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2014 (5) TMI 57 - HC - Central ExciseCENVAT Credit - Whether in the facts and circumstances of the case the Hon ble CESTAT has committed an error in concluding that Cenvat Credit on the inputs received is admissible to the respondent on the ground that no action is taken by the Revenue at the supplier s end, especially when there are no provisions of law for such action - Held that - a manufacturer would be entitled to avail the cenvat credit in respect of the inputs used for the manufacture of a final product or in providing taxable service of the excise duty specified in First Schedule to the Excise Tariff Act. Insofar as the respondent is concerned, he had purchased the inputs and utilised the same for manufacture of a final product. Such goods were duty paid. Rule 3 and 4 of the Cenvat Credit Rules, 2004, thus would enable him to avail the cenvat credit. It is a different thing that the supplier of the goods to the respondent paid excise duty on such product under mistaken belief. - Decided against Revenue.
Issues:
1. Whether the CESTAT committed an error in allowing Cenvat Credit on goods exempted from Excise duty? 2. Whether the CESTAT erred in concluding that Cenvat Credit on received inputs is admissible to the respondent? 3. Whether the CESTAT was obligated to apply the ratio of a cited judgment to the present case? Issue 1: The respondent purchased Zinc Dross, a byproduct, on which the supplier paid excise duty. The Supreme Court held in a previous case that no excise duty was leviable on Zinc Dross. The respondent claimed Cenvat Credit on the duty paid by the supplier. The Revenue argued that since no duty was payable on Zinc Dross, the respondent was not entitled to the credit. However, the tribunal, relying on a Supreme Court decision, allowed the Cenvat Credit. The respondent contended that the conditions for availing the credit were met as the goods were utilized in their manufacturing activity. Issue 2: The department argued that since the product was not dutiable, no Cenvat Credit could be availed. The respondent, on the other hand, stated that the department had accepted the assessment of the supplier and that the goods were used as inputs for manufacturing output service. They relied on relevant Supreme Court judgments to support their position. Rule 3 and 4 of the Cenvat Credit Rules were analyzed to determine the entitlement to the credit. Issue 3: The judgment highlighted the importance of following the rules and conditions laid down in the Cenvat Credit Rules. It discussed a similar case before the Supreme Court where the tribunal's decision was upheld. The tribunal's observations emphasized that the duty paid by the supplier should benefit the purchaser, and the department's acceptance of declarations and duties should not be disregarded. The judgment concluded that the respondent was entitled to the Cenvat Credit despite the duty not being payable on the product. In conclusion, the High Court dismissed the tax appeal, upholding the tribunal's decision to allow the respondent to avail Cenvat Credit on the duty paid by the supplier, even though the product itself was not dutiable. The judgment emphasized the importance of adhering to the rules and conditions for claiming such credits, as well as the significance of the department's acceptance of assessments and duties in similar cases.
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