CESTAT Kolkata Allows Appeal on Cenvat Credit Denial

The appeal by M/s. Jai Balaji Industries Limited against the demand of central excise duty and denial of Cenvat credit on inputs was allowed by CESTAT Kolkata. The tribunal held that the appellant was entitled to credit on inputs even if the goods were not manufactured by the supplier but cleared 'as such'. Citing legal precedents, the tribunal emphasized that credit cannot be denied to the recipient if duty was paid, even if not legally payable or at a higher rate. As there was no evidence of intentional irregular credit availing, the demand was set aside, and the appeal was allowed on 11 December 2019.

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Issues:
Appeal against demand of central excise duty and denial of Cenvat credit on inputs.

Analysis:
The appeal was filed by M/s. Jai Balaji Industries Limited against the demand of central excise duty upheld by the Ld. Commissioner (Appeals) for the period 2011-12 to 2015-16 due to denial of Cenvat credit on inputs. The dispute arose as the department contended that the goods on which credit was availed were cleared 'as such' at a higher value by the supplier, M/s. Inductotherm (I) Pvt Ltd, Ahmedabad. The appellant argued that they availed credit in good faith based on valid central excise invoices, even if the goods were not manufactured by the supplier or duty was paid at a higher value. The department relied on a Gujarat High Court decision stating that duty paid on bought out goods cannot change the value at clearance, and hence, Cenvat credit cannot be availed.

The CESTAT Kolkata analyzed the case and found that as per Rule 3(5) and 3(6) of the CENVAT Credit Rules, the appellant was legally entitled to credit on inputs even if the goods were not manufactured by the supplier but cleared 'as such'. The tribunal referred to precedents like the Punjab and Haryana High Court cases to support the position that credit cannot be denied to the recipient when duty was paid, even if not legally payable or paid at a higher rate. The tribunal emphasized that the appellant had received the goods and used them in manufacturing, justifying the credit availed.

The tribunal further noted that there was no evidence of intentional irregular credit availing by the appellant, and denial of credit without such proof would be unwarranted. Relying on legal precedents and the absence of collusion or ulterior motive in availing credit, the tribunal set aside the demand, allowing the appeal with consequential relief. The judgment was pronounced on 11 December 2019 by SHRI P.K.CHOUDHARY, MEMBER (JUDICIAL) of the Appellate Tribunal CESTAT KOLKATA.

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