2015 (10) TMI 2395 - AT - Central Excise

CENVAT Credit - appellant was maintaining a common cenvatable register in respect of the inputs used in the manufacture of PD pumps as also in the manufacture of spare parts - spare parts manufactured by them were being cleared on payment of duty by utilizing the CENVAT credit - held that - there is no dispute on the factual position. Admittedly during the period in question the appellant availed the credit in respect of common inputs used in the manufacture of dutiable as also exempted final product. They initially reversed the CENVAT credit relatable to the inputs used in the manufacture of the exempted final product but subsequently they reversed the entire credit even the one which was relatable to the inputs used in the manufacture of spare parts. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
1. Availment of CENVAT credit under Notification No.10/2002-CE.
2. Reversal of CENVAT credit by the appellant.
3. Denial of benefit of Notification No.10/2002-CE by the Revenue.
4. Applicability of Notification conditions regarding credit availed.
5. Legal interpretation of the reversal of credit as if no credit was availed.

Analysis:

1. The appellant, engaged in manufacturing PD pumps and spare parts, availed CENVAT credit of duty paid on inputs from October 2002 to February 2003. They utilized this credit for manufacturing both PD pumps and spare parts, benefiting from Notification No.10/2002-CE. However, an audit objection led to the Revenue initiating proceedings against the appellant for denying the Notification benefit due to maintaining a common cenvatable register for both products.

2. The appellant reversed the CENVAT credit related to PD pumps, arguing that this reversal should imply no credit was taken, making them eligible for the Notification benefit. Despite this argument, the lower authorities confirmed the demand. On appeal, the Commissioner upheld the decision but set aside the penalty imposed on the appellant.

3. The appellant contended that they had initially taken a total CENVAT credit of a specific amount, which was later entirely reversed. Citing court decisions, the appellant argued that the reversal of the credit should be considered as if no credit was availed, emphasizing that even the credit for spare parts was reversed to avoid any confusion.

4. The Revenue maintained that the Notification conditions were clear that no credit should be taken by the assessee. As the appellant had availed the credit, the benefit of the Notification was rightfully denied to them, according to the Revenue's interpretation.

5. The Tribunal noted that during the relevant period, the appellant availed credit for common inputs used in both dutiable and exempted final products. Referring to legal precedents, including decisions by the Supreme Court and various High Courts, the Tribunal concluded that the reversal of credit equated to no credit being availed. Following these precedents, the Tribunal set aside the lower authorities' orders and allowed the appellant's appeal, with the appellant being liable to pay interest on the reversed credit until the reversal period, as agreed by them.