2015 (11) TMI 1583 - AT - Service Tax

Cenvat credit - availed on input service for payment of Service Tax on transportation of Molasses Sludge - Held that - the appellants availed credit on the inputs and input service for manufacture of dutiable final product and the waste was generated during the process of manufacture of dutiable final product. The Rule 6 of the said Rules would apply on the inputs which are used in the manufacture of exempted final product. In the present case the inputs were used not in the manufacture of exempted final products. It is used in the manufacture of dutiable final product. Hence Rule 6(1) of the said Rules would not apply and there is no reason to deny the Cenvat credit on the input and input service credit used for transportation of the sludge. This view is also supported by the decision of the Tribunal in the case of M/s. Lupin Ltd. v. CCE&ST 2011 (5) TMI 802 - CESTAT MUMBAI . As the matter is decided on merit there is no need to go into the limitation. - Decided in favour of appellant

Summary

Issues:
Cenvat credit disallowed on transportation of waste product generated during manufacture of dutiable product - Applicability of Rule 6(1) of Cenvat Credit Rules, 2004 - Claim of Cenvat credit by the appellant - Barred by limitation.

Analysis:
1. The appellants were involved in the manufacturing of Denatured Ethyl Alcohol (DEA), a dutiable product, which generated Molasses Sludge waste during the manufacturing process. The appellant cleared the waste and paid Service Tax on its transportation, availing Cenvat credit on the input service for this purpose. The Adjudicating authority disallowed the Cenvat credit, which was upheld by the Commissioner (Appeals). The Revenue argued that since the waste product is exempted, the appellant is not entitled to avail Cenvat credit for the transportation service tax.

2. The appellant contended that the issue is covered by a previous Tribunal decision in the case of M/s. Lupin Ltd. v. CCE&ST, where it was established that the appellant manufactured a dutiable final product, DEA. Rule 3 of the Cenvat Credit Rules allows manufacturers to take credit on inputs used for manufacturing the final product. In this case, the appellant availed credit for manufacturing the dutiable final product, not the exempted final product. Therefore, Rule 6(1) of the Rules, which disallows credit on inputs used for exempted goods, does not apply. The appellant's argument was supported by the Tribunal's decision in the case of M/s. Lupin Ltd.

3. The Tribunal found that the inputs and input services were used for the manufacture of the dutiable final product, DEA, and not for exempted products. As a result, Rule 6(1) did not apply, and the Cenvat credit on the input and input service for the transportation of the waste product was deemed admissible. Additionally, the Tribunal noted that the demand was barred by limitation, but as the matter was decided on merit, the limitation issue did not need to be addressed.

4. Consequently, the impugned order disallowing the Cenvat credit was set aside, and the appeal filed by the appellant was allowed. The judgment was dictated and pronounced in court, providing a favorable outcome for the appellant based on the interpretation of relevant rules and precedents.