2018 (5) TMI 392 - AT - Central Excise

CENVAT credit - According to department, as per definition of first stage dealer given in CCR 2004, the dealer should purchase the goods directly from the manufacturer and that the appellants are not eligible for the credit availed on the Aluminium scrap which were resold to them - Held that - the appellants are not the manufacturer of Aluminium scrap and they have only imported the scrap for manufacture of Aluminium ingots. They cleared certain quantity of scrap as such under Rule 3 (5) of CCR 2004 to a first stage dealer who availed credit on the same and thereafter resold to the appellant who availed credit on the said goods being inputs. According to department, the first stage dealer cannot avail credit on the aluminium scrap as the goods having removed as such. We do not find any sum or substance in such a proposition - For the purpose of Rule 2, the dealer is one who purchases goods from the manufacturer, and is not limited to somebody who only purchases goods manufactured by the manufacturer. Appeal allowed - decided in favor of appellant.

Issues:
1. Availing of cenvat credit on imported Aluminium scrap cleared 'as such' under Rule 3(5) of CCR 2004.
2. Eligibility of the appellant for credit availed on Aluminium scrap resold by dealers.
3. Interpretation of the definition of 'first stage dealer' under Rule 2(ij) of CCR 2004.
4. Validity of invoices issued by first stage dealers for availing cenvat credit.

Analysis:
1. The appellants, engaged in manufacturing Aluminium Alloy Ingots, availed cenvat credit on duty paid on inputs, including locally procured and imported Aluminium scrap. The department alleged that the appellants cleared cenvat availed imported scrap 'as such' under Rule 3(5) of CCR 2004, leading to a dispute over the eligibility of credit. The original authority confirmed the demand, interest, and penalties. The appellant argued that they rightly availed the credit based on documents issued by the manufacturer for the removal of inputs 'as such'. The Tribunal found the department's proposition lacking legal basis and set aside the impugned order, allowing the appeal with consequential relief.

2. The issue of eligibility for credit on Aluminium scrap resold by dealers to the appellant was raised. The department contended that the appellant, not being a manufacturer of the scrap, was not entitled to credit on goods cleared 'as such' to dealers and subsequently resold back. The appellant argued that the credit was rightfully availed as per Rule 8, which includes the amount payable under Cenvat Credit Rules, 2004. The Tribunal held that the dealer's definition under Rule 2 is not limited to purchasing 'manufactured' goods only, rejecting the department's argument. Consequently, the demand raised by the department was deemed unsustainable.

3. The interpretation of the definition of 'first stage dealer' under Rule 2(ij) of CCR 2004 was crucial to the case. The appellant's eligibility for credit availed on Aluminium scrap resold by dealers hinged on this definition. The Tribunal emphasized that the term 'dealer' encompasses those purchasing 'goods' from the manufacturer, not restricted to goods 'manufactured' by the manufacturer. This interpretation favored the appellant's position, leading to the setting aside of the impugned order and allowing the appeal.

4. The validity of invoices issued by first stage dealers for availing cenvat credit was a significant aspect of the case. The department argued that the invoices transferring credit back to the appellant were not valid documents for credit availing. However, the Tribunal's analysis of the legal provisions, including Rule 8 and the definition of 'first stage dealer,' supported the appellant's contention that the credit was rightfully availed. This analysis formed a crucial part of the decision to set aside the impugned order and allow the appeal with consequential relief, if any, as per the law.

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