Appellate Tribunal allows cenvat credit for transferred raw materials used in cigarette manufacturing

The Appellate Tribunal CESTAT Kolkata upheld the Commissioner's decision allowing cenvat credit for raw materials transferred between units for manufacturing cigarettes. The Tribunal clarified that under the Cenvat Credit Rules, the distinction between "purchased" and "procured" did not affect credit eligibility. Since the raw materials were duty paid in one unit and used in another for production, the respondent was entitled to the credit. The Tribunal dismissed the Revenue's appeal, affirming the decision in favor of the respondent.

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Issues involved:
- Appeal filed by Revenue against Order-in-Original denying cenvat credit for raw materials.
- Interpretation of Cenvat Credit Rules regarding purchase vs. procurement of goods.
- Transfer of raw materials between units and its impact on cenvat credit eligibility.

Analysis:
The appeal before the Appellate Tribunal CESTAT Kolkata was filed by the Revenue challenging the Order-in-Original passed by the Commissioner of Central Excise, Kolkata VI, which allowed cenvat credit for raw materials used in the manufacture of cigarettes. The period under dispute in this case was from April 2000 to February 2003. The Department alleged that the raw materials, including cigarette paper and cut-tobacco, were not purchased as per the books of accounts, leading to the denial of cenvat credit. However, the Commissioner allowed the credit, prompting the Revenue to file the appeal.

Upon hearing both sides and examining the records, the Tribunal noted that the raw material in question was transferred from one unit to another, eliminating the need to show it as a purchase. The Tribunal referred to Notification No. 13/2003-CE (NT) and highlighted that the substitution of "purchased" with "procured" did not impact the availability of cenvat credit under Rule 4 of the Cenvat Credit Rules, 2002. The Rules focus on the receipt of goods in the factory for manufacturing final products, regardless of whether the goods were purchased or procured. The Commissioner's order acknowledged this distinction and emphasized that the amendment only affected the nature of information to be maintained, not the entitlement to credit.

The Tribunal concluded that since the original purchase of raw materials was duty paid in a different unit and used in the final product in another unit, the respondent was entitled to avail the cenvat credit. Therefore, the Tribunal upheld the Commissioner's order, finding no grounds to interfere with it. Consequently, the appeal filed by the Revenue was dismissed, affirming the decision in favor of the respondent.

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