2017 (6) TMI 267 - AT - Central Excise

CENVAT credit - deemed manufacture - denial of credit on the ground that Rule 12 B of CER, 2002, which prescribed special procedure for textile deemed manufacturers, was omitted vide N/N. 11/2004-CE (NT) dated 9.7.2004, and the credit availed in the status of non-manufacturer is not admissible - Held that - even if it is accepted that the appellant was no more governed by Rule 12B but the fact remains that appellant though taken the CENVAT Credit but have discharged the excise duty on the processed goods and it was observed that the excise duty paid was more than the CENVAT Credit availed - It is a settled law that once the excise duty is paid even on the non-excisable goods, the CENVAT Credit should be allowed. Similar issue decided in the case of MARKFED HDPE SACKS PLANT Versus COMMISSIONER OF C. EX., LUDHIANA 2011 (4) TMI 984 - CESTAT, NEW DELHI , where it was held that the assessee is required to pay amount equal to credit availed by them u/r 16(2). Consequently, the CENVAT Credit was admissible. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Rule 12B of Central Excise Rules, 2002 post its omission, admissibility of CENVAT Credit for non-manufacturers, applicability of Rule 16 of Central Excise Rules, 2002, and relevance of past judicial precedents.

Analysis:

1. Rule 12B Omission and CENVAT Credit Admissibility:
The case involved the appellants engaged in purchasing duty-paid fabrics under Chapter 5406.10 and availing CENVAT Credit post the omission of Rule 12B on 9.7.2004. The dispute arose when the Department proposed disallowance of CENVAT Credit post the omission, arguing that the appellants were no longer deemed manufacturers. The Tribunal noted that even after 9.7.2004, the appellants continued to discharge excise duty on cleared goods, which exceeded the CENVAT Credit availed. It was held that once excise duty is paid, even on non-excisable goods, CENVAT Credit should be allowed. The Tribunal emphasized that Rule 16 permits CENVAT Credit on duty-paid goods, subject to paying excise duty equal to the credit availed upon clearance, a condition met by the appellants. The Tribunal, relying on past judgments, concluded that the CENVAT Credit was admissible despite the omission of Rule 12B.

2. Judicial Precedents and Applicability:
The appellant's counsel cited various judgments supporting the admissibility of CENVAT Credit for non-manufacturers who pay excise duty on cleared goods. In contrast, the Revenue argued that CENVAT Credit is only permissible for manufacturers. The Tribunal distinguished the Revenue's cited cases, noting their inapplicability to the present scenario. Notably, the case of Markfed HDPE Sacks Plant supported the appellant's position by emphasizing the requirement to pay an amount equal to the credit availed, making the CENVAT Credit admissible. The Tribunal found the Supreme Court's judgment in Tata Chemicals Ltd. irrelevant to the case at hand. Additionally, the Larger Bench judgment in the case of Avis Electronics Pvt. Ltd. was deemed irrelevant to the present case.

3. Final Decision:
After considering both parties' arguments and the relevant legal provisions, the Tribunal set aside the impugned order and allowed the appeal. The judgment was pronounced on 30.05.2017, in favor of the appellants, affirming the admissibility of CENVAT Credit post the omission of Rule 12B, given the excise duty payment on cleared goods and compliance with Rule 16 conditions.