2021 (8) TMI 238 - AT - Central Excise

CENVAT Credit - input - PVC Filler Hollow - credit denied to the assessee on the ground that the supplier of raw material was not liable to pay the duty on the goods supplied - HELD THAT - The duty being paid by M/s. Shiv Industries and that there is no cogent evidence that PVC of M/s. Shiv Industries is covered under Notification No. 12/2012, the relief in respect of the said duty paid including the availment of CENVAT Credit by the recipient of the goods on which the duty was paid, cannot be denied. This has been the settled law that once the raw material has suffered the excise duty, then the relief should be granted in respect of duty payable on final products. The perusal of the provisions of CCR makes it abundantly clear that the terminology used in the relevant provisions in Rule 3 erstwhile Section 57A (1) is paid and not payable . Hon ble High Court at Madras in COMMISSIONER OF CENTRAL EXCISE, CHENNAI-I VERSUS CEGAT, CHENNAI 2005 (1) TMI 125 - HIGH COURT OF JUDICATURE AT MADRAS has held that the said terminology is sufficient to consider the factual state of affairs that as to whether the duty has actually been paid on the raw material and not whether duty was payable or not. Classification of the goods cannot be changed at the recipient s end, the issue is again settled and is no more res integra as is apparent from the decision of Hon ble Apex Court in the case of SARVESH REFRACTORIES (P) LTD. VERSUS COMMISSIONER OF C. EX. CUSTOMS 2007 (11) TMI 23 - SUPREME COURT wherein it has been held that the classification by the manufacturer only has to prevail, the same cannot be altered at the buyers end. Once M/s. Shiv Industries has classified its PVC under Chapter Heading 3904 and admittedly Chapter heading 3904 is not merely for such PVC which is manufactured by scrap and is exempted from duty. The said classification cannot be denied by the appellant specially when the invoices received by him shows the payment of duty by his supplier. The question of adjudication is answered in negative holding that CENVAT Credit cannot be denied on the ground that the supplier was not liable to pay the duty on the goods supplied. Also it is observed that the finding of Commissioner (Appeals) about M/s. Shiv Industries that the product supplied by them was exempted from payment of duty is based merely on the letter from the Jurisdictional Incharge - There is no discussion in the impugned order about any mention in the letter of Jurisdictional officer about manufacturing process of M/s. Shiv Industries and about using the scrap for manufacture of their PVC Filler Hollow . Nor there is any iota of evidence about the manufacturing process of six other supplier. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of CENVAT Credit on inputs supplied by M/s. Shiv Industries.
2. Applicability of Board’s Circular No. 940/1/2011-CX and Notification No. 12/12 CE.
3. Assessment of duty paid versus duty payable.
4. Classification of goods at the recipient's end.

Issue-wise Detailed Analysis:

1. Denial of CENVAT Credit on inputs supplied by M/s. Shiv Industries:
The appellant, engaged in manufacturing electric wire and cables, availed CENVAT Credit on 'PVC Filler Hollow' supplied by seven manufacturers, including M/s. Shiv Industries. The Revenue sought to deny the CENVAT Credit for inputs from M/s. Shiv Industries, asserting that the inputs were exempt from duty under Notification No. 12/2012-CE, as they were manufactured from PVC waste and scrap. The Tribunal found no evidence proving that M/s. Shiv Industries used waste and scrap for manufacturing the 'PVC Filler Hollow'. The duty was paid, and the invoices were genuine. Consequently, the denial of CENVAT Credit on this ground was deemed unjustified.

2. Applicability of Board’s Circular No. 940/1/2011-CX and Notification No. 12/12 CE:
The appellant argued that the Board’s Circular and the Notification were not applicable as they did not specifically exempt 'PVC Filler Hollow' unless it was manufactured from waste and scrap. The Tribunal agreed, noting the absence of evidence that M/s. Shiv Industries' products were made from waste and scrap. The Tribunal emphasized that the duty paid on the inputs was relevant, not the duty payable, thus supporting the appellant's claim for CENVAT Credit.

3. Assessment of duty paid versus duty payable:
The Tribunal highlighted the settled law that CENVAT Credit is based on duty paid, not duty payable. Citing the Madras High Court and the Bangalore Bench of the Tribunal, it was reiterated that the recipient of goods is not required to reassess the duty liability of the supplier. The Tribunal found that the appellant correctly availed CENVAT Credit as the duty was paid by the supplier, M/s. Shiv Industries, and there was no provision in the CENVAT Credit Rules disallowing credit despite the duty being paid.

4. Classification of goods at the recipient's end:
The Tribunal noted that the classification of goods by the manufacturer (M/s. Shiv Industries) under Chapter Heading 3904 could not be altered at the recipient's end. The duty paid classification must prevail. The Tribunal referenced the Apex Court's decision in Sarvesh Refractories (P) Ltd. and MDS Switchgear Ltd., affirming that the recipient cannot be penalized for the supplier's classification. The Tribunal concluded that the Revenue's failure to investigate the manufacturing process of M/s. Shiv Industries and the inconsistency in allowing credit for other suppliers while denying it for M/s. Shiv Industries was unjustified.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals), allowing the appeal and granting consequential benefits. The denial of CENVAT Credit was found to be unsupported by evidence and contrary to settled legal principles. The Tribunal emphasized the importance of duty actually paid and the inadmissibility of reopening the supplier's assessment at the recipient's end.