2014 (5) TMI 57 - HC - Central Excise

Court Upholds Cenvat Credit: Duties on Exempt Product Allowed

Commissioner of Central Excise, Ahmedabad-III Versus Nahar Granities Ltd.

Commissioner of Central Excise, Ahmedabad-III Versus Nahar Granities Ltd. - 2014 (305) E.L.T. 9 (Guj.) Issues:1. Whether the CESTAT committed an error in allowing Cenvat Credit on goods exempted from Excise dutyRs.2. Whether the CESTAT erred in concluding that Cenvat Credit on received inputs is admissible to the respondentRs.3. Whether the CESTAT was obligated to apply the ratio of a cited judgment to the present caseRs.Issue 1:The respondent purchased Zinc Dross, a byproduct, on which the supplier paid excise duty. The Supreme Court held in a previous case that no excise duty was leviable on Zinc Dross. The respondent claimed Cenvat Credit on the duty paid by the supplier. The Revenue argued that since no duty was payable on Zinc Dross, the respondent was not entitled to the credit. However, the tribunal, relying on a Supreme Court decision, allowed the Cenvat Credit. The respondent contended that the conditions for availing the credit were met as the goods were utilized in their manufacturing activity.Issue 2:The department argued that since the product was not dutiable, no Cenvat Credit could be availed. The respondent, on the other hand, stated that the department had accepted the assessment of the supplier and that the goods were used as inputs for manufacturing output service. They relied on relevant Supreme Court judgments to support their position. Rule 3 and 4 of the Cenvat Credit Rules were analyzed to determine the entitlement to the credit.Issue 3:The judgment highlighted the importance of following the rules and conditions laid down in the Cenvat Credit Rules. It discussed a similar case before the Supreme Court where the tribunal's decision was upheld. The tribunal's observations emphasized that the duty paid by the supplier should benefit the purchaser, and the department's acceptance of declarations and duties should not be disregarded. The judgment concluded that the respondent was entitled to the Cenvat Credit despite the duty not being payable on the product.In conclusion, the High Court dismissed the tax appeal, upholding the tribunal's decision to allow the respondent to avail Cenvat Credit on the duty paid by the supplier, even though the product itself was not dutiable. The judgment emphasized the importance of adhering to the rules and conditions for claiming such credits, as well as the significance of the department's acceptance of assessments and duties in similar cases.