Tribunal allows appeal, upholds CENVAT Credit for recipient despite supplier's duty liability issue

The Tribunal allowed the appeal by M/s Kiswok Industries Pvt. Ltd., setting aside the Order-in-Original confirming the demand of central excise duty and disallowance of CENVAT Credit on inputs. The Tribunal held that the Appellant should not be deprived of the CENVAT Credit benefit based on the supplier's lack of liability to pay central excise duty. It was determined that the Appellant's claim for CENVAT Credit as the recipient of goods was valid, emphasizing that such credit cannot be denied solely on the grounds that the assessee's activity does not amount to manufacture, provided the output duty has been paid on the final product.

---

---

Issues:
Appeal against Order-in-Original confirming demand of central excise duty and disallowance of CENVAT Credit on inputs.

Analysis:
The appeal was filed by M/s Kiswok Industries Pvt. Ltd. against an Order-in-Original confirming a demand of central excise duty and disallowance of CENVAT Credit on inputs for the period May 2006-October 2008. The Appellant, engaged in the manufacture of excisable goods, availed CENVAT Credit on M.S. rod cuttings supplied by a particular supplier. The Department contended that the supplier did not undertake any manufacturing activity and thus was not liable to charge and pay central excise duty. Proceedings were initiated through a Show Cause Notice to deny the CENVAT Credit availed by the Appellant based on the invoices from the supplier.

The Ld. Commissioner, after due process, adjudicated the show-cause notice, leading to the current appeal by the Appellant. The Appellant's Advocate argued that the issue against the supplier had been settled in favor of the supplier, and thus, the Appellant, as the recipient of goods, should not be deprived of the CENVAT Credit benefit. The Advocate cited precedents where CENVAT Credit on inputs cannot be denied even if the activity by the assessee does not amount to manufacture, as long as output duty has been paid on the final product.

The Authorized Representative for the Revenue supported the Ld. Commissioner's findings and requested the rejection of the appeal for lacking merit. After hearing both sides and reviewing the records, the Tribunal found that the jurisdictional Commissioner of the vendor had dropped all proceedings, which had been upheld by the Tribunal and the High Court. Consequently, the Tribunal concluded that there was no basis to deny the Appellant's claim for CENVAT Credit as the recipient of the goods. The Tribunal also affirmed the legal position that CENVAT Credit cannot be denied on input merely because the assessee's activity does not amount to manufacture when the output duty has been paid on the final product.

Therefore, the Tribunal set aside the impugned Order passed by the Ld. Commissioner, deeming it legally unsustainable, and allowed the appeal with consequential relief as per law. The judgment was pronounced in open court on 16.08.2022.

---