2018 (3) TMI 1111 - AT - Central Excise

CENVAT credit - inputs - The case of the department is that during certain period, the appellant has not manufactured and cleared prototype vehicle whereas they kept on availing the CENVAT credit - Held that - The appellant admittedly cleared the input as such on payment of duty. Only for the reason that there is a long interval in the manufacture of prototype vehicle, the manufacturer will not cease to be a manufacturer. Therefore, it cannot be said that the appellant is a trading unit and not a manufacturing unit. Even if the manufacturing is not undertaken but the unit is registered, the appellant is entitled to avail the cenvat credit in terms of Rule 16 of the Central Excise Rules, 2002. The only requirement is as and when the said input is cleared, excise duty equal to cenvat credit is required to be discharged. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of cenvat credit on inputs without manufacturing and clearing prototype vehicles.
2. Denial of cenvat credit for trading activity during the period of no prototype vehicle manufacture.

Analysis:

Issue 1: Availment of cenvat credit on inputs without manufacturing and clearing prototype vehicles
The case involved the appellant, engaged in manufacturing prototype vehicles, availing cenvat credit on various inputs and capital goods despite not continuously manufacturing and clearing prototype vehicles due to the time-consuming research and development process. The department contended that since no prototype vehicles were manufactured and cleared during a specific period, the appellant was engaged in trading activity, making them ineligible for cenvat credit on inputs.

Analysis: The Tribunal noted that the appellant, a registered manufacturer of prototype vehicles, received inputs in their factory and availed cenvat credit as per the Cenvat Credit Rules. The appellant cleared inputs as such on payment of duty, complying with the rules. Despite the time gap in prototype vehicle manufacturing, the appellant remained a manufacturer entitled to cenvat credit. The Tribunal emphasized that being a registered unit entitled the appellant to avail cenvat credit, provided the duty equal to the credit was discharged upon clearing inputs.

Issue 2: Denial of cenvat credit for trading activity during the period of no prototype vehicle manufacture
The Revenue argued that since no prototype vehicles were manufactured and cleared for an extended period, and only inputs were cleared, the appellant was essentially engaged in trading activity, making them ineligible for cenvat credit.

Analysis: The Tribunal disagreed with the Revenue's contention, stating that the appellant's status as a registered manufacturer entitled them to cenvat credit under the Central Excise Rules. The Tribunal highlighted that even without continuous manufacturing, the appellant's compliance with Rule 16 of the Central Excise Rules allowed them to avail cenvat credit on inputs and capital goods. The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal, emphasizing the appellant's adherence to the Cenvat Credit Rules for availing the credit.

In conclusion, the Tribunal upheld the appellant's right to avail cenvat credit on inputs and capital goods despite the intermittent manufacturing of prototype vehicles, emphasizing their status as a registered manufacturer entitled to such credit under the relevant rules.