TaxTMI 
TaxTMI 
2019 (4) TMI 900
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....re of excisable goods falling under Chapter 72 of the Central Excise Tariff Act, 1985 (the Tariff Act). The IMIL received an Iron Ore Pellets from its sister concern­ M/s. Ispat Indstries Limited (M/s. IIL) for use in manufacture of its final goods. Theses Iron Ore Pellets received from M/s. IIL were admittedly manufactured by one M/s. Kundermukh Iron Ore Company Limited (M/s. Kundermukh) which is a 100% EOU. 4 M/s. IIL purchased Iron Ore Pellets from M/s. Kundermukh on payments of duty and in terms of CENVAT Credit Rules 2002 (Credit Rules, 2002) took the amount paid as duty on the Pellets as CENVAT Credit. However, this credit, M/s. IIL did not utilize/ use for the reason that the Iron Ore Pellets were not used for further manufacture of goods. These Iron Ore Pellets were cleared as such to M/s. IMIL under a cover of an invoice reflecting the payment of an amount equal to the credit taken on the Iron Ore Pellets when received from M/s. Kundermukh by M/s. IIL. This was done in terms of Rule 3(4) of the Credit Rules 2002. M/s. IMIL on receipt of the Iron Ore Pellets from M/s,. IIL took the CENVAT Credit in terms of Rule 3(5) of the Credit Rules, 2002 as reflected in the invo....
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....questions of law in the context of the submissions made, it may be necessary to reproduce the relevant provisions of Rule 3 of the Credit Rules, 2002 which arise for our consideration. They are as under:­ RULE­3 - CENVAT Credit­ (1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of­ (i) the duty of excise specified in the First Schedule to the Tariff Act, leviable under the Act; (ii) the duty of excise specified in the Second Schedule to the Tariff Act, leviable under he Act; (iii) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978); (iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957); (v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), as amended by clause 161 of the Finance Bill 2003, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931) the for....
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....where BCD and CVD denote ad valorem rates, in per cent of basic customs duty and additional duty of customs leviable on the inputs or the capital goods respectively and X denotes the assessable value." 8 We will now consider the two substantial questions of law which had been admitted for consideration in seritam. 9 Re. Question (a):­ (i) From the facts, it is clear that the Respondent - M/s. IML had purchased Iron Ore Pellets from M/s. IIL. It is also an admitted position that M/s. IIL in turn had purchased inputs i.e. Iron Ore Pellets from M/s. Kundermukh which is a 100% EOU. Further, it is undisputed that M/s. IIL on receipt of Iron Ore Pellets, took CENVAT Credit of the duty paid by M/s. Kundermukh. However, it did not use the purchased inputs i.e. Iron Ore Pellets for further manufacture. In fact, the Iron Ore Pellets were removed by M/s. IIL as such i.e. as received from M/s. Kundermukh. (ii) In the above facts, Rule 3(4) of the Credit Rules 2002 is clearly applicable. Thus, M/s. IIL is entitled to remove the Iron Ore Pellets received from M/s.Kundermukh on payment of an amount equal to the credit taken in respect of such inputs on receipt from M/s. Kundermukh....
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....t Rules, 2002 would have no application to the present facts in view of the non-­obstante Rule 3(6) of the Credit Rules, 2002. This as the recipients of inputs i.e. Iron Ore Pellets who use it in the manufacture of final products are restricted from taking CENVAT Credit in excess of the formula prescribed therein, if the Pellets have been manufactured, inter alia by a 100% EOU. In this case, admittedly, the Iron Ore Pellets have been manufactured by the said M/s. Kundermukh which is a 100% EOU. Thus, the entitlement and eligibility to take credit in respect of said goods is capped by the formula provided under Rule 3(6)(a) (i) of the Credit Rules 2002. (iii) As against the above, Mr. Agarwal, learned Counsel appearing for the Respondent submits as under:­ (a) Rule 3(6)(a) (i) of the Credit Rules 2002 would have no application to the present facts. This as the non­-obstante Rule 3(6) of the Credit Rules is only in respect of sub­-rule (1) of Rule 3. Therefore, it does not, in any manner restrict the operation of Rule 3(4) and (1) of the Credit Rules, 2002. Thus, the Respondent­-IMIL is entitled to take credit of the CENVAT Credit as reflected in the i....
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....is restriction is on the taking of the CENVAT Credit of the inputs used in the manufacture of final products. Thus, the restriction/ capping of taking CENVAT Credit would therefore apply even if the supplier of the inputs is not the 100% EOU itself, as the restriction is not on the basis of supplier/ seller of the inputs but the manufacturer of the inputs and is applicable only where the recipient uses the inputs in further manufacture. Thus, the above Rule 3(6) of Credit Rules 2002 would apply even where inputs had been received under Rule 3(4) of the Credit Rules, 2002. It is not as though Rule 3(4) and 3(6) of Credit Rules, 2002 are mutually exclusive. Therefore, the impugned order of the Tribunal proceeds incorrectly on the basis that there can be no limitation/ capping on the credit taken by the Respondent-­M/s. IMIL where the goods have been supplied by M/s. IIL i.e. supplier in terms of Rule3(4) of the Credit Rules, 2002. Thus it is a complete misreading of the provisions. The capping of the CENVAT Credit is only in case of that manufacturer who uses the inputs in further manufacture and does not apply to a manufacturer who on acquisition of inputs does not use it for fu....