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2024 (12) TMI 9 - AT - Central ExciseAdmissibility of CENVAT Credit availed on inputs at B-59 transferred to Unit B-165 - credit on inputs used in the final product not amounting to manufacture - credit on rejected goods and procedural discrepancies. Admissibility of the credit availed on inputs received in their factory and later transferred to their other Unit B-165 having separate Central Excise registration - HELD THAT - The appellant had accounted for the receipt of the inputs and its transfer to their other Unit at B-165 under proper challans which have been accounted there in their records, later consumed in the manufacture of finished goods cleared for export on payment of duty. Thus, the entire movement of the inputs from the stage of receipt at B-59 till the clearance of the final product on payment of duty from B-165 had been duly recorded. On going through the said documents, it is opined that the appellant could able to establish the receipt and transfer of inputs and its proper use at Unit B-165 to the satisfaction of the authority. In these circumstances, there is no justification for denial of the cenvat credit of Rs.72,97,860/- merely because necessary permission was not obtained for clearance of finished goods on payment of duty from Unit B-165 , instead of bringing it back to their Unit at B-59. CENVAT credit of Rs.18,24,719/- availed on inputs that were used in the manufacture of finished goods was denied on the ground that the process of conversion of inputs into final products does not amount to manufacturer - HELD THAT - This issue has been considered by this Tribunal in their own case and it has been observed that the process viz. drilling, burr removal, grinding, blackening etc. as per the specification of customers undertaken by the appellant result into the emergence of a new product having distinct identity, use and hence amount to manufacture, vide Final Order 2023 (10) TMI 958 - CESTAT BANGALORE . Thus, the credit on this count is also admissible. Admissibility of cenvat credit of demand of Rs.5,60,978/- on rejected goods - HELD THAT - Credit cannot be denied merely on the ground of affixation of wrong seal indicating the receipt of returned goods at Unit B-165, which pertains to B-49, when the documents submitted reveal that the rejected goods were duly received recorded as inputs and reprocessed and cleared on payment of duty on the processed goods. Extended period of limitation - penalty - HELD THAT - The demand pertains to the period December 2004 to July 2005 and the show-cause notice was issued on 08.08.2007 invoking suppression of facts which cannot be sustained when all movements of inputs from B-59 to B-165 had been duly recorded by the Appellant and clearance of finished goods effected on payment of appropriate Central Excise duty. Therefore, the demand is also barred by limitation and cannot be sustained. Further, we find that the transfer of raw materials and utilisation of credit availed on inputs used in the manufacture of finished goods later cleared on payment of duty relate to the appellant s own units at B-59 and B-165, therefore imposition of penalty on the appellant also cannot be sustained. The impugned order is set aside - appeal is allowed.
Issues Involved:
1. Admissibility of cenvat credit of Rs.72,97,860/- on inputs transferred from Unit B-59 to Unit B-165. 2. Admissibility of cenvat credit of Rs.18,24,719/- on inputs used in processes not amounting to manufacture. 3. Admissibility of cenvat credit of Rs.5,60,978/- on rejected goods and procedural discrepancies. Issue-wise Detailed Analysis: 1. Admissibility of Cenvat Credit on Inputs Transferred Between Units: The appellant contested the denial of cenvat credit amounting to Rs.72,97,860/- on inputs transferred from Unit B-59 to Unit B-165. The appellant argued that both units are under the same division and registered under the same range. The inputs were transferred with proper documentation, including delivery notes and challans, and were used to manufacture hand primers and fuel filters at Unit B-165, which were later cleared on payment of duty. The appellant provided evidence of these transactions, including monthly statements and sample invoices, to establish that the inputs were legitimately transferred and used. The tribunal found that the appellant had adequately documented the movement and use of inputs, and thus there was no justification for denying the credit merely due to the lack of permission for clearance from Unit B-165. The tribunal ruled in favor of the appellant on this issue. 2. Admissibility of Cenvat Credit on Inputs Used in Processes Not Amounting to Manufacture: The appellant challenged the denial of cenvat credit of Rs.18,24,719/- on the grounds that the processes undertaken, such as drilling, burr removal, grinding, and blackening, did not amount to manufacture. The tribunal referenced a previous decision in the appellant's own case, which held that these processes resulted in a new product with a distinct identity and use, thus qualifying as manufacture. Consequently, the tribunal found the credit on this count to be admissible and ruled in favor of the appellant. 3. Admissibility of Cenvat Credit on Rejected Goods and Procedural Discrepancies: The appellant argued against the denial of cenvat credit of Rs.5,60,978/-, which was based on procedural discrepancies such as invoices addressed to the wrong unit and the affixation of incorrect seals. The appellant explained that certain goods were rejected by a customer and returned to Unit B-59, where they were reprocessed and cleared on payment of duty. The tribunal accepted the appellant's explanation that the procedural errors, such as the wrong seal, did not affect the substantive compliance, as the goods were correctly received, reprocessed, and cleared. The tribunal also found that the demand was barred by limitation, as the show-cause notice was issued beyond the permissible period without sufficient grounds for invoking the extended period. Therefore, the tribunal ruled in favor of the appellant on this issue as well. Conclusion: The tribunal set aside the impugned order, allowing the appeal with consequential relief. The tribunal found that the appellant had adequately documented the movement and use of inputs, processes amounted to manufacture, and procedural discrepancies did not justify denial of credit. Additionally, the demand was barred by limitation, and the imposition of penalties was not warranted.
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