CENVAT credit allowed on imported Propane and Butane for LPG despite absence of manufacturer registration at receipt time

CESTAT Bangalore allowed the appeal regarding recovery of CENVAT credit with interest and penalty on imported Propane and Butane used for LPG clearance from warehousing premises. The tribunal held that absence of manufacturer registration at time of goods receipt does not disentitle CENVAT credit availability, citing Karnataka HC precedent that registration is not mandatory without statutory provision. Following Bombay HC and Karnataka HC rulings, once department accepts duty on final product, denial of input credit cannot be sustained. The impugned order was set aside.

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Issues:
1. Entitlement to CENVAT credit on imported Propane and Butane for clearance of LPG.
2. Validity of denial of CENVAT credit by the Commissioner.
3. Imposition of penalty and interest.

Analysis:

Issue 1: Entitlement to CENVAT credit on imported Propane and Butane for clearance of LPG
The case involved the appellants engaged in warehousing and selling of LPG, importing Propane and Butane, blending them at the port, and then transferring the resulting LPG to their storage facility for clearance to non-domestic customers. The question was whether the appellants were entitled to avail CENVAT credit on the imported Propane and Butane. The Tribunal held that lack of manufacturer registration at the time of receipt of goods did not disentitle the appellants from availing CENVAT credit, citing a judgment by the Hon'ble Karnataka High Court. The appellants were deemed entitled to the credit on inputs used for clearance of LPG from their facility.

Issue 2: Validity of denial of CENVAT credit by the Commissioner
The Revenue contended that the appellants were not entitled to avail CENVAT credit as they had not registered their facility as a manufacturer at the relevant time. However, the Tribunal noted that subsequent amendment to include manufacturing in the registration was sufficient. Relying on judgments by the Hon'ble Bombay High Court and the Karnataka High Court, the Tribunal held that denial of credit on inputs after duty acceptance on the final product was not sustainable. The impugned order was set aside, allowing the appeal with consequential relief.

Issue 3: Imposition of penalty and interest
The appellants argued that imposition of penalty and interest was not justified when the demand itself was considered legally flawed. The Tribunal did not delve into this issue explicitly but set aside the impugned order, which could imply that penalty and interest were also overturned along with the demand decision.

In conclusion, the Tribunal ruled in favor of the appellants, allowing them to avail CENVAT credit on imported Propane and Butane for clearance of LPG, rejecting the denial of credit by the Commissioner, and potentially overturning the imposition of penalty and interest.

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