2007 (3) TMI 606 - AT - Central Excise

Summary

Issues involved: Entitlement to Cenvat credit on fuel used as input for manufacturing excisable goods on own behalf and job work basis, and rejection of refund claim based on non-payment of duty and unjust enrichment.

Entitlement to Cenvat Credit: The appellants, engaged in manufacturing steel products, availed Cenvat credit on "Furnace Oil" used as fuel for manufacturing goods on own behalf and job work basis. The Department objected to the credit availed for goods manufactured on job work basis without duty payment. The appellant reversed the credit and filed a refund claim, which was rejected on grounds of non-eligibility for job work fuel credit and lack of evidence on passing duty incidence. The rejection was based on the principle of unjust enrichment, as per the decision in M/s. Solar Pesticide Pvt. Ltd. The appellants failed to prove non-passing of duty element, and the interpretation of Cenvat Credit Rules, 2002 was deemed incorrect.

Interpretation of Rules: The Commissioner (Appeals) upheld the rejection, citing decisions under Modvat Rules, but the Larger Bench ruling in Sterlite Industries (I) Ltd. clarified that duty paid on inputs for final products cleared without duty payment is eligible for credit. The definition of inputs in Cenvat Credit Rules, 2002 supports the appellant's eligibility, especially since Rule 6(2) excludes fuel credit from reversal. The principle of unjust enrichment, as in CCE v. Dura Syntex Ltd., was deemed inapplicable to input credit refunds, necessitating restoration of credit in the accounts.

Conclusion: The appeal was disposed of in favor of the appellant, with the order to restore the input credit in the accounts, pronounced on 30-3-2007.