2015 (9) TMI 293 - HC - Central Excise

Denial of CENVAT Credit - Rule 9A - Transitional provisions for textile and textile articles - physical content of the inputs in process - claim rejected towards process loss - Held that - Right from the stage of issue of show cause notice upto the stage of the order of the Tribunal, the claim of the appellant that they incur a manufacturing loss to the extent of 5% of the total quantity of the finished product, has not been disputed by the Department. In cases where there is a dispute about the existence of a loss and in cases where there is a dispute with regard to the quantum of loss, the questions may have to be left open. But, in cases where the quantum of manufacturing loss claimed at 5% by the appellant is never disputed by the Department from the stage of issue of the show cause notice upto the stage of the order of the Tribunal, the interpretation given to Rule 9A cannot be accepted. - appellant was right in making a claim for CENVAT credit, with reference to the total quantity and the value of the inputs that went into the making of the fabric. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Rule 9A of the CENVAT Credit Rules, 2002
2. Limitation related to the date of filing returns under Central Excise Act, 1944 and CENVAT Credit Rules, 2002

Interpretation of Rule 9A of the CENVAT Credit Rules, 2002:
The appellant, a manufacturer of cotton knitted garments and fabrics, filed an appeal questioning the correctness of an order disallowing CENVAT credit. The appellant claimed credit for the entire quantity and value of inputs used in making fabric, arguing a 5% loss during manufacturing justifies the claim. Rule 9A allows credit for inputs of finished products in stock or process as of 31.3.2003. The Court noted the appellant's claim was for the total inputs used in fabric production, not just the finished product weight. The Court emphasized that manufacturing processes inherently involve some loss, supporting the appellant's claim. The Department did not dispute the 5% manufacturing loss claimed by the appellant. Thus, the Court held that the appellant was entitled to claim CENVAT credit for the total quantity and value of inputs used in fabric production.

Limitation related to date of filing returns:
The Court framed substantial questions of law related to limitation issues, but as the judgment favored the appellant on the Rule 9A interpretation, the Court did not address these questions. The questions involved whether the return filing date under specific rules is the "relevant date" for limitation purposes. Since the Court found in favor of the appellant on the Rule 9A interpretation, questions related to limitation were not addressed. The judgment disposed of the civil miscellaneous appeal without costs, as a substantial point of law favored the appellant. The related miscellaneous petition was also closed in light of the judgment.