2023 (6) TMI 236 - AT - Central Excise

CENVAT Credit - inputs - TMT Cutting, Square Cobble, MRM Rolls Spoils, Misrolls End cutting, Scrap Melting Scrap - manufacture of their final products MS Flat/Bar, MS Channel, MS Round, MS Angle, MS Ribbed Bar etc - Department s contention is that the Appellant is only a Rolling Mill and does not have furnace for melting of such waste and scrap and hence they could not have used these scrap as inputs to manufacture their finished goods namely hot rolled products - suppression of facts - extended period of limitation. HELD THAT - As per Rule 3 of Cenvat Credit Rules 2004, any manufacturer can avail credit of duty paid on any goods (excepting light diesel oil, high speed diesel oil and motor spirit) treating the same as input if those goods are used in or in relation to manufacture of their final products. Thus for the purpose of availment of credit on such items, it has to be established that the same were used in the manufacture of final products. Rule 3(1) of the Cenvat Credit Rules, 2004 clearly states that a manufacturer or producer of final products and a provider of output service shall be allowed to take credit of the duty paid on eligible inputs or services. It means that cenvat credit can be availed by manufacturer or producer of final products who uses the inputs in or in relation to manufacture of final products. Rule 2(k)(i) of the Cenvat Credit Rules, 2004 which defines iputs for manufacturer states that these should be used in the factory . In the instant case, there is no evidence brought on record to show that the impugned goods purchased by the Appellant from IISCO and other manufacturers on payment of duty has not been used in the factory. Only an allegation has been made without any evidence that the scrap were not used in the factory as they were not capable to be used in the manufacture of Billets or Ingots. The Appellant stated that the goods so purchased from SAIL and others have been subjected to heating, straightening to make suitable for rolling and sometimes cut to sizes and then rerolled to manufacture their final products - the Appellants are eligible for the CENVAT credit availed on the inputs used in the manufacture of their final products namely, Rerolled products, MS Flat/Bar, MS Angle, MS Channel, MS Round etc and hence the demands made in the impugned order is not sustainable. Extended period of limitation - suppression of tacts - HELD THAT - When a show cause notice was already issued and the facts are in the knowledge of the authorities, then another notice cannot be issued on the same facts alleging suppression of facts. Thus, the Notice dated 23/04/205 issued on the same ground and the impugned order confirming the demands made in the Notice are not sustainable on the ground of limitation also. Thus, the demands made in the impugned orders along with the demand of interest and penalties are not sustainable on merit as well as on the ground of limitation. The impugned orders set aside - appeal allowed.

Summary

Issues Involved:
1. Merits of the Case and Document Examination
2. Classification of Inputs
3. Disallowance and Recovery of CENVAT Credit
4. Interest on CENVAT Credit
5. Imposition of Penalty
6. Reliance on Previous Tribunal Decisions

Summary:

1. Merits of the Case and Document Examination:
The Hon'ble High Court questioned whether the Tribunal erred by not examining the merits of the case and the documents, instead relying solely on the decision in Jai Raj Ispat Limited Vs. Commissioner of Central Excise, Hyderabad-IV. The High Court found no factual findings recorded by the Tribunal and noted that the Tribunal did not address the classification issue, which was central to the Jai Raj Ispat Ltd. case.

2. Classification of Inputs:
The Tribunal was directed to determine the correct classification of inputs purchased by the Appellant. The Appellant purchased TMT Cuttings, MRM Roll Spoils, Cobble Cuttings, and finished TMT Bar Rolls Spoils from manufacturers like SAIL and IISCO. These were classified under tariff item No. 72044100. The Tribunal observed that the classification done by the supplier cannot be changed by the receiver and that the goods received by the Appellant were correctly classified under subheading 72044100.

3. Disallowance and Recovery of CENVAT Credit:
The Department alleged that the Appellant wrongly availed CENVAT credit on Scrap, MS Scraps, TMT Cuttings, MRM Rolls Spoil, amounting to Rs. 1,36,01,979/-. The Tribunal noted that the goods purchased were used in the manufacture of final products, and the Department failed to provide evidence that these inputs were not used in the factory. Therefore, the Tribunal held that the Appellant was eligible for the CENVAT credit.

4. Interest on CENVAT Credit:
The Department proposed to charge interest under Rule 14 of the CENVAT Credit Rules, 2004, read with erstwhile Section 11AB and/or present Section 11AA of the Central Excise Act, 1944. However, since the Tribunal found the Appellant eligible for the CENVAT credit, the demand for interest was not sustainable.

5. Imposition of Penalty:
The Department proposed penal action under Rule 15(2) of the CENVAT Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944. The Tribunal held that since the Appellant was eligible for the CENVAT credit, the penalties imposed were not sustainable.

6. Reliance on Previous Tribunal Decisions:
The Tribunal was criticized for heavily relying on previous decisions without independent reasoning. The High Court remanded the matter to the Tribunal for fresh adjudication, instructing it to consider the factual position, legal aspects, and various decisions that may be relied upon, and to pass a speaking order on merits.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals filed by the Appellant, finding the demands made in the impugned orders unsustainable on both merit and limitation grounds. The Tribunal was directed to pass a speaking order on merits and in accordance with the law, considering the correct classification of inputs and the factual position.