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2014 (4) TMI 418 - AT - Central ExciseCENVAT Credit - Receipt of free materials - Held that - There is nothing in this Rule which says that the inputs have to be received by the way of purchase. Rule 57AE(3), which has been invoked by the Revenue mentions that the manufacturer of final product has to maintain proper records for receipt, disposal, consumption and inventory of the inputs and capital goods in which the relevant information regarding the value, duty paid, the person from whom the inputs or capital goods has been purchased has been recorded and the burden of proof regarding the admissibility of Cenvat credit shall lie on the manufacturer taking such credit. This provision is with regard to the maintenance of the records of receipt, disposal and consumption of the inputs and capital goods purchased, in respect of which Cenvat credit has been taken from the use of the word purchase , in this Rule, it cannot be concluded that the inputs or capital goods have to be acquired by a manufacture only by purchase, for taking the Cenvat credit. There is no such condition in Rule 57AB of Central Excise Rules, 1944 and corresponding provisions of Cenvat Credit Rules 2001/2002. Therefore I do not find any infirmity in the impugned order - Rule 57AE(3) is a procedural rule using the expression purchased , whereas in the substantive provision, there is no such stipulation regarding purchase for the grant of input duty credit - Following decision of Exide Industries Vs. CCE, Haldia 2008 (1) TMI 190 - CESTAT, KOLKATA - Decided against Revenue.
Issues:
1. Entitlement to CENVAT credit on free received materials. 2. Interpretation of Rule 57AE(3) of the Central Excise Rules, 1944 regarding the requirement of purchase for availing CENVAT credit. Analysis: 1. The case involved the question of whether the respondents, engaged in manufacturing excisable engineering goods, were entitled to CENVAT credit for duty paid on free materials received from their customers. The Revenue contended that since the materials were not purchased by the respondents, they should not be eligible for the credit. The original adjudicating authority upheld the Revenue's objection, but the Commissioner (Appeals) overturned this decision, stating that there was no requirement under the CENVAT credit rules for the materials to be purchased by the assessee. The Tribunal referred to previous cases, including CCE, Raipur Vs. Vishnu Chemicals Pvt. Ltd., to support the position that there is no explicit condition of purchase for availing CENVAT credit. The Tribunal emphasized the need for proper record-keeping but clarified that the inputs need not necessarily be acquired through purchase for credit eligibility. 2. The crux of the issue lay in the interpretation of Rule 57AE(3) of the Central Excise Rules, 1944, which the Revenue relied on to argue that the inputs must be 'purchased' for CENVAT credit. However, the Tribunal, citing the case of Exide Industries Vs. CCE, Haldia, highlighted that Rule 57AE(3) is a procedural rule using the term 'purchased,' whereas the substantive provisions do not mandate purchase for granting input duty credit. The Tribunal's analysis focused on the absence of any explicit requirement of purchase in Rule 57AB of the Central Excise Rules and the corresponding provisions of the CENVAT Credit Rules 2001/2002. Consequently, the Tribunal dismissed the Revenue's appeal, affirming that the absence of a purchase condition for availing CENVAT credit was consistent with the relevant legal framework. In conclusion, the judgment clarified that the entitlement to CENVAT credit on free received materials does not hinge on the requirement of purchase, as there is no explicit stipulation mandating purchase for credit eligibility under the relevant rules. The decision underscored the importance of maintaining proper records but emphasized that the inputs need not be acquired through purchase for manufacturers to claim CENVAT credit. The Tribunal's analysis of Rule 57AE(3) and the precedents cited established a clear legal basis for rejecting the Revenue's appeal in this case.
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