The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) granted Cenvat Credit on the supply of inputs by manufacturers of copper.
M/s KSH International Pvt Ltd, a manufacturer of insulated ‘copper/aluminium’ conductors in which ‘copper’ is an essential ingredient, had been clearing final product, in both the domestic market as well as for exports towards fulfilment of obligation under the ‘advance licence/authorization scheme’ of Foreign Trade Policy (FTP) enabling import of the primary ingredient, viz., copper, without payment of duty.
The respondent, instead of sourcing copper from abroad had, in terms of the scheme in the Foreign Trade Policy (FTP), obtained the same from M/s Hindalco Industries Ltd and M/s Sterlite Industries Ltd between October 2004 and March 2009 on payment of duty of ₹ 5,26,47,414/- and upon invalidation of the ‘advance authorization’ to such extent.
The availment of these duties as credit was objected to by central excise authorities who proceeded to initiate action for recovery thereof under rule 14 of CENVAT Credit Rules, 2004 on the ground that suppliers of ‘copper’ were entitled to clear those without payment of duty in terms of notification no. 44/2001- CE (NT) dated 26th June 2001.
The show cause notice proposed recovery on the ground that the respondent was required to fulfil export obligation either by using imported raw materials, or by deploying supplies from domestic manufacturers, without payment of duty especially in the light of invalidation of the advance authorization to that extent thus disentitling them to availment of credit on such duty discharged by the supplier of ‘copper’ to them which was dropped by the adjudicating authority leading to the appeal.
According to the Authorised Representative, the competent reviewing authority has concluded that the respondent was not eligible for availing Cenvat credit as the procurement of such goods on payment of duty is not in concord with scheme of ‘advance licence’ in the Foreign Trade Policy (FTP).
A Two-Member Bench of the Tribunal comprising CJ Mathew, Technical Member and Ajay Sharma, Judicial Member observed that “The duty having been discharged by manufacturers of copper who had supplied ‘inputs to the respondent, there is no ground for denial of eligibility for CENVAT credit. Furthermore, the primary contention in the appeal of Revenue is that on identical matter was pending resolution, in their appeal, before the High Court of Bombay in re Oleofine Organics India Pvt Ltd. With the disposal of that appeal, discarding the challenge mounted by Revenue against the order of the Tribunal permitting availment of credit, the grounds of appeal itself ceases to exist.”
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