2014 (3) TMI 833 - AT - Central Excise

Denial of CENVAT Credit - Inputs not received in factory and not utilized in final product - Held that - As the Tribunal in the case of Ajinkya Enterprises vs. CCE - 2013 (6) TMI 610 - CESTAT MUMBAI wherein this Tribunal held that if any inputs on which the assessee has paid the duty and the same has been cleared and availed credit thereof which were cleared by them as such on payment of duty, the duty paid by them shall amounts to reversal of credit taken on these inputs. Therefore, in the light of Ajinkya Enterprises, the issue is no more res integra. Accordingly, I hold that the appellant is entitled to take credit on bought-out items which have been cleared on payment of duty - Decided in favour of assessee.

Summary

Issues: Appeal against denial of CENVAT credit on inputs directly supplied to customers.

Analysis:
1. Issue of CENVAT credit denial: The appellant, a manufacturer of sugar manufacturing equipments, appealed against the denial of CENVAT credit on inputs directly supplied to customers. The Revenue contended that since these inputs were not received in the factory and not used in the final product, the appellant was not entitled to take credit.

2. Judicial Precedent: The Tribunal referred to the case of Ajinkya Enterprises vs. CCE, where it was held that if an assessee pays duty on inputs and clears them "as such" on payment of duty, the duty paid amounts to the reversal of credit taken on those inputs. The Tribunal further affirmed that the issue was no longer res integra based on the Ajinkya Enterprises case, which was upheld by the Hon'ble High Court of Bombay.

3. Decision: Considering the precedent set by Ajinkya Enterprises, the Tribunal ruled in favor of the appellant. It held that the appellant was entitled to take credit on bought-out items that were cleared on payment of duty. Consequently, the impugned order denying CENVAT credit was set aside, and the appeal was allowed with any consequential relief deemed appropriate.

This judgment clarifies the entitlement of manufacturers to claim CENVAT credit on inputs directly supplied to customers, provided the inputs were cleared on payment of duty. The decision reinforces the legal principle established in the Ajinkya Enterprises case and provides guidance on similar issues concerning the availment of credit on bought-out items.