2018 (7) TMI 1934 - AT - Central Excise

CENVAT Credit - inputs received from their sister concern on stock transfer basis - denial of credit on the ground that the assessee has not purchased inputs - period April, 2000 to June, 2001 and October, 2001 to February, 2003 - HELD THAT - There is no dispute that the inputs were received by the assessee in their factory. The duty paid nature of these inputs and documentary proof evidencing payment of duty are also not in dispute. Receipt of inputs by way of purchase is not a necessary condition for availment of credit - Credit cannot be denied - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Eligibility of the assessee to avail cenvat credit on inputs received from sister concern.
2. Interpretation of relevant CENVAT Credit Rules regarding purchase vs. procurement of inputs.
3. Adjudicating authority's observation on the necessity of purchase for credit availment.

Analysis:
1. The case involved a dispute over the eligibility of the assessee to avail cenvat credit on duty paid inputs received from their sister concern on a stock transfer basis. The Revenue contended that since the assessee did not purchase the inputs, they were not entitled to cenvat credit. However, it was established that the inputs were received by the assessee in their factory, and the duty paid nature of these inputs was not in dispute. The Tribunal noted that the receipt of inputs by purchase was not a mandatory condition for availing credit, leading to the dismissal of the Revenue's appeal.

2. The Revenue argued that as per Rule 57AE (3) of Central Excise Rules, 1944/Rule 7(4) of Cenvat Credit Rules, 2002, the manufacturer of the final product must purchase the inputs to avail cenvat credit. They cited a clarification by CBE&C emphasizing that the admissibility of cenvat credit should be evident from the manufacturer's records, including payments made for inputs. The Tribunal acknowledged the replacement of "purchased" with "procured" in Rule 7(4) effective from March 1, 2003, but noted that the demand in question pertained to a period before this amendment.

3. The adjudicating authority's observation that the receipt of inputs through purchase was not a necessary condition for credit availment was challenged by the Revenue. They argued that this premise contradicted the prevailing CENVAT Credit Rules. However, the Tribunal found that the records showed the receipt of duty paid inputs by the assessee, and the lack of a purchase transaction did not bar them from availing cenvat credit. Consequently, the Tribunal upheld the impugned order and dismissed the Revenue's appeal.

This detailed analysis of the judgment highlights the key issues of eligibility for cenvat credit, the interpretation of relevant rules, and the adjudicating authority's observations, providing a comprehensive understanding of the case and its resolution by the Tribunal.