Case Law Details
Gujarat Sulphur Limited Vs C.C.E. & S.T (CESTAT Ahmedabad)
Appellant submits that the appellant under bonafide belief that the sulphur powder manufactured by them attracts duty under sub-heading no CETH 2503 010 hence availed the cenvat credit and paid the excise duty on the finished goods. Once the excise duty was paid on the finished goods, cenvat credit on the inputs cannot be denied even if it is found that the finished goods cleared by appellant is not otherwise dutiable submits that the duty paid on the finished goods is much more than the Cenvat Credit availed on the inputs, therefore, there is Revenue neutral situation and no demand will survive. In this regard he placed reliance on the Hon’ble Supreme Court judgement in the case of CCE vs Jamshedpur vs Jamshedpur Beverages 2007 (214) ELT 321 (SC). He further submits that once the duty is paid on the finished goods even though said finished goods attract nil rate of duty or exempted under any notification, the cenvat credit on the input cannot be denied. He alternatively submits that even in terms of Rule 16 of Central Excise Rules, 2002, it permits to an assessee to receive duty paid goods in the factory, avail cenvat credit thereon and while clearing to pay the duty either any process is involved or without any process, therefore, this transaction is otherwise covered under Rule 16 of Rules.
Rule 16 of Central Excise Rules, 2002 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. For this reason also, the cenvat credit on the input received by the appellant for manufacture of Sulpur Powder cannot be denied.
FULL TEXT OF THE CESTAT AHMADABAD ORDER
This appeal is directed against order in appeal passed by learned Commissioner (Appeals), whereby the order of the Original authority was set aside and Revenue’s appeal was allowed. The case of the department is that since the appellant have cleared the Sulphur Powder which is correctly classifiable under sub-heading No. 2503 0090 which attracts nil rate of duty, the appellant was not entitled for cenvat credit on the inputs used in the manufacture of Sulphur Powder falling under sub-heading No. 2503 0090 of Central Excise Tariff Act-1985.
2. Shri S.J. Vyas, learned counsel appearing on behalf of the appellant submits that the appellant under bonafide belief that the sulphur powder manufactured by them attracts duty under sub-heading no CETH 2503 010 hence availed the cenvat credit and paid the excise duty on the finished goods. Once the excise duty was paid on the finished goods, cenvat credit on the inputs cannot be denied even if it is found that the finished goods cleared by appellant is not otherwise dutiable submits that the duty paid on the finished goods is much more than the Cenvat Credit availed on the inputs, therefore, there is Revenue neutral situation and no demand will survive. In this regard he placed reliance on the Hon’ble Supreme Court judgement in the case of CCE vs Jamshedpur vs Jamshedpur Beverages 2007 (214) ELT 321 (SC). He further submits that once the duty is paid on the finished goods even though said finished goods attract nil rate of duty or exempted under any notification, the cenvat credit on the input cannot be denied. He alternatively submits that even in terms of Rule 16 of Central Excise Rules, 2002, it permits to an assessee to receive duty paid goods in the factory, avail cenvat credit thereon and while clearing to pay the duty either any process is involved or without any process, therefore, this transaction is otherwise covered under Rule 16 of Rules. He placed reliance on the following judgements:
- Creative Enterprise 2008 (7) TMI 311 (Guj H.C.)
- Creative Enterprise (SC) 2009 (7) TMI 1206
- Sanjay Road Lines 2019 (6) TMI 262 (TRI AHD)
- Tata Steel Ltd 2017 (349) ELT 783 (TRI BOM)
- Standard Chemical Co 2019 (11) TMI 1262 (TRI BOM)
- Shree Rubber Plast 2016 (336) ELT 313 (TRI BOM)
3. Shri V.G. Iyengar, Learned Superintendent (Authorized Representative) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. I have carefully considered the submissions made by both the sides and perused the records.
5. I find 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. I find that 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 CCE-Jamshedpur vs Jamshedpur Beverages (supra), wherein the Hon’ble Supreme Court observed as follows:
“[Order]. – The Revenue has filed the present appeal against Final Order No. A-838/KOL/2002, dated 12th August, 2002 in Appeal No. E138/2002 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, Eastern Bench, Kolkata [for short “the Tribunal”].
2. The grievance of the Revenue in the present case is that the assessee had wrongly availed the Modvat credit and was liable to pay the amount to the extent of Rs. 26,77,320/-.
3. It is stated by the counsel appearing for the assessee that the 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.
4. In view of this, the appeal is dismissed leaving the question of law open. However, there shall be no order as to costs.
5. If upon verification, the submission of the counsel for the assessee is found to be incorrect, liberty is granted to the appellant-Revenue to mention the matter before this Court.”
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.
Without prejudice to the above, I also find 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. For this reason also, the cenvat credit on the input received by the appellant for manufacture of Sulpur Powder cannot be denied. This view is supported by this Tribunal decision in the case of Tata Steel Limited (supra), wherein the Tribunal has passed the following order:
“We have carefully considered the submissions made by both sides and perused the records.
5. We find that the credit on the wire rods was denied only on the ground that the activity of drawing of wire from thicker to thinner gauge does not amount to manufacture as held by the Hon’ble Apex Court in the case of Technoweld Industries (supra). Rule 16 of Central Excise Rules, 2001, which is relevant to the facts of the present case, reads as under :
Rule 16. Credit of duty on goods brought to the factory.
(1)Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re- conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take Cenvat credit of the duty paid as if such goods are received as inputs under the Cenvat Credit Rules.
(2)The assessee shall be liable to pay the duty on goods returned under sub-rule (1) when removed subsequently at the rate applicable on the date of removal and on the value determined under Section 4 of the Act.
As per the above Rule, the assessee is permitted to avail the Cenvat credit on the duty paid goods for carrying out remaking, refining, reconditioning or for any other reason and after any of the said process even if not amounting to manufacture when the goods is cleared then the duty has to be paid equal to Cenvat credit availed on receipt of duty paid Input. In the present case, the respondents have taken credit on the duty paid on wire rods and after the process of drawing they have paid duty determined on clearances on the transaction value. Therefore, the entire transaction is squarely covered under the provisions of Rule 16 of CER, 2001.
6. We also observe that the demand is pertaining to the period 29-3. 2000 to 28-5-2004. Therefore, the period from 29-3-2000 to 30-6-2001 is not covered by Rule 16. However, even if Rule 16 was not available, the respondents have taken credit on the input and cleared after the processing of drawing for export. As per this transaction, it is nothing but the availment of credit on the Input and if at all the activity does not amount to manufacture it is removal of input as such. The removal of input either can be on the payment of duty which is equal to the Cenvat amount or can be cleared without payment of duty for export under bond. Therefore, the Cenvat credit availed by the respondents either before 1-7- 2001 or thereafter and the processed goods have been cleared for export, the Cenvat credit is legally admissible. It is not the case of the Revenue that the respondent has cleared the goods in the domestic market without payment of duty. The dispute is only related to the availment of credit.
7. As per above discussion, we do not find any infirmity in the impugned order. The impugned order is upheld. Revenue appeal is dismissed.”
For the reason of above decision of Tribunal also, the demand is not sustainable. As per my above discussion and findings, the impugned order is not sustainable. Accordingly, the same is set aside and appeal is allowed with consequential relief.
(Pronounced in the open court on 23.01.2023)
