2012 (8) TMI 865 - HC - Central Excise

CENVAT Credit - Whether, in the facts and circumstances of the case, the Tribunal has justified in allowing Cenvat credit on the grey fabrics as input of the respondent - Held that - While it may be that when the appeal was preferred, the circular dated 17-8-2011 was not issued. However, it appears from record that the appeal was posted before the Court first time on 11-12-2011 and the notice was issued on 12-11-2012. At the time of issuance of notice in the appeal, the circular dated 17-8-2011 was very much in force and the monetary limit of 10 lakhs provided therein was applicable. Had the said aspect been pointed out to the Court, the Court would not have issued the notice. In any way, when this appeal has come up for consideration, the circular is in vogue and the monetary limit applies. We, therefore, do not find it necessary to go into the merits of the appeal, as the disputed amount in the present appeal is below 10 lakhs. The department is bound by its own Circular and the instruction thereof. We are informed that no other circular withdrawing or reducing the monetary limit has been issued by the Department and circular dated 17-8-2011 hold the field as far as the prescription of monetary limit for filing appeal before High Court is concerned. It is pertinent to mention that we have taken the similar view in various tax appeals. Decided against Revenue.

Summary

Issues:
1. Justification of Tribunal's decision on grey fabrics as 'input'
2. Tribunal's justification on treating respondent as manufacturer of processed fabrics
3. Allowance of Cenvat credit on grey fabrics as 'input'
4. Legality of Tribunal's order

Analysis:
1. The appellant-Department challenged the Tribunal's decision on whether grey fabrics could be considered 'input' for the respondent, who had never used grey fabric as 'input' or manufactured finished fabrics. The Tribunal's justification was questioned regarding the respondent's manufacturing status and Cenvat credit on grey fabrics. The Court issued notice in the appeal on 12-1-2012, indicating a review of the Tribunal's decision.

2. The respondent, engaged in manufacturing grey fabrics, faced a recovery order for wrongful Cenvat credit availed. The Assessing Officer imposed penalties and interest based on a show cause notice. During the hearing, the respondent's advocate highlighted circulars setting monetary limits for filing appeals before the High Court. The Department's appeal was questioned due to the duty amount being below the limit set in a subsequent circular. The appellant's advocate argued that the appeal was filed before the enhanced limit came into effect, but the Court found the limit applicable at the time of notice issuance.

3. The Court emphasized the Department's obligation to adhere to its circulars and noted that the monetary limit specified in the circular dated 17-8-2011 applied to the case at hand. As the disputed amount was below the set limit, the appeal was dismissed solely based on this ground. The Court clarified that the dismissal did not address the appeal's merits, leaving the questions raised by the Department open for future consideration in a suitable case.

4. In conclusion, the High Court dismissed the appeal due to the monetary limit prescribed in the circular, without delving into the substantive issues raised by the Department. The judgment underscored the importance of following circular instructions and indicated a consistent approach in similar tax appeals. The decision maintained the relevance of the circular's monetary limit for filing appeals before the High Court, leaving the substantive issues for potential future review in an appropriate case.