2024 (7) TMI 467 - AT - Central Excise

Recovery of CENVAT Credit with interest and penalty - import of Propane and Butane and utilisation of the same on clearance of LPG from the warehousing premises (MLIF) - HELD THAT - It is found that merely on the ground that the appellants are not possessing manufacturer registration at the time of receipt of the goods in their premises would not disentitle them in availing CENVAT credit in view of the judgment of the Hon ble Karnataka High Court in the case of MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX 2011 (9) TMI 450 - KARNATAKA HIGH COURT , the Hon ble High Court had observed 'In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. Therefore, said finding recorded by the Tribunal as well as by the lower authorities cannot be sustained.' Thus, the appellants are entitled to avail CENVAT credit on the inputs viz., Propane and Butane which were later utilised in the clearance of LPG from their MLIF. Besides, in view of the ratio laid down by the Hon ble Bombay High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES 2012 (7) TMI 141 - BOMBAY HIGH COURT which was followed by the Karnataka High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-V VERSUS M/S. VISHAL PRECISION STEEL TUBES AND STRIPS PVT. LTD. 2017 (3) TMI 1287 - KARNATAKA HIGH COURT once the department accepts the duty on the final product, denial of the credit on the inputs cannot be sustained. The impugned order is set aside - Appeal allowed.

Issues:
1. Entitlement to CENVAT credit on imported Propane and Butane for clearance of LPG.
2. Validity of denial of CENVAT credit by the Commissioner.
3. Imposition of penalty and interest.

Analysis:

Issue 1: Entitlement to CENVAT credit on imported Propane and Butane for clearance of LPG
The case involved the appellants engaged in warehousing and selling of LPG, importing Propane and Butane, blending them at the port, and then transferring the resulting LPG to their storage facility for clearance to non-domestic customers. The question was whether the appellants were entitled to avail CENVAT credit on the imported Propane and Butane. The Tribunal held that lack of manufacturer registration at the time of receipt of goods did not disentitle the appellants from availing CENVAT credit, citing a judgment by the Hon'ble Karnataka High Court. The appellants were deemed entitled to the credit on inputs used for clearance of LPG from their facility.

Issue 2: Validity of denial of CENVAT credit by the Commissioner
The Revenue contended that the appellants were not entitled to avail CENVAT credit as they had not registered their facility as a manufacturer at the relevant time. However, the Tribunal noted that subsequent amendment to include manufacturing in the registration was sufficient. Relying on judgments by the Hon'ble Bombay High Court and the Karnataka High Court, the Tribunal held that denial of credit on inputs after duty acceptance on the final product was not sustainable. The impugned order was set aside, allowing the appeal with consequential relief.

Issue 3: Imposition of penalty and interest
The appellants argued that imposition of penalty and interest was not justified when the demand itself was considered legally flawed. The Tribunal did not delve into this issue explicitly but set aside the impugned order, which could imply that penalty and interest were also overturned along with the demand decision.

In conclusion, the Tribunal ruled in favor of the appellants, allowing them to avail CENVAT credit on imported Propane and Butane for clearance of LPG, rejecting the denial of credit by the Commissioner, and potentially overturning the imposition of penalty and interest.

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