2024 (3) TMI 1169 - AT - Central Excise

Tribunal Affirms Correct Valuation Method for Cenvat Credit Reversal; Revenue's Appeal Dismissed, Appellant Wins.

The Tribunal ruled in favor of the appellant, determining that the correct valuation method for reversing cenvat credit on inputs cleared as such is based ... CENVAT Credit - clearance of inputs as such without reversal of payment of amount of credit availed on the said inputs - it is alleged that while clearing the inputs as such, they were required to reverse the input on the highest value of input received in a particular month - HELD THAT:- The said method of adoption of value is not correct as held by this Tribunal in the case of LSR SPECIALITY OIL PVT LTD, AROKIA SAMY, RAMESH BABU VERSUS COMMISSIONER OF CENTRAL EXCISE, BELAPUR [2015 (9) TMI 983 - CESTAT MUMBAI] wherein this Tribunal has held that the average value of input procured in a year is to be taken for reversal of cenvat credit on input cleared as such and the adjudicating authority has also relied on the said decision. Admittedly, the show-cause notices were issued to the assessee to direct them for reversal on highest value of inputs in a particular month when they were procured, which is not correct. The adjudicating authority cannot improve the case of the Revenue by adopting the decision in the case of LSR Speciality Oil Private Limited at the stage of adjudication. The charge made in the show-cause notices against the assessee as highest value of input for the month of procurement cannot be adopted for reversal of the cenvat credit by the assessee, is set aside - the impugned order is not sustainable in the eyes of law - appeal filed by the Revenue is dismissed. Issues involved:The issues involved in this case are related to the reversal of cenvat credit on inputs cleared as such without payment, specifically focusing on the method of valuation based on the highest value of inputs procured in a particular month.Summary:Issue 1: Valuation method for reversal of cenvat creditThe case pertains to an appellant engaged in the manufacture of iron and steel products, facing show-cause notices for not reversing the amount of credit availed on inputs cleared as such. The dispute centered around the valuation method adopted by the adjudicating authority, with the appellant contesting the correctness of using the highest value of inputs cleared in a particular month. The Tribunal held that the correct method is to consider the average value of inputs procured in a year for the reversal of cenvat credit, citing a precedent to support this position. Consequently, the show-cause notices demanding reversal based on the highest value for a particular month were set aside.Issue 2: Clearance of Sinter and demand for cenvat creditAnother aspect of the case involved the clearance of Sinter, with the Revenue contending that the highest value of inputs for the month should be used for valuation. The appellant argued that fines remained on the Sinter, which were processed at a sister unit before being cleared, thus not constituting clearance as such. The Tribunal found in favor of the appellant, emphasizing that the charge based on the highest value of inputs for a particular month was not valid, and the impugned order lacked legal merit. Consequently, the appeal filed by the appellant was allowed, and the Revenue's appeal was dismissed.This judgment highlights the importance of applying the correct valuation method for the reversal of cenvat credit on inputs cleared as such, emphasizing the need to consider the average value of inputs procured over a period rather than the highest value in a specific month.