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TMI Blog2019 (4) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... Credit - Rule 3(6)(a) of CENVAT Credit Rules - Whether M/s. IMIL has correctly availed the CENVAT Credit as prescribed under Rule 3(6)(a) of CENVAT Credit Rules? - Held that:- The impugned order of the Tribunal proceeds incorrectly on the basis that there can be no limitation/ capping on the credit taken by the Respondent- M/s. IMIL where the goods have been supplied by M/s. IIL i.e. supplier in terms of Rule3(4) of the Credit Rules, 2002. Thus it is a complete misreading of the provisions. The capping of the CENVAT Credit is only in case of that manufacturer who uses the inputs in further manufacture and does not apply to a manufacturer who on acquisition of inputs does not use it for further manufacture but removes it as such so as to be governed by Rule 3(4) of the Credit Rules 2002.Thus in such case Rule 3(6)(a) of the Credit Rules, 2002 will prevail over Rule 3(5) of the Credit Rules, 2002 as it reduces the availing of credit in respect of goods manufactured by a 100% EOU. The next submission that the entire exercise of restricting the credit is an exercise for reassessing the duty paid by the supplier viz. M/s. IIL. Therefore, the submission that this exercise cannot be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Iron Ore Pellets to it under Rule 3(4) of the Credit Rules, 2002. 5 Thereafter, the Revenue issued two show cause- cum -demand notices for the period aggregating to March, 2003 to March, 2004 to the Respondent -IMIL, calling upon it to show cause as to why excess CENVAT Credit taken in contravention of Rule 3(6)(a) (i) of the Credit Rules, 2002 should not be recovered. The basis of both the show cause notices was that the Iron Ore Pellets were manufactured by a 100% EUO, thus the credit which can be taken by the Respondent -IMIL is restricted/capped by the formula prescribed under Rule 3(6)(a) (i) of the Credit Rules, 2002. M/s. IMIL resisted both the show cause notices. However, the Commissioner of Central Excise by a common order dated 9th January, 2006 confirmed both the show cause notices dated 7th April, 2004 and 9 th November, 2004. This by holding that in terms of Rule 3(6)(a) (i) of the Credit Rules 2002, the Respondent -IMIL can only take credit of the CENVAT Credit on the Iron Ore Pellets in terms of the formula prescribed in Rule 3(6)(a)(i) of the Credit Rules 2002, as Iron Ore Pellets had been manufactured by M/s. Kundermukh which is undisputedly a 100% EOU. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses(i), (ii), (iii), (iv) and (v) above, paid on any inputs or capital goods received in the factory on or after the first day of March, 2002, including the said duties paid on any inputs used in the manufacture or intermediate products, by a job worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.214/86 Central Excise, dated the 25th March, 1986, published vide number G.S.R. 547 (E) dated the 25th March, 1986 and received by the manufacturer for use in, or in relation to, the manufacture of final producer, on or after the first day of March, 2002. 2 and 3 . . . . . 4 When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 7. 5 The amount paid under sub rule (4) shall be eligible as CENVAT credit as if it was a duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s. IIL on removal the Iron Ore Pellets purchased from M/s. Kundermukh as such to it. This on the basis of the amount shown under the invoice issued by M/s. IIL. This in accord with Rule 3(5) of the Credit Rules 2002. (iii) In the above facts and the self evident position in law, no fault can be found with M/s. IIL, reversing the CENVAT Credit to the extent of credit which it had availed in respect of the Iron Ore Pellets which it had received from M/s. Kundermukh. Therefore, when removing the Iron Ore Pellets as such i.e. without it being used in manufacture of any other product or it being processed per se, it had correctly in terms of Rule 3(4) of the Credit Rules, 2002 had correctly reversed the CENVAT Credit taken. This in view of the clear mandate of Rule 3(4) of the Credit Rules 2002. (iv) Therefore, no fault can be found with M/s. IIL reversing the CENVAT Credit taken on receipt of Iron Ore Pellets from M/s. Kundermukh while clearing the Iron Ore Pellets to the Respondent-IMIL. (v) In the above view, question (a) is to be answered in the affirmative i.e. in favour of the Respondent- Assessee and against the Appellant-Revenue. 10 Re. Question (b): (i) F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it would put an impossible burden upon a party to find out the origin of the inputs i.e. the source of manufacture of the inputs or capital goods received by it in normal course of business. This before it can take the CENVAT Credit as reflected in the invoice covering inputs received by it. Therefore, it is submitted that the Rule 3(6)(a) (I) of the Act is not capable of being acted upon and thus, must be ignored; and (c) In any case, without the supplier i.e. M/s. IIL being made a party to the proceedings, it is not open to the Revenue to reassess the value of the supplier's its clearance/ removal. (iv) We have considered the rival submissions. We note that it is the case of the Revenue that credit available to the Respondent -M/s. IMIL is restricted in the manner provided in Rule 3(6)(a)(i) of the Credit Rules 2002. This in view of the fact that the inputs namely Iron Ore Pellets have been admittedly manufactured by a 100% EOU namely M/s. Kundermukh. While on the other hand, it is the case of the Respondent- M/s. IMIL that the credit which has been taken by it in terms of Rule 3(5) of the Credit Rules 2002 is the correct credit and calls for no interference. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, 2002 as it reduces the availing of credit in respect of goods manufactured by a 100% EOU. (vi) The next submission that the entire exercise of restricting the credit is an exercise for reassessing the duty paid by the supplier viz. M/s. IIL. Therefore, the submission that this exercise cannot be done in the absence of M/s. IIL in the present facts cannot be accepted. We have already held in answer to question (a) that M/s. IIL had correctly paid the CENVAT Credit while supplying the inputs to the Respondent M/s. IMIL. This has no bearing to the question of the quantum of credit which can be taken by the Respondent M/s. IMIL. This is so as the same is restricted/ capped by virtue of Rule 3(6) of the Credit Rules, 2002. This for the reason that M/s. IMIL use the inputs in further manufacture and the inputs are admittedly manufactured by M/s. Kundermukh as 100% EOU. Therefore, the reliance by the Respondent in the following decisions in : (a) CCE C v/s. MDS Switchgear Ltd., 2008 (229) ELT 485; (b) CCE, Goa v/s. Nestle India Ltd. 2012 (275) ELT 49; (c) CCEx, Ahmedabad III v/s. Nahar Granites Ltd., 2014 (305) ELT 9; (d) CCE, Chennai I v/s. CEGAT, Chennai 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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