2009 (3) TMI 171 - AT - Central Excise

Tribunal allows Cenvat Credit claim for duty on molasses, preventing double taxation

SANJIVANI SSK. LTD. Versus COMMISSIONER OF C. EX., AURANGABAD

The Tribunal ruled in favor of the appellant, holding that they were entitled to claim Cenvat Credit for duty paid on molasses by the manufacturer. The ... Molasses – Demand - appellants had taken Cenvat Credit of the duty paid on molasses by the manufacturer - The appellant was the procurer of molasses. According to the revenue, they were not entitled to take Cenvat Credit of an amount of duty which was liable to be paid by themselves – held that - In the instant case, duty was admittedly ‘paid’ on the molasses by its manufacturer and that duty was never refunded. Levy of duty on the same goods from the procurer on the strength of Rule 4(2) of the Central Excise Rules, 2002 would militate against one of the basic tenets of taxation law, which says that there can be no double taxation on the same goods - The question whether the appellants as procurer of the molasses could be denied the benefit of Cenvat Credit is squarely covered by the Board’s Circular - The credit taken by the appellants of the duty ‘paid’ on molasses by its manufacturer is, therefore, in order. Issues:- Entitlement to Cenvat Credit of duty paid on molasses by the manufacturer during a disputed period.- Interpretation of Rule 4(2) of the Central Excise Rules, 2002 regarding liability to pay duty on molasses.- Double taxation on the same goods and denial of Cenvat Credit to the manufacturer of final products.Analysis:1. The case involved a dispute regarding the entitlement of the appellant to Cenvat Credit for duty paid on molasses by its manufacturer during a specific period. The department contended that since the appellant was the procurer of molasses, they were not entitled to claim Cenvat Credit for duty already paid on the same goods. The original authority confirmed a demand for duty against the appellants, along with interest and penalty. The appeal was dismissed by the Commissioner (Appeals), leading to the present appeal.2. The appellant argued that there cannot be a double demand for duty on the same goods and that Cenvat Credit for duty paid on inputs should not be denied to the manufacturer of final products. The molasses on which duty was paid were used in the manufacturing process of the appellant's final products, which were cleared after paying duty. The appellant cited a Tribunal decision and a Board's Circular to support their claim. The department argued that Rule 4(2) mandated the procurer of molasses to pay duty, emphasizing that the duty payment was mandatory.3. Upon reviewing the submissions, the Tribunal found support for the appellant's grounds in a previous case involving a similar dispute. In that case, it was established that when duty was already paid by the supplier, no additional duty could be demanded from the procurer on the same goods, and the Cenvat Credit could not be denied. The Tribunal also considered the Board's Circular, which clarified the eligibility for Cenvat Credit based on duty 'paid' by the input manufacturer, not duty 'payable.' The Tribunal noted that the Revenue cannot contest against the Circular.4. The Tribunal emphasized that duty was indeed 'paid' on the molasses by the manufacturer and was not refunded. Levying duty on the procurer based on Rule 4(2) would lead to double taxation on the same goods, contrary to taxation principles. The Tribunal reiterated that the appellant, as the procurer, could not be denied the benefit of Cenvat Credit based on the duty 'paid' by the manufacturer. Therefore, the Tribunal allowed the appeal, ruling in favor of the appellant on all counts.5. In conclusion, the Tribunal held that the appellant was entitled to the Cenvat Credit for duty paid on molasses by the manufacturer during the disputed period. The decision was based on the principle of avoiding double taxation on the same goods and following the interpretation of Rule 4(2) and the Board's Circular regarding duty payment eligibility for Cenvat Credit. The appeal was allowed, granting relief to the appellant.