2022 (1) TMI 759 - AT - Central Excise

Tribunal rules in favor of Lanxess India, emphasizing manufacturing process nature for Cenvat credit eligibility

Lanxess India Pvt Ltd Versus C.C.E. & S.T. -Vadodara-II

Lanxess India Pvt Ltd Versus C.C.E. & S.T. -Vadodara-II - 2022 (380) E.L.T. 616 (Tri. - Ahmd.) Issues:1. Delayed receipt of inputs from job workers.2. Short receipt of inputs from job workers.3. Denial of Cenvat credit, interest, and penalty.Delayed Receipt of Inputs from Job Workers:The case involved M/s. Lanxess India Private Limited sending chemicals for distillation to job workers, including a water base, for recovering pure elements. The Central Excise Department raised objections regarding inputs not being returned within 180 days. The appellant debited Cenvat Credit as a precaution, but the audit report highlighted a failure to reverse a specific amount. The demand was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals). The appellant argued that inputs were stored and transported in a water base, leading to a lower concentration of chemicals when sent for distillation. They contended that the material returned after 180 days was waste, not subject to credit reversal. The Tribunal found that the appellant received the processed goods within 180 days, making the demand unsustainable.Short Receipt of Inputs from Job Workers:Another issue was the short receipt of inputs after 180 days, leading to a demand for Cenvat credit. The appellant explained that due to the nature of the process involving chemicals stored in a water base, a certain amount of material loss was inevitable. They argued that such losses were not subject to credit reversal under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The Tribunal agreed, stating that wastage arising during manufacturing could not be a basis for denying Cenvat credit. The demand for short receipt of inputs was deemed unsustainable.Denial of Cenvat Credit, Interest, and Penalty:The appellant further contended that even if the demand for Cenvat credit was upheld, they had reversed the credit before utilization, rendering the demand for interest and penalty unsustainable. They cited various judgments to support their argument. The Tribunal agreed, stating that when credit was reversed before utilization, it equated to not availing credit at all. The appellant's compliance with Rule 4(5)(a) procedures and lack of malafide intentions led the Tribunal to set aside the demand, ruling in favor of the appellant.In conclusion, the Tribunal found in favor of M/s. Lanxess India Private Limited, setting aside the demand for Cenvat credit, interest, and penalty. The judgment highlighted the importance of considering the nature of the manufacturing process, the inevitability of process-related losses, and the compliance with relevant rules in determining the eligibility for Cenvat credit and the reversal of the same.