2025 (3) TMI 329 - AT - Central Excise

Revenue cannot deny CENVAT Credit when duty payment accepted despite manufacturing capability concerns

CESTAT Kolkata allowed the appeal regarding CENVAT Credit denial. Revenue investigated and found the supplier had no electricity connection, questioning ... CENVAT Credit - extended period of limitation - HELD THAT:- Revenue had initiated an investigation and on investigation, it was revealed that M/s. Ganpati had no electricity connection and therefore the Revenue took the view that they would not be able to manufacture the goods. Thus, it has been alleged that they are not entitled to avail CENVAT Credit on the invoices issued to M/s. Ronix. However, it is a fact on record that M/s. Ganpati has manufactured the goods and the same have been cleared on payment of duty, which has been accepted by the Revenue. If the duty has been accepted by the Revenue, in these circumstances, CENVAT Credit availed cannot be denied, as has been held by the Hon’ble Bombay High Court in the case of Commissioner of C.Ex., Pune-III v. M/s. Ajinkya Enterprises [2012 (7) TMI 141 - BOMBAY HIGH COURT]. wherein it has been held that payment of duty shall amount to reversal of credit even if there is no manufacturing activity. Admittedly, in this case, M/s. Ganpati has paid the duty and therefore, CENVAT Credit cannot be denied. The same is with the case of M/s. Ronix, which has taken CENVAT Credit on the duty paid by M/s. Ganpati and the same has been used in the manufacture of their final product, which were cleared on payment of duty. In these circumstances, when the Revenue has accepted the duty payment from the appellants, CENVAT Credit cannot be denied. Conclusion - Since the duty payment was accepted, CENVAT Credit cannot be denied. Appeal allowed. The issues presented and considered in the judgment are as follows:1. Whether the appellants are entitled to avail CENVAT Credit on the invoices issued to M/s. Ronix Polymer Private LimitedRs. 2. Whether the demands raised against the appellants are barred by limitationRs.Issue-wise detailed analysis:Issue 1:The relevant legal framework and precedents cited by the appellants include the decisions of the Hon'ble Gujarat High Court in the case of Commissioner of C.Ex. & Cus., Surat-III v. M/s. Creative Enterprises and the Hon'ble Bombay High Court in the case of Commissioner of C.Ex., Pune-III v. M/s. Ajinkya Enterprises. The appellants argued that they should not be denied credit as they used the inputs and manufactured goods, clearing them on payment of duty.The Court interpreted the facts of the case, noting that M/s. Ganpati had paid duty and manufactured goods, which were cleared on payment of duty. The Court relied on the decision of the Hon'ble Bombay High Court in Commissioner of C.Ex., Pune-III v. M/s. Ajinkya Enterprises, which held that payment of duty amounts to reversal of credit even in the absence of manufacturing activity. The Court concluded that CENVAT Credit cannot be denied to the appellants.Issue 2:The appellants argued that the demands raised against them were barred by limitation, as the investigation was conducted in 2009, but the Show Cause Notices were issued in 2011 and 2012.The Court considered the submissions of both parties and found that M/s. Ganpati had indeed manufactured goods and paid duty, which was accepted by the Revenue. The Court held that since the duty payment was accepted, CENVAT Credit cannot be denied. The Court also deemed the entire exercise against the appellants as futile and unsustainable.Significant holdings:The Court set aside the impugned orders and allowed the appeals, providing consequential relief as per law.In conclusion, the Court ruled in favor of the appellants, holding that they were entitled to avail CENVAT Credit and that the demands raised against them were barred by limitation. The Court found the proceedings against the appellants to be unsustainable and set aside the impugned orders, allowing the appeals with consequential relief.