2018 (5) TMI 859 - AT - Central Excise

CENVAT credit - common inputs/input services/capital goods for manufacture of final products as well as trading - non-maintenance of separate records - Held that - the appellant is a manufacturer and he has cleared some inputs as such by reversing the cenvat credit taken by them originally on the said input and therefore, activity is covered by Rule 3(5) of Cenvat Credit Rules - Revenue has also not been able to establish that appellant is a trader and is engaged in trading activities - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Modification of Order-in-Original by Commissioner (Appeals)
- Allegation of trading imported scrap without maintaining separate accounts
- Availment of cenvat credit on inputs and input services
- Applicability of Rule 6(3)(i) and Rule 15(1) of Cenvat Credit Rules, 2004
- Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004
- Reversal of credit at the time of clearance of inputs
- Comparison with relevant legal precedents

Modification of Order-in-Original by Commissioner (Appeals):
The appeal was filed against an order modifying the Order-in-Original, where the appellants were accused of trading imported scrap without maintaining separate accounts. The Commissioner (Appeals) held the appellants liable to pay 5% of the value of trading under Rule 6(3)(i) of Cenvat Credit Rules, 2004, along with penalties under Rule 15(1) of the same rules.

Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004:
The appellant argued that the impugned order did not properly appreciate Rule 3(5) of the Cenvat Credit Rules, 2004. They contended that being a manufacturer of MS Ingots and MS Bars, they were not traders of inputs. The appellant maintained that the availment of credit on inputs indicated that the goods procured were meant for their manufacturing process. They reversed the credit at the time of input clearance, citing compliance with Rule 3(5) which allows for clearance of inputs as such upon reversal of originally availed credit.

Comparison with Relevant Legal Precedents:
The appellant cited various legal decisions in support of their argument, including cases like CCE & ST, Ghaziabad Vs. Mahaveer Cylinders Ltd. and Commissioner Vs. UP. Telelinks. The Tribunal found that the appellant, being a manufacturer, had cleared some inputs as such by reversing the cenvat credit, thus falling under the purview of Rule 3(5) of the Cenvat Credit Rules. It was concluded that this activity did not amount to trading, and the Revenue failed to establish that the appellant was engaged in trading activities. Relying on the legal precedents cited, the Tribunal set aside the impugned order, allowing the appeal of the appellant.