2024 (8) TMI 1465 - AT - Central Excise

CENVAT credit allowed on goods from other manufacturers when duty paid exceeds credit availed under Rule 16

CESTAT Kolkata allowed the appeal regarding CENVAT credit denial on goods received from other manufacturers. The appellant had utilized CENVAT credit of ... CENVAT Credit on goods received from other manufacturers - denial of credit on the ground that for the goods received from other manufacturers since the goods are already the finished goods of the appellant - value addition on goods - HELD THAT:- While discharging this Excise Duty, they have utilized the CENVAT Credit of 1,63,96,895/- and paid the balance amount of Rs. 7,58,271/- by cash. This shows that there has been some value addition and they have paid higher duty on the finished goods than whatever CENVAT Credit they have taken on the goods received from their vendors. The Mumbai Tribunal in the case of Bunty Foods India Pvt. Ltd. v. CCE Thane [2017 (10) TMI 204 - CESTAT MUMBAI] has held 'In the facts of the present case, the appellants have brought the duty paid goods from various vendors and the same were repacked as per the requirements of export and goods were exported, even though the activity was not amount to manufacture, they have discharged excise duty. Therefore, in our view, the appellants have complied with the provisions of Rule 16(1) and (2).' In the present case, it is not in dispute that the appellant has reversed the entire CENVAT Credit and also paid further Rs. 7,58,271/- under PLA account while clearing the goods which they had bought from other vendors. Therefore, the ratio laid down by the Tribunal in the case of Bunty Foods is squarely applicable. A careful reading of Rule 16 of CER 2002 clarifies that any goods on which duty has been paid at the time of removal can be taken as CENVAT Credit. It does not specify that the finished goods of any other third party cannot be used as input by the assessee for availing the concession of Rule 16(1), 16(2). It is clearly stated that the amount of Excise Duty paid while clearing such goods received under Rule 16(1) should be either equivalent or more than the CENVAT Credit taken. This condition has been fulfilled in the present case. In view of the foregoing, the impugned order is set aside and appeal allowed. Issues:1. Eligibility of the appellant to take CENVAT Credit for goods received from other manufacturers.2. Time-barred nature of the Show Cause Notice issued to the appellant.Analysis:Issue 1: Eligibility of the appellant to take CENVAT Credit for goods received from other manufacturers:The appellant, a manufacturer of Ferro Silicon, received a large order from Steel Authority of India (SAIL) but lacked the capacity to fulfill it with their own goods. They opted to buy goods from other manufacturers, reprocess them, and then supply them to SAIL. The dispute arose when the Department issued a Show Cause Notice alleging that the appellant was not eligible for CENVAT Credit on goods received from other manufacturers as they were already the appellant's finished goods. The appellant argued that Rule 16 of Central Excise Rules, 2002 allowed for CENVAT Credit on finished goods regardless of the manufacturer. They demonstrated that the duty paid on the goods sold to SAIL exceeded the CENVAT Credit taken, resulting in a net payment of Excise Duty by the appellant. Citing precedents and legal provisions, the appellant contended that they were entitled to the credit. The Tribunal agreed, emphasizing that the duty paid on goods received could be claimed as CENVAT Credit as long as it equaled or exceeded the credit taken. The Tribunal set aside the demand, ruling in favor of the appellant.Issue 2: Time-barred nature of the Show Cause Notice:The appellant argued that the Show Cause Notice issued in July 2013 was partly time-barred, covering the period from December 2009 to February 2013. They contended that their communication in December 2009 had informed the Department of their procurement process, and they had regularly filed returns, indicating no suppression of facts. The appellant asserted that the confirmed demand for the period December 2009 to May 2010 should be set aside due to the time bar. The Department, however, maintained that the appellant's activities did not constitute manufacturing under the Central Excise Act, justifying the demand. The Tribunal found merit in the appellant's argument, holding that the Show Cause Notice for the specified period was time-barred. Consequently, the Tribunal allowed the appeal on the grounds of limitation as well.In conclusion, the Tribunal allowed the appeal both on merits regarding the eligibility for CENVAT Credit and on account of the time-barred nature of the Show Cause Notice. The appellant was deemed eligible for any consequential relief as per the law.