The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) remanded the matter of cenvat credit reversal for verification of actual availment and substantive reversal.
M/s Rohm & Haas (I) P Ltd , the appellant Commissioner of Central Excise, Belapur holding the goods cleared by them, domestically and for export, between 2007 and 2011 as not liable to be charged to excise duty and, in consequence, ineligible to avail credit of ₹ 3,28,39,680 on ‘inputs’ procured by them, from domestic sources and from abroad, and to credit of ₹ 21,77,227 on ‘input services’ under rule 3 of CENVAT Credit Rules, 2004.
The appellant is in the business of re-packing and labeling ‘coronate LS’, ‘bayhdur 302’ and ‘atomatic blu RB2’ of which the first two are imported with credit was availed on the additional duty of customs discharged on clearance from customs and on the entire duty included in the purchase price of the last.
Proceedings for recovery of such credit was initiated on the ground that the notes in related chapters and sections of Schedule to Central Excise Tariff Act, 1985 did not deem such activity to be manufacture and the said process did not also conform to any other facet of manufacture in section 2(f) of Central Excise Act, 1944 with no change in product or enhancement of marketability having occurred. It was evident that the appellant had been clearing the re-packed goods on payment of appropriate duties of central excise.
It was contended by Counsel that the finding of no manufacture having taken place renders the collection of duty thereon to be beyond the pale of law and hence any credit availed for such
clearance should be adjusted against the recovery ordered by the adjudicating authority.
It was further contended that the credit taken has been offset by availment at the time of clearance and, hence, is ‘constructive’ reversal mandated in rule 3(5) of CENVAT Credit Rules, 2004.
Even if the goods cleared by the appellant have not undergone manufacture, the consequent non-excisability would render the credit as not having been availed. It would, therefore, appear that the issue in dispute is limited to taking of credit on goods that are not ‘inputs’ as defined in rule 2 of CENVAT Credit Rules, 2004.
A two member bench comprising Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) observed that “the utilization of credit for cleared products is tantamount to reversal and, hence, recovery of such credit is an exercise in superfluity. These decisions were not available with the adjudicating authority then and has settled the law on recovery thereupon. Learned Authorized Representative has suggested that actual availment and corresponding substantive reversal need to be verified.”
The CESTAT set aside the impugned order and remanded the matter back to the original authority for such verification and to limit recovery, if any, only to such credit as is in excess of that availed on procurement of the three products.
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