2013 (3) TMI 428 - AT - Central Excise

Cenvat Credit - Clearance of final product on payment of Central Excise Duty higher than the Cenvat credit availed by them - appellant contested that entire exercise was revenue neutral as by paying duty at the time of furnace of the goods, which according to the Revenue was not liable to be paid, the appellant have reversed the entire input credit - Held that - The decisions of Crompton Greaves Ltd. (2008 (5) TMI 180 - CESTAT MUMBAI), Vickers systems International Ltd. (2007 (12) TMI 140 - CESTAT, MUMBAI), Ajinkya Enterprises (2009 (7) TMI 944 - CESTAT, MUMBAI) states that the duty paid at the time of clearance of the product, which was not required to be paid on account of non-manufacture activity, amounts to reversal of the entire Cenvat credit and in such a situation, the demand of Cenvat credit cannot be sustained. Thus consequential relief to the appellant granted.

Summary

Issues:
1. Denial of Cenvat credit on imported goods.
2. Revenue's contention of non-manufacturing activity and trading.
3. Appellant's argument of revenue-neutral activity.

Analysis:
1. The appellant, engaged in manufacturing CNG/LPG conversion kits, availed Cenvat credit on inputs, input service, and capital goods. They imported fuel system analyzers (FSA) for testing and inspection of their products. The Revenue alleged that the appellant did not further manufacture the imported goods and initiated proceedings to deny Cenvat credit amounting to Rs. 4,97,543. The adjudicating authority and Commissioner (Appeals) upheld the demand.

2. The appellant argued that even if their activity was non-manufacturing, they cleared their final products by paying Central Excise Duty higher than the availed Cenvat credit, rendering the process revenue-neutral. They contended that paying duty at the time of goods' clearance, even if not required according to Revenue, reversed the input credit. The appellant cited precedents like Crompton Greaves Ltd. and Vickers Systems International Ltd. to support their position.

3. The Tribunal, considering the cited decisions, held that paying duty upon product clearance, despite not being mandatory due to non-manufacturing activity, equated to reversing the Cenvat credit entirely. Consequently, the demand for Cenvat credit was deemed unsustainable. The Tribunal set aside the impugned orders, allowing the appeal and granting consequential relief to the appellant.