2018 (5) TMI 912 - AT - Central Excise

CENVAT credit - input services used commonly in manufacture of dutiable goods and trading - Rule 6(3)(1) of the CCR 2004 - Held that - the appellant is a manufacturer and he has cleared some inputs as such by reversing the CENVAT credit taken by them originally on the said input and therefore, activity is covered by Rule 3(5) of CCR - Revenue has also not been able to establish that appellant is a trader and is engaged in trading activities. Reliance placed in appellant own case Kairali Steels and Alloys Pvt. Ltd. Versus Commissioner of Central Excise, Customs and Service Tax, Calicut 2018 (5) TMI 859 - CESTAT BANGALORE , where it was held in favor of assessee. Appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Availment of CENVAT credit on inputs for manufacturing and trading.
2. Allegation of not maintaining separate accounts for input services.
3. Applicability of Rule 3(5) of CENVAT Credit Rules, 2004.
4. Dispute over whether the appellant is a manufacturer or a trader.
5. Interpretation of Rule 6 and Rule 3(5) in relation to the case.
6. Previous decisions cited in support of the appellant's argument.

Analysis:
1. The appeals were filed against an order rejecting the appellant's appeal regarding the availment of CENVAT credit on inputs for manufacturing MS Ingots and TMT Bars, involving both manufacturing and trading activities. The appellant was accused of not maintaining separate accounts for input services used in trading and manufacturing, leading to the dispute.

2. The key issue revolved around the applicability of Rule 3(5) of the CENVAT Credit Rules, 2004. The appellant argued that the provisions of Rule 3(5) applied to their situation as a manufacturer, allowing for the reversal of credit at the time of clearance of inputs. They contended that the mere clearance of some inputs as such did not automatically classify them as traders, emphasizing the correct application of Rule 3(5).

3. The appellant maintained that they were manufacturers, not traders, as evidenced by the availment of credit on inputs for their manufacturing process. They cited various decisions supporting their position, highlighting that the clearance of inputs as such did not necessitate the reversal of credit availed on input services at the time of clearance.

4. The Tribunal analyzed the submissions of both parties, along with the provisions of Rule 3(5) and the precedent decisions cited by the appellant. It concluded that the appellant, being a manufacturer, had appropriately reversed the CENVAT credit on inputs cleared as such, aligning with Rule 3(5) requirements. The Tribunal found that the appellant's activity did not amount to trading, as the Revenue failed to establish their engagement in trading activities.

5. Notably, the Tribunal referenced a previous decision in the appellant's favor on an identical issue, further supporting the appellant's stance. By applying the principles established in prior decisions and considering the appellant's manufacturing status, the Tribunal deemed the impugned order unsustainable and allowed the appeal, setting aside the earlier decision.

6. The Tribunal's judgment highlighted the importance of correctly interpreting the CENVAT Credit Rules, particularly Rule 3(5), in distinguishing between manufacturing and trading activities. The reliance on previous decisions provided a strong legal basis for the Tribunal's decision in favor of the appellant, emphasizing the significance of maintaining clarity and adherence to the specified rules in such cases.