2024 (4) TMI 903 - HC - Central Excise

CENVAT Credit - inputs - respondent does not possess any furnace to use such inputs in or in relation to manufacture of final product - whether for the purpose of eligibility of Cenvat Credit the classification of the input is irrelevant? - burden of proof upon the respondent to establish that the goods covered under Central Excise Tariff sub-heading No.72044100 procured by the respondent treating them as inputs has been used in the manufacture of finished products without requiring a furnace in the factory - HELD THAT - As a general proposition the Tribunal may be right that the classification issue will not be a relevant issue for the purpose of claiming of Cenvat credit. However when an issue is argued before this Court at the instance of the assessee and the revenue the Court is bound to consider the same. Having said so it is now require to examine whether the Tribunal was right in allowing the assessee s appeal - In paragraph 13 of the impugned order the Tribunal has taken note of the factual position and found that the assessee had purchased goods from SAIL and others and they have been subjected to heating straightening to make them suitable for rolling and sometimes cut to sizes and then rerolled to manufacture their final products and the rolling mill installed by them have the capacity to roll such items. This factual position appears to have not been shown to be wrong by the Department. Further the Tribunal has noted that the respondent s rolling mill has the capacity to roll such items and the Department has not produced any evidence to counter the claim. The argument on behalf of the revenue before is by referring to the observations made by the adjudicating authority in paragraph 6.2 of the order-in-original dated 13th February 2017. However the said observation is not relatable to the respondent assessee since the adjudicating authority after referring to the classification under Tariff Item No.72044100 makes an observation that for manufacture of MS Flat/Bar MS Channel MS Round MS Angle MS Ribbed Bar etc. There is a requirement of ingots and billets. However this observation made by the adjudicating authority does not relate to the factual position of the assessee s case. Thus there are no question of law much less substantial questions of law arising for consideration - appeal dismissed.

Summary

Issues:
The judgment involves the following Issues:
1. Eligibility of Cenvat credit on inputs without possessing a furnace.
2. Relevance of input classification for Cenvat credit eligibility.
3. Availing Cenvat credit on goods not meeting the definition of 'input'.
4. Burden of proof u/s Rule 9(5) of Cenvat Credit Rules on the respondent.

Eligibility of Cenvat Credit on Inputs:
The appeal was filed by the revenue u/s 35G(1) of the Central Excise Act, 1944 against the order of the Tribunal. The primary issue raised was whether the respondent could avail Cenvat credit on inputs without having a furnace for their use in manufacturing the final product. The Tribunal observed that the respondent had purchased goods from SAIL and others, which were processed to make them suitable for rolling and manufacturing final products. The Tribunal found that the respondent's rolling mill had the capacity to roll such items, and the Department failed to provide evidence to counter this claim. The Court noted that the Tribunal granted relief to the assessee based on the factual position, and no substantial questions of law arose for consideration. Therefore, the appeal was dismissed, along with the stay applications.

Relevance of Input Classification for Cenvat Credit:
The Tribunal's observation that the classification of the input is irrelevant for determining Cenvat credit eligibility was deemed uncalled for by the Court. Although the Tribunal may generally consider classification irrelevant, when an issue is raised before the Court, it must be duly considered. The Court expressed reservations about the Tribunal's observation and proceeded to examine whether the Tribunal was justified in allowing the assessee's appeal. The Tribunal's decision was upheld based on the factual position regarding the processing of goods by the respondent and the capacity of their rolling mill, which was not disproved by the Department.

Availing Cenvat Credit on Goods Not Meeting Input Definition:
Another issue raised was whether the respondent could avail Cenvat credit on goods that did not satisfy the definition of 'input' as per Rule 2(k) of the Cenvat Credit Rules, 2004 and were not used in manufacturing excisable final products. The Court's decision was based on the factual findings regarding the processing of goods by the respondent and the capacity of their rolling mill, which supported the grant of relief to the assessee.

Burden of Proof u/s Rule 9(5) of Cenvat Credit Rules:
The final issue pertained to the burden of proof on the respondent u/s Rule 9(5) of the Cenvat Credit Rules to establish that goods procured as 'inputs' were used in manufacturing finished products without requiring a furnace. The Court's decision to dismiss the appeal was grounded in the factual assessment of the respondent's operations and the lack of substantial legal questions arising from the case.