2023 (7) TMI 423 - AT - Central Excise

CENVAT Credit - Goods sent for Job-work - damaged/broken bottles were not reused or manufactured of the bottles and same were sold as scrap on payment of duty on nominal value - cenvat credit availed and utilized on the basis of the duty paid without clearance of any goods is in violation to provision Rule 3 (1) of Cenvat Credit Rules 2004 - Revenue neutrality - time limitation - HELD THAT - The provision of the section 3 of the central excise act 1944 read with Rule 4 and Rule 8 of the central excise rules 2002 a manufacture assessee is required to pay central excise duty on the goods manufactured and cleared by him. From the facts as appear it appears that the goods namely waste and scrap which got generated along with the finished goods have been cleared separately on nominal price to various traders and therefore the invoices issued by the appellant themselves for making the balance of the finished goods compare with the total quantity manufactured by them was primarily without any basis i.e. no goods no goods finished or waste or scrap were actually available against the invoices issued by them on which central excise duty was paid - the manufacturer or provider of the output service is entitled to take credit of central excise duty paid by them on any input or capital goods received in the factory of manufacturer of final product or by the provider of the out service and any input service received by the manufacturer of final product or by the provider of the output service. The entire transaction on basis of which the cenvat credit has been availed by the appellant is only on paper. Firstly the goods which are purported to be shown as cleared have not been cleared and invoices were issued on which central excise duty has been shown as paid. The products which have been mentioned on the invoices is primarily a finished goods of the appellant and therefore otherwise also cannot be an input for manufacturer of the finished product - the cenvat credit availed by the appellant on the basis of their own invoices is not permissible as per the provisions of the law and therefore the finding given in the impugned orders agreed upon which are here in appeal and therefore the cenvat credit availed by the appellant denied on the basis of invoices issued in their own name for finished goods which otherwise cannot be an input for them. Revenue Neutrality - HELD THAT - The revenue neutrality being a question of fact and apparently they should not be foul. The facts of the matter does not absolved the appellant of consciously by passing the law and working with their own whims and convenience. Time Limitation - HELD THAT - The appellant has availed cenvat credit as per their own convenience which otherwise not as per the provisions of Rule 3 of Cenvat Credit Rules 2004. It was only during the course of audit from the record of the appellant that the department came to know the practice being followed by the assessee. In view of this the provisions of invoking extended time period is justifiable on the part of the department. Appeal dismissed.

Summary

Issues Involved:
1. Whether the appellant's practice of accounting for broken/damaged glass bottles as finished goods and availing Cenvat credit was in compliance with the Cenvat Credit Rules, 2004.
2. Whether the duty paid by the appellant on broken/damaged bottles and subsequent availing of Cenvat credit was lawful.
3. Whether the demand under the first show cause notice is time-barred.

Issue-Wise Summary:

1. Compliance with Cenvat Credit Rules, 2004:
The appellant, a manufacturer of glass bottles, sent certain bottles for job work under Rule 4(5) of the Cenvat Credit Rules, 2004. Some bottles were damaged during processing, yet the appellant accounted for these as fully finished goods in their daily stock register (RG-1) instead of as waste and scrap. The department contended that this practice violated Rule 3(1) of the Cenvat Credit Rules, 2004, as the appellant availed Cenvat credit on duty paid without actual clearance of goods.

2. Lawfulness of Duty Payment and Cenvat Credit:
The appellant paid duty on broken/damaged bottles as if they were finished goods and took Cenvat credit based on their own invoices. However, the tribunal found that the appellant's actions were not in accordance with the provisions of the Central Excise Act, 1944, and the Central Excise Rules, 2002. The tribunal emphasized that duty should only be paid on actual clearance of finished goods or waste/scrap, and the appellant's practice of issuing invoices to themselves and taking Cenvat credit was not permissible.

3. Time-Barred Demand:
The appellant argued that the demand for the period August 2010 to February 2015 was time-barred. However, the tribunal held that the extended time period for demand was justifiable as the appellant's practice of availing Cenvat credit was discovered during an audit, indicating a lack of compliance with the provisions of Rule 3 of the Cenvat Credit Rules, 2004.

Conclusion:
The tribunal dismissed the appeals, holding that the appellant's practice of accounting for broken/damaged bottles as finished goods and availing Cenvat credit was not in compliance with the law. The tribunal also rejected the appellant's argument of revenue neutrality and upheld the department's invocation of the extended time period for demand.