2015 (1) TMI 756 - HC - Central Excise

Adjustment of CENVAT Credit - process of packing of bought out items and manufactured items undertaken by the appellant to make CJK which was not amount to manufacture - Held that - Tribunal while adjudicating the issue against the appellant came to the conclusion that there was no excise duty payable on CJK and as such, the assessee had claimed, wrong Cenvat Credit in respect thereof. The Tribunal further noticed that the present case related to recovery of wrongly utilised Cenvat Credit amounting to ₹ 20,50,911/- on the bought out items for payment of duty on CJK and it was not a case of demand of excise duty. No illegality or perversity could be shown by the learned counsel for the appellant in the approach of the Tribunal. Furthermore, under Rule 6 of the Rules, the assessee is not entitled to claim Cenvat Credit on such quantity of input used in the manufacture of exempted goods. However, under sub-rule (2) thereof, the assessee can bifurcate the claim between manufacture of dutiable goods and exempted goods, where the manufacturer is required to maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take Cenvat Credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. - no question of law arises for consideration - Decided against assessee.

Summary

Issues:
- Appeal under Section 35G of the Central Excise Act, 1944 against the order passed by the Tribunal
- Denial of Cenvat Credit on bought-out items in the manufacture of Cable Jointing Kit (CJK)
- Dispute over adjustment of Cenvat Credit on bought-out items supplied with CJK
- Interpretation of rules regarding Cenvat Credit on inputs used in the manufacture of exempted goods
- Applicability of previous judgments on similar issues

Detailed Analysis:

1. The appellant filed an appeal under Section 35G of the Central Excise Act, 1944 against the order passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi. The appellant contested the denial of Cenvat Credit on bought-out items used in the manufacture of Cable Jointing Kit (CJK).

2. The dispute centered around the adjustment of Cenvat Credit on bought-out items supplied with the CJK. The Additional Commissioner of Central Excise had directed the denial of Cenvat Credit on bought-out items under Rule 12 of Cenvat Credit Rules, 2002. The Commissioner (Appeals) upheld the disallowance but allowed adjustment of Cenvat Credit from the central excise duty paid on the CJK.

3. The appellant argued that they should be eligible for Modvat credit on bought-out items as long as they are discharging excise duty on the consolidated value of manufactured and bought-out items. The appellant cited judgments and the decision in Sidhartha Tubes Limited v. Collector of Central Excise to support their claim.

4. The High Court, after hearing the arguments, found no merit in the appeal. The Tribunal had concluded that no excise duty was payable on CJK, leading to the disallowance of Cenvat Credit claimed by the appellant. The Court emphasized that under Rule 6 of the Rules, the assessee cannot claim Cenvat Credit on inputs used in the manufacture of exempted goods.

5. The Court addressed the reliance on the Sidhartha Tubes Limited case, clarifying that the issue in that case was different from the present matter. The Court highlighted that the adjustment of Cenvat Credit was not the subject matter before the Supreme Court in the Sidhartha Tubes case, thus not supporting the appellant's argument.

6. Ultimately, the Court concluded that no question of law arose for consideration based on the facts presented. The appeal was dismissed, affirming the Tribunal's decision on the denial of Cenvat Credit on bought-out items used in the manufacture of CJK.

This detailed analysis outlines the key issues raised in the appeal, the arguments presented by the appellant, and the Court's reasoning leading to the dismissal of the appeal.