2014 (3) TMI 520 - AT - Central Excise

Availment of CENVAT Credit - Revenue contends that the waste of cotton arising out of the manufacture of cotton fabric is not entitled for credit availed by the appellant - Held that - Appellants are entitled to avail CENVAT credit on cotton which is being used for manufacturing of cotton fabrics but during the course of manufacture of cotton fabrics, cotton waste is arising which is a by product. Therefore, they are entitled to avail CENVAT credit on cotton involved in cotton waste and same view has been take by Tribunal in Gobald Textiles P. Ltd. 2004 (11) TMI 367 - CESTAT, CHENNAI - Decided in favour of assessee.

Summary

Issues:
Whether the appellant is entitled to avail CENVAT credit on cotton waste arising during the manufacture of cotton fabric.
Interpretation of Rule 57D of Central Excise Rules, 1944.

Analysis:
The case involved a dispute regarding the appellant's entitlement to CENVAT credit on cotton waste generated during the manufacturing process of cotton fabric. The revenue contended that the appellant should reverse the credit availed on the cotton involved in the waste. A show-cause notice was issued, leading to adjudication where the authority initially dropped the demand based on the decision of Gobald Textiles P. Ltd. However, the Commissioner (Appeals) set aside this decision, stating that Rule 57D of Central Excise Rules, 1944 was not in existence, and thus, the appellant needed to reverse the credit.

During the appeal, the appellant's representative argued that a CBEC circular clarified the entitlement to credit on cotton waste as it is considered a by-product. Referring to the Gobald Textiles P. Ltd. case, it was emphasized that since cotton waste is not the final product and arises during the manufacturing process, no reversal of credit was required. The appellant sought the dismissal of the appeal.

Upon considering the submissions, the Tribunal referred to a relevant Board circular which confirmed that CENVAT credit is permissible on inputs contained in waste or by-products used in manufacturing final products. It was established that the appellant was entitled to avail credit on cotton involved in cotton waste, as ruled in the Gobald Textiles P. Ltd. case. Therefore, the impugned order was deemed without merit and set aside, allowing the appeal with any consequential relief.

In conclusion, the judgment clarified the appellant's right to CENVAT credit on cotton waste generated during the production of cotton fabric, emphasizing the admissibility of credit on inputs used in the manufacturing process, even if they result in by-products. The ruling aligned with previous decisions and relevant circulars, ultimately favoring the appellant's position in the case.