2025 (4) TMI 811 - AT - Central Excise

Manufacturers Retain Tax Credit Despite Processing Changes, Duty Payment Validates Input Credit Under Rule 57

SC affirmed Cenvat credit validity for duty-paid M.S. plates processed by a manufacturing unit. The Tribunal ruled that once duty is paid and input status ... Recovery of Cenvat credit on duty-paid M.S. plates that were subjected to processes such as cleaning, drilling holes, etc., by their Jamshedpur unit - HELD THAT:- The issue is no more res-integra and covered by the judgment of this Tribunal in a series of cases including the case of Novozymes South Asia Pvt. Ltd. v. CCE, Bangalore-I [2024 (5) TMI 324 - CESTAT BANGALORE]. This Tribunal after referring to the judgment of the Hon’ble Supreme Court in the case of Sarvesh Refractories Pvt. Ltd. Vs. CC.Ex. & Customs [2007 (11) TMI 23 - SUPREME COURT] and CCE Vs. MDS Switchgear Ltd., [2008 (8) TMI 37 - SUPREME COURT] held that once the duty paid character of inputs had not been questioned, in the hands of the manufacturer when the duty was paid, the same cannot be questioned in the hands of the receiver. In the present case, the duty paid on the M.S. Plates at the Jamshedpur unit was held to be regular and Tribunal at Kolkata allowed cenvat credit on the inputs availed by the Jamshedpur unit. The present Show-cause notice has been issued by Dharwad unit for denial of the credit as a follow-up action of the Notice issue to their Jamshedpur unit - In the present case, since the credit availed by Jamshedpur unit has been held to be regular and admissible, therefore, the credit availed by the Dharwad unit cannot be denied. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is whether the appellant is entitled to avail Cenvat credit on duty-paid M.S. plates that were subjected to processes such as cleaning, drilling holes, etc., by their Jamshedpur unit. The issue arises from the allegation that these processes did not amount to 'manufacture' under the Central Excise Tariff Act, 1985, thereby questioning the validity of the Cenvat credit availed by the Dharwad unit.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework revolves around the Central Excise Tariff Act, 1985, and the concept of 'manufacture' under the Act. The Tribunal referenced several precedents, including judgments from the Karnataka High Court, Gujarat High Court, and the Supreme Court, which established that once goods are cleared on payment of duty considering them as manufactured, the credit on inputs cannot be denied. Key cases cited include Vishal Precision Steel Tubes & Strips Pvt Ltd. and Creative Enterprises, among others.Court's Interpretation and ReasoningThe Court interpreted that the duty-paid character of inputs, once established, should not be questioned at the receiver's end if it was not questioned at the manufacturer's end. The Tribunal emphasized that the issue of whether the processes amounted to manufacture was already settled in favor of the Jamshedpur unit by the Kolkata Bench of the Tribunal, which allowed the appeal filed by the Jamshedpur unit.Key Evidence and FindingsThe evidence presented included the procedural details of the processes undertaken at the Jamshedpur unit and the subsequent utilization of Cenvat credit by the Dharwad unit. The Tribunal found that the duty paid on the M.S. plates at the Jamshedpur unit was regular, and the Cenvat credit availed was admissible.Application of Law to FactsThe Tribunal applied the legal principles from the cited precedents to the facts of the case, concluding that since the duty-paid status of the goods was not in question, the Cenvat credit availed by the Dharwad unit could not be denied. The Tribunal noted that the processes undertaken, even if not amounting to manufacture, did not affect the entitlement to Cenvat credit once duty was paid.Treatment of Competing ArgumentsThe Tribunal acknowledged the arguments from the revenue, which reiterated the findings of the Commissioner. However, it found these arguments unpersuasive in light of the established legal precedents and the decision of the Kolkata Bench, which had already settled the issue in favor of the appellant.ConclusionsThe Tribunal concluded that the Cenvat credit availed by the Dharwad unit was valid and could not be denied. The impugned order was set aside, and the appeal was allowed with consequential relief as per law.SIGNIFICANT HOLDINGSThe Tribunal held that 'once the duty paid character of inputs had not been questioned, in the hands of the manufacturer when the duty was paid, the same cannot be questioned in the hands of the receiver.' This principle was pivotal in deciding the case in favor of the appellant. The final determination was that the Cenvat credit availed by the Dharwad unit was regular and admissible, leading to the setting aside of the impugned order and the allowance of the appeal.