The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), observed that Cenvat Credit on Inputs cannot be denied because Final Product and hence attracts ‘Nil’ Rate of Excise Duty.
The case of the department is that since the appellant, Gujarat Sulphur Limited, 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.
S.J. Vyas, the 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.
The Counsel further submitted 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 and 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.
The Coram consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “In the present case also, the appellant has received the duty paid inputs, thereafter processed the same and cleared after processing on payment of duty on the transaction value and is 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 Tribunal concluded that the cenvat credit on the input received by the appellant for manufacture of Sulphur Powder cannot be denied.
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