2019 (3) TMI 790 - AT - Central Excise

CENVAT Credit of Additional Duty of Customs (ADC) - ADC paid by the assessee on consignments of waste paper imported - Held that - As is evident from the term input what matters is which material has gone into the process of manufacture. It is true if some element of the input goes into waste credit cannot be denied on that count. What is important is what does the input invoice/ bill of entry say and how it classifies the input. As long as input bill of entry is assessed or the input invoice classifies the product in a particular way it has to be followed unless the classification itself is challenged and modified in an appeal. In respect of bills of entry where the input is treated as waste paper unless such classification has been challenged and modified at the appellate stage the appellant is entitled to CENVAT credit. The eligibility of CENVAT credit depends solely on raw material used and how it was classified in the input bills of entry/ invoices. The classification made in the bills of entry/ invoices cannot be changed while determining the eligibility of the CENVAT credit. Wherever the inputs bills of entry classified the product as waste paper the appellant is entitled to the benefit of CENVAT credit on waste paper regardless of the fact that some component of such waste paper may be non-paper. Wherever the bills of entry have classified the inputs under different headings the appellant is entitled to the credit of additional duty paid on waste paper and not the credit of additional duty paid on plastic waste and metal waste. CENVAT Credit allowed - penalty set aside - appeal allowed in part.

Summary

Issues: Disallowance of credit of Additional Duty of Customs paid on imported waste paper.

Detailed Analysis:

1. The appeals involved the disallowance of credit of Additional Duty of Customs paid on consignments of waste paper imported by the appellant for manufacturing paper and paper-boards. The dispute arose from the classification of non-paper content within the waste paper consignments and its impact on the entitlement to CENVAT credit.

2. The appellant imported waste paper containing non-paper content like plastic and metal waste, leading to a dispute on the classification and charging of customs duty. The issue was previously addressed by the Tribunal in a related case and the appellant had filed an appeal before the Supreme Court, which was admitted without a stay against the Tribunal's order.

3. The dispute primarily revolved around the denial of proportionate credit for non-paper waste content found in imported consignments. The appellant argued that the waste paper should be considered the essential material based on Rule 3(b) of the Tariff Interpretation Rules, emphasizing that the segregation of materials was a necessary part of the manufacturing process.

4. The appellant contended that the entire consignments were classified as waste paper, justifying their claim for credit on the additional duty paid. They relied on legal precedents highlighting that the segregation of raw materials was integral to the manufacturing process, supporting their entitlement to CENVAT credit.

5. For consignments provisionally assessed under different headings, the appellant argued that the segregation of materials at their job worker premises was a crucial step in the manufacturing process, warranting the credit on the duty paid for waste paper.

6. The appellant maintained that the interpretation of the CENVAT Credit Rules was central to the dispute, emphasizing that the matter was pending before the Supreme Court. They cited legal judgments to support their position that no penalty should be imposed during an interpretational dispute.

7. The departmental representative supported the lower authorities' findings, asserting that the appellant should only receive credit equal to the duty paid on the raw material used in manufacturing. The classification of the imported mixture had been previously decided by the Tribunal, and the same principle should apply in this case.

8. The representative argued that once the assessment was under different headings, credit could not be claimed for materials not related to the final product's manufacture. Therefore, the appeals should be rejected based on the classification and usage of the imported materials.

9. The Tribunal analyzed the arguments and records, emphasizing that the question of classification was not under consideration. The focus was on whether the appellant was entitled to CENVAT credit based on the materials used in manufacturing, as classified in the bills of entry and invoices.

10. The Tribunal clarified that the eligibility for CENVAT credit depended on the raw material used and its classification in the input documents. The appellant was entitled to credit on waste paper based on the classification in the bills of entry, regardless of the presence of non-paper components. However, credit for plastic and metal waste was not allowed as they were not part of the final product.

11. In conclusion, the Tribunal ruled that the appellant was entitled to credit for duty paid on waste paper as per the bills of entry. Penalties under the CENVAT Credit Rules were set aside due to the interpretational nature of the dispute and the appellant's belief in their entitlement to credit.

This comprehensive analysis of the judgment highlights the key legal arguments, interpretations of relevant rules, and the final decision by the Appellate Tribunal.