2016 (6) TMI 509 - AT - Central Excise

Allowability of Cenvat credit - Partially Oriented Yarn - used in manufacture of Polyester texturised yarn - Held that - Once the polyester texturised yarn was cleared upto 31.03.2003 on payment of duty at concessional rate subject to the condition that the CENVAT credit of duty paid on POY used in the manufacture of polyester texturised yarn was not availed of, the question of admissibility of credit on POY contained in such polyester texturised yarn (which had been cleared on payment of concessional rate of duty upto 31.03.2003 and in product manufactured out of such polyester texturised yarn simply would not aise. Further once POY was used in the manufacture of polyester texturised yarn, which was cleared on concessional rate of duty subject to the condition that credit on POY was not taken, the question of taking credit on POY contained in certain waste arising in process of manufacture of polyester texturised yarn would also not arise. Nowhere Rule 9A of CENVAT Credit Rules, 2002 contains anything to the contrary. - Decided against the appellant

Summary

Issues:
Admissibility of CENVAT credit on POY used for manufacturing polyester texturised yarn cleared on concessional rate of duty.

Analysis:
The appeal was filed against an Order-in-Appeal upholding an Order-in-Original disallowing CENVAT credit of ?3,45,198/- and imposing a penalty of ?10,000/-. The appellant, engaged in manufacturing polyester texturised yarn, contended that POY should be considered an input despite being used in the manufacture of yarn cleared at a concessional rate of duty. The Revenue argued that taking credit on POY contained in the yarn cleared at a concessional rate was not admissible. The appellant also claimed entitlement to credit on waste arising during manufacturing. The Revenue allowed CENVAT credit of ?4,67,830 but disputed the admissibility of credit on POY. The tribunal noted that once yarn was cleared at a concessional rate without availing POY credit, claiming credit on POY in the yarn or its by-products was not permissible under Rule 9A of the CENVAT Credit Rules, 2002. The Commissioner (Appeals) observed that availing credit on both yarn and POY was unsustainable as per the duty payment conditions.

The tribunal analyzed the records and determined that the appellant's claim for CENVAT credit on POY used in manufacturing yarn cleared at a concessional rate was not permissible. The judgment highlighted that once the yarn was cleared without availing POY credit, claiming credit on POY in the yarn or its by-products was not allowed under Rule 9A. The tribunal emphasized that the duty payment conditions specified that credit on POY could not be taken if yarn was cleared at a concessional rate. Therefore, the tribunal upheld the impugned order, dismissing the appeal.