2021 (9) TMI 771 - AT - Central Excise

CENVAT Credit - inputs - V belts - procured 'pulleys' - denial on the ground that appellants were not manufacturing any goods and the activity that took place was trading of goods - HELD THAT - It is not disputed that the appellant has cleared the final product viz. Belt Accessories (Pulleys and V Belts) after payment of excise duty. When the appellant has discharged the excise duty on final product then the department cannot disallow credit alleging that there is no process of manufacture. In case of any doubt, the department ought to have intimated the appellant before discharge of excise duty. In the present case payment of duty on the inputs is not disputed. The Hon ble High Court of Bombay in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES 2012 (7) TMI 141 - BOMBAY HIGH COURT held that when the duty has been paid on the finished products then the availment of the credit of duty paid on inputs cannot be faulted. The demand cannot sustain - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Cenvat credit availed on imported V belts and locally procured pulleys, Classification of goods as inputs, Contravention of Cenvat Credit Rules, Show cause notice validity, Dispute over availment of credit, Double taxation allegation, Applicability of previous tribunal and high court decisions, Departmental findings challenged.

Analysis:
The case involved a dispute over the appellant's availing of Cenvat credit on imported V belts and locally procured pulleys, which were considered finished goods by the Revenue, leading to a show cause notice being issued. The Revenue contended that as the goods were finished products, they did not qualify as inputs under Rule 2(k) of the Cenvat Credit Rules, alleging contravention of the rules due to the trading activity instead of manufacturing. The appellant argued that they had paid duty on the final products, belts, and pulleys, and should not be denied credit, highlighting the risk of double taxation.

The Commissioner (Appeals) rejected the appellant's contention, leading to the appeal. The appellant's counsel referenced previous decisions, including Ruchi Soya Industries Ltd. and CCE Vs Vishal Precision Steel Tubes and Strips Pvt. Ltd., to support their argument that the credit availed should be allowed. The department reiterated its findings, but the Tribunal noted that the appellant had paid duty on the final products, belts, and pulleys, which should prevent disallowance of credit according to the Hon'ble High Court of Bombay's decision in CCE Pune Vs Ajinkya Enterprises.

The Tribunal, after considering the facts and legal precedents, concluded that the demand for disallowing the credit could not be sustained. Citing the decisions in previous cases, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief as per the law. The judgment emphasized the importance of duty payment on final products in determining the eligibility for availing credit on inputs, ultimately ruling in favor of the appellant based on established legal principles and precedents.