2016 (4) TMI 775 - AT - Central Excise

Demand - Availed Cenvat credit on bought out plastic bottles - Department rejected the credit that no manufacturing activity has been carried out and are resold as such - Held that - the transaction of purchase of goods, availment of Cenvat credit thereon and payment of duty on the said goods on its removal is squarely coverd under the provisions of Rule 16 of the Central Excise Rules, 2002. More over in the appellant s own case, for a different unit, on the identical issue this Tribunal had upheld the order of the Commissioner (Appeals) wherein the Ld. Commissioner (Appeals) had dropped the demand. Considering the above decision, the appellant has correctly availed the Cenvat Credit on the bought out plastic bottles. Therefore, the demand is set aside. - Decided in favour of appellant

Summary

Issues Involved:
The issue involves the appellant engaged in manufacturing plastic products availing Cenvat Credit on purchased goods, facing disallowance of credit by the Commissioner (Appeals) due to lack of manufacturing activity, leading to appeals by both the appellant and the Revenue.

Detailed Analysis:

1. Manufacturing Activity and Cenvat Credit:
The appellant, a manufacturer of plastic goods, availed Cenvat Credit on purchased plastic bottles, caps, and plugs, along with goods manufactured in-house. The dispute arose when the Commissioner (Appeals) disallowed the credit, alleging no manufacturing activity took place for the purchased goods. The appellant argued for credit entitlement under Rule 16 of the Central Excise Rules, 2002, citing a previous favorable decision in a similar case.

2. Appellant's Submission:
The appellant's counsel contended that despite no manufacturing activity on the purchased goods within the factory premises, they were eligible for credit as per Rule 16. Reference was made to a previous case where the Tribunal upheld the Commissioner (Appeals) decision in favor of credit allowance, emphasizing the consistency in treatment for similar issues.

3. Revenue's Argument:
On the contrary, the Revenue representative reiterated the position that the appellant traded purchased goods without engaging in manufacturing activities, thus challenging the eligibility for Cenvat Credit on such transactions.

4. Judgment and Rule Interpretation:
The Tribunal, after considering both arguments, analyzed Rule 16 of the Central Excise Rules, 2002. The rule allows Cenvat Credit on purchased goods brought to the factory for re-making, conditioning, or other purposes, subject to payment of duty on clearance. The Tribunal emphasized the requirement to pay duty equal to the availed credit if the activity does not amount to manufacturing. In this case, since the appellant paid duty on clearance, the Tribunal deemed the credit availed on purchased goods permissible under Rule 16.

5. Decision and Disposition:
Based on the interpretation of Rule 16 and the precedent in the appellant's favor from a previous case, the Tribunal set aside the demand, allowing the appeals of the appellant. Consequently, the Revenue's appeals against the dropped penalty on the company's director were dismissed as the company's appeals were allowed. The Tribunal's decision upheld the appellant's entitlement to Cenvat Credit on purchased plastic goods, emphasizing compliance with Rule 16 provisions.

This detailed analysis outlines the key legal arguments, rule interpretation, and the Tribunal's decision, providing a comprehensive understanding of the judgment's implications and reasoning.