2015 (11) TMI 359 - AT - Central Excise

CENVAT Credit - suo moto re-credit of Cenvat credit which was reversed at the instance of Audit Team on GTA service - Held that - As regard the admissibility of the Cenvat credit of GTA and in respect of invisible loss, as submitted by Ld. Consultant that the entire transportation was used for export of goods and invisible loss is during the process at the job worker s end and in both the cases Cenvat credit should be allowed. I find that the lower authority has decided the issue merely on the point of suo moto credit and fact that the GTA in respect of credit was taken is whether for export or otherwise has not been verified. I am of the considered view that if Cenvat credit in respect of service tax paid towards GTA and said GTA used for export of goods, the place of removal stands extended up to the port of export and therefore transportation from factory to port of export is clearly covered by the term up to the place of removal and if it is so, appellant is entitle for Cenvat credit. Cenvat Credit on invisible loss - Held that - invisible loss unless and until it is proved that the goods were diverted so far it is invisible loss, Cenvat credit cannot be denied. Invisible loss is process loss on which Cenvat credit is admissible in terms of para 3.7 of Chapter 5 of Supplementary instruction of Central Excise manual The Cenvat credit admissible in respect of amount of input contained in waste, refused or by product. Similarly, Cenvat is not to be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. - provisions the quantity of input which shown as invisible loss has been used in or in relation to the manufacture of final product though the part of manufacturing has taken place at the job workers end. Therefore in view of the above clear instruction, if at all it is found that input used has been lost in the manufacturing process, either with the appellant or with the job worker of the appellant, credit should be allowed. However adjudicating authority has to verify quantum of input lost in the process. - since both the lower authority have not verified properly the admissibility of the Cenvat credit on the factual aspect, matter needs remand to the original authority - Decided in favour of assessee.

Summary

Issues:
1. Admissibility of Cenvat credit for outward transportation.
2. Validity of suo moto re-credit of Cenvat credit.
3. Admissibility of Cenvat credit for invisible loss during job work process.

Analysis:

Issue 1: Admissibility of Cenvat credit for outward transportation
The appellant availed Cenvat credit for outward transportation, which was later disputed during an audit. The appellant re-credited the amount in their account but faced a show cause notice alleging that they should have filed a refund claim instead. The Commissioner upheld the demand and penalty, stating that suo moto credit is not allowed. However, the appellant argued that outward transport for export should be admissible, extending the place of removal up to the port of export. The Tribunal found that if transportation is for export, credit should be allowed, and the lower authority failed to verify this crucial aspect. The matter was remanded for a fresh adjudication to consider the admissibility of the credit properly.

Issue 2: Validity of suo moto re-credit of Cenvat credit
The appellant contended that suo moto re-credit of Cenvat credit, as opposed to a refund claim under Section 11B, was justified. Citing a Tribunal judgment and a Madras High Court decision, the appellant argued that no refund claim was necessary for re-credited Cenvat. The Tribunal agreed that the re-credit was in order and could not be denied solely based on being suo moto. The lower authorities failed to consider this aspect adequately, leading to a remand for a fresh adjudication.

Issue 3: Admissibility of Cenvat credit for invisible loss during job work process
Regarding the invisible loss of input during the job work process, the appellant argued that unless diversion of goods occurred, Cenvat credit should not be denied. The Tribunal referred to the Central Excise manual, stating that credit is admissible for inputs lost in the manufacturing process. The lower authorities did not properly verify the admissibility of the credit for invisible loss. Therefore, the matter was remanded for a thorough re-examination to determine the quantum of input lost during the process.

In conclusion, the Tribunal allowed the appeal by remanding the case to the original authority for a fresh adjudication considering all the relevant aspects of admissibility of Cenvat credit for outward transportation, suo moto re-credit, and invisible loss during the job work process. The judgment emphasized the need for a detailed verification of facts before making a decision on the admissibility of Cenvat credit in each scenario.