2024 (2) TMI 1079 - AT - Central Excise

Recovery of CENVAT Credit alongwith interest and penalty - credit availed by the appellant on inputs during 12.02.2004 onwards - process amounting to manufacture or not - HELD THAT - The issue involved in the present case is no more res integra and has been consistently held by various decisions of the Tribunal, upheld by the Hon ble Supreme Court and High Court wherein it has been held that when process undertaken by the assessee does not amount to manufacture, even then the CENVAT credit is admissible if such inputs are cleared on payment of duty which would amount to reversal of credit availed. Reliance can be placed in the case of COMMISSIONER OF CENTRAL EX. CUS., SURAT-III VERSUS CREATIVE ENTERPRISES 2008 (7) TMI 311 - GUJARAT HIGH COURT which was upheld by the Hon ble Apex Court in COMMISSIONER VERSUS CREATIVE ENTERPRISES 2009 (7) TMI 1206 - SC ORDER wherein it was held that once duty on final products has been accepted by the Department in the case, CENVAT credit cannot be denied even if the activity does not amount to manufacture. The impugned order is not sustainable in law and therefore is set aside - appeal allowed.

Summary

Issues involved: Disallowance of CENVAT credit, recovery of interest and penalty under CENVAT Credit Rules, 2002/2004.

Detailed Judgment:

Issue 1: Disallowance of CENVAT credit

The appeal was against the order disallowing CENVAT credit of Rs.36,58,909/- on inputs availed by the appellant. The appellant, engaged in manufacturing Plastic Laminates and Pouches, availed CENVAT credit on capital goods and inputs. The Department contended that the process undertaken by the appellant did not amount to manufacture, hence not entitled to CENVAT credit. The Commissioner disallowed the credit, imposed interest, and penalty. The appellant argued that their activity amounted to clearing the CENVAT credit availed inputs, permissible under CENVAT Credit Rules, as they paid an amount exceeding the credit availed.

Issue 2: Legal precedents and admissibility of CENVAT credit

The appellant cited various legal precedents where it was held that CENVAT credit is admissible even if the process undertaken does not amount to manufacture, provided inputs are cleared on payment of duty equivalent to the credit availed. Decisions by Tribunal and High Courts affirmed that when duty paid on clearance equals or exceeds credit availed, it constitutes reversal of credit. The Tribunal, in similar cases, ruled in favor of the appellants, emphasizing the need for duty payment equivalent to credit availed on input clearance.

Judgment:

After considering submissions and legal precedents, the Tribunal found the issue to be settled law. It held that CENVAT credit is admissible when inputs are cleared on payment of duty equivalent to credit availed, even if the process does not amount to manufacture. Citing consistent decisions by higher courts, the Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law.

*(Pronounced on 22/02/2024)*