2017 (1) TMI 157 - AT - Central Excise

Tribunal grants credit on inputs pre-2008 for manufacturing process, emphasizing equity and justice

M/s. Muskan Polymers Versus CCE, Hyderabad-III (Vice-Versa)

The Tribunal allowed the assessee's appeal and dismissed the Department's appeal regarding the disallowance of credit on inputs used in a manufacturing ... Disallowance of Cenvat credit - Interest - Penalty - Held that: - I do not understand on what basis the original authority disallowed ₹ 2,03,462/- when the same officer held that credit of ₹ 26,93,931/- is eligible. I do not find any logic in allowing part of the credit and disallowing a portion of ₹ 2,03,462/- on the ground that it has not been utilized prior to 01/03/2008. The assessee was under bona fide belief that the process undertaken by them amounted to manufacture. They took registration, paid excise duty and also availed credit on inputs - The assessee can utilize this credit taken prior to 01/03/2008 for paying the duty on the products which have become excisable after 01/03/2008 - Decided in favor of the assessee. Issues: Disallowance of credit on inputs for manufacturing process prior to 01/03/2008Analysis:1. The appeals involved the issue of disallowance of credit on inputs for a manufacturing process undertaken by the assessee prior to 01/03/2008.2. The assessee, registered with the Central Excise Department, was involved in manufacturing excisable goods by processing plastic sheets into finished products. The dispute arose when a clause was inserted stating that the process amounts to manufacture for goods falling under a specific category. The Department issued a show-cause notice alleging irregular credit availed by the assessee on inputs before the amendment date. The original authority allowed a partial credit and imposed a penalty, leading to appeals by both parties before the Tribunal.3. In Appeal No. E/176/2009, the assessee challenged the disallowance of credit. The assessee contended that even if the process did not amount to manufacture, they were eligible for credit as they had paid excise duty on the finished products. Citing precedent cases, the assessee argued for credit eligibility based on prior excise duty payments.4. On the Department's side, it was argued that since the process did not amount to manufacture before the specified date, the assessee should not be eligible for any credit on inputs. The Department challenged the Commissioner's decision to allow partial credit to the assessee.5. The Tribunal, after hearing both parties, noted that the assessee did not contest whether the process amounted to manufacture but focused on credit eligibility. The Tribunal found the disallowance of credit unjustified, especially considering the excise duty paid on finished products before the amendment date. Referring to a relevant case law, the Tribunal emphasized the principle of equity and justice in allowing credit on inputs used for production, even if the process did not strictly qualify as manufacture. The Tribunal concluded that the disallowance of credit was unsustainable and allowed the appeal filed by the assessee, while dismissing the Department's appeal.6. In the final decision, the Tribunal modified the impugned order to allow the credit amount in question and provided consequential reliefs to the assessee. The Department's appeal was dismissed, affirming the assessee's eligibility for credit on inputs used in the manufacturing process before the specified amendment date.