2015 (10) TMI 1263 - AT - Central Excise

Denial of CENVAT Credit - whether the appellants are entitled to credit on the duty paid on bright bars used as inputs - Held that - The Tribunal in the precedent case held that the appellants therein are entitled to avail credit on the excise duty paid on the inputs. The Tribunal in that case has taken the view that as appellants have discharged the duty liability on their final product after availing credit, there is no justification to deny the same. If the supplier who supplied the goods is allowed credit even though the finished product is not an excisable commodity I cannot find any reason to deny the credit to the appellants who have received the goods by paying the duty. In CCE, Hyderabad vs. Deepthi Formulations Ltd 2013 (3) TMI 547 - CESTAT BANGALORE the Tribunal has taken the view that when the input is received in the factory and used in or in relation to manufacture of final product and payment of duty is evidenced by the invoices the credit cannot be denied. The question whether the input is a result of a process of manufacture is irrelevant. What is relevant is whether duty has been paid or not on such input - impugned order is set aside - Decided in favour of assessee.

Summary

Issues involved: Challenge to disallowance of Cenvat credit on bright bars as non-excisable commodity.

Analysis:

1. Issue of Cenvat credit on bright bars: The appeal challenged the disallowance of Cenvat credit on bright bars by the impugned order, contending that these bars were used as inputs in the manufacturing of vehicle parts. The Department argued that no duty was payable on bright bars as they were not considered excisable goods due to the absence of a manufacturing process in their transformation from round bars. However, it was undisputed that duty was paid on these bars and they were indeed used in the production process. The main contention was whether the appellants were entitled to avail credit on duty paid for these bright bars.

2. Legal precedents and conflicting interpretations: The judgment referred to the Supreme Court decision in the case of CCE vs. Vee Kayan Industries, where it was held that the process of transforming round bars into bright bars did not amount to manufacture. However, a subsequent trade notice clarified that manufacturing bright bars from wire rods did constitute manufacture. This conflicting interpretation led to confusion within the Department, resulting in protective demands being issued. The delay in adjudicating the matter further highlighted the uncertainty regarding the excisability of bright bars.

3. Entitlement to credit and supplier's duty payment: The Tribunal's previous ruling in a similar case involving Joneja Bright Steel (P) Ltd established that if the supplier had paid duty on the goods supplied, the recipients were entitled to avail credit on the duty paid. This principle was upheld in various judgments, emphasizing that as long as duty was paid on the inputs and valid documents were in place, the credit could not be denied based on the excisability of the final product. The focus remained on the payment of duty on inputs rather than the manufacturing process involved.

4. Decision and conclusion: Considering the above arguments and legal precedents, the impugned order disallowing the Cenvat credit on bright bars was set aside. The appeal was allowed, granting the appellants relief and establishing their entitlement to the credit based on the duty paid on the inputs. The judgment highlighted the importance of duty payment on inputs and valid documentation for availing credit, irrespective of the excisability of the final product.