2011 (4) TMI 1225 - AT - Central Excise

Waiver of pre deposit - Availmet of CENVAT Credit - Credit has been denied on the ground is that the appellant was not a manufacturer and not being a manufacturer the Cenvat credit could not have been taken - Held that - this is a case where the procedure has been followed correctly. There is no dispute that duty was paid by utilizing Cenvat credit and paid in cash while claiming the rebate and there is no lacuna in the procedure they were required to follow. The only ground on which credit has been denied is that the appellant was not a manufacturer and not being a manufacturer the Cenvat credit could not have been taken. Further duty has been paid and the duty paid is resulting in a revenue neutral situation. Similarly in case of rebate also there are several decisions which have taken a view that even if the duty is not payable, and the same has been paid, rebate would be admissible - appellants have made out a very strong case in their favour for waiver of pre-deposit - Stay granted.

Summary

Issues:
1. Admissibility of Cenvat credit on duty paid for processed fabrics.
2. Eligibility for rebate on duty paid for processed fabrics.
3. Denial of Cenvat credit and rebate due to non-manufacturer status.
4. Interpretation of Rule 3 of Cenvat Credit Rules.

Analysis:
1. The appellants, engaged in exporting processed fabrics, faced demands for Cenvat credit availed and rebate sanctioned, along with penalties. The denial of Cenvat credit was based on the argument that the main appellant did not engage in processing of fabrics, rendering the credit inadmissible. The Tribunal noted that duty was paid by utilizing Cenvat credit and in cash while claiming rebate, following correct procedures. Despite the non-manufacturer status of the appellant, the duty paid resulted in a revenue-neutral situation, leading the Tribunal to find in favor of the appellants for waiver of pre-deposit.

2. The appellants claimed rebate on duty paid for processed fabrics, which was contested due to their non-manufacturer status. The advocate for the appellants cited Tribunal and Supreme Court decisions supporting the admissibility of rebate once duty has been paid, regardless of the duty being payable. The advocate also referenced the C.B.E. & C. Manual, highlighting provisions for rebate in cases of processing not amounting to manufacture. The Tribunal acknowledged these arguments and granted a stay against recovery during the appeal process.

3. The denial of Cenvat credit and rebate was primarily based on the appellants not being classified as manufacturers. The learned Advocate argued that once duty has been paid, rebate should be admissible, emphasizing a revenue-neutral situation. In contrast, the learned DR contended that Rule 3 of Cenvat Credit Rules stipulates credit admissibility only for manufacturers. The Tribunal, after considering both sides' submissions, found in favor of the appellants, emphasizing the correct procedural adherence and the revenue-neutral impact of duty payment.

4. The interpretation of Rule 3 of Cenvat Credit Rules played a crucial role in the judgment. The rule specifies that credit is admissible only when the assessee is a manufacturer. The learned DR aligned with the Commissioner (Appeals) on this interpretation. However, the Tribunal, after thorough consideration, ruled in favor of the appellants, emphasizing the correctness of the followed procedures and the revenue-neutral aspect of the duty payment, leading to the waiver of pre-deposit and a stay against recovery during the appeal process.