2016 (3) TMI 801 - AT - Central Excise

Cenvat Credit allowability on the inputs used in the manufacture of exempted goods or non dutiable goods - Held that - We find that the facts of the case is not much in dispute inasmuch as the respondent have availed the credit on inputs which was used in the process of printing and lamination processes of the Polyester/BOPP Film and this activity was held to be non manufacture. Cenvat Credit on the inputs cannot be denied as per the provisions of Rule 16 of the Central Excise Rules, 2002 as from the plain reading of the above Rule it can be seen that under this provision Cenvat Credit is allowed on the duty paid material treating it as inputs for the purpose of various processes and after processing if the activity is not amount to manufacture the assessee is required to clear such processed goods on payment of duty which is equal to Cenvat Credit and if the activity is amount to manufacture then excise duty is required to be paid on transaction value. As per this clear provision, even if, activity does not amount to manufacture the credit is permissible. As per the above discussion, we are of the considered view that Cenvat Credit on the inputs used in the process which does not amount to manufacture, is admissible. - Decided in favour of assessee

Summary

Issues Involved:
- Whether Cenvat Credit is allowed on inputs used in the manufacture of exempted or non-dutiable goods.

Analysis:
The appeal in this case was against the Order-in-Appeal passed by the Commissioner Central Excise & Customs (Appeals) Aurangabad, where the issue revolved around the admissibility of Cenvat Credit on inputs used in the manufacturing process of exempted or non-dutiable goods. The respondent procured duty paid Polyester/BOPP Film and conducted printing and lamination processes on the film before clearing it to customers. The department denied Cenvat Credit based on a Supreme Court judgment stating that laminating/metalizing of duty paid film does not constitute manufacturing for excisable goods. The Commissioner (Appeals) allowed the credit, leading to the Revenue's appeal.

The Revenue argued that Cenvat Credit can only be allowed if inputs are used in the manufacture of excisable goods, emphasizing that in this case, the inputs were used for non-manufacturing activities. The respondent contended that since excise duty was paid on the laminated films, credit should be granted, supported by previous judgments. The Tribunal noted that the respondent availed credit for printing and lamination processes that were deemed non-manufacturing activities. The Commissioner allowed the credit based on various reasons, including previous tribunal decisions and the revenue-neutral nature of the credit amount. Additionally, Rule 16 of the Central Excise Rules, 2002 was cited to support the admissibility of Cenvat Credit on duty paid material used in processes not amounting to manufacture.

The Tribunal upheld the impugned order, stating that Cenvat Credit on inputs used in processes not amounting to manufacture is permissible under Rule 16. The judgment emphasized that even if the activity does not constitute manufacturing, the credit is admissible, as per the provision allowing credit on duty paid material treated as inputs. Consequently, the Revenue's appeal was dismissed, and the cross-objection was also disposed of.