2015 (12) TMI 1400 - AT - Central Excise

Tribunal upholds supplier's duty discharge, validating respondent's CENVAT credit

The Tribunal dismissed the Revenue's appeal challenging the setting aside of the order confirming demand of ineligible credit. The appeal was based on the ... Denial of CENVAT Credit - the case of the Revenue that Associated Capsules Ltd. was not manufacturing aluminium foils but was engaged in cutting/slitting jumbo rolls into smaller rolls and the said activity does not amount to manufacture and the duty discharged by M/s Associated Capsules Ltd. is not Central Excise duty. - Held that:- department filed an appeal against the order of the Commissioner dropping the proceedings initiated against M/s Associated Capsules Ltd., before the Tribunal in appeal [2014 (2) TMI 721 - CESTAT MUMBAI] and the department's appeal was dismissed by the Tribunal as reported in [2014 (2) TMI 721 - CESTAT MUMBAI] and produced a copy of the same. I find that the Tribunal has upheld the duty discharged by M/s Associated Capsules Ltd. as correct and if that be so CENVAT credit taken by the respondent in the case in hand cannot be disputed, as the fulcrum of the revenue to deny credit on the ground that Associated Capsules could not have discharged duty, is now set aside. - Decided against Revenue. Issues:1. Whether the appellate authority was correct in setting aside the order confirming demand of ineligible credit.Analysis:The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs (Appeals), Nashik. The main issue revolved around the correctness of setting aside the order-in-original confirming the demand of ineligible credit. The respondent had availed cenvat credit of Central excise duty on aluminium foil received from a supplier engaged in cutting/slitting jumbo rolls into smaller rolls. The Revenue contended that the supplier was not manufacturing aluminium foils, and the duty paid was not Central Excise duty. The adjudicating authority confirmed the demand, stating that the duty paid by the supplier was a deposit made to the department voluntarily. However, the first appellate authority set aside the order-in-original, holding that the recipient's authorities cannot re-classify or deny cenvat credit based on the supplier's duty discharge. The appellate authority also noted that the show cause notice issued to the supplier was dropped in their favor.The Chartered Accountant representing the respondent pointed out that the department had appealed the Commissioner's decision to drop proceedings against the supplier. The Tribunal had dismissed the department's appeal, upholding the duty discharged by the supplier as correct. The Tribunal's decision rendered the Revenue's argument to deny credit based on the supplier's duty discharge invalid. Consequently, the CENVAT credit taken by the respondent could not be disputed. The Tribunal's ruling on the supplier's duty discharge served as the basis for dismissing the Revenue's appeal, as the appeal lacked merit in light of the Tribunal's decision.In conclusion, the Tribunal, through the Member (J), found no merits in the Revenue's appeal and dismissed it based on the upheld duty discharge by the supplier. The judgment highlighted the importance of the Tribunal's decision in appeal no. E/1281/2007, which established the correctness of the duty discharge by the supplier and consequently validated the CENVAT credit availed by the respondent.