2014 (9) TMI 686 - AT - Central Excise

Tribunal allows appeal for remand on CENVAT Credit eligibility despite procedural irregularities

M/s Alkem Laboratories Ltd. Versus CCE Daman

The Tribunal allowed the appeal for remand to verify if the sister concern cleared products with duty payment, emphasizing that procedural irregularities ... CENVAT Credit - part of the steam generated supplied to adjoining sister concern - whether appellant will be entitled to CENVAT Credit with respect to furnace oil used for generation of that part of the steam which is supplied to the sister concern of the appellant - Held that:- Procedures existed at the relevant time to avail cenvat credit on inputs sent to the power plant as job worker. The only irregularity committed by the appellant was that they did not follow the prescribed procedures. It has been a settled position of law now that a substantial benefit of cenvat credit cannot be denied for not following the prescribed procedures when it is not disputed that inputs on which credit is taken have been utilized for manufacture of final product on which Central Excise Duty has been paid/payable. In the case of sister concerns such captive consumption of materials become a case of revenue neutral exercise. Accordingly, cenvat credit with respect to inputs, sent to the power plant by the clinker unit for generation of electricity sent to grinding unit, cannot be denied to the appellant for not following the prescribed procedures of Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rules 2004 which allowed the appellant to send the clinker to grinding unit under job work and then clear the finished goods from the job worker’s factory premises when diversion of inputs/electricity is not alleged by the Revenue. Matter remanded back - Decided in favour of assessee. Issues:Entitlement to CENVAT Credit for furnace oil used in generating steam supplied to sister concern.Analysis:1. The appellant, a pharmaceutical products manufacturer, installed a boiler using duty paid furnace oil to generate steam for manufacturing products. Some steam was supplied to a sister concern. The Revenue contended that CENVAT Credit for furnace oil used in generating steam for the sister concern was inadmissible. The appellant argued citing procedural irregularities and no diversion/sale of steam to the sister concern.2. The appellant relied on a previous case judgment and CENVAT Credit Rules to support their claim. The Revenue cited precedents to deny the credit based on the fuel used for steam generation supplied to the sister concern. The argument revolved around whether the sister concern cleared final products with duty payment.3. The Tribunal analyzed the case records and referred to relevant legal provisions and judgments. The key issue was whether the appellant could claim CENVAT Credit for the fuel used in generating steam supplied to the sister concern. The Tribunal distinguished the present case from previous judgments based on the absence of evidence of steam sale to the sister concern.4. The Tribunal discussed the provisions of CENVAT Credit Rules, emphasizing that procedural irregularities should not deny credit if the inputs are used for dutiable products. The Tribunal highlighted that the appellant did not follow prescribed procedures but did not divert electricity elsewhere. The Tribunal concluded that the credit cannot be denied for procedural lapses when the inputs were used for dutiable products.5. The Revenue raised concerns regarding the sister concern's duty payment for final products. The Tribunal directed a remand to verify if the sister concern cleared products with duty payment. If verified, the credit cannot be denied solely based on procedural non-compliance. The appeal was allowed for remand to the adjudicating authority for verification.This detailed analysis of the legal judgment addresses the issues of entitlement to CENVAT Credit for fuel used in generating steam supplied to a sister concern, covering arguments from both parties and the Tribunal's decision for remand based on duty payment verification.