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 finished goods were not excisable. The Tribunal followed prior CESTAT precedent ruling that where no duty was payable on finished goods, recovery of credit purportedly used to pay such duty cannot be demanded. Having previously accepted that position, the Revenue could not deny the Cenvat credit at this late stage.

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Issues:
- Eligibility for Cenvat credit on inputs for duty paid on final product
- Classification of bright bars as excisable goods

Analysis:

Issue 1: Eligibility for Cenvat credit on inputs for duty paid on final product
The 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 goods
The 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.

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