Appellant entitled to Cenvat credit despite ownership transfer upon sale

The Tribunal held that the appellant, engaged in medicine manufacturing, was entitled to Cenvat credit on inputs used in manufacturing medicament for principles, despite ownership transfer upon sale. The key criteria for credit eligibility were met as the inputs were duty paid, used in manufacturing dutiable final products, and the final products were cleared after paying duty. The Tribunal disagreed with the Revenue's argument based on ownership transfer via commercial invoices, ruling in favor of the appellant and allowing the appeals while disposing of cross objections filed by the Revenue.

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Issues:
- Denial of Cenvat credit on inputs used in manufacturing medicament on loan license basis for principles due to ownership transfer upon sale to principles.

Analysis:
The appellant, engaged in medicine manufacturing, also manufactures medicament on loan license for various principles. The dispute arose when the department disallowed Cenvat credit on inputs used for manufacturing medicament for the principles, claiming that ownership transferred upon sale to principles, making the appellant ineligible for the credit. The Commissioner(Appeals) concurred with the adjudicating authority's decision, leading the appellant to appeal before the Tribunal.

The appellant's counsel argued that the ownership transfer is not relevant for availing Cenvat credit as long as the inputs were used in manufacturing dutiable final products, which were cleared after paying duty. The counsel cited judgments like Polyplastics Industries (I) Pvt Ltd Vs. CCE&ST [2016(332) ELT 895(Tri.-Del.)] to support this argument. On the other hand, the Revenue contended that since the appellant collected both the principle amount and Cenvat credit amount by raising invoices, the credit should not be allowed.

After considering both sides' submissions and examining the records, the Tribunal observed that the sole reason for denying credit was the transfer of ownership upon issuing commercial sale invoices for the inputs used. However, the Tribunal disagreed with the Revenue's argument, emphasizing that the key criteria for allowing credit under Cenvat provisions are that the input should be duty paid, used in manufacturing the final product, and the final product should be cleared after paying duty. In this case, despite issuing commercial invoices, the inputs remained in the appellant's factory and were used in manufacturing the final product without being cleared to the principles. Therefore, the Tribunal concluded that the appellant was legally entitled to the input credit. The judgments cited by the appellant's counsel further supported this decision. As a result, the Tribunal set aside the impugned orders and allowed the appeals, disposing of the cross objections filed by the Revenue.

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