2007 (7) TMI 77 - AT - Central Excise

Appellant entitled to Cenvat credit on inputs used to make non-excisable bright bars; revenue barred from recovery

CESTAT (Chennai - AT) allowed the appeal, holding that the appellant was entitled to Cenvat credit on inputs used in producing bright bars even though the ... Cenvat credit utilisation towards payment of duty on final products - excisability of bright bars - manufacture versus conversion - precedential effect of Tribunal decisionsCenvat credit utilisation towards payment of duty on final products - excisability of bright bars - Entitlement of the appellants to retain and utilise Cenvat credit taken on inputs which was utilised towards payment of duty on bright bars cleared during May, 2003 to February, 2004 - HELD THAT: - The Tribunal held that the appellants, who paid duty on bright bars using Cenvat credit of duty paid on inputs (black bars), were entitled to that credit. The Appellate Tribunal Chennai treated the matter as squarely covered by the Tribunal's earlier decision in Syndet India, which held that even if duty were not payable on the finished goods (there being no manufacture), utilisation of credit towards payment of such duty precludes any question of recovery of that credit. The Tribunal noted the Syndet India decision was rendered on 9-12-2003 and was apparently accepted by Revenue; accordingly, Revenue cannot at this distant point deny the Cenvat credit to the appellants. The Court therefore set aside the impugned order denying credit and allowed the appeal. [Paras 3, 4]Cenvat credit utilised towards payment of duty on bright bars is allowable; impugned order denying such credit set aside and appeal allowed.Manufacture versus conversion - precedential effect of Tribunal decisions - Effect of prior decisions (including the Tribunal's Syndet India decision) and the position that Revenue cannot now deny credit despite earlier judicial views on whether conversion amounts to manufacture - HELD THAT: - Although the Revenue relied on earlier judicial authority holding conversion of black bars to bright bars did not amount to manufacture (Vee Kayan Industries), the Tribunal relied on the Syndet India decision and the administrative acceptance of its reasoning to conclude that the credit once utilised for payment of duty could not be recovered. The Appellate Tribunal treated the Syndet India precedent as determinative and observed that, given the passage of time and apparent acceptance by Revenue, it was not open to Revenue to deny the credit. [Paras 2, 3]Prevailing Tribunal precedent (Syndet India) applies and, given its acceptance by Revenue, Revenue cannot now deny the Cenvat credit; the appeal succeeds on that basis.Final Conclusion: The impugned order denying Cenvat credit is set aside; the appeal is allowed, pre-deposit dispensed and the appellants' utilisation of Cenvat credit towards duty on bright bars for May, 2003 to February, 2004 is upheld. Issues:- Eligibility for Cenvat credit on inputs for duty paid on final product- Classification of bright bars as excisable goodsAnalysis:Issue 1: Eligibility for Cenvat credit on inputs for duty paid on final productThe appellants manufactured bright bars and utilized Cenvat credit of duty paid on their input (black bars) for duty payment on the final product. The lower appellate authority denied this credit, stating that the final product was not excisable, hence ineligible for Cenvat credit. The appellants argued that Cenvat credit on inputs and capital goods is available for utilization in duty payment on the final product, citing a Tribunal decision in Syndet India case. The Revenue contended that the conversion of black bars into bright bars did not amount to manufacture, referring to a Supreme Court decision in Vee Kayan Industries case. However, the appellants pointed out that the CBEC had clarified that bright bars are excisable goods, supported by Circular No. 720/36/2003-CX and a Trade Notice.Issue 2: Classification of bright bars as excisable goodsThe Tribunal noted that the issue in this case is covered against the Revenue by the Tribunal's decision in the Syndet India case, where it was held that even if duty was not payable on the finished goods due to no manufacture, the utilization of credit towards duty payment precludes further recovery. This decision, dated 9-12-2003, was accepted by the Revenue previously. Therefore, the Tribunal concluded that at this stage, the Revenue cannot deny the Cenvat credit to the appellants. Consequently, the impugned order was set aside, and the appeal was allowed.This judgment clarifies the eligibility of Cenvat credit on inputs for duty paid on the final product and establishes the classification of bright bars as excisable goods based on relevant legal precedents and circulars.