2021 (6) TMI 783 - AT - Central Excise

CENVAT Credit - inputs - Bars and Rods which were used in annealing process - process amounting to manufacture or not - credit availed on the inputs received from sister concern, in case the supplier has paid duty - HELD THAT - In terms of Rule 3 of Cenvat Credit Rules, 2004, that a manufacturer or producer of final products or a provider of taxable services shall be allowed to take credit of (various taxes mentioned there in suffered on the inputs) 3(i) any input or capital goods received in the factory of manufacture of final products; in terms of Rule 9 of CCR, 2004 the inputs must be accompanied by proper documents evidencing duty payment and that the same should be utilized for manufacture of final products cleared on payment of duty. It is not the case of the department that the respondents did not receive the said inputs; the same were not duty paid and the same were not utilized for manufacture of final dutiable products. Going by the facts of the case it is found that none of the essential conditions have been violated to deny the credit to the appellant. The department has not taken any steps to dishonor the duty payment made by the supplier of respondents. A show cause was issued alleging that their availment of Cenvat Credit was incorrect as the process undertaken by them did not amount to manufacture. The availment of Cenvat Credit by the respondents cannot be held to be illegal as it was found to be otherwise in order - Appeal dismissed - decided against Revenue.

Issues:
1. Alleged wrongful availing of Cenvat Credit on Bars and Rods used in annealing process
2. Whether the recipients were correct in availing credit on inputs received from the supplier
3. Interpretation of Rule 3 and Rule 9 of Cenvat Credit Rules, 2004
4. Validity of availing Cenvat Credit when the supplier ceased to be a manufacturer
5. Denial of benefit of Cenvat Credit based on duty payment and utilization of inputs
6. Compliance with essential conditions for availing Cenvat Credit

Issue 1: Alleged wrongful availing of Cenvat Credit on Bars and Rods used in annealing process
The appeal was filed by Revenue against an order alleging that the Respondents wrongly availed Cenvat Credit on Bars and Rods used in the annealing process. The supplier of the Respondents was accused of not being a manufacturer anymore, leading to the transfer of credit to the Respondents. The Commissioner's order favored the Respondents, prompting the Revenue to file an appeal.

Issue 2: Interpretation of Rule 3 and Rule 9 of Cenvat Credit Rules, 2004
The case revolved around whether the recipients were correct in availing credit on inputs received from their sister concern, even if the supplier had paid duty without performing processes amounting to manufacture. Rule 3 of Cenvat Credit Rules, 2004 allows credit on duty-paid inputs utilized for manufacturing final products cleared on payment of duty. The Tribunal found that all essential conditions for availing credit were met by the respondents.

Issue 3: Denial of benefit of Cenvat Credit based on duty payment and utilization of inputs
The department argued that since the supplier was not liable to pay duty due to certain operations not amounting to manufacture, the appellants were not entitled to avail credit. However, the Commissioner held that the duty paid inputs, when genuinely used in manufacturing dutiable final products, should not be denied the benefit of Cenvat Credit. The Tribunal agreed with the Commissioner's interpretation and found no violation of CCR, 2004.

Issue 4: Compliance with essential conditions for availing Cenvat Credit
The Tribunal noted that the department failed to prove any violation of CCR, 2004 regarding the availing of Cenvat Credit by the respondents. The duty payment by the supplier was not dishonored, and the Tribunal found that the appeal lacked merit. The settled law and various judgments cited by the respondents supported their position, leading to the dismissal of the appeal.

Conclusion:
The Tribunal dismissed the appeal as it found no merit in the arguments presented by the Revenue. The respondents were found to have correctly availed Cenvat Credit based on the duty paid inputs received, in compliance with the Cenvat scheme and relevant rules. The judgment reiterated the importance of duty payment and utilization of inputs in determining the eligibility for Cenvat Credit, ultimately ruling in favor of the respondents based on established legal principles and precedents.

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