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2017 (6) TMI 527 - AT - Central ExciseCENVAT Credit - N/N. 3/2001-CE, dt.01.03.2001, and 06/2002-CE, dt.01.03.2002 - denial of credit on the ground that Lidoncaine USP/HCL is Anaesthetics and exempted from duty under said notification - Held that - from the very beginning, the Appellants have been claiming that the product is non-Anaesthetics and in support, they have placed end-use certificate from their customer. Also, I find from the records that the Appellant tried to make out a point before the Adjudicating Authority in support of their case that necessary sample of the product was required to be drawn for testing so as to ascertain the use of their product as Anaesthetics or otherwise, which was not considered. In these circumstances, the Appellant discharged duty and cleared their product for home consumption after availing CENVAT Credit on the inputs that were used in the manufacture of such product which would have been otherwise cleared by them as exempted, if the test result would have shown the product as Anaesthetics. The issue is covered by the judgment of the Tribunal in the case of CCE Pune-III Vs Ajinkya Enterprises 2012 (7) TMI 141 - BOMBAY HIGH COURT , where it was held that once the duty on the final product has been accepted by the Department, the CENVAT Credit availed need not be reversed even if the activity does not amount to manufacture subsequently. Appeal allowed - decided in favor of appellant.
Issues:
- Admissibility of CENVAT Credit on inputs used in the manufacture of excisable goods - Classification of Lidoncaine USP/HCL as Anaesthetics - Applicability of Rule 6(1) of CENVAT Credit Rules, 2004 - Exported goods under bond and home consumption clearances - Interpretation of relevant case laws in support of respective contentions Analysis: 1. Admissibility of CENVAT Credit on inputs used in the manufacture of excisable goods: The appeal challenged the recovery of CENVAT Credit amounting to ?15,59,256/- on the inputs used in manufacturing Lidoncaine USP/HCL, which was alleged to be exempted from duty under specific notifications. The Appellant contended that the product was multi-functional and not solely used as Anaesthetics. The Tribunal noted that the Appellant had cleared the product for home consumption after availing CENVAT Credit. The judgment referred to the case law of CCE Pune-III Vs Ajinkya Enterprises, emphasizing that once duty on the final product is accepted by the Department, CENVAT Credit need not be reversed even if the subsequent activity does not amount to manufacture. 2. Classification of Lidoncaine USP/HCL as Anaesthetics: The Revenue argued that since the product was exempted, availing CENVAT Credit on inputs used in its manufacture was inadmissible. The Tribunal considered the Appellant's claim that the product was not solely used as Anaesthetics, supported by an end-use certificate from the customer. The judgment highlighted the Appellant's request for testing the product to ascertain its use as Anaesthetics, which was not considered by the Adjudicating Authority. The Tribunal found merit in the Appellant's argument and set aside the impugned order. 3. Applicability of Rule 6(1) of CENVAT Credit Rules, 2004: The Appellant argued that Rule 6(1) was not applicable to the quantity of inputs used in manufacturing goods exported under bond. The Tribunal did not find this argument relevant to the case and focused on the broader issue of the product's classification and the admissibility of CENVAT Credit based on the final use of the product. 4. Exported goods under bond and home consumption clearances: The Appellant highlighted that a significant portion of the clearances was for export under bond, and the remaining clearances were for home consumption. The Tribunal considered this aspect along with the Appellant's consistent claim regarding the product's multi-functionality and the end-use certificate provided. The judgment underscored the importance of testing the product to determine its actual use and upheld the Appellant's contention regarding the admissibility of CENVAT Credit. 5. Interpretation of relevant case laws in support of respective contentions: Both parties cited various case laws to support their arguments. The Tribunal analyzed these references, emphasizing the applicability of specific judgments to the facts of the present case. The Tribunal found that the case laws cited by the Appellant aligned more closely with the circumstances of the case, leading to the decision to set aside the impugned order and allow the appeal with consequential relief as per law. This detailed analysis of the issues involved in the judgment provides a comprehensive understanding of the legal reasoning and application of relevant provisions and case laws in determining the admissibility of CENVAT Credit and the classification of the excisable product in question.
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