2011 (10) TMI 552 - HC - Central Excise

Classification of goods - Availment of CENVAT Credit - violation of Rules 57A, 57AA and 57AB of Central Excise Rules, 1944 - Held that - commissioner has rightly found that the classification of the manufacturing goods cannot be gone into by the adjudicating authority as such classification falls within the exclusive domain of the authority with whose jurisdiction, the supplier is situated. There is no dispute that the supplier has paid the duty at the rate of 16% in terms of classification under Chapter Heading 5801.31, though, another supplier supplied the goods under Chapter Heading 5801.32. Since the excise duty was paid by the supplier in bona fide understanding of the classification and thus it is a duty paid under Clause (1) of Rule 57AB of the Rules and the assessee has rightly availed Cenvat credit. No substantial question of law arises - Decided against Revenue.

Summary

Issues:
1. Appeal under Section 35G of the Central Excise Act against the order allowing Cenvat credit to the respondent-assessee.
2. Classification of plush fabrics under different Chapter Headings and availing Cenvat credit.
3. Interpretation of Rules 57A, 57AA, and 57AB of the Central Excise Rules regarding Cenvat credit.
4. Dispute over the correct excise duty rate and the eligibility of the assessee to claim Cenvat credit.

Analysis:

1. The appeal was filed by the revenue under Section 35G of the Central Excise Act against the order passed by the Customs, Excise & Service Tax Appellate Tribunal, affirming the benefit of Cenvat credit allowed to the respondent-assessee. The respondent was engaged in manufacturing bus seats and availed Cenvat credit on plush fabrics from two manufacturers, each clearing the fabric under different Chapter Headings with varying excise duty rates.

2. The Adjudicating Authority issued a show cause notice questioning the classification of plush fabrics supplied by one manufacturer and the excess excise duty paid. The authority contended that the assessee claimed Cenvat credit in violation of specific Rules. However, the Tribunal, after considering the documents of bona fide duty paid, ruled in favor of the assessee, stating that the authority lacked jurisdiction to reassess duty paid for claiming Cenvat credit.

3. The appellant argued that as per Rule 57AB of the Rules, only excise duty specified in the First Schedule can be allowed as Cenvat credit. Since the duty was paid at 16% instead of 8%, the appellant claimed the assessee wrongly benefited from the higher duty rate. However, the High Court found no merit in the appeal, emphasizing that the classification of goods falls under the supplier's jurisdiction. The duty paid by the supplier in good faith was considered valid under Rule 57AB, allowing the assessee to rightfully avail Cenvat credit.

4. The Court concluded that no substantial question of law arose in the appeal, leading to its dismissal. The judgment clarified the jurisdictional boundaries regarding classification and duty payment, affirming the assessee's eligibility to claim Cenvat credit based on the supplier's duty payment under the applicable Rules.