interpreted strictly and no additional conditions can be implied. Therefore, the denial of credit by importing excise side restrictions into customs notifications is legally unsustainable. The consistent view taken by this Tribunal as well as affirmed by the Hon’ble Calcutta High Court is that CENVAT credit of 1% / 2% Additional Duty of Customs (CVD) paid on imported coal is admissible under Rule 3(1)(vii) of the CENVAT Credit Rules, 2004, and that conditions prescribed under Central Excise exemption notifications cannot be imported into or superimposed upon Customs notifications for the purpose of denial of such credit. In Shyam Steel Industries Ltd. [2022 (9) TMI 230 - CALCUTTA HIGH COURT], the Hon’ble High Court has unequivocally held that CVD levied under Section 3 of the Customs Tariff Act retains its character as a customs duty and that restrictions contained in Central Excise notifications have no application to duties levied under the Customs law. The said judgment, being of a High Court, is binding and squarely applicable to the facts of the present case. The Appellant is entitled to avail CENVAT credit of 1% / 2% Additional Duty of Customs (CVD) paid on imported coal under Notification No. 12/2012-Cus dated 17.03.2012 and Notification No. 12/2013-Cus dated 01.03.2013 - Appeal allowed.

2026 (1) TMI 507 - CESTAT CHENNAI Central Excise

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Manufacture treatment for refurbished used machinery supports CENVAT credit on inputs and input services used in the process.
Repair and refurbishment of imported used tunnel boring machines was treated as manufacture on the same factual matrix in a subsequent proceeding, and that acceptance governed the present issue. On that basis, the process could not be characterised as non-manufacturing for denial of credit, because CENVAT credit on inputs and input services used in carrying out the manufacture was admissible. The operative principle stated is that once the department has accepted refurbishment of used machinery as manufacture on identical facts, credit attributable to the inputs and input services used in that process cannot be denied.

2026 (1) TMI 1459 - CESTAT BANGALORE Central Excise

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Cenvat credit on input services disclosure in ER-1 prevents invocation of extended limitation and sustains relief against penalties
Cenvat credit availed on input services was disclosed in ER-1 return and supporting correspondence, which the adjudicator found sufficient to show no suppression or mis-declaration; therefore invocation of the extended period of limitation was unjustified and demand and penalties could not be sustained. The disclosure included amortisation of free issue design costs against dutiable final products, establishing the nature and use of the input service and negating personal liability for undisclosed credit. The result is setting aside of the confirmed demand and penalties, and allowance of the appeals.

Cenvat credit - input service - ER-1 return as disclosure - suppression / mis-declaration - extended period of limitation - penalty and personal penaltiesCenvat credit - input service - ER-1 return as disclosure - suppression / mis-declaration - extended period of limitation - penalty and personal penalties - Validity of cenvat credit availed on service tax paid by the Pune unit for drawings and designs and whether extended period of limitation and penalties could be invoked for its recovery. - HELD THAT: - The Tribunal found on the record that the Pune unit had discharged service tax on the design/drawing invoices, had not availed cenvat credit itself, and the invoices expressly stated that the service tax related to services to be used as input service by the Bangalore manufacturing unit. The appellant notified the department by a letter dated 23.03.2009 about availing cenvat credit on those invoices and also reflected the availment and the nature of the input service in the ER-1 return for January 2009. The Commissioner's findings that the letter was addressed to Service Tax authorities (and not Central Excise) and that the ER-1 remarks were insufficient were rejected: the department did not deny receipt of the letter and the ER-1 return clearly disclosed the availment and amortisation of design cost. Because the material facts were disclosed and not suppressed or mis-declared, invocation of the extended period of limitation was held to be unsustainable. Consequentially, the demand confirmed and the penalties, including personal penalties imposed on directors and employees, could not be sustained.Demand, interest and penalties (including personal penalties) set aside and appeals allowed.Final Conclusion: The cenvat credit availed in January 2009 on service tax paid by the Pune unit for drawings and designs was held to have been properly disclosed (by letter and ER-1 return); there was no suppression to justify extended limitation or penalties, and the impugned demand and penalties were set aside.

2026 (1) TMI 641 - CESTAT ALLAHABAD Central Excise

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Issues: (i) Whether the demand of excise duty and interest for clandestine manufacture and removal is sustainable; (ii) Whether penalty under Rule 25(b) on the firm and penalty under Rule 26 on the partner are sustainable; (iii) Whether the seized red diary and the partner's confessional statements are admissible and constitute sufficient/corroborative evidence; (iv) Whether prior orders arising from the same search (confiscation set aside by Tribunal) operate to invalidate the present demands or proceedings.

Issue (i): Whether the demand of excise duty and interest on clandestine manufacture and removal is sustainable.

Analysis: The Tribunal examined the evidentiary material including the recovered diary, admissions by the partner recorded under Section 14, part deposits by the party by GAR-7 challans, and applicable provisions of Section 11A read with Sections 11AB and 11AA. The Tribunal applied principles relating to burden of proof in clandestine/white-collar contraventions and noted that material facts were within the special knowledge of the appellants; it also considered precedents on sufficiency of confessional statements together with corroborative material.

Conclusion: The demand of excise duty and interest is upheld in favour of the Revenue.

Issue (ii): Whether penalty under Rule 25(b) on the firm and penalty under Rule 26 on the partner are sustainable.

Analysis: The Tribunal reviewed rule provisions and relevant authorities addressing imposition of penalties on firms and on partners. It considered that penalty under Rule 25(b) against the firm is warranted on the established clandestine manufacture and removal. Regarding personal penalty under Rule 26 on the partner, the Tribunal addressed earlier appellate action (which had set aside the personal penalty) and applied precedents concerning imposition of separate penalties on partners when a penalty has been imposed on the firm.

Conclusion: Penalty on the firm under Rule 25(b) is sustained (in favour of Revenue). The Tribunal's overall decision results in maintenance of the adjudication on penalty as reflected in the impugned order sequence (outcome overall not favourable to the appellant firm).

Issue (iii): Whether the seized red diary and the partner's confessional statements are admissible and sufficient/corroborative evidence.

Analysis: The Tribunal applied Section 36A presumption as to documents seized and considered legal principles on confessional statements and retractions (including requirement of voluntariness and possibility of corroboration). It found the diary recovery admitted by the partner in statements recorded under Section 14, part duty deposits corroborative, and that the confessional statements were voluntary and supported by independent evidence (seized stocks, entries, and deposits), making the documentary and testimonial material admissible and probative.

Conclusion: The red diary and the partner's confessional statements are admissible and constitute sufficient/corroborative evidence for upholding the demand and penalties (in favour of Revenue).

Issue (iv): Whether prior Tribunal order setting aside confiscation (arising from the same search) nullifies or bars the present proceedings.

Analysis: The Tribunal distinguished the earlier order that set aside confiscation on specific factual and evidentiary grounds, noting that that decision did not address or disallow the clearances and admissions recorded in the red diary or the confessional statements. The Tribunal further applied principles of res judicata and constructive res judicata, observing that the appellant had not raised the present factual/contention at the earliest opportunities and that the earlier decision did not cover the same matters in identical circumstances.

Conclusion: The prior order does not operate to invalidate the present demands; the plea based on that earlier decision is rejected (in favour of Revenue).

Final Conclusion: On the consolidated factual and legal analysis the Tribunal dismissed the appeal, upholding the departmental demand and evidentiary reliance on the seized diary and confessional statements; the adjudication as to duty, interest and penalties stands against the appellant, resulting in dismissal of the appeal.

Clandestine manufacture and clearance of excisable goods proven by recovered diary and admissions, appeal consequently dismissed.
Clandestine manufacture and clandestine clearance of excisable goods was established by a private diary recovered during search and by admissions in statements; the recovered document was held admissible and entitled to a legal presumption as to correctness, leading to its evidential weight. The partners admissions and partial payment of duty corroborated clandestine clearances, obviating the need for independent proof of those facts. Reliance on prior cases was rejected where facts differed, and arguments previously made before the adjudicating authority were held precluded by res judicata, resulting in dismissal of the appeal.

Demand duty with interest - clandestine manufacture and clearance of the excisable goods to various persons - seizure of private diary and statements recorded under Section 14 of Central Excise Act, 1944 - without making proper entry in the statutory records and without payment of excise duty - principles of Res-judicata - Evidential value of the confessional statement - presumption in respect of the correctness of the facts stated in the document recovered or tendered during the investigation proceedings - HELD THAT:- The appellant who had never disputed the recovery of “Red Diary titled Laxmi Book” from his premises and his connection with the said diary, all of sudden by the advent of new counsel started disowning the diary and denying his connection with the same. No merits in the said submissions as the affidavit claiming so has been filed for first time in 20.01.2017 in respect of the recovery made from the premises of the appellant on 11.01.2010 i.e. more than seven years after the search. The said affidavit was never filed at the time of investigation or in proceedings before the lower authority and not even at the time of filing this appeal or at the time of argument of stay application. It is settled principle that the question sought to be agitated by way of this affidavit is a question of fact and should have been agitated at the first available opportunity. Such belated of submission of this affidavit on 20.01.2017 is contrary to settled principles of law and the affidavit filed needs to be rejected on this ground. As per Section 36A of Central Excise Act, 1944, presumption is in respect of the correctness of the facts stated in the document recovered or tendered during the investigation proceedings. In this case not only the “Red Diary titled Laxmi Book” is admissible in evidence, in view of the presumption cast by the above section but also for the reason that recovery and correctness of the facts/ entries have been admitted by the Partner of the appellant in his statements recorded under Section 14 of Central Excise Act, 1944. I do not find anything contrary to the above presumption being stated in the appeal. The question of clandestine clearance is purely a question of fact and needs to be determined on the basis of the evidences recovered and marshalled in a particular proceedings. There cannot be any precedence without showing that the cases relied by the appellant were rendered in the similar or identical circumstances. It is settled principle that one addition fact/ evidence makes the case completely different from relied upon by the appellant. It is evident from the facts as stated, that the partner of the appellant firm has admitted to the recovery of the said “Red Diary titled Laxmi Book” and to the contents of the said diary. The admission of the contents is also evident from the fact that the appellant has deposited the part duty against the admitted clandestine clearances vide GAR-7 Challan No 19.01.2010 for Rs 25,000/- and GAR-7 Challan No 20 dated 09.02.2010 for Rs 25,000/-. The fact of clandestine clearance was as per the said “Red Diary titled Laxmi Book” was again admitted by the appellant in his statement recorded on 25.03.2011. It is settled principle in law that the facts admitted in the proceedings need not be proved by the other party. The arguments being advanced by the appellant in the present appeal were foreclosed in terms of the submissions made by the appellant before the Adjudicating authority. Acting on the submissions made by the appellant adjudicating authority has not imposed any penalty. Raising these arguments for the first time in subsequent proceedings will be hit by the principles of Res-judicata. Thus in view of the discussions as above I do not find any merits in this appeal. Appeal is dismissed.

2026 (1) TMI 506 - CESTAT NEW DELHI Central Excise

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Conditional exemption applies only from the opted date; rectification cannot shift the exemption's retrospective start absent apparent error.
A conditional exemption notification operates only from the date consciously opted by the assessee in its declaration, and rectification cannot be used to substitute an earlier retrospective commencement date unless an error apparent on record is shown. The applications sought modification of a final order to extend Notification No. 50/2003-CE backward and delete the confirmed duty demand for the earlier period, but the record showed the exemption had been claimed only from the declared dates. In the absence of any apparent mistake, the request to alter the final order was rejected, with the confirmed demand for the prior period left undisturbed in favour of Revenue.

Rectification of mistakes - Misatke apparent on the face of record or not - declaration under N/N. 50/2003-CE was made by Hindustan Unilever Limited (HUL), the Principal manufacturer would apply to job-workers as well or not - Filing of ST-3 returns, etc. is as good as filing declaration under N/N. 50/2003-CE dated 10.6.2003 or not - HELD THAT:- The exemption N/N. 50/2003-CE was a conditional exemption notification. Any conditional exemption notification is optional. One may opt for it, fulfil the conditions and avail the exemption notification OR one may not opt for it and not fulfil the conditions and not avail the exemption notification. If one avails the exemption, evidently other benefits such as CENVAT credit will not be available. It is for the assessee to decide whether to avail the benefit of a conditional notification or not. Neither Revenue nor any court can compel an assessee to avail a conditional exemption notification and consequently forfeit any benefit such as CENVAT. It is purely the business decision of the assessee. Denial of benefit of the exemption notification for procedural lapses - HELD THAT:- Although the declaration was to be made before availing the benefit of the exemption, both Maxima and Today filed declarations and sought benefit with retrospective effect from specific dates and it has been allowed retrospectively from the dates of their choices - The submission of the learned counsel that since service tax has been paid, no excise duty is payable has no basis. If an activity amounts to manufacture, excise duty has to be paid and if the activity is a service, service tax has to be paid. Neither the charging sections nor any other provisions of the Central Excise Act, 1944 or the Finance Act, 1994 give any assessee an option to choose whether to pay central excise duty or to pay service tax. If service tax was wrongly paid, they can seek refund of service tax but that is not the subject of this appeal. Thus, it is not open to this Tribunal to modify the retrospective dates from which the applicant Respondents had opted for the exemption Notification No. 50/2003-CE. The exemption was allowed retrospectively from the dates of their choice - There is no mistake in the Final Order, let alone, one apparent on record. Both applications for Rectification of Mistake are rejected.

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