2013 (11) TMI 1339 - AT - Central Excise

Validity of Cenvat credit taken on duty paid - whether duty has been paid or not and if duty has been paid by the supplier/assessee, the receiving assessee cannot be found fault with if he takes CENVAT credit of the duty paid so long it is used as input and CENVAT credit is admissible Held that - Following Commissioner of Central Excise, Chennai-I vs. CEGAT, Chennai 2005 (1) TMI 125 - HIGH COURT OF JUDICATURE AT MADRAS - Rule 57A(1) of Central Excise Rules, 1944 provides for availment of CENVAT credit of duty paid and not payable - This distinction is very important and which indicates that what is to be taken into account is the factual state of affairs - once the duty has actually been paid on the raw material, the credit is admissible - Even the amended CENVAT Credit Rules have similar provisions and provide for CENVAT credit of duty paid on inputs. There is no such obligation on the person who receives the goods and avails the CENVAT credit - He is eligible to take CENVAT credit of duty paid which is specified in the First Schedule to the Central Excise Tariff Act - The responsibility of the receiver of the inputs/capital goods is to ensure that duty has been paid and the same has been received by him, accounted for by him and utilized by him properly. In Board s Circular No. 940/1/2011-CX dated 14.1.2011, it has been stated that where an assessee pays Excise duty on exempted goods, the amount recovered as Excise duty has to be deposited with the Central Government and CENVAT credit also needs to be recovered in terms of Rule 14 of the CENVAT Credit Rules, 2004 - The credit which was taken wrongly would arise when an assessee is required to determine whether the inputs/capital goods received by him are liable to duty or not and whether duty is payable or not - There is no rule which puts an obligation on the receiver of goods - assessment has been taken away even from the Central Excise officer - the Board s Circular which has been issued without taking into consideration and considering the implications of the provisions and implications of the instructions on the assessees cannot be applied blindly Decided in favour of Assessee.

Summary

Issues:
Classification of Ethanol for CENVAT credit under Central Excise Tariff Act, 1985.

Analysis:
The appellant, engaged in the manufacture of Bulk Drugs and intermediaries, purchased Ethanol (un-denatured) from a supplier. The Revenue argued that Ethanol was non-excisable post-01/03/2005, leading to proceedings against the appellant for availing CENVAT credit wrongly. The Commissioner (Appeals) upheld the demand for CENVAT credit repayment with interest and penalty.

The Judge noted that the duty payment by the supplier is crucial for CENVAT credit eligibility, not the recipient's assessment of duty liability. Referring to a Madras High Court case, it was emphasized that once duty is paid on raw material, credit is admissible. The Judge found the High Court's decision applicable to the present case, stating that the appellant's credit availing was valid.

The Revenue contended that Ethanol was not excisable during the relevant period, challenging the applicability of the High Court's decision. However, the Judge clarified that the duty assessment obligation lies with the supplier, not the recipient availing CENVAT credit. The Judge highlighted that the recipient's role is to ensure duty payment by the supplier, not to assess duty liability.

Considering Rule 9 of the CENVAT Credit Rules and a Board Circular, the Judge emphasized that the recipient's responsibility is to verify duty payment and proper utilization of inputs, not to determine duty liability. The Circular's requirement to recover wrongly taken credit was deemed inapplicable as the recipient is not obligated to assess duty liability.

Conclusively, the Judge set aside the impugned orders, allowing the appeals and disposing of the stay application. The judgment emphasized the supplier's duty payment as the key factor for CENVAT credit eligibility, absolving the recipient from duty liability assessment.