2017 (6) TMI 200 - AT - Central Excise

CENVAT credit - inputs - case of the department is that since inputs they used within the factory on loan licence basis has been sold to principle, ownership stands transferred therefore appellant is not entitle for the Cenvat credit in respect of such inputs - Held that - for the purpose of allowing credit criteria laid down in Cenvat provisions is that input should be duty paid, should be used in the manufacture of the final product and final product is cleared on payment of duty - In the present case this criteria stand fulfilled - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of Cenvat credit on inputs used in manufacturing medicament on loan license basis for principles due to ownership transfer upon sale to principles.

Analysis:
The appellant, engaged in medicine manufacturing, also manufactures medicament on loan license for various principles. The dispute arose when the department disallowed Cenvat credit on inputs used for manufacturing medicament for the principles, claiming that ownership transferred upon sale to principles, making the appellant ineligible for the credit. The Commissioner(Appeals) concurred with the adjudicating authority's decision, leading the appellant to appeal before the Tribunal.

The appellant's counsel argued that the ownership transfer is not relevant for availing Cenvat credit as long as the inputs were used in manufacturing dutiable final products, which were cleared after paying duty. The counsel cited judgments like Polyplastics Industries (I) Pvt Ltd Vs. CCE&ST [2016(332) ELT 895(Tri.-Del.)] to support this argument. On the other hand, the Revenue contended that since the appellant collected both the principle amount and Cenvat credit amount by raising invoices, the credit should not be allowed.

After considering both sides' submissions and examining the records, the Tribunal observed that the sole reason for denying credit was the transfer of ownership upon issuing commercial sale invoices for the inputs used. However, the Tribunal disagreed with the Revenue's argument, emphasizing that the key criteria for allowing credit under Cenvat provisions are that the input should be duty paid, used in manufacturing the final product, and the final product should be cleared after paying duty. In this case, despite issuing commercial invoices, the inputs remained in the appellant's factory and were used in manufacturing the final product without being cleared to the principles. Therefore, the Tribunal concluded that the appellant was legally entitled to the input credit. The judgments cited by the appellant's counsel further supported this decision. As a result, the Tribunal set aside the impugned orders and allowed the appeals, disposing of the cross objections filed by the Revenue.