2017 (5) TMI 1293 - AT - Central Excise

CENVAT credit - revenue has taken a view that the removal of inputs as such was to be treated as trading activity - N/N. 03/2011-CE (NT) dated 01.03.2011 - Held that - the learned Commissioner has nowere established that the value on which amount under Rule 6 (3) was being demanded, was the value of activity other than the activity of clearance of inputs as such after reversal of Cenvat credit as provided under Sub-rule 5 of Rule 3 of CCR, 2004 - removal of input as such by manufacturer after reversal of Cenvat credit cannot be treated as trading activity - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Allegation of trading activity in clearance of inputs
- Demand under Rule 6 (3) of Cenvat Credit Rules, 2004
- Applicability of Notification No.03/2011-CE (NT) dated 01.03.2011
- Contention of the appellant regarding reversal of Cenvat credit
- Interpretation of Rule 3(4) and Sub-rule 5 of Cenvat Credit Rules, 2004

Analysis:
The appeal was directed against an Order-in-Original passed by the Commissioner of Central Excise & Customs, Ghaziabad, alleging trading activity by the appellants in clearing inputs. The revenue demanded an amount under Rule 6 (3) of Cenvat Credit Rules, 2004, for the period from 2007-08 to 2010-11. The appellants argued that they were clearing inputs after reversing Cenvat credit, as reported in their returns, and thus, it did not constitute trading activity. The value considered for the demand was that of inputs cleared after reversing Cenvat credit, falling under Sub-rule 5 of Rule 3 of Cenvat Credit Rules, 2004.

The Tribunal found that the Commissioner failed to establish that the value considered for the demand was for an activity other than the clearance of inputs after Cenvat credit reversal, as per Sub-rule 5 of Rule 3. Citing a precedent ruling in a similar case, the Tribunal concluded that clearing inputs after reversing Cenvat credit cannot be deemed as trading activity. Therefore, the appeal was allowed, and the appellant was granted consequential relief.

In the absence of evidence showing the value considered was unrelated to the clearance of inputs after Cenvat credit reversal, the Tribunal upheld the appellant's contention that their actions were in accordance with the Cenvat Credit Rules. The Tribunal's decision was based on a previous ruling establishing that such clearances do not amount to trading activity, thus providing relief to the appellant in this case.