2016 (3) TMI 200 - AT - Central Excise

Cenvat credit for discharging duty on the inputs procured without payment of duty - revenue contended that, the duty on the fibre procured without payment of duty, but not used for the intended purpose, cannot be discharged for availing cenvat credit and also such duty discharged cannot be further availed as a credit by the appellant. - Held that - Regarding the analysis of Rule 3 of Cenvat Credit Rules by Lower Authorities, we find reliance has been placed by the Revenue on Rule 3(4)(b), which states that an amount equal to cenvat credit taken on inputs, such inputs are removed as such or after being partially processed. As admitted by the lower authorities, in the present case, first of all, there is no clearance of inputs as such and hence the above said provisions have no application. The admitted fact is that the inputs have been procured without payment of duty and on failure of use of the same for the intended purpose, duty has to be discharged. Here, the duty has to be discharged by the appellant as a recipient of goods. In case if they procured the said inputs on payment of duty (without availing the exemption) then they would have discharged the duty and availed credit of the same based on duty paid document of the seller. Since the payment of duty on the inputs has to be discharged by appellant in the present case, in the absence of any specific bar, the appellants have utilized the cenvat credit available in the records for this purpose. We find no infirmity in such payment. The inputs having been used for the intended purpose of manufacture and clearance of dutiable final products, the credit of such payment is again available to the appellants. In view of the above analysis and also following the precedent decisions of the Tribunal, we set aside the impugned order and allow the appeals in favour of assessee

Summary

Issues:
1. Discharge of duty on fibre procured without payment of duty but not used for intended purpose.
2. Utilization of cenvat credit for discharging duty on inputs.
3. Availability of credit for duty paid on inputs for discharging duty on final products.

Analysis:
The case involved three appeals against the order of the Commissioner (Appeals) related to the discharge of duty on fibre procured without payment but not used for the intended purpose. The appellants, engaged in manufacturing M.M. Blended yarn, were clearing products for domestic and export markets. They used cenvat credit to discharge duty on fibre not utilized for the intended purpose. The department objected to this practice, leading to penalties and recovery orders. The Commissioner (Appeals) upheld the original order, prompting the appellants to file appeals.

The main issue was whether the appellants could use cenvat credit to discharge duty on inputs procured without payment but not used for the intended purpose. The appellants argued that since the raw materials were used for dutiable final products, the duty paid on the fibre was eligible for credit. They cited a Tribunal decision supporting their position. The Revenue contended that duty on such inputs cannot be discharged using cenvat credit, referring to Rule 3 of Cenvat Credit Rules.

After examining the case records, the Tribunal found that the key question was the permissibility of using cenvat credit to discharge duty on inputs not used for the intended purpose. Relying on a previous decision, the Tribunal held that such payments could be utilized as credit for discharging duty on final products. The Tribunal noted that Rule 3(4)(b) did not apply in this case as the inputs were not cleared as such. The duty had to be discharged by the appellants, who used cenvat credit for this purpose. As the inputs were used for manufacturing dutiable final products, the credit for the duty paid was available to the appellants.

In conclusion, the Tribunal set aside the impugned order and allowed the appeals, emphasizing that the appellants were entitled to utilize cenvat credit for discharging duty on inputs procured without payment but not used for the intended purpose. The decision was based on precedent rulings and the specific circumstances of the case.