2016 (7) TMI 1106 - AT - Central Excise

Cenvat Credit on returned goods - activity of bringing the cement from Mattampally unit to the appellant unit - claim denied on the goods as not inputs but finished goods - Held that - Manufacturer can take credit of duty paid on the goods by treating them as inputs. It is seen from the above rule that if goods are brought for any other reason also, the manufacturer is entitled to take credit as if the goods are inputs. The learned counsel for appellant submitted that the appellant unit had railway sliding tracks and this is the reason that the cement was brought from Mattampally unit to the appellant unit and marked with ISI mark and dispatched to the buyer. The contention of Revenue is that the goods being cement/finished product, the credit is not admissible. Rule 16 does not require remanufacturing of goods or that goods should undergo any process after being brought to the factory and before being removed. The goods if brought for being re-made, refined, reconditioned or for any other reason , the rule would apply. Thus, do not find that there is contravention of any of the provisions of Cenvat Credit Rule, 2004. The activity falls within the ambit of Rule 16 of Central Excise Rules, 2002. On such score, the demand of interest and imposition of penalty is unsustainable - Decided in favour of assessee.

Issues involved:
1. Availment of Cenvat credit on cement brought from one unit to another.
2. Interpretation of Rule 16 of Central Excise Rules, 2002.
3. Admissibility of Cenvat credit on goods brought for any reason.
4. Procedural infraction and imposition of interest and penalty.

Analysis:

Issue 1: Availment of Cenvat credit on cement brought from one unit to another
The appellants, engaged in cement manufacturing, brought 43 grade cement from one plant to another and marked it with ISI mark, availing Cenvat credit on the duty paid. The department contended that as the cement was moved between units, it should be considered finished goods, not inputs. A show cause notice was issued, demanding recovery of Cenvat credit availed, along with interest and penalty.

Issue 2: Interpretation of Rule 16 of Central Excise Rules, 2002
The Commissioner (Appeals) analyzed Rule 16, which allows duty paid goods to be brought into a factory for various reasons, enabling the manufacturer to take Cenvat credit as if the goods are inputs. The Commissioner found the situation to be revenue neutral, as the credit availed was utilized towards duty payment, concluding that the dispute was about Cenvat credit availment, not revenue benefit.

Issue 3: Admissibility of Cenvat credit on goods brought for any reason
The Commissioner held that while the situation was revenue neutral, there was a procedural infraction by the appellants in violating Cenvat Credit Rules, leading to the imposition of interest and penalty. The appellants argued that they were within Rule 16's provisions to receive duty paid goods for any reason and utilize the credit, citing relevant case laws to support their position.

Issue 4: Procedural infraction and imposition of interest and penalty
The learned counsel for the appellants argued against the procedural infraction, emphasizing compliance with Rule 16 and entitlement to utilize duty paid credit. The department reiterated that the goods brought were finished products, not inputs, leading to a violation of Cenvat Credit Rules and justifying the interest and penalty imposed.

In the final judgment, the Tribunal examined Rule 16 and concluded that the manufacturer could take credit of duty paid goods as inputs, even if brought for any reason, as long as they were not remanufactured. The activity of bringing cement from one unit to another fell within the ambit of Rule 16, making the demand for interest and penalty unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential reliefs.

This detailed analysis of the judgment highlights the key legal issues, interpretations of relevant rules, arguments presented by both parties, and the Tribunal's final decision, ensuring a comprehensive understanding of the case.

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