2009 (1) TMI 155 - HC - Central Excise

Credit denied on ground that the supplier of inputs did not indulge in any manufacturing activity in view of Circular dated 2.3.05 held that goods were manufactured prior to 2-3-2005 and the circular dated 2-3-2005 was not to apply in any case - supplier of inputs paid duty which is not in dispute. The supplier of inputs is not a party to the present proceedings - held that the appellant-assessee as consumer cannot get classification changed under which goods were cleared by the manufacturer credit allowed

Summary

Issues:
1. Admissibility of CENVAT credit on inputs not amounting to manufacture.
2. Interpretation of circular dated 2-3-2005 regarding manufacturing activities.
3. Validity of disallowing CENVAT credit by revenue.
4. Supplier's liability in CENVAT credit disputes.
5. Applicability of Supreme Court judgment in similar cases.

Analysis:
1. The case involved a dispute over the admissibility of CENVAT credit on inputs where the supplier's activities did not amount to manufacturing. The revenue challenged the order disallowing the credit, raising a substantial question of law for determination by the Court.

2. The respondent, engaged in manufacturing excise goods, claimed CENVAT credit based on invoices from a supplier. The revenue alleged that the supplier's activities did not constitute manufacturing as per a circular dated 2-3-2005. A show cause notice was issued, leading to the disallowance of credit, recovery demands, interest, and penalties by the Additional Commissioner of Central Excise.

3. The Commissioner of Central Excise upheld the disallowance in appeal, but the Tribunal set aside the order, citing a Supreme Court judgment. The Tribunal emphasized that the supplier had paid duty, the inputs were manufactured before the circular's applicability, and the revenue could not deny credit based on the supplier's activities.

4. The revenue contended that the supplier did not engage in manufacturing activities, questioning the validity of the credit claimed by the assessee based on the supplier's invoices. However, the Court held that the goods supplied were correctly classified, and the duty payment was evident from the invoices, supporting the assessee's claim for credit.

5. The Court dismissed the revenue's appeal, stating that the Tribunal's decision was legally sound, and no question of law arose. The judgment highlighted the applicability of a Supreme Court ruling, emphasizing that the assessee could not change the classification of goods cleared by the manufacturer, especially when duty had been paid on the inputs.

In conclusion, the Court upheld the Tribunal's decision, emphasizing the importance of duty payment on inputs and the timing of manufacturing processes in determining the admissibility of CENVAT credit. The judgment provided clarity on the supplier's liability, circular interpretation, and the relevance of previous legal precedents in resolving such disputes.