2023 (1) TMI 988 - AT - Central Excise

CENVAT Credit on inputs used in the manufacture of Sulphur Powder falling under sub-heading No. 2503 0090 of Central Excise Tariff Act-1985 - denial of credit on the ground that the Sulphur Powder is correctly classifiable under sub-heading No. 2503 0090 which attracts nil rate of duty - Revenue Neutrality - Applicability of Rule 16 of Central Excise Rules 2000 - HELD THAT - The appellant is not disputing the classification however their contest is that once the duty on the finished goods was paid even though it attracts nil rate of duty the cenvat credit cannot be denied - there is no dispute that the appellant have paid the excise duty on the finished goods which is more than the cenvat credit availed on the input used in the said finished goods therefore this is clear case of Revenue neutral for this reason demand cannot be sustained. This similar issue has been considered by the Hon ble Supreme Court in the case of COMMISSIONER OF C. EX. JAMSHEDPUR VERSUS JAMSHEDPUR BEVERAGES 2007 (4) TMI 264 - SC ORDER wherein the Hon ble Supreme Court held that excise duty paid and the Modvat credit availed were identical and therefore consequences of payment of excise duty after availing Modvat credit was revenue neutral. In view of the above apex court judgement as per the facts of the present case also it is clear case of Revenue Neutrality therefore demand is not sustainable on this ground. Applicability of Rule 16 of Central Excise Rules 2000 - HELD THAT - Rule 16 clearly provides that an assessee can receive the duty paid goods in their factory and avail the cenvat credit and while clearing the same out of the factory the same can be cleared on payment of excise duty. In this provision the duty paid goods is deemed to be input in terms of Cenvat Credit Rules. The said goods can be cleared on payment of duty and the credit availed on the goods received by the assessee is allowed - In the present case also the appellant have received the duty paid inputs thereafter processed the same and cleared after processing on payment of duty on the transaction value. This would as permitted in terms of Rule 16 of Central Excise Rules 2000 therefore the transaction in the present case is squarely covered by the Rule 16 of Rules. The demand is not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Classification of goods under Central Excise Tariff Act-1985
- Entitlement to cenvat credit on inputs used in manufacturing
- Revenue neutrality in excise duty payment and cenvat credit availed
- Application of Rule 16 of Central Excise Rules, 2002

Classification of Goods:
The appeal challenged an order setting aside the original authority's decision, claiming the appellant cleared Sulphur Powder under sub-heading No. 2503 0090, attracting nil duty rate. The department argued against the appellant's entitlement to cenvat credit on inputs used for manufacturing.

Entitlement to Cenvat Credit:
The appellant, under a bona fide belief, availed cenvat credit and paid excise duty on finished goods, even if they were not dutiable. The appellant cited the Supreme Court's judgment in CCE vs Jamshedpur Beverages, emphasizing revenue neutrality due to paying more duty on finished goods than cenvat credit availed on inputs.

Revenue Neutrality and Excise Duty:
The Tribunal found the appellant's excise duty payment on finished goods exceeding cenvat credit availed on inputs resulted in a revenue-neutral situation. Citing the Supreme Court's decision in a similar case, the Tribunal upheld revenue neutrality, dismissing the demand based on excise duty payment.

Application of Rule 16 of Central Excise Rules, 2002:
The Tribunal invoked Rule 16, allowing an assessee to receive duty-paid goods, avail cenvat credit, and clear goods by paying excise duty. Relying on precedents like Tata Steel Ltd, the Tribunal held that the appellant's transaction fell within Rule 16's purview, permitting cenvat credit on inputs used for manufacturing Sulphur Powder. The Tribunal dismissed the revenue's appeal, upholding the appellant's entitlement to cenvat credit based on Rule 16 and revenue neutrality principles.