2018 (6) TMI 1340 - AT - Central Excise

Tribunal rules in favor of appellant, emphasizing actual utilization of inputs in manufacturing for Cenvat credit eligibility.

The Tribunal set aside the Commissioner's order confirming Cenvat credit demand, ruling in favor of the appellant. The appellant successfully argued that ... CENVAT credit - inputs - manufacturing activity stopped - case of appellant is that just because, the certain quantity of inputs in semi finished stage are lying in the silos and certain quantity of finished goods is lying in stock, the Cenvat credit cannot be denied - Held that:- It is evident that the inputs in respect of which the Cenvat credit had been taken, have been used for manufacture of finished products and just because some of the inputs in form of work in progress and some of the finished products are still lying in stock, the Cenvat credit cannot be denied as Cenvat credit is admissible in respect of inputs used in or in relation to manufacture of some final products. The Cenvat credit would be deniable only when the inputs are cleared as such which is not the department’s case against the assessee. Appeal allowed - decided in favor of appellant. Issues:1. Denial of Cenvat credit for inputs used in manufacturing due to non-clearance of final products.2. Appeal against the Order-in-Original dated 23/12/2013 confirming Cenvat credit demand.Issue 1: Denial of Cenvat credit for inputs used in manufacturing due to non-clearance of final products:The appellant set up a plant for manufacturing Purified Terepthelic Acid (PTA) in 1997, with manufacturing activities starting in September 1999. The appellant took Cenvat credit of Rs. 1,27,95,483/- for various inputs from November 1997 to March 1999. Due to low-quality final products, manufacturing stopped in August 2000, but the appellant continued selling finished products until April 2008. The Revenue initiated proceedings for Cenvat credit demand, alleging non-manufacture and clearance of goods during the credited period. Previous orders had conflicting decisions on the matter, leading to appeals and remand to the Commissioner for re-adjudication. The Commissioner confirmed the Cenvat credit demand in the de-novo order dated 23/12/2013, imposing a penalty equal to the demand. The appellant contended that all inputs were used in manufacturing, with 1172 MTs of PTA cleared on duty payment. The Tribunal found that the inputs were utilized for finished products, making the denial of Cenvat credit unjustified. Therefore, the impugned order was set aside, and the appeal was allowed.Issue 2: Appeal against the Order-in-Original dated 23/12/2013 confirming Cenvat credit demand:The appellant argued that all inputs for which Cenvat credit was taken were utilized in manufacturing, with a significant quantity of PTA cleared on duty payment. The Revenue supported the impugned order confirming the Cenvat credit demand. The Tribunal examined the records and found that the inputs credited were indeed used for manufacturing finished products, with a stock of 34.37 MTS of PTA in April 2008. As Cenvat credit is permissible for inputs used in manufacturing final products, the denial based on some inputs being in semi-finished state or as finished goods in stock was deemed unsustainable. Consequently, the appeal was allowed, setting aside the impugned order, and the appellant was granted consequential relief as per law.This judgment highlights the importance of utilizing credited inputs in manufacturing final products to justify Cenvat credit claims, even if some inputs are in semi-finished or finished goods stock. The decision provides clarity on the admissibility of Cenvat credit based on the actual utilization of inputs in the manufacturing process, rather than solely on the clearance status of final products.