2012 (11) TMI 26 - AT - Central Excise

Waiver of pre-deposit cenvat credit - returned goods - Department submits that when goods received from outside were input and that did not undergo manufacturing process, there should be denial of Cenvat credit Held that - Rule 16(1) of Central Excise Rules, 2002, does not create any embargo to avail Cenvat credit in respect of finished goods consigned from a different unit to Bolpur Unit by fiction of law treating such finished goods as input. The finished goods were treated under law as input which need not undergo processing since accountability was only safe-guard measure provided to grant Cenvat credit. To such extent, applicant is correct to have bona fide belief of availing canvat credit - waiver of pre-deposit allowed

Summary

Issues:
1. Interpretation of Rule 16(1) of the Central Excise Rules, 2002 regarding Cenvat credit for finished goods received from a different unit.
2. Validity of maintaining separate set of books for identification of goods.
3. Retrospective effect of permission granted for stock transfer.
4. Denial of Cenvat credit for goods not undergoing manufacturing process.
5. Prima facie decision on waiver of pre-deposit and stay petition.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Kolkata involved a dispute regarding the interpretation of Rule 16(1) of the Central Excise Rules, 2002 concerning the eligibility for Cenvat credit for finished goods received from a different unit. The applicant argued that the rule does not mandate the finished goods to undergo processing to avail Cenvat credit, thus justifying their belief in maintaining separate books for identification. The Tribunal acknowledged the applicant's bona fide belief and granted a waiver of pre-deposit during the appeal, allowing the stay petition.

Another issue addressed was the retrospective effect of the permission granted for stock transfer. The Department contended that goods not undergoing manufacturing process should be denied Cenvat credit, citing the lack of retrospective application of the permission obtained. However, the applicant's consultant highlighted the method followed by the applicant before the permission was granted, emphasizing the maintenance of separate registers for identification and verification.

The Tribunal, after hearing both sides and examining the report and permission documents, found that Rule 16(1) does not restrict availing Cenvat credit for finished goods received from a different unit. The Tribunal considered the finished goods as inputs under the law, not requiring processing, and agreed with the applicant's consultant's belief in availing Cenvat credit. Consequently, the balance of convenience favored the applicant, leading to the waiver of pre-deposit and the allowance of the stay petition.

In conclusion, the judgment clarified the interpretation of Rule 16(1) of the Central Excise Rules, 2002, upheld the validity of maintaining separate books for identification, addressed the retrospective effect of permission granted, and decided on the denial of Cenvat credit for goods not undergoing manufacturing process. The Tribunal's decision to grant a waiver of pre-deposit and allow the stay petition was based on the prima facie assessment of the applicant's case.